Pledge Agreement

PLEDGE AGREEMENT AND LIMITED RECOURSE GUARANTY


THIS PLEDGE AGREEMENT (this "Agreement"), dated as of July 16, 1998, is made among ASSET INVESTORS CORPORATION, a Maryland corporation (the "Non-Managing Member"), ASSET INVESTORS OPERATING PARTNERSHIP, L.P., A Deleware limited partnership (the "Managing Member") and SALOMON BROTHERS REALTY CORP., a New York corporation, as agent for the Lenders under the Loan Agreement referred to below (the "Secured Party").


R E C I T A L S :


A. Pursuant to that certain Loan Agreement, dated as of the date hereof (as amended, modified or supplemented and in effect from time to time, the "Loan Agreement"), by and among AIOP Brentwood West, L.L.C., AIOP Lost Dutchman Notes, L.L.C., and AIOP Mullica, L.L.C. (collectively, the "Non-Florida Borrowers") and AIOP Gulfstream Harbor, L.L.C., AIOP Gulfstream Outlot I, L.L.C., AIOP Gulfstream Outlot II, L.L.C., AIOP Gulfstream Outlot III, L.L.C., and AIOP Serendipity, L.L.C. (collectively, the "Florida Borrowers"), as borrowers (the Florida Borrowers and the Non-Florida Borrowers, collectively, the "Borrower"), LaSalle National Bank, as collateral agent, and Secured Party, as agent and initial lender, Secured Party has agreed to make a loan (the "Loan") to Borrower upon the terms and subject to the conditions set forth therein. The Loan is to be evidenced by, and repayable with interest thereon in accordance with, a promissory note dated the date hereof, executed and delivered by Borrower to the order of Salomon Brothers Realty Corp. (as amended, modified, supplemented or substituted and in effect from time to time, the "Note").


B. The Managing Member is the sole member of Non-Florida Borrowers. The Managing Member and the Non-Managing Member (each a "Pledgor" and collectively, the "Pledgors") are the sole members of the Florida Borrowers and the Non-Managing Member is the sole general partner of the Managing Member. The Managing Member and the Non-Managing Member each will therefore derive a benefit from the making of the Loan. To induce Secured Party to enter into the Loan Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgors have agreed to (i) provide a limited recourse guaranty of Borrower's obligations under the Loan and (ii) pledge and grant a security interest in the Collateral (as defined herein) as security for such guaranty.


C. The execution and delivery of this Agreement by the Pledgors to Secured Party is a condition precedent to the obligation of Secured Party to make the Loan.


NOW, THEREFORE, for good and valuable consideration, receipt of which by the parties hereto is hereby acknowledged, the parties hereto hereby agree as follows:


Section 1. Definitions. Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in the Loan Agreement. In addition, as used herein:


"Collateral" shall have the meaning assigned to such term in Section 4 hereof.


"Obligations" shall mean (i) all indebtedness, obligations and liabilities of Borrower to Secured Party arising under, or in connection with, the Loan Documents, whether now existing or hereafter arising; (ii) any and all sums paid by Lender in order to preserve the Mortgaged Property or its security interest therein; (iii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations or liabilities of Borrower referred to in clause (i), the expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on the Mortgaged Property, or of any exercise by Secured Party of its rights with respect to the Mortgaged Property under the Loan Documents, together with attorneys' fees and expenses and court costs; and (iv) all indemnity obligations of Borrower to Secured Party pursuant to the Loan Documents.


"Organizational Agreement" means the Limited Liability Company Agreement of each Borrower, each dated as of July 13, 1998, as amended and restated from time to time.


"Records" shall have the meaning assigned to such term in Section 2(a) hereof.


"Secured Obligations" shall mean the Obligations and the rights of Secured Party pursuant to Section 6.


"UCC" means at any time the Uniform Commercial Code as in effect in the State of New York; provided, that if, by reason of mandatory provisions of law, the validity or perfection of Secured Party's security interest in any item of Collateral is governed by the UCC as in effect in a jurisdiction other than New York, "UCC" means the UCC as in effect in such other jurisdiction for purposes of the provisions hereof relating to such validity or perfection.


Section 2. Representations and Warranties. Each Pledgor represents and warrants to Secured Party that:


(a) The chief place of business of Borrower and the Managing Member is at c/o Asset Investors Corporation, 3410 South Galena Street, 17th Floor, Denver, Colorado 80222. The chief executive office of Borrower and the Managing Member and the place where (i) the original copies of the Organizational Agreement are located and (ii) Borrower and Managing Member keep their records concerning the applicable Collateral, including the registration books in which all membership interests in Borrower, partnership interests in Managing Member and pledges and transfers thereof are recorded (collectively, the "Records"), is at c/o Asset Investors Corporation, 3410 South Galena Street, 17th Floor, Denver, Colorado 80222. Pledgors have heretofore furnished to Secured Party a certified copy of the Organizational Agreement as in effect on the date hereof.


(b) The Managing Member is a limited partnership, duly formed, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to do business and is in good standing in all other places where necessary in light of the business it conducts and the property that it owns and intends to conduct and own and in light of the transactions contemplated by this Agreement. No filing, recording, publishing or other act


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that has not been made or done is necessary or desirable in connection with the existence or good standing of the Managing Member or the conduct of the business of the Managing Member, except as would not have a Material Adverse Effect.


(c) The Non-Managing Member is a corporation, duly formed, validly existing and in good standing under the laws of the State of Maryland and is duly qualified to do business and is in good standing in all other places where necessary in light of the business it conducts and the property it owns and intends to conduct and own and in light of the transactions contemplated by this Agreement. No filing, recording, publishing or other act that has not been made or done is necessary or desirable in connection with the existence or good standing of the Non-Managing Member, or the conduct of the business of the Non-Managing Member, except as would not have a Material Adverse Effect.


(d) Each Pledgor has the full power, authority and legal right to execute, deliver and perform its obligations under this Agreement and the Organizational Agreement. The execution, delivery and performance by each Pledgor of this Agreement and the Organizational Agreement and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action, partnership action or limited liability company action, as applicable. Each of this Agreement and the Organizational Agreement has been duly executed and delivered by each Pledgor, has not been amended or otherwise modified except as otherwise disclosed in writing to Secured Party prior to the date hereof, is in full force and effect and is the legal, valid and binding obligation of each Pledgor, enforceable against each Pledgor in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally and to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law). None of the Pledgors is in default in the performance of any covenant or obligation set forth in the Organizational Agreement.


(e) Each Pledgor is the sole beneficial owner of the Collateral pledged by it under Section 4 hereof free and clear of all claims, mortgages, pledges, liens, security interests and other encumbrances of any nature whatsoever (and no right or option to acquire the same exists in favor of any other person or entity), except for the assignment, pledge and security interest in favor of Secured Party created or provided for herein, and each Pledgor agrees that it will not encumber or grant any security interest in or with respect to the Collateral or permit any of the foregoing.


(f) Upon the filing of UCC-l financing statements ("UCC-ls") in the States where the principal office of each Pledgor is located and, to the extent that the Collateral or any part thereof constitutes "securities" for purposes of Article 8 of the UCC, registration of such pledge on the registration book maintained by Borrower, the pledge and security interest hereunder in favor of Secured Party constitutes a first priority pledge and security interest in and to all of the Collateral pledged by each Pledgor hereunder.


(g) None of the execution and delivery of this Agreement and the Organizational Agreement or the consummation of the transactions contemplated herein will conflict with or result in a breach of, or require any


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consent under, any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency to which Pledgor or its property is bound or subject, or any agreement or instrument to which the Pledgors are a party or by which the Pledgors or any of the Pledgors' property is bound or to which the Pledgors are subject, or constitute a default under any such agreement or instrument, or (except for the liens created pursuant hereto) result in the creation or imposition of any lien or encumbrance upon any of the Pledgors' revenues or assets pursuant to the terms of any such agreement or instrument.


(h) No authorizations, approvals or consents of, and no filings or registrations with, any governmental authority are necessary for the execution, delivery or performance by the Pledgors of this Agreement or the Organizational Agreement, except for the filings of the UCC-ls.


(i) There is no action, suit or proceeding at law or in equity by or before any governmental authority, arbitral tribunal or other body now pending, or to the best knowledge of the Pledgors, threatened against or affecting the Pledgors or any of its property or the Collateral that could have a material adverse effect on such party's condition, financial or otherwise.


(j) No Pledgor is (i) required to register as an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or an "investment advisor" within the meaning of the Investment Company Act of 1940, as amended, (ii) an "electric utility company", a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of either a "holding company" or a "subsidiary company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.


(k) The Pledgors and Borrower do not, in connection with incurring the Loan and pledging the Collateral, have any actual intent to hinder, delay or defraud any entity to which any of the Pledgors or Borrower is or is to become indebted.


(l) Each of the Pledgors and Borrower (or their respective equity owners) is receiving reasonably equivalent value in exchange for the Loan and pledge.


(m) Each of the Pledgors and Borrower is not insolvent on the date hereof and will not become insolvent as a result of such Loan and pledge.


(n) The Loan and pledge do not result in any of the Pledgors or Borrower having unreasonably small capital for its intended purposes.


(o) Each of the Pledgors and Borrower does not intend to incur, or believe in respect of the Loan and pledge that it will incur, debts that would be beyond such Pledgor's ability to pay as such debts matured.


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(p) The Pledgors are the sole members of the Florida Borrowers and their percentage interests in the Florida Borrowers are as set forth on Schedule A hereto. The Managing Member is the sole member of Non-Florida Borrowers.


(q) The Managing Member is the sole managing member of Borrower and has the full power, authority and legal right under the Organizational Agreement to execute and deliver the Loan Documents on behalf of Borrower and to direct the operations of Borrower, including the performance by Borrower of its obligations under the Loan Documents. Each such Loan Document has been duly executed and delivered by the Managing Member on behalf of Borrower, and constitutes the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally and to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law).


(r) The Non-Managing Member is the sole general partner of the Managing Member and has the full power, authority and legal right under the Organizational Agreement to execute and deliver the Loan Documents on behalf of the Managing Member on behalf of Borrower and to direct the operations of the Managing Member on behalf of the Borrower, including the performance by the Managing Member on behalf of the Borrower of Borrower's obligations under the Loan Documents. Each such Loan Document has been duly executed and delivered by the Non-Managing Member on behalf of the Managing Member on behalf of Borrower, and constitutes the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally and to the application of general principles of equity (regardless of whether considered in a proceeding in equity or at law).


(s) All instruments and stock or other certificates representing the Collateral are being delivered by Pledgors to the Secured Party simultaneously herewith duly endorsed in blank.


(t) There are no outstanding options, warrants or other agreements with respect to any portion of the Collateral.

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