PROMISSORY NOTE
$1,671,000 May 23, 1997
Cleveland, Ohio
FOR VALUE RECEIVED, the undersigned, JEFFREY I.
FRIEDMAN (the "Maker"), hereby promises to pay to the order of
ASSOCIATED ESTATES REALTY CORPORATION, an Ohio corporation
("Payee"), the principal amount of ONE MILLION SIX HUNDRED
SEVENTY ONE THOUSAND DOLLARS ($1,671,000), together with interest
on and from the date hereof until due, whether at stated
maturity, by acceleration or otherwise, upon the outstanding
balance of the principal amount hereof at a fluctuating rate of
interest equal at all times to the Libor Rate for a one month
Interest Period in effect from time to time, as such capitalized
terms are defined in the Second Amended and Restated Credit
Agreement, among Payee and National City Bank, as agent, and the
Banks, dated as of September 26, 1995, as amended from time to
time (the "Credit Agreement"). Both principal and interest are
payable in lawful money of the United States of America to Payee
at 5025 Swetland Court, Richmond Heights, Ohio 44143-1467, or at
such other address as Payee may designate in writing from time to
time to Maker, in immediately available funds.
Section 1. Terms of Payment. Except under those
circumstances hereinafter set forth providing for acceleration or
for the payment of interest after the same becomes due, the
principal of and interest on this Promissory Note are payable as
follows: (a) accrued and unpaid interest only on the outstanding
principal balance of this Promissory Note shall be paid quarterly
on the first day of each February, May, August and November,
commencing on August 1, 1997, until the principal balance hereof
is paid in full; and (b) the entire outstanding balance of the
principal hereof, together with all accrued and unpaid interest
thereon, shall be due and payable on the 1st day of May, 2002.
Any amount of principal or interest which is not paid when due,
whether at stated maturity, by acceleration or otherwise, or
within ten days thereafter, shall bear interest, payable on
demand, on and from the day when due at a fluctuating rate equal
at all times to the Default Rate, as such term is defined in the
Credit Agreement, until such amount is paid in full .
Section 2. Optional Prepayment. The Maker shall have
the privilege of prepaying all or any part of the amounts due
under this Promissory Note at any time and from time to time
without notice or any prepayment penalty. Any prepayment shall
first be applied to accrued but unpaid interest and thereafter
applied to the unpaid principal balance hereof.
Section 3. Acceleration. In the event (a) the
undersigned shall fail to pay any installment of principal of or
interest on this Promissory Note when due and payable or within
ten days thereafter, or (b) the undersigned shall fail to pay any
installment of principal of or interest on that certain unsecured
Promissory Note, in the original principal amount of One Million
Six Hundred Seventy One Thousand Dollars ($1,671,000), of even
date herewith of Maker in favor of Payee when due and payable or
within ten days thereafter; (c) an Event of Default as defined
under and described in that certain Pledge Agreement of even date
herewith of Maker in favor of Payee (the "Pledge Agreement")
shall occur and be continuing, or (d) the undersigned shall admit
in writing his inability to pay debts generally as they become
due, or (e) the undersigned shall make a general assignment for
the benefit of creditors, or (f) any proceeding shall be
instituted by or against the undersigned seeking to adjudicate
him bankrupt or insolvent or seeking reorganization, arrangement,
adjustment or composition of his debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking appointment of a receiver, trustee or other similar
official for him or for any substantial part of his property,
then, and in any such event, the entire amount then remaining
unpaid on this Promissory Note and accrued interest thereon
shall, at the option of the holder or holders hereof, become due
and payable at once without notice, presentment or demand, such
notice, presentment and demand being hereby expressly waived.
Section 4. Security; Rights and Remedies. This
Promissory Note is secured by a pledge by Maker to Payee of
150,000 common shares, without par value, of Payee pursuant to
the Pledge Agreement. The rights and remedies set forth herein
shall be cumulative and in addition to any other or further
rights and remedies available at law or in equity. The
invalidity or unenforceability of any term or provision of this
Promissory Note, or the application of such term or provision to
any person or circumstance, shall not impair or affect the
remainder of this Promissory Note and its application to other
persons and circumstances and the remaining terms and provisions
hereof shall not be invalid, but shall remain in full force and
effect.
Section 5. Applicable Law. This Promissory Note shall
be governed by and construed in accordance with the laws of the
State of Ohio.
Section 6. Headings. Section headings used in this
Promissory Note are for convenience only and shall not affect the
construction of this Promissory Note.
Section 7. Waiver. The Maker hereby waives
presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance,
default or enforcement of this Promissory Note, assents to any
extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of
collateral, and/or to the addition or release of any other party
or person primarily or secondarily liable under this Promissory
Note.
Section 8. Cognovit Note. THE UNDERSIGNED HEREBY
AUTHORIZES ANY ATTORNEY AT LAW TO APPEAR FOR THE UNDERSIGNED, IN
AN ACTION ON THIS PROMISSORY NOTE, AT ANY TIME AFTER THE SAME
BECOMES DUE, AS HEREIN PROVIDED, IN ANY COURT OF RECORD IN OR OF
THE STATE OF OHIO, OR ELSEWHERE, TO WAIVE THE ISSUING AND SERVICE
OF PROCESS AGAINST THE UNDERSIGNED AND TO CONFESS JUDGMENT IN
FAVOR OF THE HOLDER OF THIS PROMISSORY NOTE AGAINST THE
UNDERSIGNED FOR THE AMOUNT THAT MAY BE DUE, WITH INTEREST AT THE
RATE HEREIN MENTIONED AND COSTS OF SUIT, AND TO WAIVE AND RELEASE
ALL ERRORS IN SAID PROCEEDINGS AND JUDGMENT, AND ALL PETITIONS IN
ERROR, AND RIGHT OF APPEAL FROM THE JUDGMENT RENDERED.
This Promissory Note has been executed at Cleveland,
Cuyahoga County, Ohio, as of the date first above written.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT
TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE
AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARD-
LESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH
THE AGREEMENT, OR ANY OTHER CAUSE.
/s/ Jeffrey I. Friedman
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Jeffrey I. Friedman
JCM3614:35295:97001:JCM-02E.NOT
jcm 05/19/97