CONSTRUCTION LOAN AGREEMENT
BETWEEN
FOUNDRY SQUARE ASSOCIATES II, LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY,
AS BORROWER
AND
RIVERSIDE FINANCE COMPANY, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY,
AS LENDER
EXECUTED AS OF APRIL 25, 2002
CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT ("Agreement") is executed as of April 25,
2002, by and between FOUNDRY SQUARE ASSOCIATES II, LLC, a California limited
liability company ("Borrower"), and RIVERSIDE FINANCE COMPANY, L.L.C., a
Delaware limited liability company ("Lender").
RECITALS
A. Borrower owns or will own certain real property described in EXHIBIT A
hereto ("Property").
B. Borrower proposes to construct new improvements or renovate existing
improvements on the Property consisting of: A 10-story office building, together
with all appurtenances, fixtures, and tenant improvements now or hereafter
located on the Property ("Improvements"). The Improvements shall be constructed
in accordance with plans and specifications which Borrower has heretofore, or
will hereafter deliver to Lender, as amended in order to comply with the terms
and conditions of this Agreement ("Plans and Specifications"). Borrower has
requested from Lender a loan for the purpose of such construction.
NOW, THEREFORE, Borrower and Lender agree as follows:
ARTICLE 1. DEFINITIONS
1.1. Defined Terms. The following capitalized terms generally used in this
Agreement shall have the meanings defined or referenced below. Certain other
capitalized terms used only in specific sections of this Agreement are defined
in such sections.
"Account" - means an account with Bank, account number 14226-02990, in the
name of Borrower or Borrower's designee into which Loan proceeds will be
deposited.
"ADA" - means the Americans with Disabilities Act, 42 U.S.C. Section
12101, et seq. as now or hereafter amended or modified.
"Affiliate" - means, as to any person or entity, any person or entity
which, directly or indirectly, controls, is controlled by or is under common
control with, or which has the power to control the management or operations of,
such person or entity.
"Architect" - means Roberson Rae Olson & Sueberkrop d/b/a/ Studios
Architecture.
"Architect's Agreement" - means that certain agreement dated December 1,
1999 by and between Borrower and Architect.
"Bank" - means Bank of America.
"Bankruptcy Code" - means the Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101-1330) as now or hereafter amended or recodified.
"Bonded Work" - shall have the meaning ascribed to such term in Section
8.1.
"Border Zone Property" - means any property designated as "border zone
property" under the provisions of California Health and Safety Code, Sections
25220 et seq., or any regulation adopted in accordance therewith.
"Borrower" - means Foundry Square Associates II, LLC, a California limited
liability company.
"Borrower's Funds" - means all funds of Borrower deposited with Lender
into the Borrower's Funds Account maintained with Bank pursuant to the terms and
conditions of this Agreement.
"Borrower's Funds Account" - means the account with Bank into which all
funds deposited with Lender pursuant to this Agreement shall be placed.
"Business Day" - means a day of the week (but not a Saturday, Sunday or
holiday) on which the offices of Bank are open to the public for carrying on
substantially all of Bank's business functions. Unless specifically referenced
in this Agreement as a Business Day, all references to "days" shall be to
calendar days.
"Certificate of Approval" - means a certificate in the form of EXHIBIT F.
"Completion Date" - means the date upon which Borrower satisfies the last
of the conditions for the release of the Retention, as provided in Paragraph C
of EXHIBIT D, currently estimated to be August 17, 2001, the date by which
construction of the Improvements must be complete, subject to extension pursuant
to change orders approved by Lender as provided herein or pursuant to the
provisions of Section 4.3.
"Construction Agreement" - means that certain agreement to construct the
Improvements dated June 1, 2000 by and between Borrower and Contractor.
"Contractor" - means Webcor Construction, Inc.
"Deed of Trust" - means that certain Construction Deed of Trust with
Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing
of even date herewith executed by Borrower, as Trustor, to Chicago Title
Company, as Trustee, for the benefit of Lender, as Beneficiary, as hereafter
amended, supplemented, replaced or modified.
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"Deemed Approval Matter" - means any matter requiring the consent of
Lender under the Loan Documents including, without limitation, the following:
(1) contracts for which Lender approval is required hereunder, as contemplated
in Sections 4.4 and 4.5, (2) Plans and Specifications and changes thereto for
which Lender approval is required hereunder, as contemplated in Section 4.6, (3)
Borrower's contracting for any materials, furnishings, equipment, fixtures or
other parts or components of the Improvements in which any third party will
retain any interest for which Lender approval is required hereunder, as
contemplated in Section 4.8, (4) the inclusion of the Property in any assessment
district or community facilities district for which Lender approval is required
hereunder, as contemplated in Section 4.11, (5) formation and authorization
documents of Borrower and Payment Guarantor, and modifications thereto, for
which Lender approval is required hereunder, as contemplated in Sections 6.3 and
9.10, (6) the issuance of any Set Aside Letter for which Lender approval is
required hereunder, as contemplated in Section 8.1; (7) leases and leasing
parameters for which Lender approval is required hereunder, as contemplated in
Section 9.4, (8) any Subdivision Map for which Lender approval is required
hereunder, as contemplated in Section 9.6, (9) assignment of all or any portion
of Borrower's interest under the Loan documents or any moneys due or to become
due thereunder for which Lender approval is required hereunder, as contemplated
in Section 9.8, and (10) agreements providing for the management, leasing or
operation of the Property or Improvements for which Lender approval is required
hereunder, as contemplated in Section 9.9; provided, however, the Lender's right
to approve, as provided in this Agreement, (i) the Title Policy and (ii) any
transfer of the Property, any interest in Borrower, any interest in the Project
Entity or any interest in WEO other than a Permitted Transfer, shall not
constitute Deemed Approval Matters.
"Default" - shall have the meaning ascribed to such term in Section 11.1.
"Development and Management Agreements" - means that development
management agreement by and between Borrower, as owner, and WEO, as manager,
dated June 20, 2000, or any other substitute or additional contract for
development management, property management and/or brokerage services for the
Property, and any amendment thereof, in each case, that has been approved by
Lender.
"Disbursement Budget" - means the design and construction budget for the
Improvements, as approved by Lender from time to time.
"Distribution" - means any transfer of cash or other property from
Borrower to any constituent member or statutory manager thereof, whether
characterized as a distribution, dividend, redemption, fee, repayment of a loan
or otherwise, but excluding the payment of any fees, commissions or expenses
pursuant to the Development and Management Agreements prior to the date that
Lender requires Borrower to terminate the Development and Management Agreements
under the provisions of Section 11.6 and following the date of any reinstatement
of any terminated Development and Management Agreements under the provisions of
Section 11.6.
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"Effective Date" - means the date the Deed of Trust is recorded in the
Office of the County Recorder of the county where the Property is located.
"Environmental Report" - means the reports actually received by Lender as
contemplated in Section 3.1(d) of this Agreement.
"EOP Project Investor" - EOP - F2 First/Howard Investors, L.L.C., a
Delaware limited liability.
"Hazardous Materials" - shall have the meaning ascribed to such term in
Section 7.1(a).
"Hazardous Materials Claims" - shall have the meaning ascribed to such
term in Section 7.1(c).
"Hazardous Materials Laws" - shall have the meaning ascribed to such term
in Section 7.1(b).
"Improvements" - shall have the meaning ascribed to such term in Recital
B.
"Lender" - means Riverside Finance Company, L.L.C., a Delaware limited
liability company.
"Lender Payment Turnaround Period" - means, provided that Borrower
delivers the applicable application for payment to Lender under cover of a
written notice stating in bold, all-capitalized letters what the outside date
for such Lender Payment Turnaround Period is for that specific application for
payment, ten (10) calendar days.
"Loan" - means the principal sum that Lender agrees to lend and Borrower
agrees to borrow pursuant to the terms and conditions of this Agreement: ONE
HUNDRED SIXTEEN MILLION, SIX HUNDRED FIFTY-FIVE THOUSAND, ONE HUNDRED
THIRTY-THREE AND NO/100THS DOLLARS ($116,655,133.00).
"Loan Documents" - means those documents, as hereafter amended,
supplemented, replaced or modified, properly executed and in recordable form, if
necessary, listed in EXHIBIT B as Loan Documents.
"Maturity Date" - means the earliest to occur of (i) August 26, 2004, (ii)
the date that is one hundred eighty days (180) days after the date that either
of the "B Unit" or the "C Unit" (with each of such quoted terms defined as
provided in the Operating Agreement of Project Entity) is transferred to the EOP
Project Investor or any person or entity controlling, controlled by or under
common control with the EOP Project Investor; and (iii) the date on which all
interests of WEO in the Project Entity are sold or otherwise transferred to any
person or entity that does not control, is not controlled by or is not under
common control with either the EOP Project Investor or WEO.
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"Note" - means that certain Promissory Note Secured by Deed of Trust of
even date herewith, in the original principal amount of the Loan, executed by
Borrower and payable to the order of Lender, as hereafter amended, supplemented,
replaced or modified.
"Obligee" - shall have the meaning ascribed to such term in Section 8.1.
"Operating Agreement of Project Entity" - means the limited liability
company agreement of the Project Entity dated as of October 31, 2000, in the
form delivered to Lender, as hereafter amended, supplemented, replaced or
modified as permitted in this Agreement.
"Operating Agreement of WEO" - means that certain Amended and Restated
Operating Agreement No. 1 of Wilson/Equity Office, LLC dated as of August 1,
2000, in the form delivered to Lender, as hereafter amended, supplemented,
replaced or modified as permitted in this Agreement.
"Other Borrower Loan Documents" - means those documents, as hereafter
amended, supplemented, replaced or modified from time to time, properly executed
and in recordable form, if necessary, listed in EXHIBIT B as "Other Borrower
Loan Documents."
"Other Related Documents" - means those documents, as hereafter amended,
supplemented, replaced or modified from time to time, properly executed and in
recordable form, if necessary, listed in EXHIBIT B as Other Related Documents.
"Out of Balance Notice" - shall have the meaning ascribed to such term in
Section 3.1(b).
"Payment Guarantor" - means the Project Entity.
"Permitted Transfers" - means transfers of interests in the Project Entity
that are permitted under the Operating Agreement of the Project Entity and
transfers of interests in Wilson/Equity Office, LLC, that are permitted under
the Operating Agreement of WEO.
"Plans and Specifications" - shall have the meaning ascribed to such term
in Recital B.
"Principal Subs" - shall have the meaning ascribed to such term in Section
4.7.
"Project Entitlements" - means (i) San Francisco Planning Commission
Motions No. 15005 and 15006, dated March 2, 2000; (ii) Notice of Special
Restrictions Under the Planning Code recorded December 29, 2000, Reel H794,
Image 524, Series No. 00-G884921; (iii) Notice of Special Restrictions Under the
Planning Code recorded
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December 29, 2000, Reel H794, Image 525, Series No. 00-G884922; and (iv) Terms
and Conditions contained in the Declaration of Use recorded March 29, 2001, Reel
H855, Image 0680, Series No. 2001-G924319.
"Project Entity" means Foundry Square Investors II, LLC, a California
limited liability company.
"Property" - shall have the meaning ascribed to such term in Recital A.
"Required Equity Contribution" - means FORTY-NINE MILLION, NINE HUNDRED
NINETY-FIVE THOUSAND, FIFTY-SEVEN AND NO/100THS DOLLARS ($49,995,057.00).
"Secured Obligations" - shall have the meaning ascribed to such term in
the Deed of Trust.
"Set Aside Letter" - shall have the meaning ascribed to such term in
Section 8.1.
"Subdivision Map" - shall have the meaning ascribed to such term in
Section 9.6.
"Surety" - shall have the meaning ascribed to such term in Section 8.1.
"Title Policy" - means the LP-10 ALTA Lender's Policy of Title Insurance
as issued by Chicago Title Company, together with such special endorsements as
Lender may require thereto, including, without limitation, forms CLTA 100
(making particular reference to any easement or encroachment listed in the Title
Policy), 116, 116.1, 116.4 (if there are any contiguity issues, in Lender's
opinion), 116.7, 103.7 (modified to insure access to a physically open public
street sufficient to provide vehicular and pedestrian ingress and egress),
variable interest rate, separate tax parcel, and such other special endorsements
as Lender may require.
"WEO" - means Wilson/Equity Office, LLC, a Delaware limited liability
company.
"Working Capital" - means all proceeds of the Loan disbursed by Lender
into the Working Capital Reserve Account maintained with Bank pursuant to the
terms and conditions of this Agreement.
"Working Capital Reserve Account" - means the account with Bank into which
all funds disbursed as Working Capital by Lender pursuant to this Agreement
shall be placed.
1.2. Exhibits Incorporated. EXHIBITS A, B, C, D, E, F and G, all attached
hereto, are hereby incorporated into this Agreement.
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ARTICLE 2. LOAN
2.1. Loan. By and subject to the terms of this Agreement, Lender agrees to
lend to Borrower and Borrower agrees to borrow from Lender the principal sum of
ONE HUNDRED SIXTEEN MILLION, SIX HUNDRED FIFTY-FIVE THOUSAND, ONE HUNDRED
THIRTY-THREE AND NO/100THS DOLLARS ($116,655,133.00), said sum to be evidenced
by the Note of even date herewith. The Note shall be secured, in part, by the
Deed of Trust, of even date herewith, encumbering certain real property and
improvements as legally defined therein. Amounts disbursed to or on behalf of
Borrower pursuant to the Note shall be used to finance the acquisition and
construction of the Property and Improvements and for such other purposes and
uses as may be permitted under this Agreement and the other Loan Documents.
2.2. Loan Documents. Borrower shall deliver to Lender concurrently with
this Agreement each of the documents, properly executed and in recordable form,
as applicable, described in EXHIBIT B as Loan Documents, together with those
documents described in EXHIBIT B as Other Related Documents. Notwithstanding
anything to the contrary contained elsewhere within this Agreement, the lien of
the Deed of Trust shall not secure any obligation under any of the Loan
Documents that are designated on EXHIBIT B as not being secured by liens upon
real property.
2.3. Effective Date. The date of the Loan Documents is for reference
purposes only. The Effective Date of delivery and transfer to Lender of the
security under the Loan Documents and of Borrower's and Lender's obligations
under the Loan Documents shall be the date the Deed of Trust is recorded in the
Office of the County Recorder of the county where the Property is located.
2.4. Maturity Date; Prepayment. Upon the Maturity Date, all sums due and
owing under this Agreement and the other Loan Documents shall be repaid in full.
All payments due to Lender under this Agreement, whether at the Maturity Date or
otherwise, shall be paid in immediately available funds. Amounts owing under the
Note may be prepaid by Borrower, upon not less than thirty (30) days prior
written notice to Lender, in whole or in part, at any time, without premium or
penalty.
2.5. Credit for Principal Payments. Any payment made upon the outstanding
principal balance of the Loan shall be credited as of the Business Day received,
provided such payment is received by Lender no later than 11:00 a.m. Pacific
Time) and constitutes immediately available funds. Any principal payment
received after said time or which does not constitute immediately available
funds shall be credited upon such funds having become unconditionally and
immediately available to Lender.
2.6. Full Repayment and Reconveyance. Upon receipt of all sums owing and
outstanding under the Loan Documents, Lender shall issue a full reconveyance of
the Property and Improvements from the lien of the Deed of Trust and otherwise
release
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Lender's security interest in all other personal property collateral that secure
the Loan; provided, however, that all of the following conditions shall be
satisfied at the time of, and with respect to, such reconveyance: (a) Lender
shall have received all escrow, closing and recording costs, the costs of
preparing and delivering such reconveyance and any sums then due and payable
under the Loan Documents, and (b) Lender shall have received a written release
satisfactory to Lender of any set aside letter, letter of credit or other form
of undertaking which Lender has issued to any surety, governmental agency or any
other party in connection with the Loan and/or the Property and Improvements.
Lender's obligation to make further disbursements under the Loan shall terminate
as to any portion of the Loan undisbursed as of the date of issuance of such
full release or reconveyance, and any commitment of Lender to lend any
undisbursed portion of the Loan shall be canceled.
2.7. Certificates of Approval. With respect to any Deemed Approval Matter,
such matter shall be deemed approved by Lender if Borrower delivers to Lender,
with Borrower's next request for a disbursement pursuant to Article III, below,
a properly completed and factually accurate Certificate of Approval, and Lender
does not dispute such Certificate of Approval by written notice to Borrower
delivered within five (5) Business Days following Lender's receipt thereof. Such
Lender approval shall be effective as of the date such approval was required,
unless Lender timely delivers such written notice disputing such Certificate of
Approval.
ARTICLE 3. DISBURSEMENT
3.1. Conditions Precedent. Lender's obligation to make any disbursements
or take any other action under the Loan Documents shall be subject at all times
to satisfaction of each of the following conditions precedent:
(a) There shall exist no Default, as defined in this Agreement,
Default as defined in any of the other Loan Documents, event, omission or
failure of condition which would constitute a Default after notice or lapse of
time, or both, or default by Borrower (following any applicable notice and cure
period) under any of the Other Related Documents, except to the extent that such
event, omission or failure (i) is of a nature that it could ripen into a
monetary Default, and that event, omission or failure will be cured by the
requested disbursement or with funds that Borrower is then attempting to raise
during the 60-day cure period set forth in the provisions of the final paragraph
of Section 11.1, or (ii) is of a nature that it could ripen into a non-monetary
Default, such event, omission or failure is curable, and Borrower is then
diligently prosecuting such cure to completion within the applicable cure
period; and
(b) Any undisbursed Loan funds together with all sums, if any, to be
provided by Borrower as shown in EXHIBIT C shall be at all times equal to or
greater than the amount which Lender from time to time reasonably determines
necessary to: (i) pay, through completion, all costs of renovation, development,
construction, operation,
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marketing and sale or leasing of the Property and Improvements in accordance
with the Loan Documents; (ii) pay all sums which may accrue under the Loan
Documents prior to repayment of the Loan; and (iii) enable Borrower to perform
and satisfy all of the covenants of Borrower contained in the Loan Documents. If
Lender reasonably determines at any time that the undisbursed Loan funds are
insufficient for said purposes, Lender may deliver to Borrower written notice
demanding that Borrower then deposit funds equal to such deficiency in the
Borrower's Funds Account (an "Out of Balance Notice"), in which event Borrower
shall deposit the amount of such deficiency in the Borrower's Funds Account
within thirty (30) days after the date of delivery of the applicable Out of
Balance Notice; and
(c) Lender shall have received all Loan Documents, other documents,
instruments, policies, and forms of evidence or other materials requested by
Lender under the terms of this Agreement or any of the other Loan Documents,
including, without limitation, such forms of estoppel certificates and
subordination, non-disturbance and attornment agreements as Lender may then
require from existing tenants of the Property; and
(d) Lender acknowledges that it has received and approved in form
and substance satisfactory to Lender: (i) a soils report for the Property and
Improvements; (ii) an environmental questionnaire and environmental site
assessment with respect to the presence, if any, of Hazardous Materials on the
Property and Improvements; (iii) two sets of the Plans and Specifications,
certified as complete by the Architect (or if the Plans and Specifications for
the entirety of the Improvements are not then complete or some portion of the
Improvements are to be constructed using a design/build process, in either such
case pursuant to partial Plans and Specifications approved by Lender under the
provisions of Section 4.6 of this Agreement and for which a valid building
permit has been issued, then such portion of the Plans and Specifications to the
extent that payment for such portion of the Improvements is to be covered by a
current disbursement request), together with evidence of all necessary or
appropriate approvals of governmental agencies; (iv) copies of all agreements
which are material to completion of the Improvements; (v) copies of all building
permits and similar permits, licenses, approvals, development agreements and
other authorizations of governmental agencies required in connection with the
development of the Property and Improvements, or, if such approvals are to be
issued on a staged basis, then for the current and all prior stages of
development, provided that such staged development has been approved by Lender,
as contemplated in Section 4.6; and (vi) copies of any initial study, negative
declaration, mitigated negative declaration, environmental impact report, notice
of determination or notice of exemption prepared, adopted, certified or filed by
any governmental agency in connection with the Property; and
(e) Lender shall have received and approved evidence reasonably
acceptable to Lender that Borrower has invested the Required Equity Contribution
into
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the acquisition and development of the Property and Improvements, either as
shown on EXHIBIT C or otherwise.
3.2. Account, Pledge and Assignment, and Disbursement Authorization. The
proceeds of the Loan and Borrower's Funds, when qualified for disbursement,
shall be deposited into the Account or otherwise disbursed to or for the benefit
or account of Borrower under the terms of this Agreement. Disbursements
hereunder may be made by Lender upon the written request of any person who has
been authorized by Borrower to request such disbursements until such time as
written notice of Borrower's revocation of such authority is received by Lender
at the address shown in EXHIBIT D. As additional security for Borrower's
performance under the Loan Documents, Borrower hereby irrevocably pledges and
assigns to Lender the Account and all monies at any time deposited in the
Account.
3.3. Borrower's Funds Account, Pledge and Assignment. Except as otherwise
provided in this Agreement, all of the Borrower's Funds which are deposited with
Lender by Borrower as shown in EXHIBIT C, or any other provision of the Loan
Documents, shall be placed in the Borrower's Funds Account for disbursement
under this Agreement. As additional security for Borrower's performance under
the Loan Documents, Borrower hereby irrevocably pledges and assigns to Lender
the Borrower's Funds Account and all monies at any time deposited in the
Borrower's Funds Account.
3.4. Loan Disbursements. Subject to the conditions set forth in Section
3.1(b), the proceeds of the Loan and Borrower's Funds shall be disbursed in
accordance with the terms and conditions of EXHIBIT D. Disbursements made after
the deposit of Borrower's Funds shall be made first from the Borrower's Funds
Account until depleted. All disbursements shall be held by Borrower in trust and
applied by Borrower solely for the purposes for which the funds have been
disbursed. Lender has no obligation to monitor or determine Borrower's use or
application of the disbursements. Partial disbursements shall be permitted under
the terms and subject to the conditions set forth in EXHIBIT D.
3.5. Working Capital. From time to time, in Borrower's Applications for
Payment, Borrower may request the disbursement of proceeds of the Loan and
Borrower's Funds into the Working Capital Reserve Account to maintain the
balance of the Working Capital Reserve Account at the amount specified in the
Disbursement Budget, provided that amounts in the Working Capital Reserve
Account may only be used to pay reasonable costs of the design or construction
of the Improvements, and that Borrower shall have delivered the monthly reports
with respect to the Working Capital Reserve Account that are required under the
provisions of Section 10.1 of this Agreement for all prior months. As additional
security for Borrower's performance under the Loan Documents, Borrower hereby
irrevocably pledges and assigns to Lender the Working Capital Reserve Account
and all monies at any time deposited in the Working Capital Reserve Account.
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3.6. Pre-Closing Loan Disbursements. Attached to this Agreement as EXHIBIT
G is a schedule of advances that were made by Lender to Borrower prior to the
date of the closing of the Loan. Notwithstanding the fact that such advances
occurred prior to the date of the closing of the Loan, Lender and Borrower
hereby agree that each of such advances shall be treated as if it were a
disbursement of proceeds of the Loan under and subject to the provisions of the
Loan Documents, in each case, as of the date of each such advance.
ARTICLE 4. CONSTRUCTION
4.1. Commencement and Completion. Borrower shall commence construction of
the Improvements without delay after recordation of the Deed of Trust and shall
complete construction of the Improvements on or before the Completion Date.
4.2. Commencement and Completion of Offsite Improvements. Borrower shall
commence construction of any offsite improvements required by any governmental
authority to be performed by Borrower under any Project Entitlements in
connection with the construction of the Improvements without delay after
recordation of the Deed of Trust and shall complete construction of any such
offsite improvements on or before the date required under the applicable Project
Entitlements.
4.3. Force Majeure. The time within which construction of the Improvements
must be completed shall be extended for a period of time equal to the period of
any delay directly affecting construction which is caused by fire, earthquake or
other acts of God, unexpected inclement weather, utility shortages or
interruptions, strike, lockout, acts of public enemy, riot, insurrection, or
governmental regulation of the sale or transportation of materials, supplies or
labor, the failure of any governmental authority to issue any Project
Entitlement for reasons beyond Borrower's reasonable control, the failure of any
condition of approval on any Project Entitlement for any reason beyond
Borrower's reasonable control, or any moratorium enacted by any governmental
authority over Borrower's good faith opposition that prohibits, impairs, delays
or restricts development of the Improvements; provided, however, that Borrower
shall furnish Lender with written notice satisfactory to Lender evidencing any
such delay within ten (10) days after the occurrence of any such delay. In no
event shall the time the anticipated date for completion of the Improvements be
extended beyond the Maturity Date or more than one hundred twenty (120) days
beyond the Completion Date as scheduled prior to such delay.
4.4. Construction Agreement. Borrower and Contractor have entered into the
Construction Agreement pursuant to the terms and conditions of which Contractor
is to construct the Improvements. Borrower shall require Contractor to perform
in accordance with the terms of the Construction Agreement and shall not amend,
modify or alter the Construction Agreement without Lender's prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed. Borrower shall execute, upon Lender's request, an assignment of
Borrower's rights under the Construction Agreement
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to Lender as security for Borrower's obligations under this Agreement and the
other Loan Documents and shall cause the Contractor to consent to any such
assignment.
4.5. Architect's Agreement. Borrower and Architect have entered into the
Architect's Agreement, pursuant to which Architect is to design the
Improvements. Borrower shall require Architect to perform in accordance with the
terms of the Architect's Agreement and shall not amend, modify or alter the
Architect's Agreement without Lender's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed. Upon Lender's
request, Borrower shall execute an assignment of the Architect's Agreement and
the Plans and Specifications to Lender as additional security for Borrower's
performance under this Agreement and the other Loan Documents and shall cause
the Architect to consent to any such assignment.
4.6. Plans and Specifications.
(a) Changes; Lender Consent. If the Plans and Specifications
contemplate staged design and construction, and if Lender has approved Plans and
Specifications that contemplate that certain stages will be designed in the
future, then any stages of such Plans and Specifications that have not been
approved by Lender as of the date of this Agreement shall be subject to Lender's
prior written approval, which consent shall not be unreasonably withheld,
conditioned or delayed. Except as otherwise provided in this Agreement, Borrower
shall not make any changes in the Plans and Specifications or the Improvements
without Lender's prior written consent if such change, taken together with all
other changes for which Lender's approval was not required hereunder, could
materially affect the overall quality or efficiency of the Improvements or the
Improvements' exterior, lobbies or building systems. Without limiting the above,
Lender agrees that Borrower may make minor changes in the Plans and
Specifications and Improvements without Lender's prior written consent, provided
that such changes do not violate any of the conditions specified herein.
Notwithstanding the foregoing, Lender shall not have any approval rights
respecting any change in the Plans and Specifications or the Improvements if
such change follows inevitably from previously approved Plans and Specifications
or changes thereto. Borrower shall at all times maintain, for inspection by
Lender, a set of working drawings of the Improvements, which, if there is staged
design that has not yet occurred, if applicable, shall at least cover the
portions of the Improvements completed and under construction or fully designed
at such time.
(b) Changes; Submission Requirements. Borrower shall submit any
proposed change in the Plans and Specifications requiring Lender's consent to
Lender prior to the commencement of construction relating to such proposed
change, at least ten (10) Business Days prior to the commencement of
construction. Requests for any change which requires consent shall be
accompanied by working drawings (or appropriate submittals) and a written
description of the proposed change, submitted on a change order form acceptable
to Lender, signed by Borrower and, if required by Lender, also by the
Page 12
Architect and the Contractor. At its option, Lender may require Borrower to
provide: (i) evidence satisfactory to Lender of the cost and time necessary to
complete the proposed change; and (ii) a deposit in the amount of any increased
costs into Borrower's Funds Account.
(c) Consent Process. Borrower acknowledges that Lender's review of
any changes and required consent may result in delays in construction and hereby
consents to any such delays. Nevertheless, Lender shall use commercially
reasonable efforts to respond to requests for approval within the time periods
provided in this Agreement.
(d) Final Plans and Specifications. Upon completion of the
Improvements, Borrower shall deliver to Lender within sixty (60) days a set of
final, as-built Plans and Specifications.
4.7. Contractor/Construction Information. Borrower shall deliver to Lender
in a form acceptable to Lender: (a) a list detailing the name, address and phone
number of each contractor, subcontractor and material supplier to be employed or
used for construction of the Improvements who is under contract or otherwise has
been selected to supply goods or services or perform work for the Project
costing in excess of $5,000 in the aggregate and any other person or entity who
delivers a Preliminary Notice to Owner or Lender under Civil Code Sections 3097
or 3098 (collectively, "Principal Subs") together with the dollar amount,
including changes, if any, reflected in each contract and subcontract for the
Principal Subs, and the portion thereof, if any, paid through the date of such
list of Principle Subs; (b) copies of each contract and subcontract identified
in such list of Principal Subs, including any changes thereto; (c) a cost
breakdown of the projected total cost of constructing the Improvements, and that
portion, if any, of each cost item which has been incurred; and (d) a
construction progress schedule detailing the progress of construction and the
projected sequencing and completion time for uncompleted work, all as of the
date of such schedule.
Borrower agrees that Lender's approval of any contractor, subcontractor or
material supplier if and to the extent permitted under the terms of this
Agreement shall not constitute a warranty or representation of qualification by
Lender. Lender may contact any contractor, subcontractor or material supplier to
discuss the course of construction.
4.8. Prohibited Contracts. Without Lender's prior written consent,
Borrower shall not contract for any materials, furnishings, equipment, fixtures
or other parts or components of the Improvements, if any third party shall
retain any ownership interest (other than lien rights created by operation of
law) in such items after their delivery to the Property and Improvements.
Borrower shall have twenty (20) days to effect the removal of any such retained
interest not otherwise permitted above, or, provided that such interest or the
holder's realization thereon will not jeopardize Borrower's title to or use of
the Property, if such retained interest cannot be reasonably removed in such
period,
Page 13
Borrower shall have commenced such removal within such time and shall diligently
pursue its removal until completed.
4.9. Liens and Stop Notices. If a claim of lien is recorded which affects
the Property or Improvements or a bonded stop notice is served upon Lender,
within twenty (20) calendar days after such recording or service or within five
(5) Business Days after Lender's demand, whichever occurs first, Borrower, at
Borrower's election, shall do one of the following: (a) pay and discharge the
claim of lien or bonded stop notice; (b) effect the release thereof by recording
or delivering to Lender a surety bond in sufficient form and amount; or (c)
provide Lender with other assurances which Lender deems, in its sole discretion,
to be satisfactory for the payment of such claim of lien or bonded stop notice
and for the full and continuous protection of Lender from the effect of such
lien or bonded stop notice.
4.10. Construction Responsibilities. Borrower shall construct the
Improvements in a workmanlike manner substantially in accordance with the Plans
and Specifications and the recommendations of any soils or engineering report
approved by Lender pursuant to Section 3.1(d) above. Borrower shall
substantially comply with all applicable laws, ordinances, rules, regulations,
building restrictions, recorded covenants and restrictions, and requirements of
all regulatory authorities having jurisdiction over the Property or
Improvements. Borrower shall be solely responsible for all aspects of Borrower's
business and conduct in connection with the Property and Improvements,
including, without limitation, for the quality and suitability of the Plans and
Specifications and their compliance with all governmental requirements, the
supervision of the work of construction, the qualifications, financial condition
and performance of all architects, engineers, contractors, material suppliers,
consultants and property managers, and the accuracy of all applications for
payment and the proper application of all disbursements. Lender is not obligated
to supervise, inspect or inform Borrower or any third party of any aspect of the
construction of the Improvements or any other matter referred to above.
4.11. Assessments and Community Facilities Districts. Without Lender's
prior written consent, Borrower shall not cause or suffer to become effective or
otherwise consent to the formation of any assessment district or community
facilities district which includes all or any part of the Property and
Improvements pursuant to: (a) the Mello-Roos Community Facilities Act of 1982;
(b) the Municipal Improvement Act of 1913; or (c) any other comparable or
similar statute or regulation. Nor shall Borrower cause or otherwise consent to
the levying of special taxes or assessments against the Property and
Improvements by any such assessment district or community facilities district.
4.12. Delay. Borrower shall promptly notify Lender in writing of any event
causing delay or interruption of construction, or the timely completion of
construction. The notice shall specify the particular work delayed, and the
cause and period of each delay.
Page 14
4.13. Inspections. Lender shall have the right to enter upon the Property
at all reasonable times to inspect the Improvements and the construction work to
verify information disclosed or required pursuant to this Agreement. Any
inspection or review of the Improvements by Lender is solely to determine
whether Borrower is properly discharging its obligations to Lender and may not
be relied upon by Borrower or by any third party as a representation or warranty
of compliance with this Agreement or any other agreement. Lender owes no duty of
care to Borrower or any third party to protect against, or to inform Borrower or
any third party of, any negligent, faulty, inadequate or defective design or
construction of the Improvements as determined by Lender.
4.14. Surveys. Upon Lender's written request, Borrower shall promptly
deliver to Lender: (a) a current survey of the Property showing the location of
the Improvements on the Property (as constructed as of the date of such survey),
all easements, encroachments and applicable governmental set backs; and (b) upon
completion of the Improvements, an as-built survey acceptable to a title insurer
for purposes of issuing an ALTA policy of title insurance. All such surveys
shall be performed and certified by a licensed engineer or surveyor acceptable
to the title insurer.
ARTICLE 5. INSURANCE
Borrower shall, while any obligation of Borrower or Payment Guarantor
under any Loan Document remains outstanding, maintain at Borrower's sole
expense, with licensed insurers approved by Lender, the following policies of
insurance in form and substance satisfactory to Lender:
5.1. Title Insurance. A Title Policy insuring Lender, in the principal
amount of the Loan, of the validity and the priority of the lien of the Deed of
Trust upon the Property and Improvements, subject only to matters approved by
Lender in writing. During the term of the Loan, Borrower shall deliver to
Lender, within five (5) Business Days after Lender's written request, such other
endorsements to the Title Policy as Lender may reasonably require.
5.2. Property Insurance. A Builders Risk Completed Value Hazard Insurance
policy, including, without limitation, such endorsements as Lender may require,
insuring Lender against damage to the Property and Improvements in an amount
acceptable to Lender. Lender shall be named on the policy under a Lender's Loss
Payable Endorsement (form #438BFU or equivalent).
5.3. Flood Hazard Insurance. A policy of flood insurance, as required by
applicable governmental regulations, or as deemed necessary by Lender.
5.4. Liability Insurance. A policy of commercial general liability
insurance with limits as required by Lender, insuring against liability for
injury and/or death to any
Page 15
person and/or damage to any property occurring on the Property and/or in the
Improvements from any cause whatsoever.
5.5. General. Borrower shall provide to Lender the originals of all
required insurance policies, or other evidence of insurance acceptable to
Lender. All insurance policies shall provide that the insurance shall not be
cancelable or materially changed without ten (10) days prior written notice to
Lender. Lender shall be named under a Lender's Loss Payable Endorsement (form
#438BFU or equivalent) on all insurance policies which Borrower actually
maintains with respect to the Property and Improvements. Borrower shall provide
to Lender evidence of any other hazard insurance Lender may deem necessary at
any time during the Loan.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
As a material inducement to Lender's entry into this Agreement, Borrower
represents and warrants to Lender as of the Effective Date and as of the date
each Application for Payment is submitted to Lender pursuant to EXHIBIT D
(provided, however, that to the extent circumstances have changed for reasons
beyond the reasonable control of Borrower such that Borrower must qualify such
representations and warranties as of the date of delivery of any such
Application for Payment, such qualification, to the extent it renders the
applicable representation materially untrue or breaches the applicable warranty,
shall merely be a failure of condition to Lender's obligation to disburse funds
under the provisions of EXHIBIT D, as opposed to constituting an Event of
Default) that:
6.1. Authority/Enforceability. Borrower is in substantial compliance with
all laws and regulations applicable to its organization, existence and
transaction of business and has all necessary rights and powers to own, develop
and operate the Property and Improvements as contemplated by the Loan Documents.
6.2. Binding Obligations. Borrower is authorized to execute, deliver and
perform its obligations under the Loan Documents and such obligations are and
shall continue to be valid and binding obligations of Borrower.
6.3. Formation and Organizational Documents. Borrower has delivered to
Lender all formation and organizational documents of Borrower, and of the
Payment Guarantor, and all such formation and organizational documents remain in
full force and effect and have not been amended or modified since they were
delivered to or otherwise approved by Lender. Borrower shall immediately provide
Lender with copies of any amendments or modifications of the formation or
organizational documents, to the extent permitted hereunder.
6.4. No Violation. Borrower's execution, delivery, and performance under
the Loan Documents do not: (a) require any consent or approval not heretofore
obtained
Page 16
under any partnership agreement, operating agreement, limited liability company
agreement, articles of incorporation, bylaws or other document; (b) materially
violate any governmental requirement applicable to the Property and Improvements
or any other statute, law, regulation or ordinance or any order or ruling of any
court or governmental entity; (c) materially conflict with, or constitute a
material breach or default or permit the acceleration of obligations under any
agreement, contract, lease, or other document by which the Borrower is or the
Property and Improvements are bound or regulated; or (d) materially violate any
statute, law, regulation or ordinance, or any order of any court or governmental
entity.
6.5. Compliance with Laws. Borrower has, and at all applicable times shall
have obtained, all permits, licenses, exemptions, and approvals necessary to
construct, occupy, operate and market the Property and Improvements for the
applicable stage of development and operation, and shall maintain substantial
compliance with all governmental requirements applicable to the Property and
Improvements and all other applicable statutes, laws, regulations and ordinances
necessary for the transaction of its business.
6.6. Litigation. Except as disclosed to Lender in writing, there are no
claims, actions, suits, or proceedings pending, or to Borrower's knowledge
threatened, against Borrower, Payment Guarantor or affecting the Property or
Improvements that are of a material nature and that, if successfully prosecuted
against Borrower or Payment Guarantor, as applicable, would create a material
adverse change in the financial condition of either Borrower or Payment
Guarantor.
6.7. Financial Condition. All financial statements and information
relating to the financial condition of Borrower, Payment Guarantor, the
Property, and the Improvements, which have been heretofore and hereafter are
delivered to Lender by Borrower, fairly and accurately represent as of the date
of such delivery the financial condition of the subject thereof and have been
prepared (except as noted therein) in accordance with generally accepted
accounting principles consistently applied. Borrower acknowledges and agrees
that Lender may request and obtain additional information from third parties
regarding any of the above, including, without limitation, credit reports.
6.8. [Deleted]
6.9. Loan Proceeds and Adequacy. The undisbursed Loan proceeds, together
with Borrower's Funds and all other sums, if any, to be provided by Borrower as
shown in EXHIBIT C, are sufficient to construct the Improvements in accordance
with the terms and conditions of this Agreement.
6.10. Accuracy. All reports, documents, instruments, information and forms
of evidence delivered to Lender concerning the Loan or security for the Loan or
required by the Loan Documents are accurate, correct and sufficiently complete
to give Lender true
Page 17
and accurate knowledge of their subject matter, and do not contain any material
misrepresentation or omission.
6.11. Tax Liability. Borrower has filed all required federal, state,
county and municipal tax returns and has paid all taxes and assessments owed and
payable by Borrower or with respect to the Property, and Borrower has no
knowledge of any basis for any additional payment with respect to any such taxes
and assessments.
6.12. Utilities. Subject to the provisions of Section 4.3 of this
Agreement, all utility services, including, without limitation, gas, water,
sewage, electrical and telephone, necessary for the development and occupancy of
the Property and Improvements are available at or within the boundaries of the
Property, or Borrower has taken all steps reasonably necessary to date to assure
that all such services will be available upon completion of the Improvements.
6.13. Compliance. Borrower is familiar with and in substantial compliance
with all governmental requirements for the development of the Property and
construction of the Improvements and, subject to the provisions of Section 4.3
of this Agreement, will substantially conform to and comply with all
governmental requirements and the Plans and Specifications.
6.14. Americans With Disabilities Act Compliance. The Improvements have
been or will be designed and shall be constructed and completed, and thereafter
maintained, in general accordance and substantial compliance with all of the
requirements of the Americans with Disabilities Act, of July 26, 1990, Pub. L.
No. 101-336, 104 Stat. 327, 42 U.S.C.Section 12101, et seq., as amended from
time to time. Borrower shall be responsible for all ADA compliance costs;
provided however, Lender acknowledges and agrees that construction and operation
of portions of the Improvements which are intended to satisfy the foregoing
representation and warranty and any related covenant of Borrower may be funded
by the Loan.
6.15. Business Loan. The Loan is a business loan transaction in the stated
amount solely for the purpose of carrying on the business of Borrower and none
of the proceeds of the Loan will be used for the personal, family or
agricultural purposes of the Borrower.
ARTICLE 7. HAZARDOUS MATERIALS
7.1. Special Representations and Warranties. Without in any way limiting
the other representations and warranties set forth in this Agreement, and after
reasonable investigation and inquiry, and except as disclosed in the
Environmental Report or otherwise disclosed in writing to Lender prior to the
date of this Agreement, Borrower hereby specially represents and warrants to the
best of Borrower's knowledge as of the date of this Agreement as follows:
Page 18
(a) Hazardous Materials. The Property and Improvements are not and
have not been a site for the use, generation, manufacture, storage, treatment,
release, threatened release, discharge, disposal, transportation or presence of
any oil, flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, hazardous wastes, toxic or contaminated substances or
similar materials, including, without limitation, any substances which are
"hazardous substances," "hazardous wastes," "hazardous materials," "toxic
substances," "wastes," "regulated substances," "industrial solid wastes," or
"pollutants" under the Hazardous Materials Laws, as described below, and/or
other applicable environmental laws, ordinances or regulations (collectively,
the "Hazardous Materials"). "Hazardous Materials" shall not include commercially
reasonable amounts of such materials used in the ordinary course of preparation
of the Property for construction, construction of the Improvements and operation
of the Property which are used and stored in accordance with all applicable
environmental laws, ordinances and regulations.
(b) Hazardous Materials Laws. The Property and Improvements are in
substantial compliance with all laws, ordinances and regulations relating to
Hazardous Materials ("Hazardous Materials Laws"), including, without limitation:
the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et
seq.; the Comprehensive Environment Response, Compensation and Liability Act of
1980, as amended (including the Superfund Amendments and Reauthorization Act of
1986, "CERCLA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control
Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and
Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine
Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the
Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq.; and all
comparable state and local laws, laws of other applicable jurisdictions or
orders and regulations.
(c) Hazardous Materials Claims. There are no claims or actions
("Hazardous Materials Claims") pending or threatened against Borrower, the
Property or Improvements by any governmental entity or agency or by any other
person or entity relating to Hazardous Materials or pursuant to the Hazardous
Materials Laws.
(d) Border Zone Property. The Property has not been designated as
Border Zone Property under the provisions of California Health and Safety Code,
Sections 25220 et seq. and there has been no occurrence or condition on any real
property adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to be designated as Border Zone Property.
Page 19
7.2. Hazardous Materials Covenants. Borrower agrees as follows:
(a) No Hazardous Activities. Except for the implementation of
remediation programs or plans required under agreements, orders or consent
decrees referenced in the Environmental Report, Borrower shall not cause or
permit the Property or Improvements to be used as a site for the use,
generation, manufacture, storage, treatment, release, discharge, disposal,
transportation or presence of any Hazardous Materials.
(b) Compliance. Except to the extent such compliance is to be the
result of the implementation of remediation programs or plans required under
agreements, orders or consent decrees referenced in the Environmental Report,
Borrower shall comply and cause the Property and Improvements to comply with all
Hazardous Materials Laws.
(c) Notices. Except for those matters set forth in the Environmental
Report or otherwise disclosed in writing to Lender prior to the date of this
Agreement, Borrower shall immediately notify Lender in writing of: (i) the
discovery of any Hazardous Materials on, under or about the Property and
Improvements; (ii) any knowledge by Borrower that the Property and Improvements
are not in material compliance with any Hazardous Materials Laws; (iii) any
Hazardous Materials Claims; and (iv) the discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
could cause the Property or any part thereof to be designated as Border Zone
Property.
(d) Remedial Action. Except with respect to any Hazardous Materials,
violations of Hazardous Materials Laws and Hazardous Materials Claims that are
to be remedied by the implementation of remediation programs or plans required
under agreements, orders or consent decrees referenced in the Environmental
Report, in response to the presence of any Hazardous Materials on, under or
about the Property or Improvements, Borrower shall immediately take, at
Borrower's sole expense, all remedial action required by any Hazardous Materials
Laws or any judgment, consent decree, settlement or compromise in respect to any
Hazardous Materials Claims.
(e) Inspection By Lender. Upon reasonable prior notice to Borrower,
Lender, its employees and agents, may from time to time (whether before or after
the commencement of a nonjudicial or judicial foreclosure proceeding) enter and
inspect the Property and Improvements for the purpose of determining the
existence, location, nature and magnitude of any past or present release or
threatened release of any Hazardous Materials into, onto, beneath or from the
Property and Improvements.
(f) Hazardous Materials Indemnity. BORROWER HEREBY AGREES TO DEFEND,
INDEMNIFY AND HOLD HARMLESS LENDER, ITS DIRECTORS, OFFICERS, MEMBERS, MANAGERS,
EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY AND ALL LOSSES,
DAMAGES,
Page 20
LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND EXPENSES) WHICH LENDER MAY
INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF THE USE, GENERATION, MANUFACTURE,
STORAGE, DISPOSAL, THREATENED DISPOSAL, TRANSPORTATION OR PRESENCE OF HAZARDOUS
MATERIALS IN, ON, UNDER OR ABOUT THE PROPERTY OR IMPROVEMENTS. BORROWER SHALL
IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING UNDER THIS INDEMNITY,
TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL PAID AT THE
RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTE. BORROWER'S
DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER SHALL SURVIVE
THE CANCELLATION OF THE NOTE AND THE RELEASE, RECONVEYANCE OR PARTIAL
RECONVEYANCE OF THE DEED OF TRUST.
(g) Legal Effect of Section. Borrower and Lender agree that: (a)
this Article VII is intended as Lender's written request for information (and
Borrower's response) concerning the environmental condition of the real property
security as required by California Code of Civil Procedure Section 726.5; and
(b) each provision in this Article (together with any indemnity applicable to a
breach of any such provision) with respect to the environmental condition of the
real property security is intended by Lender and Borrower to be an
"environmental provision" for purposes of California Code of Civil Procedure
Section 736, and as such it is expressly understood that Borrower's duty to
indemnify Lender hereunder shall survive: (i) any judicial or non-judicial
foreclosure under the Deed of Trust, or transfer of the Property in lieu
thereof; (ii) the release and reconveyance or cancellation of the Deed of Trust;
and (iii) the satisfaction of all of Borrower's obligations under the Loan
Documents.
ARTICLE 8. SET ASIDE LETTERS
8.1. Set Aside Letters. If, at Borrower's request, Lender issues any
letter or letters ("Set Aside Letter") to any governmental agency ("Obligee") or
bonding company ("Surety") whereby Lender agrees to allocate Loan proceeds for
the construction of off-site, common area, or other improvements required by any
governmental agency or for which bonds may be required ("Bonded Work") in
connection with the development of the Property, Borrower represents, warrants,
covenants and agrees as follows:
(a) The sum which Borrower requests Lender to allocate for the
Bonded Work shall be sufficient to pay for the construction and completion cost
of the Bonded Work in accordance with any agreement between Borrower and Obligee
or as may be required under the Project Entitlements, and a copy of such
agreement shall be furnished to Lender by Borrower prior to and as a condition
precedent to the issuance by Lender of any Set Aside Letter;
Page 21
(b) Lender is irrevocably and unconditionally authorized to disburse
to the Obligee or Surety all or any portion of said allocated Loan proceeds upon
a demand of such Surety or Obligee made in accordance with the terms and
conditions of the Set Aside Letter;
(c) Any disbursements or payments which Lender makes or may be
obligated to make under any Set Aside Letter, whether made directly to the
Surety, Obligee, or to others for completion of all or part of the Bonded Work,
shall be deemed a disbursement under this Agreement to or for the benefit or
account of Borrower;
(d) BORROWER SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER FROM
ANY CLAIM, DEMAND, CAUSE OF ACTION, DAMAGE, LOSS OR LIABILITY, INCLUDING,
WITHOUT LIMITATION, ANY COURT COSTS AND ATTORNEYS' FEES AND EXPENSES, WHICH
LENDER MAY SUFFER OR INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF ITS ISSUANCE
OF OR COMPLIANCE WITH ANY REQUESTED SET ASIDE LETTER. BORROWER SHALL PAY ANY
INDEBTEDNESS ARISING UNDER THIS INDEMNITY TO LENDER IMMEDIATELY UPON DEMAND OF
LENDER. BORROWER'S DUTY TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER HEREUNDER
SHALL SURVIVE THE RELEASE AND CANCELLATION OF THE NOTE AND THE FULL OR PARTIAL
RELEASE OR RECONVEYANCE OF THE DEED OF TRUST OR OTHER LOAN DOCUMENTS;
(e) Lender shall have no obligation to release any collateral or
security under the Loan Documents unless and until Lender has received a full
and final written release of its obligations under each Set Aside Letter; and
(f) Lender is not obligated to issue any Set Aside Letter and may
refuse to do so in Lender's sole and absolute discretion, excepting only the
following Set Aside Letters: None.
ARTICLE 9. COVENANTS OF BORROWER
9.1. Expenses. Borrower shall immediately pay Lender upon demand all
Lender's reasonable out-of-pocket costs and expenses actually incurred by Lender
in connection with: (a) the preparation of this Agreement, all other Loan
Documents and Other Related Documents contemplated hereby; (b) the
administration of this Agreement, the other Loan Documents and Other Related
Documents for the term of the Loan; and (c) the enforcement or satisfaction by
Lender of any of Borrower's obligations under this Agreement, the other Loan
Documents or the Other Related Documents. For all purposes of this Agreement,
Lender's costs and expenses shall include, without limitation, all appraisal
fees, cost engineering and inspection fees, legal fees and expenses, accounting
fees, environmental consultant fees, auditor fees, and the cost to Lender of any
title insurance premiums, title surveys, reconveyance and notary fees. Borrower
recognizes
Page 22
and agrees that Lender may, at its option, require inspection of the Property
and Improvements by an independent supervising architect and/or cost engineering
specialist: (i) prior to each advance; (ii) at least once each month during the
course of construction even though no disbursement is to be made for that month;
(iii) upon completion of the Improvements; and (iv) at least semi-annually
thereafter during the term of the Loan. To the extent that any of the foregoing
are performed or incurred by employees of Lender or any Affiliate of Lender, no
such costs, or any associated travel, lodging, subsistence or other expenses for
such goods and services shall be owed by Borrower.
9.2. ERISA Compliance. Borrower shall at all times comply with the
provisions of ERISA with respect to any retirement or other employee benefit
plan to which it is a party as employer, and as soon as possible after Borrower
knows, or has reason to know, that any Reportable Event (as defined in ERISA)
with respect to any such plan of Borrower has occurred, it shall furnish to
Lender a written statement setting forth details as to such Reportable Event and
the action, if any, which Borrower proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event furnished to the
Pension Benefit Guaranty Corporation.
9.3. Leasing. Once the Improvements are completed and ready for occupancy,
Borrower shall use its commercially reasonable efforts to maintain all leasable
space in the Property leased at no less than fair market rental rates.
9.4. Approval of Leases. EXHIBIT E sets forth certain leasing parameters
applicable to the Property. Borrower shall not execute any proposed lease not
conforming to such leasing parameters without Lender's prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed.
9.5. Revenue to be Applied to Debt Service. Following the occurrence and
during the continuation of any Default, no Distributions shall be made or
distributed to any partner, venturer, member or equity investor of Borrower.
9.6. Subdivision Maps. Prior to recording any final map, plat, parcel map,
lot line adjustment or other subdivision map of any kind covering any portion of
the Property (collectively, "Subdivision Map"), Borrower shall submit such
Subdivision Map to Lender for Lender's review and approval, which approval shall
not be unreasonably withheld. Within ten (10) Business Days after Lender's
receipt of such Subdivision Map, Lender shall provide Borrower written notice if
Lender disapproves of said Subdivision Map. Lender shall be deemed to have
approved the Subdivision Map if such notice is not so provided to Borrower.
Within five (5) Business Days after Lender's request, Borrower shall execute,
acknowledge and deliver to Lender such amendments to the Loan Documents as
Lender may reasonably require to reflect the change in the legal description of
the Property resulting from the recordation of any Subdivision Map. In
connection with and promptly after the recordation of any amendment or other
modification to the Deed of Trust recorded in connection with such amendments,
Page 23
Borrower shall deliver to Lender, at Borrower's sole expense, a title
endorsement to the Title Policy in form and substance satisfactory to Lender
insuring the continued first priority lien of the Deed of Trust. Subject to the
execution and delivery by Borrower of any documents required under this Section,
Lender shall, if required by applicable law, sign any Subdivision Map approved,
or deemed to be approved, by Lender pursuant to this Section.
9.7. Further Assurances. Upon Lender's request and at Borrower's sole cost
and expense, Borrower shall execute, acknowledge and deliver any other
instruments and perform any other acts necessary, desirable or proper, as
determined by Lender, to carry out the purposes of this Agreement and the other
Loan Documents or to perfect and preserve any liens created by the Loan
Documents.
9.8. Assignment. Without the prior written consent of Lender, Borrower
shall not assign Borrower's interest under any of the Loan Documents, or in any
monies due or to become due thereunder, and any assignment without such consent
shall be void. In this regard, Borrower acknowledges that Lender would not make
this Loan except in reliance on Borrower's expertise, reputation, prior
experience in developing and constructing commercial real property, Lender's
knowledge of Borrower, and Lender's understanding that this Agreement is more in
the nature of an agreement involving personal services than a standard loan
where Lender would rely on security which already exists.
9.9. Management of Property. Without the prior written consent of Lender,
Borrower shall not enter into any agreement providing for the management,
leasing or operation of the Property or Improvements, other than the Development
and Management Agreements.
9.10. Governing Documents. Without the prior written consent of Lender,
Borrower shall not modify or permit to be modified the formation or
organizational documents of WEO, the Project Entity or Borrower, or any
partners, joint venturers or members thereof.
9.11. WAIVER OF FIDUCIARY CLAIMS. BORROWER ACKNOWLEDGES THAT EOP INVESTOR,
L.L.C., A DELAWARE LIMITED LIABILITY COMPANY, EOP PROJECT INVESTOR, THE PROJECT
ENTITY, AND CERTAIN AFFILIATES THEREOF (COLLECTIVELY, "EQUITY"), ARE AFFILIATES
OF LENDER. NEVERTHELESS, BORROWER ACKNOWLEDGES AND AGREES THAT LENDER IS
ADVANCING FUNDS TO BORROWER AS EVIDENCED BY THIS AGREEMENT SOLELY IN ITS ROLE AS
A THIRD PARTY LENDER, AND THAT THIS AGREEMENT AND ANY OTHER LOAN DOCUMENTS,
TOGETHER WITH LENDER'S RIGHT TO EXERCISE ITS REMEDIES AS A LENDER IN THE EVENT
OF ANY DEFAULT, IS COMPLETELY SEPARATE FROM EQUITY'S DIRECT OR INDIRECT
OWNERSHIP OF CONSTITUENT MEMBERSHIP INTERESTS IN
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BORROWER. BORROWER FURTHER ACKNOWLEDGES THAT LENDER WOULD NOT HAVE MADE THE LOAN
TO BORROWER WITHOUT THE WAIVER SET FORTH BELOW. THEREFORE, BORROWER, FOR ITSELF
AND ON BEHALF OF BORROWER'S AFFILIATES AND ALL CONSTITUENT MEMBERS AND MANAGERS
OF EITHER, HEREBY WAIVES ANY RIGHT THAT IT OR ANY SUCH AFFILIATE OR ANY OF SUCH
CONSTITUENT MEMBERS OR MANAGERS WOULD OTHERWISE HAVE, UNDER ANY OF THE LOAN
DOCUMENTS OR OTHERWISE UNDER ANY LEGAL THEORY BASED UPON STATUTORY OR COMMON
LAW, TO BRING ANY CLAIM AGAINST LENDER OR ANY PARTY THAT CONTROLS LENDER,
ASSERTING THAT LENDER'S ADVANCING FUNDS PURSUANT TO THIS AGREEMENT OR LENDER'S
EXERCISE OF ITS RIGHTS OR REMEDIES AS A LENDER HEREUNDER OR UNDER THE DEED OF
TRUST OR ANY OTHER LOAN DOCUMENTS, CONSTITUTES A BREACH BY LENDER OR ANY PARTY
THAT CONTROLS LENDER OF ANY FIDUCIARY DUTY TO BORROWER, ANY BORROWER AFFILIATE
OR TO THE CONSTITUENT MEMBERS OR MANAGERS OF EITHER. BY INITIALING BELOW,
BORROWER ACKNOWLEDGES THAT IT WAS ADVISED BY COMPETENT LEGAL COUNSEL IN
REVIEWING THIS PROVISION, INCLUDING, WITHOUT LIMITATION, A DETAILED DISCUSSION
OF THE FACT THAT LENDER'S EXERCISE OF ITS REMEDIES (FOR EXAMPLE, IN THE CONTEXT
OF COST OVERRUNS THAT BORROWER IS UNABLE TO FUND) WOULD DISPROPORTIONATELY
AFFECT BORROWER'S CONSTITUENT MEMBERS WHO HOLD DISPROPORTIONATE PROFITS INTEREST
IN BORROWER, AND THAT IT HAS ELECTED TO WAIVE ITS RIGHTS AND THE RIGHTS OF EACH
BORROWER AFFILIATE AND EACH OF THEIR CONSTITUENT MEMBERS AND MANAGERS AS
PROVIDED ABOVE IN CONSIDERATION OF LENDER'S AGREEMENT TO ADVANCE THE FUNDS
EVIDENCED BY THIS AGREEMENT.
-----------------
Borrower
ARTICLE 10. REPORTING COVENANTS
10.1. Financial Information. Borrower hereby consents to Lender's
obtaining from other parties copies of any and all reports that Borrower
delivers to any party under the provisions of Article 6 of the Operating
Agreement of WEO, as well as any and all reports to be delivered to any party
under the provisions of the limited liability company agreement or operating
agreement of the Project Entity. In addition, on or before the tenth (10th) day
of each month, Borrower shall deliver to Lender a reconciliation showing the
balance of the Working Capital Reserve Account as of the beginning of the first
day of the preceding calendar month, the balance of the Working Capital Reserve
as of the end of the last day of the preceding calendar month, and a line item
listing of all
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expenditures, together with supporting documentation, of amounts expended from
the Working Capital Reserve Account during such period.
To the extent not otherwise obtained as provided above, within thirty (30)
days after Lender's request, Borrower shall also deliver to Lender such
quarterly and other financial information regarding the Property, or Borrower or
Payment Guarantor. If audited financial information is prepared, Borrower shall
deliver to Lender copies of that information within fifteen (15) days after its
final preparation. Except as otherwise agreed to by Lender, all such financial
information shall be prepared in accordance with generally accepted accounting
principles consistently applied. Upon written request of Lender, Borrower use
good faith efforts to obtain and deliver to Lender any specific financial
reports and information pertaining to the members, managers, partners and
shareholders of Borrower.
10.2. Books and Records. Borrower shall maintain complete books of account
and other records for the Property and Improvements and for disbursement and use
of the proceeds of the Loan and Borrower's Funds, and the same shall be
available for inspection and copying by Lender upon reasonable prior notice.
ARTICLE 11. DEFAULTS AND REMEDIES
11.1. Default. The occurrence of any one or more of the following shall
constitute an event of default (hereinafter, "Default") under this Agreement and
the other Loan Documents:
(a) Monetary. Borrower's failure to pay within ten (10) Business
Days following the date of delivery of written notice from Lender to Borrower
that such amount was not received when due, any sums payable under the Note or
any of the other Loan Documents or Borrower's failure to deposit any Borrower's
Funds as and when required under this Agreement; provided, however, that if such
written notice from Lender is an Out of Balance Notice, then, in lieu of such
10-Business Day period, Borrower shall have a thirty (30) day period following
the date of delivery of such Out of Balance Notice before a Default shall occur
in which to deposit funds equal to the amount of the applicable deficiency into
the Borrower's Funds Account, as contemplated by the provisions of Section
3.1(b); further, provided, however, that no such notice or cure period shall
apply at maturity or upon acceleration; or
(b) Performance of Obligations. Borrower's failure to perform any
obligation in addition to those in Section 11.1(a) above under any of the Loan
Documents within thirty (30) days following the date of delivery of written
notice from Lender; provided, however, that if a longer or shorter cure period
is expressly provided for the remedy of any such failure, Borrower's failure to
perform will not constitute a Default until such longer or shorter date as the
specified cure period expires; but provided further, however, if such Default is
curable, but the nature of such failure is such that it cannot
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reasonably be cured within said thirty (30) days (or longer or shorter specified
cure period), then if Borrower fails to commence a cure thereof within said time
and thereafter fails to diligently pursue a cure thereof and fails to complete
same within ninety (90) days after Lender's written demand; or a default by
Borrower (following any applicable notice and cure period) under any of the
Other Related Documents; or
(c) Construction; Use. (i) There is any material deviation in the
work of construction from the Plans and Specifications or governmental
requirements from that required under this Agreement or the appearance or use of
defective workmanship or materials in constructing the Improvements, and
Borrower fails to remedy the same to Lender's satisfaction within ten (10)
Business Days after Lender's written demand to do so, or if the nature of such
deviation or defect is curable but such that it cannot reasonably be cured
within said ten (10) Business Days, then if Borrower fails to commence a cure
thereof within said ten (10) Business Days and thereafter fails to diligently
pursue a cure thereof and complete same within ninety (90) days after Lender's
written demand; or (ii) subject to the provisions of Section 4.3, there is a
cessation of construction of the Improvements prior to completion for a
continuous period of more than fifteen (15) days; or (iii) the construction,
renovation, sale or leasing of any of the Improvements in accordance with the
Loan Documents is prohibited, enjoined or delayed for a continuous period of
more than forty-five (45) days; or (iv) subject to the provisions of Section
4.3, utilities or other public services necessary for the full occupancy and
utilization of the Property and Improvements are curtailed for a continuous
period of more than thirty (30) days; or
(d) Liens, Attachment; Condemnation. (i) The recording of any claim
of lien against the Property or Improvements or the service on Lender of any
bonded stop notice relating to the Loan and the continuance of such claim of
lien or bonded stop notice for twenty (20) days without discharge, satisfaction
or provision for payment being made by Borrower in a manner satisfactory to
Lender, subject to the provisions of Section 4.9 hereof and Section 5.5 of the
Deed of Trust ; or (ii) the condemnation, seizure or appropriation of, or
occurrence of an uninsured casualty with respect to any material portion of the
Property or Improvements that is not otherwise offset by Borrower's deposit of
sufficient restoration funds (including any applicable deductible amount under
any applicable policy of casualty insurance) into the Borrower's Funds Account
within forty-five (45) days after the occurrence of such event; or (iii) the
sequestration or attachment of, or any levy or execution upon any of the
Property or Improvements, any other collateral provided by Borrower under any of
the Loan Documents, any monies in the Account or in the Borrower's Funds
Account, or any substantial portion of the other assets of Borrower, which
sequestration, attachment, levy or execution is not released, expunged or
dismissed prior to the earlier of forty-five (45) days or the sale of the assets
affected thereby; or
Page 27
(e) Representations and Warranties. (i) The material failure of any
representation or warranty of Borrower in any of the Loan Documents to be true,
correct and complete as of the date made, and the continuation of such failure
for more than ten (10) Business Days after written notice to Borrower from
Lender requesting that Borrower cure such failure; or
(f) Voluntary Bankruptcy; Insolvency; Dissolution. (i) The filing of
a petition by Borrower for relief under the Bankruptcy Code, or under any other
present or future state or federal law regarding bankruptcy, reorganization or
other debtor relief law; (ii) a general assignment by Borrower for the benefit
of creditors; or (iii) Borrower applying for, or the appointment of, a receiver,
trustee, custodian or liquidator of Borrower or any of its property; or
(g) Involuntary Bankruptcy. (i) The filing of any pleading or an
answer by Borrower in any involuntary proceeding under the Bankruptcy Code or
other debtor relief law which admits the jurisdiction of the court or the
petition's material allegations regarding Borrower's insolvency; or (ii) the
failure of Borrower to effect a full dismissal of any involuntary petition under
the Bankruptcy Code or under any other debtor relief law that is filed against
Borrower or in any way restrains or limits Borrower or Lender regarding the
Loan, the Property or the Improvements, prior to the earlier of the entry of any
court order granting relief sought in such involuntary petition, or forty-five
(45) days after the date of filing of such involuntary petition; or
(h) Partners; Indemnitors. The occurrence of any of the events
specified in Section 11.1(f) or 11.1(g) as to Payment Guarantor or Wilson
Investors - California, LLC, a Delaware limited liability company ("WIC"); or
(i) Change In Management or Control. The occurrence of any material
management or organizational change in Borrower or in the partners, venturers or
members of Borrower, excluding Permitted Transfers, but including, without
limitation, any dispute among the constituent members or partners of Borrower,
involving as at least one of the disputants a party that is neither WEO nor
Equity (nor any party controlling, controlled by or under common control with
either), and which Lender determines, in its sole and absolute discretion, shall
have a material adverse effect on the Loan, on the Property and Improvements, or
on the ability of Borrower or its partners, venturers or members to perform
their obligations under the Loan Documents; or
(j) Loss of Priority. The failure at any time of the Deed of Trust
to be a valid first lien upon the Property and Improvements or any portion
thereof, other than as a result of any release or reconveyance of the Deed of
Trust with respect to all or any portion of the Property and Improvements
pursuant to the terms and conditions of this Agreement; or
Page 28
(k) Hazardous Materials. The discovery of any significant Hazardous
Materials in, on or about the Property or Improvements subsequent to the
Effective Date (to the extent not disclosed in the Environmental Report or
otherwise disclosed in writing to Lender prior to the date of this Agreement);
provided, however, if such Default is curable, but the nature of such failure is
such that it cannot reasonably be cured within thirty (30) days, then if
Borrower fails to commence a cure thereof within said time and thereafter fails
to diligently pursue a cure thereof and fails to complete same within ninety
(90) days after Lender's written demand. Any such Hazardous Materials shall be
"significant" for this purpose if said Hazardous Materials, in Lender's sole
discretion, have a materially adverse impact on the value of the Property and
Improvements.
Notwithstanding any of the foregoing or anything to the contrary in this
Agreement, to the extent that any Default can be cured by the payment of money
directly to Lender, to Borrower's Funds Account or to any third party to
reimburse same for materials or services already delivered or performed or for
the purpose of delivering materials or performing services which if so done
would cure said Default, the applicable cure period specified in this Agreement
shall be extended by an additional sixty (60) days to allow Borrower to
undertake any necessary capital calls or to seek or arrange the necessary
partnership loans.
11.2. Acceleration Upon Default; Remedies. Upon the occurrence of any
Default specified in this Article XI, Lender may, at its sole option, declare
all sums owing to Lender under the Note, this Agreement and the other Loan
Documents immediately due and payable. Upon such acceleration, Lender may, in
addition to all other remedies permitted under this Agreement and the other Loan
Documents and at law or equity, apply any sums in the Account and Borrower's
Funds Account to the sums owing under the Loan Documents and any and all
obligations of Lender to fund further disbursements under the Loan shall
terminate.
11.3. Disbursements to Third Parties. Upon the occurrence of a Default
occasioned by Borrower's failure to pay money to a third party as required by
this Agreement, Lender may but shall not be obligated to make such payment from
the Loan proceeds, Borrower's Funds, or other funds of Lender. If such payment
is made from proceeds of the Loan or from Borrower's Funds, Borrower shall
immediately deposit with Lender, upon written demand, an amount equal to such
payment. If such payment is made from funds of Lender, Borrower shall
immediately repay such funds upon written demand of Lender. In either case, the
Default with respect to which any such payment has been made by Lender shall not
be deemed cured until such deposit or repayment (as the case may be) has been
made by Borrower to Lender.
11.4. Lender's Completion of Construction. Upon the occurrence of a
Default, Lender may, upon five (5) Business Days prior written notice to
Borrower, and with or without legal process, take possession of the Property and
Improvements, remove Borrower and all agents, employees and contractors of
Borrower from the Property and
Page 29
Improvements, complete the work of construction and market for lease and lease
space within the Property and/or Improvements. For this purpose, Borrower
irrevocably appoints Lender as its attorney-in-fact, which agency is coupled
with an interest. As attorney-in-fact, Lender may, in Borrower's name, take or
omit to take any action Lender may deem appropriate with respect to third
parties, including, without limitation, exercising Borrower's rights under all
contracts concerning the Property and/or Improvements, but excluding the Loan
Documents.
11.5. Lender's Cessation of Construction. If Lender determines at any time
that the Improvements are not being constructed substantially in accordance with
the requirements under this Agreement, then upon the occurrence of a Default
therefor, Lender may, upon five (5) Business Days prior written notice to
Borrower, immediately cause all construction to cease on any of the Improvements
affected by the condition of nonconformance. Borrower shall thereafter not allow
any construction work, other than corrective work, to be performed on any of the
Improvements affected by the condition of nonconformance until such time as
Lender notifies Borrower in writing that the nonconforming condition has been
corrected.
11.6. Termination or Continuation of Development and Management
Agreements. Upon the occurrence of a Default wherein Lender elects to accelerate
the Loan and records a notice of default to foreclose the lien of the Deed of
Trust, Lender may elect to require Borrower to terminate the Development and
Management Agreements (and Borrower shall immediately do so), without any
termination fee or penalty, provided that all fees and expenses previously
accrued thereunder up to the effective date of such termination are paid in
full; provided however, so long as the Development and Management Agreements are
not terminated, the respective party or parties performing services thereunder
shall be entitled to continue to receive all fees and expenses owed such party
or parties under the applicable Development and Management Agreements. In the
event that Borrower reinstates the Loan under California law prior to the
foreclosure of the lien of the Deed of Trust, such Development and Management
Agreements shall be deemed to have been reinstated as of the date of such
reinstatement of the Loan.
11.7. Repayment of Funds Advanced. Any funds expended by Lender in the
exercise of its rights or remedies under this Agreement and the other Loan
Documents shall be payable to Lender upon demand, together with interest at the
rate applicable to the principal balance of the Note from the date the funds
were expended.
11.8. Rights Cumulative, No Waiver. All Lender's rights and remedies
provided in this Agreement and the other Loan Documents, together with those
granted by law or at equity, are cumulative and may be exercised by Lender at
any time. Lender's exercise of any right or remedy shall not constitute a cure
of any Default unless all sums then due and payable to Lender under the Loan
Documents are repaid and Borrower has cured all other Defaults. No waiver shall
be implied from any failure of Lender to take, or any
Page 30
delay by Lender in taking, action concerning any Default or failure of condition
under the Loan Documents, or from any previous waiver of any similar or
unrelated Default or failure of condition. Any waiver or approval under any of
the Loan Documents must be in writing and shall be limited to its specific
terms.
ARTICLE 12. MISCELLANEOUS PROVISIONS
12.1. Indemnity. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD
HARMLESS LENDER, ITS DIRECTORS, OFFICERS, MEMBERS, MANAGERS, EMPLOYEES, AGENTS,
SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES,
LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND EXPENSES) WHICH LENDER MAY
INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF: (A) THE PURPOSE TO WHICH BORROWER
APPLIES THE LOAN PROCEEDS; (B) THE FAILURE OF BORROWER TO PERFORM ANY
OBLIGATIONS AS AND WHEN REQUIRED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS; (C) ANY FAILURE AT ANY TIME OF ANY OF BORROWER'S REPRESENTATIONS OR
WARRANTIES TO BE TRUE AND CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWER, ANY
CONSTITUENT PARTNER OR MEMBER OF BORROWER, ANY CONTRACTOR, SUBCONTRACTOR OR
MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY WITH RESPECT TO
ANY OF THE PROPERTY OR IMPROVEMENTS, EXCEPT TO THE EXTENT CAUSED OR CONTRIBUTED
TO BY THE BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER. BORROWER
SHALL IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING UNDER THIS
INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL
PAID AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTE.
BORROWER'S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER
SHALL SURVIVE CANCELLATION OF THE NOTE AND THE RELEASE, RECONVEYANCE OR PARTIAL
RECONVEYANCE OF THE DEED OF TRUST.
12.2. Form of Documents. The form and substance of all documents,
instruments, and forms of evidence to be delivered to Lender under the terms of
this Agreement and any of the other Loan Documents shall be subject to Lender's
approval and shall not be modified, superseded or terminated in any respect
without Lender's prior written approval, except to the extent otherwise provided
in this Agreement.
12.3. No Third Parties Benefited. No person other than Lender and Borrower
and their permitted successors and assigns shall have any right of action under
any of the Loan Documents.
Page 31
12.4. Notices. All notices, demands, or other communications under this
Agreement and the other Loan Documents shall be in writing and shall be
delivered to the appropriate party at the address set forth on the signature
page of this Agreement and as specified in EXHIBIT D (subject to change from
time to time by written notice to all other parties to this Agreement). All
communications shall be deemed served upon delivery of, or if mailed, upon
receipt or rejection after the deposit in the United States Postal Service mail,
certified postage prepaid-return receipt requested and addressed to the address
of Borrower or Lender at the address specified; provided, however, that
non-receipt of any communication as the result of any change of address of which
the sending party was not notified or as the result of a refusal to accept
delivery shall be deemed receipt of such communication.
12.5. Attorney-in-Fact. Borrower hereby irrevocably appoints and
authorizes Lender, as Borrower's attorney-in-fact, which agency is coupled with
an interest, to execute and/or record in Lender's or Borrower's name any
notices, instruments or documents that Lender deems appropriate to protect
Lender's interest under any of the Loan Documents.
12.6. Actions. Borrower agrees that Lender, in exercising the rights,
duties or liabilities of Lender or Borrower under the Loan Documents, may
commence, appear in or defend any action or proceeding purporting to affect the
Property, the Improvements, or the Loan Documents and Borrower shall immediately
reimburse Lender upon demand for all such expenses so incurred or paid by
Lender, including, without limitation, attorneys' fees and expenses and court
costs.
12.7. Right of Contest. Borrower may contest in good faith any claim,
demand, levy or assessment (other than liens and stop notices, subject to the
provisions of Section 4.9 of this Agreement) by any person other than Lender
which would constitute a Default if: (a) Borrower pursues the contest
diligently, in a manner which Lender determines is not prejudicial to Lender,
and does not impair the rights of Lender under any of the Loan Documents; and
(b) Borrower deposits with Lender any funds or other forms of assurance which
Lender in good faith determines from time to time appropriate to protect Lender
from the consequences of the contest being unsuccessful. Borrower's compliance
with this Section shall operate to prevent such claim, demand, levy or
assessment from becoming a Default.
12.8. Relationship of Parties. The relationship of Borrower and Lender
under the Loan Documents is, and shall at all times remain, solely that of
borrower and lender, and Lender neither undertakes nor assumes any
responsibility or duty to Borrower or to any third party with respect to the
Property or Improvements, except as expressly provided in this Agreement and the
other Loan Documents.
12.9. Delay Outside Lender's Control. Lender shall not be liable in any
way to Borrower or any third party for Lender's failure to perform or delay in
performing under
Page 32
the Loan Documents if such failure to perform or delay in performing results
directly or indirectly from, or is based upon, the action, inaction, or
purported action, of any governmental or local authority, or because of war,
rebellion, insurrection, strike, lock-out, boycott or blockade (whether
presently in effect, announced or in the sole judgment of Lender deemed
probable), or from any Act of God or other cause or event beyond Lender's
control.
12.10. Attorneys' Fees and Expenses; Enforcement. If any attorney is
engaged by Lender to enforce or defend any provision of this Agreement, any of
the other Loan Documents or Other Related Documents, or as a consequence of any
Default under the Loan Documents, with or without the filing of any legal action
or proceeding, and including, without limitation, any fees and expenses incurred
in any bankruptcy proceeding of the Borrower, then Borrower shall immediately
pay to Lender, upon demand, the amount of all attorneys' fees and expenses and
all costs incurred by Lender in connection therewith, together with interest
thereon from the date of such demand until paid at the rate of interest
applicable to the principal balance of the Note as specified therein.
12.11. Immediately Available Funds. Unless otherwise expressly provided
for in this Agreement, all amounts payable by Borrower to Lender shall be
payable only in United States currency, immediately available funds.
12.12. Lender's Consent. Wherever in this Agreement there is a requirement
for Lender's consent and/or a document to be provided or an action taken "to the
satisfaction of Lender", it is understood by such phrase that Lender shall
exercise its consent, right or judgment in a reasonable manner given the
specific facts and circumstance applicable at the time.
12.13. Signs. Lender may place on the Property reasonable signs standard
to construction loan transactions stating that construction financing is being
provided by Lender and any other lenders or participants in the Loan, subject to
the requirements of the Project Entitlements and applicable law.
12.14. Lender's Agents. Lender may designate an agent or independent
contractor to exercise any of Lender's rights under this Agreement and any of
the other Loan Documents. Any reference to Lender in any of the Loan Documents
shall include Lender's agents, employees or independent contractors. Borrower
shall pay the costs of such agent or independent contractor either directly to
such person or to Lender in reimbursement of such costs, as applicable.
12.15. Tax Service. Lender is authorized to secure, at Borrower's expense,
a tax service contract with a third party vendor which shall provide tax
information on the Property and Improvements satisfactory to Lender.
Page 33
12.16. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
12.17. Severability. If any provision or obligation under this Agreement
and the other Loan Documents shall be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that provision shall be
deemed severed from the Loan Documents and the validity, legality and
enforceability of the remaining provisions or obligations shall remain in full
force as though the invalid, illegal, or unenforceable provision had never been
a part of the Loan Documents, provided, however, that if the rate of interest or
any other amount payable under the Note or this Agreement or any other Loan
Document, or the right of collectibility therefor, are declared to be or become
invalid, illegal or unenforceable, Lender's obligations to make advances under
the Loan Documents shall not be enforceable by Borrower.
12.18. Heirs, Successors and Assigns. Except as otherwise expressly
provided under the terms and conditions of this Agreement, the terms of the Loan
Documents shall bind and inure to the benefit of the heirs, successors and
assigns of the parties.
12.19. Time. Time is of the essence of each and every term of this
Agreement.
12.20. Headings. All article, section or other headings appearing in this
Agreement and any of the other Loan Documents are for convenience of reference
only and shall be disregarded in construing this Agreement and any of the other
Loan Documents.
Page 34
12.21. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of California, except to
the extent preempted by federal laws. Borrower and all persons and entities in
any manner obligated to Lender under the Loan Documents consent to the
jurisdiction of any federal or state court within the State of California having
proper venue and also consent to service of process by any means authorized by
California or federal law.
12.22. Integration; Interpretation. The Loan Documents contain or
expressly incorporate by reference the entire agreement of the parties with
respect to the matters contemplated therein and supersede all prior negotiations
or agreements, written or oral. The Loan Documents shall not be modified except
by written instrument executed by all parties. Any reference in any of the Loan
Documents to the Property or Improvements shall include all or any part of the
Property or Improvements. Any reference to the Loan Documents includes any
amendments, renewals or extensions now or hereafter approved by Lender in
writing.
12.23. Joint and Several Liability. The liability of all persons and
entities obligated in any manner under this Agreement and any of the Loan
Documents shall be joint and several.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Page 35
12.24. Counterparts. This Agreement, any of the other Loan Documents
(except for the Note), any Other Related Documents and any subsequent
modifications, amendments, waivers, consents or supplements thereof, if any, may
be executed in any number of counterparts, each of which when executed and
delivered shall be deemed to be an original and all such counterparts together,
shall constitute one and the same instrument.
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of
the date appearing on the first page of this Agreement.
"Lender"
Riverside Finance Company, L.L.C.,
a Delaware limited liability company
By: EOP Operating Limited Partnership,
a Delaware limited partnership,
its sole member
By: Equity Office Properties Trust,
a Maryland real estate investment trust,
its general partner
By: /s/ Robert J. Winter, Jr.
-------------------------------------------
Name: Robert J. Winter, Jr.
-----------------------------------------
Title: Senior Vice President - Development
Investments
----------------------------------------
Lender's Address:
Two North Riverside Plaza
Chicago, IL 60606
Attention: General Counsel
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
Page 36
"Borrower"
FOUNDRY SQUARE ASSOCIATES II, LLC,
a California limited liability company
By: Foundry Square Investors II, LLC,
a California limited liability company,
its Manager
By: Wilson/Equity Office, LLC,
a Delaware limited liability company,
its Manager
By: Wilson Investors - California, LLC,
a Delaware limited liability company,
its Manager
By: /s/ Thomas P. Sullivan
---------------------------------------
Thomas P. Sullivan
Its: Manager
Borrower's Address:
c/o Wilson/Equity Office, LLC
199 First Street, Suite 200
San Francisco, CA 94105
Attn: Thomas P. Sullivan, President
Jacqueline U. Moore, General Counsel
Page 37
EXHIBIT A
DESCRIPTION OF PROPERTY
All that certain real property located in the City and County of San
Francisco, State of California, described as follows:
CITY OF SAN FRANCISCO
LOT 30, AS SHOWN ON THAT CERTAIN MAP ENTITLED "PARCEL MAP BEING A MERGER OF THE
LANDS DESCRIBED IN GRANT DEEDS 7150 O.R. 456, 7487 O.R. 272, 8743 O.R. 272, 8743
O.R. 275, A886 O.R. 12, B387 O.R. 123, B802 O.R. 100, C368 O.R. 769, D387 O.R.
453, AND H723 O.R. 179, ALSO BEING A MERGER OF LOTS 1, 1A, 1B, 2, 4, 22, 23, 24,
25, 26, 28 & 29, FORMER SLOAN ALLEY AND TENNY PLACE & GAPS OF ASSESSOR'S BLOCK
3737, ALSO BEING A PORTION OF 100 VARA BLOCK NO. 342", RECORDED DECEMBER 29,
2000, AS INSTRUMENT NO. 2000-G884926-00 AND FILED IN BOOK 44 OF PARCEL MAPS AT
PAGES 164 AND 165, OFFICE OF THE RECORDER OF THE CITY AND COUNTY OF SAN
FRANCISCO, STATE OF CALIFORNIA.
EXHIBIT B
DOCUMENTS
A. Loan Documents. The documents listed below, numbered 1 through 9,
inclusive, and amendments, modifications and supplements thereto which have
received the prior written consent of Lender, together with any documents
executed in the future that are approved by Lender and that recite that they are
"Loan Documents" for purposes of this Agreement are collectively referred to
herein as the Loan Documents.
1. This Agreement;
2. Promissory Note Secured by Deed of Trust of even date herewith in the
original principal amount of the Loan made by Borrower payable to the order of
Lender;
3. Construction Deed of Trust with Absolute Assignment of Leases and
Rents, Security Agreement and Fixture Filing of even date herewith executed by
Borrower, as Trustor, to Chicago Title Company, as Trustee, for the benefit of
Lender, as Beneficiary;
4. State of California Uniform Commercial Code - Financing Statement -
Form UCC-1, of even date herewith, prepared for Borrower as Debtor;
5. Assignment of Construction Agreements/Contractor's Consent of even date
herewith executed by Borrower and Contractor in favor of Lender;
6. Assignment of Agreements, Plans and Specifications and Architect's/
Engineer's Consent of even date herewith executed by Borrower and
Architect/Engineer in favor of Lender.
7. Repayment Guaranty of even date herewith executed by Project Entity as
Payment Guarantor in favor of Lender;
8. Security Agreement (Guarantor) of even date executed by Payment
Guarantor as Grantor in favor of Lender;
9. State of California Uniform Commercial Code - Financing Statement -
Form UCC-1, of even date herewith, prepared for Payment Guarantor as Debtor.
B. Other Related Documents (Which Are Not Loan Documents):
None.
EXHIBIT C
FINANCIAL REQUIREMENT ANALYSIS
The Financial Requirement Analysis set forth herein represents an analysis
of the total costs necessary in Borrower's estimation to perform Borrower's
obligations under the Loan Documents.
FOUNDRY SQUARE II - CONSTRUCTION LOAN FORECASTED COSTS
Construction Loan Agreement - Foundry Square Associates II LLC and Riverside Finance Co. LLC
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