LOAN AGREEMENT
by and between
CATELLUS FINANCE 1, L.L.C.,
a Delaware limited liability company
and
PRUDENTIAL MORTGAGE CAPITAL COMPANY, INC.,
a Delaware corporation
Dated as of October 26, 1998
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................1
1.1 Defined Terms..............................................1
1.2 Exhibits and Schedules Incorporated........................7
ARTICLE II LOAN...................................................7
2.1 Loan.......................................................7
2.2 Interest Rate; Payment of Interest.........................7
2.3 Loan Documents.............................................7
2.4 Closing Date...............................................7
2.5 Anticipated Repayment Date.................................7
2.6 Maturity Date..............................................7
2.7 Full Repayment and Reconveyance............................7
2.8 Limitation on Borrower's Liability.........................7
2.9 Prepayment.................................................8
2.10 Defeasance.................................................8
2.11 Assignment and Assumption of Interest in Borrower;
Transfer of Properties.....................................8
2.12 Substitution of Properties.................................9
2.13 Build to Suit Properties..................................13
2.14 Letters of Credit - Leasing...............................14
2.15 Expansion Rights..........................................15
2.16 GATX-Woodridge Property...................................17
ARTICLE III CONDITIONS OF LENDER'S OBLIGATION TO FUND LOAN........19
3.1 Conditions Precedent......................................19
(a) Representations and Warranties True at Closing...19
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(continued)
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(b) No Default or Event of Default...................19
(c) Performance......................................19
(d) Loan Documents...................................19
(e) Zoning Compliance; Certificates of Compliance....19
(f) Hazardous Materials..............................19
(g) Property Inspection and Report...................20
(h) Earthquake Report................................20
(i) Title Insurance..................................20
(j) Survey...........................................20
(k) UCC-3 Certificate; Litigation and Bankruptcy
Searches.........................................21
(l) Documents........................................21
(m) Insurance........................................21
(n) Appraisal........................................21
(o) Consents.........................................21
(p) Financial Statements.............................21
(q) Payment of Fees and Expenses.....................21
(r) Leases...........................................21
(s) Management Agreements............................22
(t) Cash Management Agreement........................22
(u) Reserve Accounts.................................22
(v) Enforceability Opinions of Borrower's Counsel....22
(w) Bankruptcy Nonconsolidation Opinion..............23
(x) No Material Adverse Change.......................23
(y) [Intentionally Deleted]..........................23
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TABLE OF CONTENTS
(continued)
Page
(z) Funding of Deposits..............................24
ARTICLE IV INSURANCE.............................................24
4.1 Insurance.................................................24
ARTICLE V REPRESENTATIONS AND WARRANTIES........................27
5.1 Warranties of Borrower....................................27
(a) Organization and Existence.......................27
(b) Authorization....................................28
(c) Valid Execution and Delivery.....................28
(d) Enforceability...................................28
(e) No Defenses......................................28
(f) Defense of Usury.................................28
(g) No Conflict/Violation of Law.....................28
(h) Compliance with Applicable Laws and Regulations..28
(i) Consents Obtained................................29
(j) No Litigation....................................29
(k) Title............................................29
(l) Permitted Exceptions.............................30
(m) First Lien.......................................30
(n) ERISA............................................30
(o) Contingent Liabilities...........................30
(p) No Other Obligations.............................30
(q) Fraudulent Conveyance............................30
(r) Investment Company Act...........................31
(s) Access/Utilities.................................31
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TABLE OF CONTENTS
(continued)
Page
(t) Taxes Paid.......................................31
(u) Single Tax Lot...................................31
(v) Special Assessments..............................31
(w) Flood Zone.......................................31
(x) Seismic Exposure.................................31
(y) Misstatements of Fact............................32
(z) Condition of Improvements........................32
(aa) No Insolvency or Judgment........................32
(bb) No Condemnation..................................32
(cc) No Labor or Materialmen Claims...................32
(dd) No Purchase Options..............................32
(ee) Leases...........................................33
(ff) Appraisal........................................33
(gg) Boundary Lines...................................33
(hh) Survey...........................................34
(ii) Forfeiture.......................................34
(jj) No Broker........................................34
(kk) Conviction of Criminal Acts......................34
(ll) Security Agreement...............................34
(mm) Homestead........................................34
ARTICLE VI ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES...........34
6.1 Representations and Warranties............................34
6.2 Notice of Violations Under Environmental Laws.............36
6.3 Transportation of Hazardous Substances....................36
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TABLE OF CONTENTS
(continued)
Page
6.4 Compliance with Environmental Laws........................36
6.5 Notice to Lender..........................................36
6.6 Indemnification...........................................37
6.7 Hazardous Substances Audit................................38
6.8 Maintenance Program.......................................38
6.9 Existing Remediation and Monitoring Programs..............39
ARTICLE VII ADDITIONAL REPRESENTATIONS AND WARRANTIES AND
COVENANTS OF BORROWER.................................39
7.1 Expenses..................................................39
7.2 Compliance with Loan Documents............................39
7.3 Representations, Warranties and Covenants with Respect to
Indebtedness, Operations and Fundamental Changes
of Borrower; Maintenance of Separate Existence............39
7.4 Payment of Taxes..........................................42
7.5 Litigation................................................42
7.6 Indemnification of Lender.................................42
7.7 Change in Position........................................43
7.9 Further Assurances........................................43
7.10 Assignment................................................43
7.11 Management Agreements.....................................43
ARTICLE VIII REPORTING COVENANTS...................................44
8.1 Financial Statements and Books and Records................44
8.2 Representations and Warranties............................45
ARTICLE IX CASH MANAGEMENT AGREEMENT; RESERVE AND IMPOUND
ACCOUNTS..............................................45
9.1 Cash Management Agreement.................................45
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(continued)
Page
9.2 Tax and Insurance Impound Account.........................45
9.3 Repair and Remediation Reserve............................46
9.4 Replacement Reserve; Tenant Improvements and Leasing
Commissions Reserve.......................................48
9.5 Environmental Reserve.....................................50
9.6 Prepaid Rent Reserve......................................51
9.7 Interest Payable by Lender................................51
9.8 Pledge of Security Interest in Impound and Reserve
Accounts..................................................51
ARTICLE X DEFAULTS AND REMEDIES.................................53
10.1 Events of Default.........................................53
10.2 Acceleration Upon Event of Default; Remedies..............55
10.3 Further Remedies..........................................55
10.4 Repayment of Funds Advanced...............................55
10.5 Rights Cumulative, No Waiver..............................55
ARTICLE XI MISCELLANEOUS PROVISIONS..............................56
11.1 No Third Parties Benefited................................56
11.2 Notices...................................................56
11.3 Payment of Costs; Reimbursement to Lender.................56
11.4 Relationship of Parties...................................57
11.5 Delay Outside Lender's Control............................58
11.6 Attorneys' Fees...........................................58
11.7 Loan Sales and Securitization; Disclosure of Information..58
11.8 Certain Rights of Lender..................................59
11.9 Waiver; Discontinuance of Proceedings.....................59
11.10 Application of the Proceeds of the Note...................59
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TABLE OF CONTENTS
(continued)
Page
11.11 Tax Service...............................................60
11.12 Severability..............................................60
11.13 Heirs, Successors and Assigns.............................60
11.14 Time......................................................60
11.15 Headings..................................................60
11.16 Governing Law.............................................60
11.17 Consent to Jurisdiction...................................61
11.18 Integration: Interpretation...............................61
11.19 Joint and Several Liability...............................61
11.20 Counterparts..............................................61
11.21 Advertising...............................................61
11.22 Maximum Interest..........................................61
11.23 WAIVER OF RIGHT TO TRIAL BY JURY..........................62
EXHIBIT A - LIST OF PROPERTIES..............................................A-1
EXHIBIT B - FORM OF PROMISSORY NOTE.........................................B-1
EXHIBIT C - DOCUMENTS C-1
EXHIBIT D - FORM OF CERTIFICATION...........................................D-1
EXHIBIT E - FORM OF TENANT ESTOPPEL.........................................E-1
EXHIBIT F - FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT...........F-1
EXHIBIT G Legal Description of GATX-Woodridge Property.....................G-1
SCHEDULE 1 FAIR MARKET VALUES, NOI AND ALLOCATED LOAN AMOUNTS..............S1-1
SCHEDULE 2 MAJOR TENANTS/LEASES............................................S2-1
SCHEDULE 3 Reserve Calculations for Cash Management Periods................S3-1
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(continued)
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Schedule 4 Deferred Maintenance.............................................S4-1
SCHEDULE 5.1(w) Flood Zones...........................................S5.1(w)-1
SCHEDULE 5.1(ee)(ii) Lease Defaults..............................S5.1(ee)(ii)-1
SCHEDULE 5.1(ee)(iii) Rent Paid More than 30 Days in Advance....S5.1(ee)(iii)-1
SCHEDULE 5.1(ee)(v) Tenants Not in Occupancy.................. ...S5.1(ee)(v)-1
SCHEDULE 5.1(ee)(ix) Tenant Affiliated Leases.....................S5.(ee)(ix)-1
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EXHIBIT 4.3
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is executed as of October 26,
1998, by and between CATELLUS FINANCE 1, L.L.C., a Delaware limited liability
company ("Borrower") and PRUDENTIAL MORTGAGE CAPITAL COMPANY, INC., a Delaware
corporation ("Lender").
RECITALS
A. Borrower is the owner in fee simple of certain real properties
(collectively, the "Land") and all present and future improvements thereon (but
with respect to certain ground leased properties, Borrower's interest to the
improvements may be limited to a conditional future interest) (collectively, the
"Improvements") more particularly described in Exhibit A hereto (the Land and
the Improvements are collectively referred to as the "Properties").
B. Borrower has applied to Lender for a loan to be made to Borrower and
to be secured by the Properties and Lender is willing to make the loan to
Borrower upon the terms and conditions hereinafter set forth and in full
reliance upon the representations, warranties and covenants made by Borrower in
this Agreement.
NOW, THEREFORE, Borrower and Lender in consideration of the mutual
covenants hereinafter set forth and intending to be legally bound hereby agree
as follows:
ARTICLE I
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.
"Agreement" means this Loan Agreement as hereafter amended,
supplemented, replaced, modified or amended and restated from time to time.
"Allocated Loan Amount" means the principal amount of the Loan
allocated by Lender as Lender shall determine as to each individual Property
included within the Property Pool and as set forth on Schedule 1 attached
hereto, as revised from time to time to reflect any Properties added pursuant to
a Substitution.
"Anticipated Repayment Date" means the date set forth in Section 2.5 of
this Agreement.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11 USC ss.
101-1330) as hereinafter amended or recodified.
"Borrower" means Catellus Finance 1, L.L.C., a Delaware limited
liability company.
"Business Day" shall mean any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banks in California or New York are
authorized or required by law to
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close. All references in this Agreement to a "day" or a "date" shall be to a
calendar day unless specifically referenced as a Business Day.
"Cash Management Agreement" means that certain Cash Management
Agreement of even date herewith executed by and among Borrower, Lender, and
Manager.
"Closing Date" means the date Lender releases or authorizes the escrow
to release the Loan proceeds to Borrower.
"Collateral" means all of the personal property collateral as described
in the Mortgages.
"Construction Letters of Credit" has the meaning given to such term in
Section 2.13 of this Agreement.
"DCR" means Duff & Phelps Credit Rating Co.
"Default" means an event or circumstance which with the passage of time
or the giving of notice or both, would constitute an Event of Default.
"Default Interest Rate" has the meaning given to such term in Section
1.07 of the Note.
"Defeasance Period" has the meaning given to such term in Section 1.03
of the Note.
"DSCR" means the ratio of the Underwritten Net Cash Flow to annual debt
service on the Loan, as determined by the Lender.
"Environmental Indemnity Agreement" means that certain Hazardous
Substances Indemnity Agreement of even date herewith executed by Borrower and
Guarantor, for the benefit of Lender.
"Environmental Laws" has the meaning given to such term in Section 6.1
of this Agreement.
"Environmental Reports" has the meaning given to such terms in Section
6.1 of this Agreement.
"Event of Default" has the meaning given to such term in Section 10.1
of this Agreement.
"Extended Term Rate" has the meaning given to such term in Section
4.03(b) of the Note.
"FMV" means the appraised value of a Property, from time to time, as
determined by a current third-party MAI appraisal reasonably satisfactory to
Lender. Such MAI appraisal must be dated no more than six (6) months prior to
the applicable FMV determination date and must be prepared by Cushman & Wakefield or other nationally recognized appraisal company.
"Governmental Authority" means any domestic or foreign national, state
or local government, any political subdivision thereof, any department, agency,
authority or bureau of
2
any of the foregoing, or any other entity lawfully exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including the Federal Deposit Insurance Corporation, the Federal
Reserve Board, the Comptroller of the Currency, any central bank or any
comparable authority.
"Governmental Rule" means any law, rule, regulation, ordinance, order,
code interpretation, judgment, decree, directive, guidelines, policy or similar
form of decision of any Governmental Authority.
"Gross Income" means all income actually received pursuant to any
Lease, except security deposits, rents paid more than thirty (30) days in
advance and not ratably allocable to the period under measurement, interest
income and refunds.
"Ground Leased Properties" means Properties owned in fee simple by
Borrower and leased by Borrower to a tenant pursuant to a ground lease as more
particularly identified on Exhibit A attached hereto.
"Guarantor" means Catellus Development Corporation, a Delaware
corporation.
"Hazardous Substances" has the meaning given to such term in Section
6.1 of this Agreement.
"Impound Account" has the meaning given to such term in Section 9.2 of
this Agreement.
"Improvements" means all the improvements as described in the
Mortgages.
"Indemnity and Guaranty Agreement" means that certain Indemnity and
Guaranty Agreement dated of even date herewith executed by Guarantor in favor of
Lender.
"Independent Director" has the meaning given to such term in Section
7.3(x) of this Agreement.
"Initial Term Interest Rate" has the meaning given to such term in
Section 4.03(c) of the Note.
"Leases" has the meaning given to such term in Section 3.1(r) of this
Agreement.
"Lender" means Prudential Mortgage Capital Company, Inc., a Delaware
corporation, its successors and/or assigns, including, but not limited to, a
trustee for certificateholders in connection with a Securitization, which
trustee would thereupon be a "Lender" for purposes of this Agreement.
"Lender's Office" means (a) initially, Lender's office located at 100
Mulberry Street, Gateway Center Four, 9th Floor, Newark, New Jersey 07102-4069,
Attention: Shane Tucker, SVP, and (b) subsequently, such other office designated
as such in writing by Lender to Borrower.
3
"Loan" means the principal sum that Lender agrees to lend and Borrower
agrees to borrow pursuant to the terms and conditions of this Agreement and the
Loan Documents, which amount is THREE HUNDRED SEVENTY-THREE MILLION AND
00/100THS DOLLARS ($373,000,000.00), and as evidenced by the Note.
"Loan Commitment" means the Loan Commitment dated August 28, 1998,
executed by Lender and accepted by Borrower and Guarantor on August 28, 1998.
"Loan Documents" means those documents, as hereafter amended,
supplemented, replaced, modified or amended and restated, properly executed and
in recordable form, if necessary, listed in Exhibit C as Loan Documents (and
solely for purposes of Borrower's and Guarantor's representations and warranties
contained herein and, as applicable, in the Other Related Documents), and any
other documents evidencing or securing the Loan (excluding the Other Related
Documents except as provided above).
"Lock-out Period" has the meaning given to such term in Section 1.02(a)
of the Note.
"Management Agreements" has the meaning given to such term in Section
3.1(s) of this Agreement.
"Manager" has the meaning given to such term in Section 3.1(s) of this
Agreement.
"Major Tenants" has the meaning given to such term in Section 3.1(r) of
this Agreement.
"Maturity Date" means November 11, 2028.
"Minimum Coverage Ratio" has the meaning given to such term in Section
9.1 of this Agreement.
"Monthly Payment Amount" has the meaning given to such term in Section
1.01(b) of the Note.
"Moody's" means Moody's Investors Service, Inc.
"Mortgages" means those Mortgages, Assignment of Leases and Rents,
Security Agreement and Fixture Filing of even date herewith executed by
Borrower, as mortgagor, for the benefit of Lender, as mortgagee, and those Deeds
of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
of even date herewith executed by Borrower, as trustor, for the benefit of
Lender, as beneficiary, encumbering the Properties, as hereafter amended,
supplemented, replaced, modified or amended and restated.
"Net Cash Flow" has the meaning given to such term in the Cash
Management Agreement.
"NOI" means, except as otherwise provided in the last paragraph of
Section 2.12 below, the annual Gross Income realized from ongoing and continuing
operations for a given Property or Properties, as applicable, for the twelve
(12) month period prior to the Closing Date or such other applicable twelve (12)
month period, as reasonably determined by Lender, less all
4
necessary and ordinary operating expenses (both fixed and variable) for
such twelve (12) month period, including, without limitation, utilities,
administrative, cleaning, landscaping, security, repairs and maintenance, ground
rent payments, management fees (computed at the higher of the actual management
fees or at 3 1/2% of Gross Income), replacement reserves, real estate and other
taxes, assessments and insurance, but excluding any deduction for federal, state
and other income taxes, debt service expenses (except for assessment bonds),
depreciation or amortization of capital expenditures, and other similar non-cash
items. For purposes of determining NOI, ordinary operating expenses which have
been prepaid will nonetheless be treated as a cost to be incurred. Documentation
and calculation of NOI shall be certified by an officer of Borrower and shall be
reasonably satisfactory to Lender.
"Note" means that certain Promissory Note of even date herewith and in
the form of Exhibit B to this Agreement, in the original principal amount of the
Loan, executed by Borrower in favor of Lender, as hereafter amended,
supplemented, replaced, modified or amended and restated.
"Other Related Documents" means those documents, as hereafter amended,
supplemented, replaced, modified or amended and restated, properly executed and
in recordable form, if necessary, listed in Exhibit C as Other Related
Documents.
"Payment Date" has the meaning given to such term in Section 1.01(b) of
the Note.
"Permitted Exceptions" has the meaning given to such term in Section
3.1(i) of this Agreement.
"Permitted Investments" has the meaning given to such term in the Cash
Management Agreement.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
entity, party or government (whether territorial, national, federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Properties" means the Properties described in Exhibit A (excluding as
of the date hereof the Gillette Property and the GATX-Stockton Property as such
terms are defined in Section 2.13 of this Agreement until such time as such
Properties are included under the Mortgages, together with the Improvements
thereon and such other real properties as may from time to time be added in the
Property Pool.
"Property" means any one of the Properties in the Property Pool from
time to time.
"Property Condition Report" has the meaning given to such term in
Section 3.1(g) of this Agreement.
"Property Pool" shall mean all of the Properties from time to time
serving as security for the Loan.
5
"Prudential" means Prudential Mortgage Capital Company, Inc., a
Delaware corporation, and/or any affiliated or related entity.
"Rating Agencies" means the nationally recognized statistical rating
organizations from time to time rating the securities issued in connection with
the Securitization of the Loan or any portion thereof, which are expected to be
Moody's and DCR. Requirements of the Rating Agencies under this Agreement shall
be deemed to mean the requirements of Moody's and DCR or such other Rating
Agency, as applicable.
"Rating Confirmation," with respect to the matter in question, shall
mean that as a condition thereto the Rating Agencies shall have confirmed in
writing that (i) such investment, replacement or action shall not result, in and
of itself, in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding securities (if the Securitization has occurred), or
(ii) such investment, replacement or action would not result, in and of itself,
in a reduction, withdrawal or qualification of any rating for proposed
securities then under consideration by the Rating Agencies (if the
Securitization has not yet occurred); provided that if the Securitization has
not taken (or as certified by Lender, will not take) the form of a transaction
rated by the Rating Agencies, then "Rating Confirmation" shall instead mean that
the matter in question shall be subject to the prior approval of the Lender,
which approval shall not be unreasonably withheld or delayed unless otherwise
provided.
"Replaced Properties" has the meaning given to such term in Section
2.12 of this Agreement.
"Replacement Reserve" has the meaning given to such term in Section
9.4(a) of this Agreement.
"Reserves" has the meaning given to such term in Section 9.8 of this
Agreement.
"Secured Obligations" has the meaning given to such term in the
Mortgages.
"Securitization" has the meaning given to such term in Section 11.7 of
this Agreement.
"Substitute Property" has the meaning given to such term in Section
2.12 of this Agreement.
"Substitution" has the meaning given to such term in Section 2.12 of
this Agreement.
"TI/LC Reserve" has the meaning given to such term in Section 9.4(b) of
this Agreement.
"Title Policies" has the meaning given to such term in Section 3.1(i)
of this Agreement.
"Underwritten Net Cash Flow" means aggregate NOI from the Property or
the Properties less deductions for normalized capital expenditures and capital
expenditures reserves (but without duplication of replacement reserves as
described in the NOI definition), tenant improvement costs and leasing
commissions, and any reserves established with respect thereto.
6
Underwritten Net Cash Flow shall be determined by Lender pursuant to its
customary practices and consistently applied for "CMBS" loans similar to the
Loan.
"Yield Maintenance Charge" has the meaning given to such term in
Section 1.02(c) of the Note.
1.2 Exhibits and Schedules Incorporated. All exhibits and
schedules attached hereto, are hereby incorporated into this Agreement.
ARTICLE II
LOAN
2.1 Loan. By and subject to the terms of this Agreement, Lender agrees
to lend and Borrower agrees to borrow the principal sum of THREE HUNDRED
SEVENTY-THREE MILLION AND 00/100THS DOLLARS ($373,000,000.00), said sum to be
evidenced by the Note. The Note shall be secured by, among other things, the
Mortgages and the Cash Management Agreement.
2.2 Interest Rate; Payment of Interest. Borrower shall pay interest on
the principal balance of the Loan outstanding from time to time under the Note
at the rate and in accordance with the terms set forth in the Note.
2.3 Loan Documents. Borrower shall deliver to Lender concurrently with
this Agreement each of the Loan Documents, properly executed and in recordable
form, as applicable.
2.4 Closing Date. The date of this Agreement and of the other Loan
Documents is for reference purposes only. The 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 effective on the Closing Date.
2.5 Anticipated Repayment Date. The Anticipated Repayment Date of the
Loan shall be November 11, 2008.
2.6 Maturity Date. On the Maturity Date, all outstanding principal,
together with all accrued and unpaid interest and all other sums due and owing
under the Note and under this Agreement and the other Loan Documents shall be
repaid in full. All payments due under this Agreement at the Maturity Date shall
be paid in immediately available funds.
2.7 Full Repayment and Reconveyance. Upon receipt of all sums owing and
outstanding under the Loan, Lender shall cause the Properties and the related
Collateral to be released from the lien of the Mortgages and the other Loan
Documents; provided, however, that 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.
7
2.8 Limitation on Borrower's Liability. Borrower shall have no personal
liability for the repayment of the Loan or performance under the Loan Documents
except as expressly provided in Section 1.05 of the Note, which provisions are
incorporated herein by reference.
2.9 Prepayment. Borrower may not prepay the Loan in whole or in part
except as otherwise expressly provided in the Note.
2.10 Defeasance. Borrower may cause all or a portion of the Properties
to be released from the lien of the Mortgages in accordance with the provisions
of Section 1.03 of the Note.
2.11 Assignment and Assumption of Interest in Borrower; Transfer of
Properties. The obligations of Borrower under this Agreement and the other Loan
Documents may not be assigned by Borrower or assumed by any third party. The
receipt of loan payments, the cashing of such payment checks, or such similar
acts by Lender shall not constitute a waiver of this prohibition. None of the
Properties, nor any direct or indirect interest therein, nor in Borrower, may be
transferred, except that, as long as no Default or Event of Default has occurred
and is continuing, there shall be a one-time right to transfer 100% of the
beneficial interest in Borrower (the "REIT Transfer") to a REIT (the "REIT
Transferee"), provided that and immediately subsequent to such transfer, the
REIT Transferee shall have a book value net worth of no less than
$150,000,000.00 or a market value equity of no less than $150,000,000.00 as
reasonably determined by Lender based on asset values established by third-party
MAI appraisals of the Properties acceptable to Lender in its reasonable
discretion less all existing liabilities and debts of the REIT Transferee, and
Guarantor shall reaffirm (and shall not be released from) its guarantor
obligations and liabilities under any guaranty or indemnity agreement executed
by Guarantor in connection with the Loan and the REIT Transferee executes new
guaranty and indemnity agreements substantially in the form of the Other Related
Documents. In addition, the following conditions to the REIT Transfer must be
satisfied: (a) Guarantor owns at least 51% of the economic interest in the REIT
Transferee at the time of the REIT Transfer and the REIT Transferee is managed
and controlled directly or indirectly by Guarantor and shall continue to be so
owned, managed and controlled, (b) Guarantor expressly covenants in writing that
so long as any part of the Loan remains outstanding it shall continue to own at
least 51% of the economic interest in the REIT Transferee and shall continue to
manage and directly or indirectly control the REIT Transferee, (c) at the time
of the REIT Transfer, the Loan shall have a ratio of (i) aggregate NOI from the
Properties for the prior twelve (12) month period (adjusted by Lender to the
extent Lender reasonably determines that such aggregate NOI will not continue
for the next twelve (12) months) to (ii) annual debt service on the Loan, of no
less than 1.65:1.00 and Lender reasonably believes that the loan-to-value ratio
of the Loan is no higher than 72.5%, and (d) the Rating Agencies are provided
with an opinion of counsel acceptable to the Rating Agencies (or to Lender if
the Loan has not been securitized) providing that as a result of such transfer,
Borrower remains a single-purpose, bankruptcy remote entity. Borrower shall also
deliver such other documents, certificates and opinions as required by the
Rating Agencies or the Lender, including, but not limited to, a
non-consolidation opinion acceptable to the Rating Agencies and Lender. In
addition to a $100,000 (the "Base Review Fee") non-refundable processing fee for
the REIT Transfer and for any transfer requiring Lender's consent or Rating
Confirmation, Borrower shall pay (in addition to the Base Review Fee, where
applicable) the fees and expenses relating to the review and processing of all
transfers (other than incidental share transfers in Guarantor), including, but
not limited to, the reasonable costs of Lender's
8
outside legal counsel and Rating Agency fees, cost and expenses (including,
without limitation, legal expenses). Whether or not the proposed transfer is
approved, Lender will retain the Base Review Fee and Borrower shall remain
liable for all other fees and expenses. Following such a permitted assumption of
the Loan, Borrower or the approved assignee shall have no further right to
assign the Loan.
Notwithstanding the foregoing, transfers of shareholder interests in Guarantor
shall be permitted unless such transfer causes a "Change of Control" in which
case, prior to Securitization, Lender's prior written consent shall be required
(which may include consideration of the impact such transfer will have on the
Rating Agencies review, analysis and concerns in connection with a
Securitization) and, after the Securitization, Lender shall require a Rating
Confirmation and it shall be a further pre-condition to the transfer that causes
a Change in Control that Prudential (so long as Prudential holds a majority of
the face value of the securities issued in connection with the Securitization)
provides its prior written consent. Borrower acknowledges and agrees that
Prudential's decision to approve or disapprove of any transfer shall be in
Prudential's sole and absolute discretion. For purposes of this Section 2.11, a
------------
"Change of Control" shall be deemed to occur in the event that any one or more
of the following events shall occur: (a) more than 45% of the legal or
beneficial voting shareholder interests in Guarantor are acquired in one
transfer or over time, in related transfers to or at the direction of one or
more affiliated Persons or their designees, (b) during any consecutive eighteen
(18) month period, individuals who at the beginning of such period constituted
the board of directors of Guarantor (together with any new directors whose
election to such board of directors or whose nomination for election was made or
approved by a vote of the majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the board of directors of Guarantor then in office, or
(c) the stockholders of Guarantor approve a merger or consolidation (unless
Guarantor is the surviving entity) or liquidation, dissolution or the sale of
substantially all of Guarantor's assets.
The failure to obtain Lender's prior written consent to any transfer where
Lender's prior written consent is required hereunder shall give Lender the
right, at Lender's sole option, to declare an Event of Default, to accelerate
the Loan and to declare the Loan immediately due and payable.
2.12 Substitution of Properties. From and after the date twelve (12)
months after the Closing Date, Borrower from time to time (not to exceed six (6)
occasions) may offer to Lender as collateral for the Loan (a "Substitution") one
or more substitute properties (each, a "Substitute Property" and, collectively,
"Substitute Properties"; each Substitute Property to be considered a Property
for all purposes of this Agreement) as replacements for Properties ("Replaced
Properties"), subject to there then being no Default or Event of Default
(excepting non-monetary defaults relating solely to the Replaced Property,
including, but not limited to, a breach of one or more representations or
warranties, but not excepting any default relating to financial statements or
their delivery or representations or warranties in respect thereof) and subject
further to the satisfaction of all the conditions set forth below with respect
to each Substitution and to Borrower making the representations and warranties
in Section 5.1 hereof as to each Substitute Property and to Borrower satisfying
the closing conditions of Section 3.1 hereof as to each Substitute Property. Any
proposed Substitution shall be submitted by Borrower to Lender in writing,
together with copies of all reports and other due diligence materials necessary
to enable
9
Lender to ascertain compliance with the conditions below, at least
ninety (90) days prior to the proposed date of Substitution. No Substitute
Property may qualify as a Replaced Property and, after giving effect to the
Substitution, no Property may share its tax parcel with any property not secured
by the applicable Mortgage. No Property may be substituted if it includes
property which is needed to comply with a tenant's expansion right from an
adjoining Property onto such Property unless all of the Properties related to
the tenant's expansion right are contemporaneously substituted.
(a) For each Substitution, the Substitute Property or
Substitute Properties must have an aggregate NOI of not less than the greater of
(i) the aggregate NOI of the Replaced Property or Properties as of the Closing
Date as set forth on Schedule 1 attached hereto, and (ii) the aggregate NOI of
the Replaced Property or Replaced Properties for the immediately preceding 12
month period;
(b) For each Substitution, the Substitute Property or
Substitute Properties must have an aggregate FMV of not less than the greater of
(i) the FMV of the Replaced Property or Replaced Properties as of the Closing
Date as set forth on Schedule 1 attached hereto, and (ii) the FMV of the
Replaced Property or Replaced Properties immediately prior to the Substitution;
(c) As evidenced by estoppel certificates reasonably
acceptable to Lender and the Rating Agencies, all tenants in each Substitute
Property that lease more than 20,000 s.f. (or whose rent constitute greater than
thirty percent (30%) of the Gross Income for the Substitute Property) must be
occupying their space, open for business and paying rent (after any free rent,
credit or rent abatement periods) and not in arrears more than 30 days, and all
free rent or rental grace periods shall have expired, and the tenants shall not
be in bankruptcy (provided, however, the impact of any tenant not qualifying
under this subparagraph (c) would be the disqualification of the income
associated with that tenant for purposes of calculating NOI, or establishing FMV
for the affected Substitute Property, not the elimination of the property as a
potential Substitute Property);
(d) With respect to each Substitute Property, leases affecting
at least 90% of the net rentable area must have average remaining terms of five
(5) years or more, as of the date of Substitution;
(e) Borrower must hold fee title to the Substitute Properties
and the Substitute Properties must be free of all encumbrances, easements and
other title exceptions (except those expressly permitted by Lender in its
reasonable discretion);
(f) Borrower must continue to be a bankruptcy-remote single
purpose entity and, immediately prior to each such Substitution, Borrower shall
deliver bankruptcy (including, but not necessarily limited to,
non-consolidation) and other legal opinions as reasonably required by Lender;
(g) Borrower must deliver an environmental report for each
Substitute Property in form, findings and substance acceptable to Lender in its
reasonable discretion and the Rating Agencies;
10
(h) Borrower must (i) deliver to Lender and the Rating
Agencies an engineering report (including, but not limited to, analysis of
seismic risk for any Substitute Property situated in a seismic zone, and which
analysis must show that the Substitute Property does not have a probable maximum
loss percentage that exceeds the probable maximum loss percentage of the
Replaced Property and in no event shall such Substitute Property have a probable
maximum loss of more than 15%) in form, findings and substance acceptable to
Lender and the Rating Agencies in their reasonable discretion, and (ii) deposit
125% of estimated deferred maintenance cost (if any) into a reserve account with
Lender where the estimated cost of such deferred maintenance exceeds $100,000
per Substitute Property;
(i) Each Substitute Property must comply with all title, land
use, legal, environmental and insurance requirements provided in the Loan
Documents, and Lender must receive title insurance, surveys, casualty insurance,
and other due diligence items, all acceptable to Lender in its reasonable
discretion; and with respect to the remaining Properties encumbered by the
applicable Mortgage, Borrower shall provide Lender with title insurance
endorsements reasonably acceptable to Lender to the effect that such release
will not impair the priority of such Mortgage on the remaining Properties
encumbered by the Mortgage;
(j) After giving effect to the Substitution, not more than
sixty (60%) percent of the rentable square footage of the Property Pool would be
located in Los Angeles, Riverside, San Bernardino and Orange Counties in
California;
(k) The Rating Agencies must have confirmed in writing that
such Substitution would not result in a downgrade, qualification, or withdrawal
of the ratings of the securities issued pursuant to any Securitization. Except
as provided in Subsection 2.12 (m) and Section 2.15 below, however, Rating
Agency confirmation shall not be so required if all of the following conditions
are satisfied:
(i) The Replaced Property's Allocated Loan Amount is
not among that of the top ten (10) Properties ranked by Allocated Loan Amount
as set forth on Schedule 1 attached hereto;
(ii) The Allocated Loan Amount of the Replaced Property
is less than five percent (5%) of the then-current principal amount of the
Loan immediately preceding the proposed Substitution; and
(iii) After giving effect to the proposed Substitution,
the aggregate Allocated Loan Amount for all Substitute Properties substituted
since the Closing Date is less than 15% of the original principal amount of
the Loan for all Properties as of the Closing Date.
If the Substitution is to occur prior to the Securitization, the Substitution is
subject to Lender's prior written consent. Borrower acknowledges and agrees that
Lender's decision to approve or disapprove of any Substitution shall be in
Lender's reasonable discretion, which may include consideration of the impact
such Substitution will have on the Rating Agencies review, analysis and concerns
in connection with a Securitization.
(l) The Substitute Property must be income producing and
developed property and similar in quality, nature and property type to the
Replaced Property ("Like for
11
Like") (except for the Property at 224 South Michigan Avenue, Chicago,
Illinois and the Properties known as Home Depot, Pak N' Save and Kmart, all
located in Emeryville, California (identified as Properties numbered 67, 69, 70
and 71, respectively, on Exhibit A attached hereto) for which Substitute
Properties may be either industrial, office (except office Properties may not be
substituted for retail Properties), research & development or grocery anchored
retail properties);
(m) Notwithstanding the "Like for Like" provisions of
Subsection 2.12 (l), above, up to 30% of the Allocated Loan Amounts of the
Ground Leased Properties and the "credit tenant properties" (i.e., those
Properties substantially leased to a tenant whose credit is rated BBB- or better
by one of the Rating Agencies) may be replaced by other Substitute Properties,
provided in all such Substitutions (i.e., notwithstanding any provision in the
Loan Documents to the contrary), Rating Confirmation is obtained.
(n) Borrower shall deliver certain other closing documents as
may be described in the applicable private placement memorandum or other
disclosure documents and shall execute required Loan Documents (including, but
not limited to, such mortgages, deeds of trust, and UCC-1 financing statements
as may be necessary to encumber the Substitute Properties in a manner consistent
with the other Properties in the Property Pool) and revisions thereto and to
deliver other documents, opinions and certificates reasonably required by
Lender;
(o) At the time of each Substitution request, Borrower shall
pay a non-refundable Substitution servicing fee of $15,000 per building per
Substitute Property;
(p) Upon giving effect to the Substitution, the aggregate
Allocated Loan Amount of the Replaced Properties as of the Closing Date shall
not exceed thirty percent (30%) of the principal amount of the Loan as of the
Closing Date; and
(q) After giving effect to the Substitution, and unless Rating
Confirmation is otherwise obtained, there shall remain in the Property Pool a
minimum total of at least ninety-five (95) Properties less the number of
Properties which were released pursuant to a Partial Defeasance in accordance
with Section 1.03 of the Note.
(r) Borrower shall deliver to Lender and the Rating Agencies
an opinion of counsel for Borrower or Lender, at Borrower's expense, in form and
substance and delivered by counsel reasonably satisfactory to Lender and the
Rating Agencies, that the Substitution will not cause the Trust (as defined in
the Note) to (i) fail to qualify as a "real estate mortgage investment conduit"
(a "REMIC"), within the meaning of Section 860D of the Internal Revenue Code of
1986, as amended from time to time or any successor statute (the "Code"), or
(ii) be subject to any "prohibited transaction" tax as defined in Section 860F
of the Code.
Borrower shall pay all fees, costs and expenses, including, but not limited to,
legal fees, incurred by Lender and the Rating Agencies, in connection with the
matters set forth in this Section 2.12.
------------
For purposes of this Section 2.12, the definition of NOI as set forth in Section
-------
1.1 above, shall be used, except that (x) the applicable twelve (12) month
---
period referred to in said definition shall be the twelve (12) month period
prior to the Substitution and (y) stabilized occupancy, as
12
reasonably determined by Lender, shall be assumed for the purposes of
calculating operating expenses.
With respect to any Substitution, no more than two (2) Replaced Properties may
be substituted for any one (1) Substitute Property unless Rating Confirmation is
obtained. In the event that the Substitution involves one (1) Replaced Property
for one (1) Substitute Property, the Substitute Property shall be assigned the
Allocated Loan Amount of the Replaced Property. In the event that the
Substitution involves more Replaced Properties than Substitute Properties, or
more Substitute Properties than Replaced Properties, than the total Allocated
Loan Amounts of the Replaced Properties shall be reallocated proportionately
among the Substitute Properties based on the FMV of the Substitute Properties at
the time of Substitution and as adjusted by Lender in its reasonable discretion
based on DSCR of the Substitute Properties.
Notwithstanding anything in this Section 2.12, Section 2.15 or Section 2.16 to
the contrary, in determining whether the conditions for a Substitution or a
Release, as applicable, have been satisfied under this Section 2.12 (or under
Section 3.1 to the extent incorporated herein), Section 2.15, or under Section
2.16, if at the time the Substitution or Release occurs the Loan is held by a
REMIC or by an entity that qualifies for treatment as a "grantor trust" under
the Code, all conditions contained herein (or under Section 3.1 to the extent
incorporated herein), Section 2.15 or under Section 2.16, which provide for the
exercise of discretion by the Lender (i.e., by requiring that documents or other
items be "reasonably acceptable to the Lender" or "acceptable to the Lender in
its reasonable discretion" or "acceptable to Lender in its sole discretion", or
through use of words with similar import) shall be construed as permitting the
Lender to reject a document or other item only if such document or other item
fails to satisfy generally-applicable underwriting standards for securitized
commercial mortgage loans, determined at the time such Substitution or Release
occurs.
2.13 Build to Suit Properties. With respect to each of the Gillette
build-to-suit property in Romeoville, Illinois (identified as Property #54 on
Exhibit A attached hereto and herein the "Gillette Property") and the GATX
property in Stockton, California (identified as Property #52 on Exhibit A
attached hereto and herein the "GATX-Stockton Property"), Borrower shall provide
to Lender on the Closing Date, irrevocable, unconditional letters of credit in
the amount of $16,400,000 for the Gillette Property (the "Gillette Letter of
Credit") and $13,600,000 for the GATX-Stockton Property (the "GATX-Stockton
Letter of Credit" and together with the Gillette Letter of Credit, the
"Construction Letters of Credit"), which Construction Letters of Credit must be
from an issuer, must have an account party and expiry date (which must provide
that, prior to its expiration from time to time, it shall be automatically
extended for another term if the Return Conditions have not yet been satisfied
at such time), and in all other respects must be in form and substance,
acceptable to Lender and the Rating Agencies. Without limiting the foregoing,
the issuer of the Construction Letters of Credit as well as the Leasing Letters
of Credit (as defined below) must be and continue to be from issuers rated at
least "A" by DCR and at least "Aa2" by Moody's, or, if not rated by DCR and
Moody's, correspondingly by at least two (2) Rating Agencies, or otherwise
acceptable to DCR and Moody's. If there is no Event of Default, and provided the
following conditions (including there being no Event of Default, the "Return
Conditions") are satisfied prior to December 31, 1999 or, with respect to the
Gillette Letter of Credit, prior to March 31, 2000 (the "Return Dates") in the
event the tenant under the Gillette Property lease exercises its option to have
the additional improvements constructed pursuant to
13
Section 18 of the lease on the Gillette Property, the applicable
Construction Letter of Credit shall be returned upon (a) completion of
construction related to such respective property, as evidenced by a certificate
of occupancy acceptable to Lender, (b) acceptance and occupancy of the
respective property by the tenants thereof, (c) commencement of rent payments by
the tenants (after the expiration of any free rent, credit or grace period), (d)
receipt of an estoppel certificate and, if requested by Lender, a subordination,
non-disturbance agreement, from the tenants thereof in form and substance
reasonably acceptable to Lender, (e) Lender obtaining a valid first mortgage
lien on the respective property which would be cross-defaulted and
cross-collateralized with the other Properties in the Property Pool, (f) title
to the respective property shall be vested in Borrower, (g) title insurance
endorsements and other reasonable evidence that all streets and roads reasonably
necessary for access to and full use, occupancy and operation of the respective
property have been completed, have been dedicated and accepted by the
appropriate municipal authority and are open and available, and (h) delivery to
Lender of acceptable title insurance (which shall provide, among other things,
affirmative coverage as to mechanics' liens and that such property does not
share its tax parcel with any other property), survey, property insurance, legal
opinions and such other certificates, opinions and documents reasonably
requested by Lender, including, but not limited to, third party engineering,
environmental and MAI appraisals (if not previously delivered), and payment to
Lender and the Rating Agencies of all fees, costs and expenses (including, but
not limited to, legal fees and expenses) incurred by Lender and the Rating
Agencies in respect of the matters set forth in this Section. In the event the
Return Conditions are not or will not be satisfied as to either or both of the
respective properties on or prior to the respective Return Date, Borrower shall
have the option to make a Substitution with respect to the applicable property
in accordance with Section 2.12 above to the same extent as if the applicable
property were in the Property Pool, and such Substitution shall reduce the
number of remaining Substitutions available to Borrower accordingly. A
Substitution exercised pursuant to this Section shall require Rating
Confirmation. Borrower must exercise such option by providing written notice to
Lender at least one-hundred (100) days prior to the applicable Return Date. If
Borrower fails to timely exercise its Substitution option or fails to fully
satisfy all of the requirements for a Substitution in accordance with Section
2.12 above after exercising its option at least ten (10) Business Days prior to
the applicable Return Date, Borrower shall make a partial prepayment of the Loan
in an amount equal to: (i) 125% of the Allocated Loan Amount for the applicable
Properties, plus (ii) a Yield Maintenance Charge (as defined in the Note). If
Borrower fails to make such prepayment prior to the applicable Return Date,
Lender shall be entitled to draw on the respective Construction Letter of Credit
and apply the proceeds thereof to the Loan and to the Yield Maintenance Charge.
Borrower agrees that in the event the amount of a Construction Letter of Credit
is insufficient to satisfy the amount due in connection with such partial
prepayment as set forth in clauses (i) and (ii) above, Borrower shall
immediately pay to Lender additional funds to satisfy such shortfall. If the
letters of credit described in Sections 2.13 and 2.14 are not extended, Lender
may draw upon them to avoid their expiration. Similarly, the letters of credit
described in Sections 2.13 and 2.14 may be drawn upon in the event that the
requisite issuer ratings as hereinabove set forth are not maintained and the
letters of credit described in Sections 2.13 and 2.14 are not promptly replaced
after written notice from Lender (with replacements acceptable to Lender and the
Rating Agencies).
2.14 Letters of Credit - Leasing . With respect to each of the Union
City, California property located at 2900 Faber Street (identified as Property
#5 on Exhibit A attached hereto and herein the "Union City Property") and the
Tustin, California property (identified as Property #44
14
on Exhibit A attached hereto and herein the "Tustin Property"), Borrower
shall provide to Lender on the Closing Date, irrevocable, unconditional letters
of credit in the amount of $2,500,000 for the Union City Property (the "Union
City Letter of Credit") and $1,100,000 for the Tustin Property (the "Tustin
Letter of Credit" and together with the Union City Letter of Credit, the
"Leasing Letters of Credit"), which Leasing Letters of Credit must be from an
issuer, must have an account party and expiry date, and in all other respects
must be in form and substance, acceptable to Lender and the Rating Agencies.
Each Leasing Letter of Credit must have a term of no less than twelve (12)
months, and must provide that prior to its expiration it shall be automatically
extended for one or more terms of another twelve (12) months each if the Leasing
Return Conditions have not yet been satisfied at such time. If there is no Event
of Default, and provided the following conditions (including there being no
Event of Default, the "Leasing Return Conditions") are satisfied prior to March
1, 2000 or, if Borrower, at Lender's option, is required to extend the terms of
either or both Leasing Letters of Credit for an additional term of twelve (12)
months, prior to March 1, 2001 (as applicable, the "Leasing Return Dates"),
provided that all of the Leasing Return Conditions shall have been satisfied
prior to such extended date, the applicable Leasing Letter of Credit shall be
returned upon (a) the leasing to unaffiliated third parties of no less than
ninety percent (90%) of the space at the respective Property, with a lease term
of no less than five (5) years (taking into account termination options, if
any), and at rents no less than the then prevailing market rental rate for the
area in which the Property is situated, (b) acceptance and occupancy of the
respective Property by the tenants thereof, (c) commencement of rent payments by
the tenants (after the expiration of any free rent, credit or grace period), (d)
receipt of an estoppel certificate from the tenants thereof in form and
substance reasonably acceptable to Lender and the Rating Agencies, and (e)
payment to Lender and the Rating Agencies of all fees, costs and expenses
(including, but not limited to, legal fees and expenses) incurred by Lender and
the Rating Agencies in respect of the matters set forth in this Section. In the
event the Leasing Return Conditions are not or will not be satisfied as to
either or both of the respective Properties on or prior to the Leasing Return
Date, Borrower shall have the option to make a Substitution with respect to the
applicable property subject to and in accordance with Section 2.12 above and
such Substitution shall reduce the number of remaining Substitutions available
to Borrower accordingly. Borrower must exercise such option by providing written
notice to Lender at least one-hundred (100) days prior to the applicable Leasing
Return Date. If Borrower fails to exercise its Substitution option or fails to
fully satisfy all of the requirements for a Substitution in accordance with
Section 2.12 above after exercising its option at least ten (10) Business Days
prior to the applicable Leasing Return Date, Borrower shall make a partial
prepayment of the Loan in an amount equal to: (i) 125% of the Allocated Loan
Amount for the applicable Properties, plus (ii) a Yield Maintenance Charge (as
defined in the Note). If Borrower fails to make such prepayment prior to the
applicable Leasing Return Date, Lender shall be entitled to draw on the
respective Leasing Letter of Credit and apply the proceeds thereof to the Loan
and to the Yield Maintenance Charge. Borrower agrees that in the event the
amount of a Leasing Letter of Credit is insufficient to satisfy the amount due
in connection with such partial prepayment as set forth in clauses (i) and (ii)
above, Borrower shall immediately pay to Lender additional funds to satisfy such
shortfall.
2.15 Expansion Rights.
(a) If any tenant under a Lease exercises its option as
presently set forth in its lease to lease additional land and/or improvements
(the "Expansion Land" and the portion of
15
each of such Properties excluding the Expansion Land is hereinafter the
"Remaining Property") presently constituting a portion of any of those
Properties designated on Exhibit A hereto as IL1970104 (Gillette/IL), CA0712430
(Pepsi/Ontario, CA), CA0010612 (Office Depot/Fremont, CA) and IL1970335
(GATX/IL) (collectively, the "Expansion Properties") and to have Borrower
construct thereon additional improvements (such improvements being hereinafter
referred to as the "Expansion Improvements", and the Expansion Land and the
Expansion Improvements being hereinafter referred to as the "Expansion
Premises"), Borrower shall have the right, exercised by written notice to
Lender, to have the Expansion Premises considered Substitute Properties and to
have Properties designated by Borrower released from the Property Pool as if
such Properties were Replaced Properties (subject to the limitations, exceptions
and conditions set forth below in this Section 2.15(a) and Section 2.12 above)
provided (i) no Event of Default exists as of the date of the Substitution, (ii)
the Expansion Improvements have been completed as evidenced by a certificate of
occupancy reasonably acceptable to Lender, (iii) the Expansion Improvements have
been accepted and occupied by the tenant thereof, (iv) commencement of rent
payments by the tenant (after the expiration of any free rent, credit or grace
period) has occurred, (v) Lender has received an estoppel certificate from the
tenant thereof in form and substance reasonably acceptable to Lender, (vi) title
to the Expansion Improvements shall be vested in Borrower, (vii) Borrower
delivers to Lender title insurance endorsements or other evidence reasonably
acceptable to Lender that all mechanics and materialmen have been paid in
connection with the construction and that no mechanics' liens exist with respect
to the Expansion Premises and (viii) Lender shall have received a Rating
Confirmation in respect of the Substitution involving the Expansion Premises.
Borrower shall have the right to exercise the option granted in this Section
with respect to the Expansion Premises of one or more tenants in a single
Substitution; provided, however, that all Substitutions under this Section shall
reduce the number of remaining Substitutions available to Borrower accordingly.
The terms and conditions for Substitution set forth in Section 2.12 hereof shall
apply with respect to Substitutions applicable to Expansion Premises.
Determination of NOI and FMV, and the allocation thereof as between the
Expansion Premises and the balance of the Property of which the Expansion
Premises are a part, shall be made by Lender exercising reasonable discretion.
(b) If any tenant with the option to lease Expansion Land
waives its option, or the option is otherwise terminated or expires, which
waiver, termination or expiration is evidenced by a tenant estoppel reasonably
acceptable to Lender, Borrower shall have the right, exercised by written notice
to Lender, to have the Expansion Land considered a potential Replaced Property
and to have such Expansion Land designated by Borrower released from the
Property Pool as if such Expansion Land was a Replaced Property (subject to the
limitations, exceptions and conditions set forth below in this Section 2.15(b),
2.15(c) below and Section 2.12 above) provided (i) no Event of Default exists as
of the date of the Substitution, (ii) Lender shall have received a Rating
Confirmation in respect of the Substitution involving the Expansion Land, and
(iii) Section 2.12(l) shall not be applicable; however, the Substitute
Properties must be income producing industrial, office/research and development
or grocery anchored retail properties. Borrower shall have the right to exercise
the option granted in this Section with respect to the Expansion Land of one or
more tenants in a single Substitution; provided, however, that all Substitutions
under this Section shall reduce the number of remaining Substitutions available
to Borrower accordingly. The terms and conditions for Substitution set forth in
Section 2.12 hereof shall apply with respect to Substitutions applicable to
Expansion Land. Determination of NOI, FMV and the Allocated Loan Amount, and the
allocation thereof
16
as between the Expansion Land and the balance of the Property of which the
Expansion Land is a part, shall be made by Lender exercising reasonable
discretion.
(c) The Remaining Property and/or Borrower shall be in
compliance with the following as an additional condition precedent to
Substitutions applicable to Expansion Land:
(i) The Remaining Property shall comply with all
applicable zoning, land use and similar laws, rules, regulations and ordinances
of all Governmental Authorities having or claiming jurisdiction thereover, and
all other applicable laws, with each such determination assuming the separate
ownership and operation of the Remaining Property;
(ii) Borrower must provide evidence reasonably
acceptable to Lender that (1) all zoning and subdivision approvals of
Governmental Authorities having jurisdiction as necessary to create legally
identifiable tracts of real property, and separate tax and zoning lots for all
real property taxes, have been granted in respect of the Remaining Property; and
(2) from and after the Substitution of the Replaced Property, no acts relating
to development, further subdivision, construction or use on the Replaced
Property can affect in any respect the compliance of the Remaining Property with
all Governmental Rules;
(iii) Borrower must provide evidence reasonably
satisfactory to Lender that, following any such Substitution, the Remaining
Property shall have available to it all necessary utility and other services for
the development, use, occupancy and operation of the Remaining Property, and
adequate, free, unimpeded and unencumbered access for pedestrian and vehicular
ingress and egress onto all adjacent public roads;
(iv) Borrower must provide Lender with an updated
survey of the Remaining Property, reasonably satisfactory to Lender,
prepared by a registered land surveyor for the state in which the Remaining
Property is located, and certified to the Lender, its successors and assigns,
and the title insurer in form reasonably acceptable to Lender, containing metes
and bounds legal descriptions of the Remaining Property;
(v) Borrower provides Lender with an opinion of
counsel reasonably satisfactory to Lender, which opinion shall be in form
and substance reasonably satisfactory to Lender, or other evidence reasonably
satisfactory to Lender, that the lien of the applicable Mortgage is and
continues to constitute a valid lien on the Remaining Property; and
(vi) Borrower shall procure from the title insurer
insuring the lien of the Mortgages an endorsement to Lender's title
insurance policy reasonably acceptable to Lender which shall provide, inter
alia, that the lien and priority of the applicable Mortgage on the Remaining
Property shall be unaffected as a result of the release of the Replaced
Property.
2.16 GATX-Woodridge Property. Upon satisfaction of the following terms
and conditions, Lender shall release from the Mortgages (the "Release") that
certain parcel (the "Outparcel") consisting of a portion of the Property known
as the GATX-Woodridge Property (identified as Property #53 on Exhibit A hereto),
which Outparcel is further described on Exhibit G hereto:
17
(a) The Outparcel is not required to be included within the
GATX-Woodridge Property for purposes of any Governmental Rule or necessary or
appropriate to satisfy or facilitate the requirements or terms of any Lease;
(b) The Outparcel is simultaneously with the Release being
transferred (the "Conveyance") to a third party, including, without limitation,
Guarantor;
(c) Borrower shall have given to Lender a written request for
the Release accompanied by all evidence, information and other items required by
this Section, not less than sixty (60) days prior to the desired Release date;
(d) Each of the Outparcel and the remaining portion of the
GATX-Woodridge Property (the "Remaining GATX-Woodridge Property"), including,
but not limited to, all improvements thereon, and the Release and the Conveyance
shall be in compliance with all applicable zoning, land use and other
Governmental Rules of all Governmental Authorities, with each assuming that the
result of the Conveyance is the separate ownership and operation of the
Outparcel and the Remaining GATX-Woodridge Property (collectively, the "GATX
Properties");
(e) Following the Release the Remaining GATX-Woodridge
Property will retain the Allocated Loan Amount of the GATX-Woodridge Property;
(f) Borrower provides Lender with evidence reasonably
acceptable to Lender that (i) all zoning and subdivision approvals of
Governmental Authorities have been granted so that each of the GATX Properties
constitute separate legal and real estate tax parcels and lots, and (ii) from
and after the Release, no acts relating to development, subdivision,
construction or use on the Outparcel can affect in any respect the compliance of
the Remaining GATX-Woodridge Property with all applicable Governmental Rules;
(g) Borrower provides evidence reasonably satisfactory to
Lender that, following the Release, the Remaining GATX-Woodridge Property shall
have available to it all necessary utility and other services for the
development, use, occupancy and operation of the Remaining GATX-Woodridge
Property, and adequate, free, unimpeded and unencumbered access for pedestrian
and vehicular ingress and egress onto all adjacent public roads at such
locations as are reasonably necessary for the development, use, occupancy and
operation of the Remaining GATX-Woodridge Property;
(h) Borrower provides Lender with an updated survey of the
Remaining GATX-Woodridge Property reasonably satisfactory to Lender, prepared by
a registered Illinois land surveyor and certified to Lender, its successors and
assigns, and the title insurer in form reasonably acceptable to Lender,
containing (i) only such encroachments, exceptions and state of facts as are (A)
set forth in the Title Policy insuring the applicable Mortgage or (B) approved
by Lender in writing in its reasonable discretion; and (ii) metes and bounds
legal descriptions of each of the Outparcel and the Remaining GATX-Woodridge
Property;
(i) Borrower shall procure from the Title Company insuring the
lien of the applicable Mortgage an endorsement to Lender's title insurance
policy reasonably acceptable to Lender which shall provide, inter alia, that the
lien and priority of the applicable Mortgage on the
18
Remaining GATX-Woodridge Property shall be unaffected as a result of the
Release of the Outparcel and continues to constitute a valid first lien,
together with such other matters as Lender shall reasonably require;
(j) No Event of Default exists under the Loan Documents;
and
(k) Borrower pays all of Lender's fees and expenses
(including, without limitation, attorneys' fees and expenses) incurred in
connection with the Release of such Outparcel.
ARTICLE III
CONDITIONS OF LENDER'S OBLIGATION TO FUND LOAN
3.1 Conditions Precedent. Lender's obligation to fund the Loan
hereunder is subject to the fulfillment to Lender's satisfaction of each of the
following conditions precedent:
(a) Representations and Warranties True at Closing. The
representations and warranties contained in Article V of this Agreement or
otherwise made by or on behalf of Borrower in any of the Loan Documents or in
any certificate, written statement or other writing given in connection with the
Loan (including, but not limited to, all financial and operating statements),
taken as a whole, shall be true and correct on and as of the Closing Date with
the same effect as if made at such time.
(b) No Default or Event of Default. There shall exist no
Default or Event of Default, as defined in this Agreement.
(c) Performance. Borrower shall have performed and complied
with all agreements and conditions contained herein required to be performed and
complied with by Borrower prior to or on the Closing Date.
(d) Loan Documents. Lender shall have received all Loan
Documents, Other Related Documents, instruments, policies, and forms of evidence
or other materials required or requested by Lender under the terms of this
Agreement or any of the Loan Documents.
(e) Zoning Compliance; Certificates of Compliance. Borrower
shall have delivered to Lender, and Lender shall have received and approved the
following items: (i) zoning compliance letters from the proper zoning authority
or other evidence reasonably acceptable to Lender as to each Property's
compliance with zoning or use restriction laws; and (ii) copies of a certificate
of occupancy acceptable to Lender and such other evidence of completion
reasonably acceptable to Lender in accordance with the applicable building laws
pertaining to each Property.
(f) Hazardous Materials. With respect to each of the
Properties, Lender shall have received a Phase I environmental assessment report
and such other additional reports (including, without limitation, a Phase II
environmental assessment report) requested by Lender based on the findings of
the Phase I environmental assessment report from a licensed engineer acceptable
to Lender, all in form and substance satisfactory to Lender in its sole
discretion.
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(g) Property Inspection and Report. Lender shall have received
and approved from a professional building inspector acceptable to Lender,
reports (the "Property Condition Report") stating that each of the Properties is
structurally sound and is in good order and repair, and setting forth
recommendations of remedial repairs, capital improvements and replacements which
should be undertaken.
(h) Earthquake Report. Lender shall have received and approved
from licensed engineers acceptable to Lender, reports with respect to the
Properties designated by Lender stating the maximum probable loss to such
Property resulting from seismic events. The reports should include, but shall
not be limited to, a soil analysis, structural analysis, and soil-structure
interaction analysis, proximity to known faults and seismic history.
(i) Title Insurance. Borrower shall have delivered to Lender
surveys acceptable to Lender and lender's A.L.T.A. extended coverage policies of
title insurance with Form 1 coverage, together with such endorsements and
reinsurance as required by Lender (such policies, endorsements and reinsurance
being hereinafter referred to as the "Title Policies"), in the amount of the
Loan and issued by First American Title Insurance Company (the "Title Company"),
fully paid and in form and substance reasonably satisfactory to Lender, insuring
that Borrower is the owner of the Properties in fee simple, and that the
Mortgages are valid first liens on the Properties in favor of Lender, free and
clear of all liens, encumbrances and exceptions to title whatsoever, other than
(i) current real property taxes not delinquent, and (ii) such exceptions to
title which appear in the final Title Policies accepted by Lender in connection
with the closing of the Loan (excepting therefrom all pre-printed and/or
standard exceptions) or as are otherwise approved in writing by Lender
(collectively, the "Permitted Exceptions"). The Title Policies shall effect full
coverage against losses arising out of encroachments on boundary, setback lines
or easements, against losses from existing mechanics' or materialmen's liens and
subsequent mechanics' and materialmen's liens which may gain priority over the
Mortgages and against such other losses with respect to which Lender may request
coverage, and shall be issued without any creditors' rights exception, general
survey exception, or general exception as to rights of parties in possession.
The title insurance policy shall include, in addition to all coverages required
by Lender after review of title matters, the following endorsements (if
available in the jurisdiction of the Property) or coverages: ALTA Form 9
comprehensive endorsements; ALTA Form 3.1 zoning completed structure (with
parking) endorsement; omission of creditors' rights exclusion; damage to
improvements situated on easements (similar to CLTA 103.1 and 103.3); access
endorsement (similar to CLTA Form 103.7); contiguity endorsement (similar to
CLTA Form 116.4), Aggregation Endorsement (ALTA Form 12), First Loss
Endorsement, and where appropriate; separate tax lot endorsement; survey
reading, and land same as survey endorsement (similar to CLTA Form 116.1);
Subdivision Map Act (CLTA 116.7); usury endorsement; variable rate loan
endorsement; mechanic's lien coverage; gap coverage; tie-in coverage, a waiver
of arbitration; and such other endorsements as Lender may require.
(j) Survey. Borrower shall have furnished to Lender four (4)
copies of a survey with respect to each of the Properties (i) prepared and dated
not more than two (2) months prior to the Closing Date by a registered surveyor
reasonably satisfactory to Lender, (ii) certified as correct and otherwise
meeting the detailed survey requirements set forth in Attachment 2 of the Loan
Commitment, and (iii) sufficient to allow the Title Company to issue the Title
Policy without a general survey exception.
20
(k) UCC-3 Certificate; Litigation and Bankruptcy Searches.
Lender shall have received a Certificate(s) of the Secretary of State of each
state in which the Properties are located responding to a UCC-3 Request(s) for
Information and certifying that there is not on file with the Secretary of
State's Office any effective financing statements, statements of assignments,
federal or state tax liens, attachment liens or other security interests
perfectible by the filing of a UCC-1 financing statement with respect to
Borrower, Guarantor, the Collateral or the Properties. Lender shall also have
received litigation and bankruptcy searches with respect to Borrower and
Guarantor in each county in which any of the Properties are located as Lender
shall require.
(l) Documents. Lender shall have received from Borrower, such
certificates, opinions and other documents as Lender may reasonably request and
as are consistent with the provisions of this Agreement and the other Loan
Documents, including, but not limited to, documents evidencing the organization,
existence and authority of Borrower and Guarantor, and the authority of the
persons executing this Agreement and the other Loan Documents to execute the
same for and on behalf of Borrower and Guarantor.
(m) Insurance. Borrower shall have delivered to Lender an
original ACORD 27 (Evidence of Property Insurance) and an ACORD 25 (Certificate
of Insurance) or other Lender approved equivalent listing all coverages and
policies of insurance for the Properties as required by Article IV of this
Agreement.
(n) Appraisal. Lender shall have received a third-party MAI
appraisal of each of the Properties satisfactory to Lender in its sole
discretion.
(o) Consents. Borrower shall have furnished to Lender evidence
reasonably satisfactory to Lender establishing that Borrower has obtained or
will apply for in a timely manner and in the ordinary course of business all
consents, permits and approvals from any and all Governmental Authorities having
jurisdiction over Borrower and/or the Properties, which are required in
connection with the Properties.
(p) Financial Statements. Lender shall have received
originally signed and dated, audited annual financial statements for Guarantor
dated as of December 31, 1997 and unaudited monthly financial statements for
Guarantor dated as of September 30, 1998.
(q) Payment of Fees and Expenses. Borrower shall have paid to
Lender on or before the Closing Date all fees and the expenses required by
Lender in connection with the Loan as provided in the Loan Commitment.
(r) Leases. Borrower shall have provided Lender with copies of
all leases, concessions, licenses, occupancy agreements, and the like in effect
with respect to the Properties (the "Leases"), and any amendments and lease
guarantees thereto, and a schedule (certified by Borrower to be complete and
correct) setting forth the income, rents, prepaid rentals, security deposits,
guarantees or evidence of security or guarantee paid or given in connection
therewith, expiration dates, extension options and all other information
pertaining to such leases as Lender shall require. Borrower shall cause all
tenants, concessionaires, licensees, occupants, and the like to provide estoppel
certificates and, if required by Lender, shall obtain lease
21
subordination/attornment agreements (which certificates and agreements shall be
in form and substance acceptable to Lender in its sole discretion). Borrower and
Guarantor shall have exercised (i) their best commercially reasonable efforts to
cause to be provided to Lender estoppel certificates (in the form set forth as
Exhibit E hereto and made a part hereof) acceptable to Lender from all tenants
in respect of the Properties, and (ii) in any event, cause to be provided to
Lender and the Rating Agencies estoppel certificates acceptable to Lender and
the Rating Agencies in respect of the leased premises set forth on Schedule 2
attached hereto and made a part hereof (collectively, the "Major Tenants") and
from tenants other than the Major Tenants which represent at least seventy
percent (70%) of the rentable improved square footage (exclusive of the square
footage attributable to the Major Tenants). Notwithstanding the foregoing, in
connection with that certain Property located in Chicago, Illinois (identified
as Property #67 on Exhibit A), Borrower shall deliver estoppels from Tenants
representing not less than 50% of the net rentable space of such Property. With
respect to all remaining tenants, Borrower shall furnish an estoppel for such
tenants' occupancy. In addition, Borrower and Guarantor shall have exercised
their best commercially reasonable efforts to cause to be provided to Lender
Subordination, Non-Disturbance and Attornment Agreements in the form set forth
as Exhibit F attached hereto and made a part hereof, from certain tenants as
designated in writing by Lender. All present Leases and all amendments,
modifications or terminations of any Leases, shall be subject to Lender's
approval.
(s) Management Agreements. Borrower shall have provided Lender
with copies of all management agreements in effect at the Properties (the
"Management Agreements"), which shall be in form and substance reasonably
acceptable to Lender and with managers (collectively, the "Manager") acceptable
to Lender. Borrower shall cause the Manager to consent to the assignment by
Borrower of the Management Agreements to Lender, and to subordinate the
Management Agreements (and all payments thereunder) to the Loan Documents,
pursuant to an agreement in form and substance acceptable to Lender.
(t) Cash Management Agreement. Borrower shall have executed
and delivered the Cash Management Agreement to Lender and Borrower shall have
complied with all of the requirements set forth in the Cash Management
Agreement.
(u) Reserve Accounts. Borrower shall have established all of
the impound and reserve accounts with Lender as required in Article IX.
(v) Enforceability Opinions of Borrower's Counsel. Borrower
shall furnish Lender (or cause to be furnished at Borrower's expense) an opinion
of legal counsel from attorneys admitted to practice in each and all of the
respective states in which any of the Properties are located and shall also
furnish an opinion from an attorney admitted to practice in the State of New
York (which shall be the State governing the contractual obligations hereunder
and under the Loan Documents, except as otherwise specifically provided in the
Loan Documents), each of whom shall be retained by Borrower and acceptable to
Lender, which opinions shall be in form and substance acceptable to Lender. Said
opinions shall be dated as of the Closing Date, and shall cover, without
limitation, the following matters:
(i) the due organization, valid legal existence and good
standing of Borrower and Guarantor;
22
(ii) the due authorization, execution, delivery,
validity, binding effect and enforceability of the Loan Documents, guaranties,
and indemnification agreements (including, without limitation, choice of law)
in accordance with their terms; (iii) that the Loan complies with applicable
usury laws;
(iv) the existence of, or the nonexistence of, any
requirement for any consent of any governmental authority in connection
with the execution, delivery or performance of the Loan Documents, guaranties,
and indemnification agreements;
(v) the fact that the Loan Documents, guaranties, and
indemnification agreements and the execution thereof and the performance of the
obligations thereunder do not conflict with or violate any applicable laws,
agreements or restrictions;
(vi) that the Mortgages are in form sufficient to
create a lien on the Properties in favor of the trustee thereunder for the
benefit of Lender as beneficiary and the security agreement contained in each
Mortgage is in form sufficient to create a lien to the Collateral in favor of
Lender; and
(vii) such other matters incident to the Loan as
Lender may request.
(w) Bankruptcy Nonconsolidation Opinion. Borrower shall
furnish an opinion of counsel acceptable to Lender, dated as of the Closing
Date, that the assets of Borrower (and its partners or members and, if
applicable, any affiliated Manager) will not be substantially consolidated with
the assets of any other affiliated person or entity, including, without
limitation, Guarantor or any partner or member of Borrower, if any, in the event
of a bankruptcy or insolvency proceeding of any such person or entity.
(x) No Material Adverse Change. Borrower shall have delivered
to Lender written certification, dated as of the Closing Date, and Lender shall
be independently satisfied, as to the following matters: (i) from and after the
date of any inspection of the Properties acceptable to Lender, no portion
thereof shall (1) have been damaged and not repaired to Lender's satisfaction,
(2) have been taken in condemnation or other like proceedings, or (3) have
become the subject of any pending condemnation proceeding or litigation; (ii)
the Properties have not been impaired and the values of the Properties have not
been reduced and are free from settling and other structural defects; (iii) from
and after the date of the Loan application, neither Borrower nor any general
partner, member, shareholder or principal of Borrower, nor any Guarantor nor any
Property, has been involved in any action or proceeding (criminal or civil)
which materially and adversely affects the Properties or Borrower's (or
Guarantor's, as applicable) ability to repay the Loan (in each case as
determined by Lender), or any bankruptcy, reorganization, insolvency or similar
proceeding; and (iv) from and after the date of the most recent financial
statements for such person or entity delivered to Lender, no material adverse
change has occurred with respect to Borrower, Guarantor or any other person
(provided, however, if the Guarantor incurs debt unrelated to the Properties, no
adverse change shall be deemed to have occurred).
(y) [Intentionally Deleted].
23
(z) Funding of Deposits. All amounts required to be deposited
by Borrower under the Loan Documents have been deposited and are held by or on
behalf of Lender, and there are no deficiencies with respect thereto.
ARTICLE IV
INSURANCE
4.1 Insurance. Borrower shall, at Borrower's expense, maintain in force
and effect on each Property in the Property Pool at all times the following
insurance:
(a) Insurance against loss or damage to each Property by fire,
windstorm, tornado and hail and against loss and damage by such other, further
and additional risks as may be now or hereafter embraced by an "all-risk" or
"special form" form of insurance policy. The amount of such insurance shall be
not less than one hundred percent (100%) of the full replacement cost (insurable
value) of the Improvements (as established by an MAI appraisal) situated on such
Property, without reduction for depreciation, provided, however, that such
insurance may be carried under blanket insurance policies approved by Lender
covering the Properties and other properties with liability limits of less than
the aggregate replacement cost of all Improvements as long as Lender has
reasonably determined that the amount of such insurance is adequate under the
circumstances. Full replacement cost, as used herein, means, with respect to
each of the Improvements, the cost of replacing such Improvements without regard
to deduction for depreciation, exclusive of the cost of excavations, foundations
and footings below the lowest basement floor. Borrower shall also maintain
insurance against loss or damage to such furniture, furnishings, fixtures,
equipment and other items (whether personalty or fixtures) included in such
Property and owned by Borrower from time to time, to the extent applicable, in
the amount of the cost of replacing the same. The maximum deductible for any
Property covered by such policy shall be $100,000.00, or as consented to by
Lender, such consent not to be unreasonably withheld.
(b) Commercial General Liability Insurance against claims for
personal injury, bodily injury, death and property damage occurring on, in or
about each of the Properties in amounts not less than $1,000,000.00 per
occurrence and $2,000,000.00 in the aggregate plus umbrella coverage in an
amount not less than $100,000,000.00. During any construction on the respective
Property, Borrower's general contractor for such construction shall also provide
the insurance, on a primary basis only, as required in this Subsection (b).
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances.
(c) Boiler and machinery insurance is required if steam
boilers or other pressure-fired vessels are in operation at the Property.
Minimum liability coverage per accident must equal the replacement cost
(insurable value) of the Improvements housing such boiler or pressure-fired
machinery.
24
(d) If the Improvements or any part thereof are situated in an
area now or subsequently designated by the Federal Emergency Management Agency
("FEMA") as a special flood hazard area (Zone A or Zone V), flood insurance in
an amount equal to the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid balance
of the Allocated Loan Amount for such Property if replacement cost coverage is
not available for the type of building insured). The flood insurance requirement
will be waived if: (A) although a portion of the land may be in the Special
Flood Hazard Area, no portion of the Improvements situated on such land are in
the Special Flood Hazard Area; or (B) Lender receives a letter from FEMA stating
that its maps have been amended so that the Property is no longer in a Special
Flood Hazard Area. In the event there occurs, from time to time, any loss on any
property which is not part of the Property Pool and which loss reduces the
annual aggregate coverage available for claim payments under Borrower's blanket
insurance policies, Borrower agrees that it shall repurchase, from time to time,
the amount of insurance necessary to provide the required coverages under this
Article IV within thirty (30) days after the occurrence of such loss.
(e) During the period of any construction, renovation or
alteration of the Improvements which exceeds the lesser of 10% of the principal
amount of the Allocated Loan Amount for such Property or $500,000.00, at
Lender's request, a completed value, "All Risk" Builder's Risk form, or "Course
of Construction" insurance policy in non-reporting form, in an amount approved
by Lender, may be required. During the period of any construction of any
addition to the existing Improvements, a completed value, "All Risk" Builder's
Risk form or "Course of Construction" insurance policy in non-reporting form, in
an amount approved by Lender, shall be required. These requirements may be met
by an endorsement to the policy described in Section 4.1(a). In the event there
occurs, from time to time, any loss on any property which is not part of the
Property Pool and which loss reduces the annual aggregate coverage available for
claim payments under Borrower's blanket insurance policies, Borrower agrees that
it shall repurchase, from time to time, the amount of insurance necessary to
provide the required coverages under this Article IV within thirty (30) days
after the occurrence of such loss.
(f) When required by any applicable Governmental Authority or
Governmental Rule, Worker's Compensation and Employer's Liability Insurance
covering all persons subject to the workers' compensation laws of the state in
which the applicable Property is located.
(g) Rent loss insurance in amounts sufficient to compensate
Borrower for all income losses incurred from insured perils during a period of
not less than eighteen (18) months. The amount of coverage shall be adjusted
annually to reflect any increase in the current rent levels payable during the
succeeding twelve-(12) month period. In addition, Borrower shall maintain rent
loss insurance of not less than $10,000,000, with no annual aggregate, to
compensate Borrower for all income loss incurred from earthquake loss (whether
or not Borrower maintains earthquake insurance) during a period of not less than
eighteen (18) months.
(h) Sinkhole, Mine Subsidence and/or Earthquake insurance
shall be required in the amount of $50,000,000 for those Properties (including
all other real property owned by Borrower and encumbered by other deeds of trust
or mortgages securing the Loan) located within
25
California, to the extent that such coverage is available at commercially
reasonable rates. The earthquake insurance policy shall have a deductible of not
more than five percent (5%) or such greater amount as may be commercially
reasonable under the then-existing circumstances. Lender agrees that Borrower
shall not be required to carry earthquake insurance with respect to the Ground
Leased Properties.
(i) Environmental insurance, which shall not be required as of
the Closing Date but if subsequently required for any of the Properties, must be
from a carrier and in form and substance satisfactory to Lender and the Rating
Agencies and must provide protection for preexisting, but undetected,
environmental contamination, as well as for liabilities resulting from
contamination that occurs during the policy term.
(j) Such other insurance on the Property or on any replacements
or substitutions thereof or additions thereto as may from time to time be
required by Lender against other insurable hazards or casualties which at the
time are commonly insured against in the case of property similarly situated,
due regard being given to the height and type of buildings, their
construction, location, use and occupancy.
(1) All such insurance shall (i) be with insurers
fully licensed and authorized to do business in the state within which such
Property is located (other than insurers providing coverage for loss as a result
of earthquake in California) and who have and maintain a rating of (A) at least
"A" if rated by DCR, and if not rated by DCR, then similarly rated by two
nationally recognized statistical rating agencies, and (B) at least "A2" if
rated by Moody's; (ii) contain the complete address of the Property (or a
complete legal description); (iii) be for terms of at least one year; (iv) be
subject to the reasonable approval of Lender as to insurance companies, amounts,
content, forms of policies, method by which premiums are paid and expiration
dates; and (v) include EXACTLY the following standard, non-contributory,
mortgagee clause naming:
Prudential Mortgage Capital Company, Inc.,
its successors and assigns ATIMA
c/o Prudential Mortgage Loan Servicing
P.O. Box 10387
Van Nuys, California 91401,
(A) as an additional insured under all liability (primary and excess liability)
insurance policies, (B) as the first mortgagee on all property insurance
policies, and (C) as the lender's loss payee on all loss of rents or loss of
business income insurance policies.
Borrower shall deliver to Lender evidence that said insurance
policies have been obtained as required above and certified copies of such
insurance policies and original certificates of insurance signed by an
authorized agent of the applicable insurance companies evidencing such insurance
satisfactory to Lender. Borrower shall renew all such insurance and
26
deliver to Lender certificates evidencing such renewals at least twenty
(20) days before any such insurance shall expire and deliver originals or
certified copies of the insurance policies within sixty (60) days of the
effective date of such policies. Borrower further agrees that each such
insurance policy: (i) shall provide for at least thirty (30) days' prior written
notice to Lender prior to any policy reduction or cancellation for any reason;
(ii) shall contain an endorsement or agreement by the insurer that any loss
shall be payable to Lender in accordance with the terms of such policy
notwithstanding any act or negligence of Borrower which might otherwise result
in forfeiture of such insurance; (iii) shall waive all rights of subrogation
against Lender; and (iv) may be in the form of a blanket policy. The blanket
policy must properly identify and fully protect the applicable Properties as if
a separate policy were issued for 100% of replacement cost at the time of loss
and otherwise meet all of Lender's applicable insurance requirements set forth
in this Article IV. Borrower represents that it has, and covenants that it shall
maintain throughout the term of the Loan, an ordinance or law coverage
endorsement for any Property or Improvements which constitute a legal
non-conforming use under applicable building, zoning or land use laws or
ordinances, which endorsement will contain Coverage A: "Loss Due to Operation of
Law" (with a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement established at no less than 150% of the Allocated Loan Amount for
such Property), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages. The delivery to Lender of the insurance policies (if
required by Lender) or the certificates of insurance as provided above shall
constitute an assignment of all proceeds payable under such insurance policies
relating to such Properties by Borrower to Lender as further security for the
Loan and to be applied or disbursed as provided in the Mortgages. In the event
of foreclosure of the applicable Mortgage, or other transfer of title to the
subject Property in extinguishment in whole or in part of the Loan, all right,
title and interest of Borrower in and to all proceeds payable under such
policies then in force concerning the subject Property shall thereupon vest in
the purchaser at such foreclosure, or in Lender or other transferee in the event
of such other transfer of title. Approval of any insurance by Lender shall not
be a representation of the solvency of any insurer or the sufficiency of any
amount of insurance. In the event Borrower fails to provide, maintain, keep in
force or deliver and furnish to Lender the policies of insurance required by
this Article IV or evidence of their renewal as required herein, Lender may, but
shall not be obligated to, procure such insurance and Borrower shall pay all
amounts advanced by Lender therefor, together with interest thereon at the
Default Interest Rate from and after the date advanced by Lender until actually
repaid by Borrower, promptly upon demand by Lender. Any amounts so advanced by
Lender, together with interest thereon, shall be secured by the Mortgages and by
all of the other Loan Documents securing all or any part of the Loan. Lender
shall not be responsible for nor incur any liability for the insolvency of the
insurer or other failure of the insurer to perform, even though Lender has
caused the insurance to be placed with the insurer after failure of Borrower to
furnish such insurance. If Borrower shall obtain insurance for the Properties in
addition to that required by Lender, Borrower agrees that it shall name Lender
as an additional insured on such additional insurance and shall provide Lender
with complete copies of all policies evidencing such insurance.
27
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Warranties of Borrower. Borrower, for itself and its successors and
assigns, does hereby represent, warrant and covenant to and with Lender, its
successors and assigns, that:
(a) Organization and Existence. Borrower is duly organized and
validly existing as a limited liability company in good standing under the laws
of the State of Delaware and in all other jurisdictions in which any Property is
located or in which Borrower is transacting business. Borrower has the power and
authority to execute, deliver and perform the obligations imposed on it under
the Loan Documents and to consummate the transactions contemplated by the Loan
Documents.
(b) Authorization. Borrower has taken all necessary actions
for the authorization of the borrowing on account of the Loan, and for the
execution and delivery of the Loan Documents, including, without limitation,
that those members of Borrower whose approval is required by the terms of
Borrower's organizational documents have duly approved the transactions
contemplated by the Loan Documents and have authorized execution and delivery
thereof by the respective signatories. To the best of Borrower's knowledge, no
other consent by any local, state or federal agency is required in connection
with the execution and delivery of the Loan Documents.
(c) Valid Execution and Delivery. All of the Loan Documents
requiring execution by Borrower have been duly and validly executed and
delivered by Borrower.
(d) Enforceability. All of the Loan Documents constitute
valid, legal and binding obligations of Borrower and are fully enforceable
against Borrower in accordance with their terms by Lender and its successors,
transferees and assigns, subject only to bankruptcy laws, creditors' rights, and
general principles of equity.
(e) No Defenses. The Note, the Mortgages and the other Loan
Documents are not subject to any right of rescission, set-off, counterclaim or
defense, nor would the operation of any of the terms of the Note, the Mortgages
or any of the other Loan Documents, or the exercise of any right thereunder,
render such documents unenforceable, in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury.
(f) Defense of Usury. Borrower knows of no facts that would
support a claim of usury to defeat or avoid its obligation to repay the
principal of, interest on, and other sums or amounts due and payable under, the
Loan Documents.
(g) No Conflict/Violation of Law. The execution, delivery and
performance of the Loan Documents by Borrower will not cause or constitute a
default under or conflict with the organizational documents of Borrower, any
Guarantor or any general partner or managing member of Borrower or any
Guarantor. The execution, delivery and performance of the obligations imposed on
Borrower under the Loan Documents will not cause Borrower to be in default,
including after due notice or lapse of time or both, under the provisions of any
agreement, judgment or order to which Borrower is a party or by which Borrower
is bound.
28
(h) Compliance with Applicable Laws and Regulations. All of
the Improvements and the use of the Properties by Borrower comply with, and
shall remain in compliance with, all applicable statutes, rules, regulations and
private covenants now or hereafter relating to the ownership, construction, use
or operation of the Properties, including all applicable statutes, rules and
regulations pertaining to requirements for equal opportunity,
anti-discrimination, fair housing, environmental protection, zoning (including,
without limitation, parking requirements) and land use, and no notices of
violation or non-compliance have been issued by any Governmental Authority
relating to any of the foregoing that remain outstanding. All of the
Improvements comply with, and shall remain in compliance with, applicable
health, fire and building codes. There is no evidence of any illegal activities
relating to controlled substances on any of the Properties. All certifications,
permits, licenses and approvals, including, without limitation, certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of the Properties as currently conducted have been obtained and are in
full force and effect. All of the Improvements comply with all material
requirements of any applicable zoning and subdivision laws and ordinances, and
no Improvements (other than the Improvements located at 210 Fallon Street,
Oakland, California (identified as Property #73 on Exhibit A attached hereto),
the Improvements located at 324 West Blueridge, Orange, California (identified
as Property #42 on Exhibit A attached hereto), the Improvements located at 12865
Ann Street, Santa Fe Springs, California (identified as Property #77 on Exhibit
A attached hereto), the Improvements located at 1200 Edinger Avenue, Tustin,
California (identified as Property #44 on Exhibit A attached hereto), the
Improvements located at 14352 Franklin Avenue, Tustin, California (identified as
Property #45 on Exhibit A attached hereto), the Improvements located at 1311
East Valencia, Tustin, California (identified as Property #64 on Exhibit A
attached hereto), the Improvements located at 1361 Valencia, Tustin, California
(identified as Property #65 on Exhibit A attached hereto), the Improvements
located at 15222 Del Amo, Tustin, California (identified as Property #66 on
Exhibit A attached hereto), the Improvements located at 1100 Edinger St.,
Tustin, California (identified as Property #72 on Exhibit A attached hereto) and
for which Properties Borrower has law and ordinance insurance coverage),
constitute a legal nonconforming use under any of such laws and ordinances.
(i) Consents Obtained. All consents, approvals,
authorizations, orders or filings with any court or governmental agency or body,
if any, required for the execution, delivery and performance of the Loan
Documents by Borrower have been obtained or made.
(j) No Litigation. There are no pending actions, suits or
proceedings, arbitrations or governmental investigations against any of the
Properties, Borrower, or Guarantor, an adverse outcome of which would materially
affect Borrower's performance under the Note, the Mortgages, or the other Loan
Documents.
(k) Title. Borrower has good, marketable and indefeasible fee
simple title to all of the Land and all Improvements thereon (but subject to the
terms of the leases for the Ground Leased Properties which may limit Borrower's
interest to certain Improvements to a conditional future interest), subject only
to the Permitted Exceptions. Except for the Permitted Exceptions, the possession
of each of the Properties is peaceful and undisturbed and title thereto is not
disputed or questioned to the best of Borrower's knowledge. Further, Borrower
has full power and lawful authority to grant, bargain, sell, convey, assign,
transfer, encumber and mortgage its interest in the Properties under the Loan
Documents. Borrower will preserve its
29
interest in and title to the Properties and will warrant and defend the
same to Lender against any and all claims whatsoever and will warrant and defend
the validity and priority of the lien and security interest created under the
Loan Documents against the claims of all persons and parties whomsoever, subject
to the Permitted Exceptions. The foregoing warranty of title shall survive the
foreclosure of the applicable Mortgage and shall inure to the benefit of and be
enforceable by Lender in the event Lender acquires title to such Property
pursuant to any foreclosure.
(l) Permitted Exceptions. The Permitted Exceptions do not and
will not materially and adversely affect (1) the ability of Borrower to pay in
full the principal and interest on the Note in a timely manner or (2) the use of
the applicable Property for the use currently being made thereof, the operation
of the applicable Property as currently being operated or the value of the
applicable Property other than as reflected in the appraisals of the Properties.
(m) First Lien. Except with respect to the Gillette Property
and to the GATX-Stockton Property, upon the execution by Borrower and the
recording of the Mortgages, and upon the execution and filing of UCC-1 financing
statements or amendments thereto, Lender will have a valid first lien on each of
the Properties and a valid first security interest in all Collateral, subject to
no liens, charges or encumbrances other than the Permitted Exceptions. No
Property secures any indebtedness or obligation other than as created under or
pursuant to the Loan Documents and for taxes and assessments not yet delinquent.
(n) ERISA. Borrower has made and shall continue to make all
required contributions to all employee benefit plans, if any, and Borrower has
no knowledge of any material liability which has been incurred by Borrower which
remains unsatisfied for any taxes or penalties with respect to any employee
benefit plan or any multi-employer plan, and each such plan has been
administered in compliance with its terms and the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and any
other federal or state law.
(o) Contingent Liabilities. Borrower has no known material
contingent liabilities.
(p) No Other Obligations. Borrower has no material financial
obligation under any indenture, mortgage, loan agreement or other agreement or
instrument to which Borrower is a party or by which Borrower or any of the
Properties is otherwise bound, other than obligations incurred in the ordinary
course of the operation of such Property and other than obligations under the
Mortgages and the other Loan Documents.
(q) Fraudulent Conveyance. Borrower (i) has not entered into
the Loan or any Loan Document with the actual intent to hinder, delay, or
defraud any creditor and (ii) received fair value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan contemplated by
the Loan Documents, the fair saleable value of the Borrower's assets exceed and
will, immediately following the execution and delivery of the Loan Documents,
exceed Borrower's total liabilities, including, without limitation,
subordinated, unliquidated, disputed or contingent liabilities. The fair
saleable value of Borrower's assets is and will, immediately following the
execution and delivery of the Loan Documents, be greater than Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
or its debts as
30
such debts become absolute and matured. Borrower's assets do not and,
immediately following the execution and delivery of the Loan Documents will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to, and does not believe
that it will, incur debts and liabilities (including, without limitation,
contingent liabilities and other commitments) beyond its ability to pay such
debts as they mature (taking into account the timing and amounts to be payable
on or in respect of obligations of Borrower).
(r) Investment Company Act. Borrower is not: (i) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (ii) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
(s) Access/Utilities. Each of the Properties has adequate
rights of access to public ways and is served by adequate water, sewer, sanitary
sewer and storm drain facilities. All public utilities necessary to the
continued use and enjoyment of each of the Properties as presently used and
enjoyed are located in the public right-of-way abutting such Property, and all
such utilities are connected so as to serve such Property without passing over
other property or, if such utilities must cross other property, Borrower holds
easements for such utilities that are insured by the Title Policy insuring the
lien of the Mortgage on the Property. Except for the Gillette Property and the
GATX-Stockton Property, all streets, roads, highways, bridges and waterways
necessary for access to and full use, occupancy, operation and disposition of
the Land and the Improvements have been completed, have been dedicated and
accepted by the appropriate municipal authority and are open and available to
the land and the Improvements without further condition or cost to Borrower.
(t) Taxes Paid. Borrower has filed or has caused to be filed
all federal, state, county and municipal tax returns required to have been filed
by Borrower, and has paid, or has caused to be paid, all taxes which have become
due pursuant to such returns or to any notice of assessment received by Borrower
, and Borrower has no knowledge of any basis for additional assessment with
respect to such taxes. Further, each of the Properties is free from delinquent
water charges, sewer rents, taxes and assessments.
(u) Single Tax Lot. Except as disclosed in the Title Policies,
each Property consists of a single lot or multiple tax lots; other than the
GATX-Woodridge Property, no portion of said tax lot(s) covers property other
than the applicable Property or a portion of the applicable Property and no
portion of such Property lies in any other tax lot.
(v) Special Assessments. To Borrower's knowledge, there are no
pending or, proposed special or other assessments for public improvements or
otherwise affecting any of the Properties, nor, to the knowledge of Borrower,
are there any contemplated improvements to any of the Properties that may result
in such special or other assessments.
31
(w) Flood Zone. Except as disclosed in Schedule 5.1(w), none
of the Improvements are located in a special flood hazard area as defined by the
Federal Insurance Administration.
(x) Seismic Exposure. Each Property is either not located in
Zone 3 or Zone 4 of the "Seismic Zone Map of the U.S." or all assumptions and
assessments of the applicable Improvements set forth in the seismic study of
such Improvements submitted to Lender are true and correct in all material
respects and show a probable maximum loss (as a percentage of the current
building replacement cost and based on a 50 year building life expectancy
period) of less than 15%, with the exception of Properties #68, #69, #70 and #71
as identified on Exhibit A attached hereto.
(y) Misstatements of Fact. No statement of fact made in the
Loan Documents contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained herein or therein
not misleading. There is no material fact presently known to Borrower which has
not been disclosed which adversely affects, nor as far as Borrower can foresee,
might adversely affect the business, operations or condition (financial or
otherwise) of Borrower.
(z) Condition of Improvements. To the knowledge of the
Borrower, and except as disclosed in the Property Condition Reports or otherwise
disclosed in writing to Lender: none of the Properties has been damaged by fire,
water, wind or other cause of loss which damage has not been fully restored; all
of the Improvements are structurally sound, in good repair and free of defects
in materials and workmanship and have been constructed and installed in
substantial compliance with the plans and specifications relating thereto; and
all major building systems located within the Improvements, including, without
limitation, the heating and air conditioning systems and the electrical and
plumbing systems, are in good working order and condition.
(aa) No Insolvency or Judgment. Neither Borrower, any member
of Borrower, nor Guarantor is currently (i) the debtor in any completed or
pending bankruptcy, reorganization or insolvency proceeding; or (ii) the subject
of any judgment unsatisfied of record or docketed in any court of the state in
which any of the Properties are located or in any other court located in the
United States. The proposed Loan will not render Borrower or any member of
Borrower insolvent. As used in this Agreement, the term "insolvent" means that
the sum total of all of an entity's liabilities (whether secured or unsecured,
contingent or fixed, or liquidated or unliquidated) is in excess of the value of
all such entity's non-exempt assets, i.e., all of the assets of the entity that
are available to satisfy claims of creditors.
(bb) No Condemnation. No part of any property subject to the
Loan Documents has been taken in condemnation or other like proceeding to an
extent which would impair the value of such Property, the Mortgages or the Loan
or the usefulness of such property for the purposes contemplated by the loan
application relating to the Loan, nor is any proceeding pending, or to
Borrower's knowledge, threatened or contemplated for the partial or total
condemnation or taking of any of the Properties.
32
(cc) No Labor or Materialmen Claims. All parties furnishing
labor and materials to the Properties have been paid in full with respect to all
amounts currently due and payable and, except for such liens or claims insured
against by the policies of title insurance to be issued in connection with the
Loan, there are no mechanics', laborers' or materialmen's liens or claims
outstanding for work, labor or materials affecting any of the Properties,
whether prior to, equal with or subordinate to the lien of the applicable
Mortgage.
(dd) No Purchase Options. Except as set forth in the Leases,
no tenant, person, party, firm, corporation or other entity has an option to
purchase any of the Properties, any portion thereof or any interest therein.
(ee) Leases.
(i) Borrower has delivered a true, correct and
complete schedule (such schedule, together with any attached exhibits, the
"Rent Roll") of all Leases affecting the Properties as of the date thereof,
which accurately and completely sets forth in all material respects for each
such Lease, the following: the name of the tenant, the lease expiration date,
extension and renewal provisions, the base, additional and percentage rent
payable, the security deposit held thereunder, the square footage, the building
name, and suite location.
(ii) Each Lease constitutes the legal, valid and
binding obligation of Borrower and, to the best of Borrower's knowledge and
belief, is enforceable against the tenant thereof. To the best of Borrower's
knowledge, except as disclosed in Schedule 5.1(ee)(ii), no default exists, or
with the passing of time or the giving of notice or both would exist, under any
Lease which would, in the aggregate, have a material adverse effect on Borrower
or the Property.
(iii) Except as disclosed in Schedule 5.1(ee)(iii),
no tenant under any Lease has, as of the date hereof, paid base rent more
than thirty (30) days in advance, and the rents under such Leases have not been
waived, released, or otherwise discharged or compromised.
(iv) Other than the Gillette Property and the
GATX-Stockton Property, all work to be performed by Borrower under the
Leases has been substantially performed, all contributions to be made by
Borrower to the tenants thereunder have been made and all other conditions
precedent to each such tenant's obligations thereunder have been satisfied.
(v) Except as disclosed in Schedule 5.1(ee)(v), each
tenant under a Lease has entered into occupancy of
the demised premises.
(vi) Borrower has delivered to Lender true, correct
and complete copies of all leases described in the Rent Roll.
(vii) To the best of Borrower's knowledge and belief,
each tenant is free from bankruptcy, reorganization or arrangement
proceedings or a general assignment for the benefit of creditors.
(viii) No Lease provides any party with the right to
obtain a lien upon any of the Properties superior to
the lien of the Mortgages.
33
(ix) No tenant under any Lease, except as disclosed in
Schedule 5.1(ee)(ix), is affiliated with Guarantor.
(ff) Appraisal. Other than the Gillette Property and the
GATX-Stockton Property, all requirements and conditions of the appraisals of the
Properties submitted to Lender, upon which the values of the Properties were
conditioned, have been fully satisfied.
(gg) Boundary Lines. Except as disclosed in the Title
Policies, all of the Improvements which were included in determining the
appraised value of the Properties lie wholly within the boundaries and building
restriction lines of the applicable Property, and no improvements on adjoining
properties encroach upon such Property, and no easements or other encumbrances
upon such Property encroach upon any of the Improvements, so as to affect the
value or marketability of such Property except those which are insured against
by title insurance.
(hh) Survey. Each of the surveys of the Properties delivered
to Lender in connection with the Loan, has been performed by a duly licensed
surveyor or registered professional engineer in the jurisdiction in which the
relevant Property is situated, is certified to Lender, its successors and
assigns, and the title insurance company, and is materially in accordance with
the most current minimum standards for title surveys as determined by the
American Land Title Association, with the signature and seal of a licensed
engineer or surveyor affixed thereto, and does not fail to reflect any material
matter affecting such Property or the title thereto. All curb cuts, driveways
and traffic signals shown on the survey delivered to Lender are existing and
have been fully approved by the appropriate governmental authority.
(ii) Forfeiture. There has not been and shall never be
committed by Borrower nor, to Borrower's knowledge, has there been any other
person in occupancy of or involved with the operation or use of any of the
Properties, any act or omission affording the federal government or any state or
local government the right of forfeiture as against any of the Properties or any
part thereof or any monies paid in performance of Borrower's obligations under
any of the Loan Documents.
(jj) No Broker. No financial advisors, brokers, underwriters,
placement agents, agents or finders have been dealt with by Borrower in
connection with the Loan.
(kk) Conviction of Criminal Acts. Neither Borrower nor
Guarantor has ever been convicted of a crime and neither is currently the
subject of any pending or, to Borrower's knowledge, threatened criminal
investigation or proceeding.
(ll) Security Agreement. There are no security agreements or
financing statements affecting any of the Properties other than (i) as disclosed
in writing to Lender prior to the date hereof and (ii) the security agreements
and financing statements created in favor of Lender.
(mm) Homestead. None of the Properties form a part of any
property owned, used or claimed by Borrower as a residence or business homestead
and are exempt from forced sale under the laws of the State in which any of the
Properties are located. Borrower hereby disclaims and renounces each and every
claim to all or any portion of any Property as a
34
homestead. Each Property is used and occupied for commercial purposes in
accordance with all applicable laws.
ARTICLE VI
ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES
6.1 Representations and Warranties. Borrower hereby represents and
warrants to Lender that, as of the date hereof, and except as disclosed in the
environmental assessment reports for the Properties delivered to Lender (the
"Environmental Reports") (but without limiting Borrower's liability with respect
thereto): (a) to the best of Borrower's knowledge, information and belief, none
of Borrower nor any of the Properties nor any tenant at any of Properties nor
the operations conducted thereon is in direct or indirect violation of any
local, state or federal law, rule or regulation or common law duty pertaining to
human health, natural resources or the environment, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. ss.9601 et seq.) as same may be amended "CERCLA"), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss.6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. ss.1251 et seq.), the Clean Air
Act (42 U.S.C. ss.7401 et seq.), the Emergency Planning and
Community-Right-to-Know Act (42 U.S.C. ss.11001 et seq.), the Endangered Species
Act (16 U.S.C. ss.1531 et seq.), the Toxic Substances Control Act (15 U.S.C.
ss.2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss.651 et
seq.) and the Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et
seq.), regulations promulgated pursuant to said laws, all as amended from time
to time (collectively, the "Environmental Law" or "Environmental Laws"); (b) no
hazardous, toxic or harmful substances, wastes, materials, pollutants or
contaminants (including, without limitation, asbestos or asbestos-containing
materials, lead based paint, polychlorinated biphenyls, petroleum or petroleum
products or byproducts, flammable explosives, radioactive materials, infectious
substances, radon gas or raw materials which include hazardous constituents) or
any other substances or materials which are included under or regulated by
Environmental Laws (collectively, "Hazardous Substances") are located on, in or
under or have been handled, generated, stored, processed or disposed of on or
released or discharged from any of the Properties (including underground
contamination), except for those substances used and/or disposed of by Borrower
or any tenant in the ordinary course of their respective businesses and in
compliance with all Environmental Laws; (c) none of the Properties are subject
to any private or governmental lien or judicial or administrative notice or
action arising under Environmental Laws; (d) to Borrower's knowledge,
information or belief, there is no pending nor threatened litigation arising
under Environmental Laws affecting Borrower or any of the Properties; there are
no and have been no existing or closed underground storage tanks or other
underground storage receptacles for Hazardous Substances or landfills or dumps
on any of the Properties; (e) Borrower has received no notice of, and to the
best of Borrower's knowledge, there exists no investigation, action, proceeding
or claim by any agency, authority or unit of government or by any third party
which could result in any liability, penalty, sanction or judgment under any
Environmental Laws with respect to any condition, use or operation of any of the
Properties, nor does Borrower know of any basis for an investigation, action,
proceeding or claim; (f) Borrower has received no notice of and, to the best of
Borrower's knowledge, there has been no claim by any party that any use,
operation or condition of any of the Properties has caused any nuisance or any
other liability or adverse condition on any other property, nor does Borrower
know of any
35
basis for such an investigation, action, proceeding or claim; and (g) to
the best of Borrower's knowledge, radon is not present at any of the Properties
in excess or in violation of any applicable thresholds or standards or in
amounts that require under applicable law disclosure to any tenant or occupant
of or invitee to any of the Properties or to any governmental agency or the
general public. Borrower further represents and warrants that all Environmental
Reports meet the requirements of the American Society for Testing and Materials,
and if any such report revealed any circumstance or condition with respect to
any Property that rendered such Property in violation of any Environmental Law,
then (1) the same has been remediated in all material respects, (2) sufficient
funds have been escrowed for purposes of effecting such remediation or (3)
Borrower is currently taking action with respect to such circumstances or
conditions as have been recommended by the Environmental Report or are required
by the applicable governmental regulatory authority (including implementation of
an operations and maintenance plan).
6.2 Notice of Violations Under Environmental Laws. Except as disclosed
in the Environmental Reports (but without limiting Borrower's liability with
respect thereto), Borrower has not received nor to the best of Borrower's
knowledge, information and belief has there been issued with respect to any of
the Properties, any notice, notification, demand, request for information,
citation, summons, or order in any way relating to any actual, alleged or
potential violation or liability arising under Environmental Laws.
6.3 Transportation of Hazardous Substances. None of the Properties, nor
to the best of Borrower's knowledge, information and belief any property to
which Borrower has, in connection with the maintenance or operation of the
Properties, directly or indirectly transported or arranged for the
transportation of any Hazardous Substances, is listed or, to the best of
Borrower's knowledge, information and belief, proposed for listing on the
National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined
in CERCLA) or on any similar federal or state list of sites requiring
environmental investigation or clean-up.
6.4 Compliance with Environmental Laws. Borrower shall comply with all
applicable Environmental Laws. Borrower shall keep or cause each of the
Properties to be kept free from Hazardous Substances (except those substances
used and/or disposed of by Borrower or any tenant in the ordinary course of
their respective businesses in compliance with all Environmental Laws) and in
compliance with all Environmental Laws. Borrower shall not itself, and shall not
allow any tenant under any Lease to, install or use any underground storage
tanks in violation of Environmental Laws, and in all Leases executed after the
Closing Date, shall expressly prohibit the use, generation, handling, storage,
production, processing and disposal of Hazardous Substances by all tenants in
quantities or conditions that would violate or give rise to any obligation to
take remedial or other action under any applicable Environmental Laws. Borrower
shall enforce such prohibitions against any Tenant under any Lease. Without
limiting the generality of the foregoing, Borrower shall not install in the
Improvements or permit to be installed in the Improvements any asbestos or
asbestos-containing material.
6.5 Notice to Lender. Borrower shall promptly notify Lender if Borrower
shall become aware of (a) the actual or potential existence of any Hazardous
Substances on any of the Properties other than those occurring in the ordinary
course of Borrower's or any tenant's business which do not violate Environmental
Laws, (b) any direct or indirect violation of any Environmental Laws, (c) any
lien, action or notice affecting any of the Properties or Borrower
36
resulting from any violation or alleged violation of or liability or
alleged liability under any Environmental Laws, (d) the institution of any
investigation, inquiry or proceeding concerning Borrower or any of the
Properties pursuant to any Environmental Laws or otherwise relating to Hazardous
Substances affecting Borrower or any of the Properties, or (e) the discovery of
any occurrence, condition or state of facts which would render any
representation or warranty contained in this Article VI incorrect in any
material respect if made at the time of such discovery. Immediately upon receipt
of same, Borrower, shall deliver to Lender copies of any and all requests for
information, complaints, citations, summonses, orders, notices, reports or other
communications, documents or instruments in any way relating to any actual,
alleged or potential violation or liability of any nature whatsoever arising
under Environmental Laws and relating to any of the Properties or to Borrower.
Borrower shall remedy or cause to be remedied in a timely manner (and in any
event within the time period required by applicable Environmental Laws) any
violation of Environmental Laws. Without limiting the foregoing, Borrower shall,
promptly and regardless of the source of the contamination or threat to the
environment or human health, at its own expense, take all actions as shall be
necessary or prudent, for the clean-up of any and all portions of the affected
Property or other affected property, including, without limitation, all
investigative, monitoring, removal, containment and remedial actions in
accordance with all applicable Environmental Laws (and in all events in a manner
satisfactory to Lender) and shall further pay or cause to be paid, at no expense
to Lender, all clean-up, administrative and enforcement costs of applicable
governmental agencies which may be asserted against the affected Property. In
the event Borrower fails to do so, Lender may, but shall not be obligated to,
cause the affected Property or other affected property to be freed from
Hazardous Substances in conformance with Environmental Laws and any and all
costs and expenses incurred by Lender in connection therewith, together with
interest thereon at the Default Interest Rate from the date incurred by Lender
until actually paid by Borrower, shall be immediately paid by Borrower on demand
and shall be secured by the Mortgages and by all of the other Loan Documents
securing all or any part of the Loan; and Borrower hereby grants to Lender and
its agents and employees access to the Properties and a license to remove any
items deemed by Lender to be Hazardous Substances and to do all things Lender
shall deem necessary to bring the Properties into conformance with Environmental
Laws.
6.6 Indemnification. Borrower covenants and agrees, at Borrower's sole
cost and expense, to indemnify, defend (at trial and appellate levels, and with
attorneys, consultants and experts acceptable to Lender), and hold Lender
harmless from and against any and all liens, damages (including, without
limitation, punitive or exemplary damages), losses, liabilities (including,
without limitation, strict liability), obligations, settlement payments,
penalties, fines, assessments, citations, directives, claims, litigation,
demands, defenses, judgments, suits, proceedings, costs, disbursements or
expenses of any kind or of any nature whatsoever (including, without limitation,
reasonable attorneys', consultants' and experts' fees and disbursements actually
incurred in investigating, defending, settling or prosecuting any claim,
litigation or proceeding) which may at any time be imposed upon, incurred by or
asserted against Lender or any of the Properties, and arising directly or
indirectly from or out of: (a) any violation or alleged violation of, or
liability or alleged liability under, any Environmental Law with respect to
Borrower or any of the Properties; (b) the presence, release or threat of
release of or exposure to any Hazardous Substances on, in, under or affecting
any Property or any portion of such Property and/or any surrounding areas,
regardless of whether or not caused by or within the control of Borrower; (c)
any transport, treatment, recycling, storage, disposal or arrangement
37
therefor of Hazardous Substances whether on the Property, originating from
the Property, or otherwise associated with Borrower or any operations conducted
on the Property at any time; (iv) the failure by Borrower to comply fully with
the terms and conditions of this Article VI; (v) the breach of any
representation or warranty contained in this Article VI; (vi) the enforcement of
this Article VI, including, without limitation, the cost of assessment,
investigation, containment, removal and/or remediation of any and all Hazardous
Substances from any Property or any portion of such Property or any surrounding
areas, the cost of any actions taken in response to the presence, release or
threat of release of any Hazardous Substances on, in, under or affecting any
portion of a Property or any surrounding areas to prevent or minimize such
release or threat of release so that it does not migrate or otherwise cause or
threaten danger to present or future public health, safety, welfare or the
environment, and costs incurred to comply with Environmental Laws in connection
with any Property or any portion of such Property or any surrounding areas. The
indemnity set forth in this Section 6.6 shall also include any diminution in the
value of the security afforded by the Properties or any future reduction in the
sales price of the Properties by reason of any matter set forth in this Article
VI. The foregoing indemnity shall specifically not include any such costs
relating to Hazardous Substances which are initially placed on, in or under any
of the Properties after foreclosure or other taking of title to such Properties
by Lender or its successor or assigns. Lender's rights under this Section 6.6
shall survive payment in full of the Loan, taking of title to the Properties by
Lender or its successors or assigns and foreclosure of the Mortgages, and shall
be in addition to all other rights of Lender under the Mortgages, the Note and
the other Loan Documents.
6.7 Hazardous Substances Audit. Upon Lender's request, at any time
after the occurrence of an Event of Default or at such other time as Lender has
reasonable grounds to believe that Hazardous Substances are or have been
released, stored or disposed of on any Property in violation of Environmental
Laws, or on property contiguous with such Property, or that such Property may be
in violation of the Environmental Laws, Borrower shall perform or cause to be
performed, at Borrower's sole cost and expense and in scope, form and substance
satisfactory to Lender, an inspection or audit of such Property prepared by a
hydrogeologist or environmental engineer or other appropriate consultant
approved by Lender indicating the presence or absence of Hazardous Substances on
such Property, the compliance or non-compliance status of such Property and the
operations conducted thereon with applicable Environmental Laws, or an
inspection or audit of such Property prepared by an engineering or consulting
firm approved by Lender indicating the presence or absence of friable asbestos
or substances containing asbestos on such Property. If Borrower fails to provide
reports of such inspection or audit within forty-five (45) days after such
request, Lender may order the same, and Borrower hereby grants to Lender and its
employees and agents access to such Property and an irrevocable license to
undertake such inspection or audit. The cost of such inspection or audit,
together with interest thereon at the Default Interest Rate from the date
incurred by Lender until actually paid by Borrower, shall be immediately paid by
Borrower on demand and shall be secured by the Mortgages and by all of the other
Loan Documents securing all or any part of the Loan.
6.8 Maintenance Program. Borrower covenants and agrees to maintain and
adhere to all operations and maintenance programs presently in place at any of
the Properties (the "Maintenance Program") with respect to asbestos containing
materials ("ACM's"), consistent with "Guidelines for Controlling
Asbestos-Containing Materials in Buildings" (USEPA, 1985)
38
and other relevant guidelines, and any such Maintenance Program will
continuously remain in effect until the Loan secured hereby is repaid in full.
In furtherance of the foregoing, Borrower shall inspect and maintain all ACM's
on a regular basis and ensure that all ACM's shall be maintained in a condition
that prevents exposure of residents to ACM's at all times. Without limiting the
generality of the preceding sentence, Lender may require (a) periodic notices or
reports to Lender in form, substance and at such intervals as Lender may
specify, (b) an amendment to such Maintenance Program to address changing
circumstances, laws or other matters, (c) at Borrower's sole expense,
supplemental examination of any Property by consultants specified by Lender, and
(d) variation of the Maintenance Program in response to the reports provided by
any such consultants.
6.9 Existing Remediation and Monitoring Programs. Without limiting any
of Borrower's other representations, warranties or covenants in this Article VI,
Borrower covenants that it shall continue to timely comply with the terms and
provisions of the existing remediation and monitoring programs with respect to
the Properties located at the Emeryville, California Property (identified as
Properties #69, #70 and #71 on Exhibit A attached hereto) (ground water
contamination); 4790 West Pico Boulevard, Los Angeles, California (identified as
Property #74 on Exhibit A attached hereto) (methane gas); 1310 University
Avenue, Berkeley, California (identified as Property #68 on Exhibit A attached
hereto) (asbestos O&M plan); 1200 Edinger Avenue, Tustin, California (identified
as Property #44 on Exhibit A attached hereto) (asbestos O&M plan); 224 South
Michigan Avenue, Chicago, Illinois (identified as Property #67 on Exhibit A
attached hereto) (asbestos O&M plan); and 9401 Corbin Avenue, Lot #43,
Northridge, California (identified as Property #101 on Exhibit A attached
hereto) (environmental remediation). Notwithstanding the terms and provisions
contained in any remediation and monitoring program with respect to such
Properties, as between Borrower and Lender, Borrower shall remain responsible
for complying with all Environmental Laws and indemnifying Lender for any
losses, claims and expenses as set forth in this Article VI. In connection with
the Property located at 9401 Corbin Avenue, Lot # 43, Northridge, California,
Borrower shall also establish the Environmental Reserve as set forth in Section
9.5 below.
ARTICLE VII
ADDITIONAL REPRESENTATIONS AND WARRANTIES
AND COVENANTS OF BORROWER
7.1 Expenses. Borrower shall pay on the Closing Date or within ten (10)
Business Days after Lender's demand therefor, as appropriate: (a) all of
Lender's fees, costs and expenses in connection with the Loan, including,
without limitation, Lender's legal fees, expenses and disbursements, the costs
of appraisals, environmental studies, engineering reports, title insurance,
surveys, mortgage recording taxes and fees, filing and other recording fees and
charges, inspection fees, credit report fees, environmental report charges,
taxes, tax and insurance fees and escrow fees and all other usual and customary
loan closing expenses (collectively, "Expenses"); (b) all Expenses incurred in
connection with the enforcement or satisfaction by Lender of any of Borrower's
obligations under this Agreement or the other Loan Documents; and (c) all
Expenses incurred in the successful prosecution or defense of any action in any
way related to any of the Loan Documents, including, without limitation, any
action for declaratory relief; together with interest thereon until paid, at the
Default Rate. Lender shall provide to Borrower copies of
39
invoices, statements or other records documenting such amounts to the extent
available to Lender.
7.2 Compliance with Loan Documents. Borrower will duly observe and
perform in all material respects the Secured Obligations.
7.3 Representations, Warranties and Covenants with Respect to
Indebtedness, Operations and Fundamental Changes of Borrower; Maintenance of
Separate Existence. Borrower represents, warrants and covenants as of the date
hereof and until such time as the Loan is paid in full, that Borrower:
(a) will not, nor will any partner, limited or general, member
or shareholder thereof, as applicable, amend, modify or otherwise change its
partnership certificate, partnership agreement, articles of incorporation,
by-laws, operating agreement, articles of organization, or other formation
agreement or document, as applicable, in any material term or manner, or in a
manner which adversely affects Borrower's existence as a single purpose entity;
(b) will not liquidate or dissolve (or suffer any liquidation
or dissolution), or enter into any transaction of merger or consolidation or
acquire by purchase or otherwise all or substantially all the business or assets
of, or any stock or other evidence of beneficial ownership of any entity;
(c) has not and will not guarantee, pledge its assets for the
benefit of, or otherwise become liable on or in connection, with any obligation
of any other person or entity;
(d) does not own and will not own any asset other than (i) the
Properties, (ii) Collateral and (iii) other incidental personal property
necessary for the operation of the Properties;
(e) is not engaged and will not engage, either directly or
indirectly, in any business other than the ownership, leasing, management and
operation of the Properties;
(f) will not enter into any contract or agreement with any
general partner, principal, affiliate or member of Borrower, as applicable, or
any affiliate of any general partner, principal or member of Borrower, except
upon terms and conditions that are intrinsically fair and substantially similar
to those that would be available on an arms-length basis with third parties
other than an affiliate;
(g) has not incurred and will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation), other
than (i) the Loan, and (ii) advances or trade payables or accrued expenses
incurred in the ordinary course of business of operating the Properties; and has
not incurred and will not incur any debt secured (senior, subordinate or pari
passu) by the Properties;
(h) has not made and will not make any loans or advances to
any third party (including, but not limited to, any affiliate) except to tenants
of the Properties for tenant improvements, repairs or furniture, fixtures and
equipment (which loans shall constitute Collateral);
40
(i) is solvent and is able to pay its debts from its assets as
the same become due and that the Loan and the transactions contemplated by this
Agreement will not cause Borrower to be insolvent;
(j) has done or caused to be done and will do all things
necessary to preserve its existence;
(k) will conduct and operate its business in its own name and
as presently conducted and operated;
(l) will maintain financial statements, books and records and
bank accounts separate from those of its affiliates, including, without
limitation, its general partners or members, as applicable ;
(m) will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity
(including, without limitation, any affiliate, general partner or member, as
applicable, or any affiliate of any general partner or member of the Borrower,
as applicable);
(n) will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;
(o) will not seek the dissolution or winding up, in whole or
in part, of the Borrower;
(p) shall maintain its principal executive office and
telephone and facsimile numbers separate from that of any affiliate and shall
conspicuously identify such office and numbers as its own and shall use its own
stationery, invoices and checks which reflect its address, telephone number and
facsimile number, as appropriate (which, however, may be within the premises of
and leased from an affiliate so long as overhead for such shared office space is
allocated fairly and reasonably);
(q) will not commingle the funds and other assets of Borrower
with those of any general partner, member, affiliate, principal or any other
person;
(r) has and will maintain its assets in such a manner that it
is not unreasonably costly or difficult to segregate, ascertain or identify its
individual assets from those of any affiliate or any other person;
(s) does not and will not hold itself out to be responsible
for the debts or obligations of any other person;
(t) will not do any act which would make it impossible to
carry on the ordinary business of Borrower;
41
(u) will not possess or assign any of the Properties or
incidental personal property necessary for the operation of the Properties for
other than a business or company purpose;
(v) will not sell, encumber or otherwise dispose of all or
substantially all of the Properties or incidental personal property necessary
for the operation of the Properties;
(w) will not hold title to Borrower's assets other than in
Borrower's name;
(x) will be managed by a board of directors, which board will
govern the operations of the Borrower; at least two (2) of the directors shall
serve as an "Independent Director," whose consent shall be required for, among
other things and as expressly provided in Borrower's formation documents, any
merger, consolidation, dissolution or bankruptcy of Borrower, and for any sale
or transfer of all or substantially all of the assets of Borrower. "Independent
Director" shall mean a person who is not, and has not within the past 5 years
been (i) an officer, director, employee or 10% stockholder of, or any affiliate
of, Borrower or Guarantor (other than a person who would otherwise be
disqualified under this clause (i) solely as a result of serving as an
independent director of another entity that is an affiliate of Borrower or
Guarantor), (ii) a member of the immediate family of any such person or of any
affiliate of Borrower or Guarantor or (iii) a professional retained by Borrower
or Guarantor (other than such person's retention as an Independent Director of
Borrower); and
(y) will not institute proceedings to be adjudicated bankrupt
or insolvent; or consent to the institution of bankruptcy or insolvency
proceedings against it; or file a petition seeking, or consent to,
reorganization or relief under any applicable federal or state law relating to
bankruptcy; or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Borrower or a
substantial part of Borrower's property; or make any assignment for the benefit
of creditors; or admit in writing its inability generally, to pay its debts as
they become due; or take any action in furtherance of any such action.
7.4 Payment of Taxes. Borrower will pay, or cause to be paid pursuant
to the provisions of Section 9.2 below, all taxes, assessments, or other
governmental charges levied upon any of the Properties or its other assets, or
in respect of its income before the same become delinquent, except that it will
have the right to contest the assessment and payment of such taxes, assessments
and other charges in the manner provided in the Mortgages.
7.5 Litigation. Borrower will give Lender prompt written notice of (a)
any litigation or claims of any kind which, to its knowledge, might subject
Borrower to any liability which may materially and adversely affect Borrower's
ability to repay the Loan, whether covered by insurance or not, and in any event
any litigation in which the plaintiffs' claims exceed $500,000 and (b) all
complaints and charges filed by any governmental agency materially adversely
affecting any of the Properties or the Collateral, or exercising supervision or
control of Borrower, or its business or assets.
7.6 Indemnification of Lender. Borrower hereby agrees to defend,
protect, indemnify and hold Lender, its directors, officers, employees, agents,
successors and assigns (including,
42
without limitation, any participants in the Loan), harmless from and
against any and all losses, liabilities, fines, claims, actions, judgments,
costs, expenses or damages, to the extent such losses, liabilities, fines,
claims, actions, judgments, costs, expenses or damages do not arise out of
Lender's willful misconduct or gross negligence (as finally determined by a
court of competent jurisdiction) asserted against Lender by any person, entity
or Governmental Authority arising out of or in connection with Borrower's
ownership or use of any of the Properties, including, but not limited to, any
liens (i.e., judgments, mechanics' and materialmen's liens, or otherwise),
charges and encumbrances filed against any Property, and from any claims and
demands for damages or injury, including claims for property damage, personal
injury or wrongful death, arising out of or in connection with any accident or
fire or other casualty on the Properties or any nuisance made or suffered
thereon, including, without limitation, in any case, reasonable attorneys' fees,
costs and expenses as aforesaid, whether at pretrial, trial or appellate level,
and such indemnity shall survive payment in full of the Loan. Lender will be
entitled to appear in any action or proceeding to defend itself against such
claims, and all costs incurred by Lender in connection therewith, including
reasonable attorney's fees, shall be paid by Borrower to Lender upon request.
Lender shall, at its option, and subject to Borrower's reasonable prior written
approval, be entitled to settle or compromise any asserted claim against it, and
such settlement shall be binding upon Borrower for purposes of this
indemnification. Payment thereof by Lender or the payment by Lender of any such
judgment or claim successfully perfected against Lender shall bear interest at
the Default Interest Rate and shall be payable within ten (10) Business Days
after Lender's demand therefor. Lender shall provide copies of invoices,
statements or other records documenting such amounts to the extent available to
Lender.
7.7 Change in Position. Borrower agrees immediately to inform Lender of
any material adverse change in the financial condition of Borrower and/or any
transfer of ownership of any material assets of Borrower or any change in the
location of Borrower's principal executive office.
7.8 Secondary Financing. Secondary financing of any type encumbering
any Property or the Collateral, or any portion thereof, is prohibited without
the prior written consent of Lender, which consent shall be in Lender's absolute
discretion.
7.9 Further Assurances. Borrower shall, on the request of Lender and at
the expense of Borrower: (a) promptly correct any defect, error or omission
which may be discovered in the contents of this Agreement or in the contents of
any of the other Loan Documents; (b) promptly execute, acknowledge, deliver and
record or file such further instruments (including, without limitation, further
mortgages, deeds of trust, security deeds, security agreements, financing
statements, continuation statements and assignments of rents or leases) and
promptly do such further acts as may be necessary to carry out the purposes of
this Agreement and the other Loan Documents and to subject to the liens and
security interests hereof and thereof any property intended by the terms hereof
and thereof to be covered hereby and thereby, including specifically, but
without limitation, any renewals, additions, substitutions, replacements or
appurtenances to the Properties; (c) promptly execute, acknowledge, deliver,
procure and record or file any document or instrument (including specifically,
without limitation, any financing statement) deemed advisable by Lender to
protect, continue or perfect the liens or the security interests hereunder
against the rights or interests of third persons; and (d) promptly furnish to
Lender, upon Lender's request, a duly acknowledged written statement and
estoppel certificate
43
addressed to such party or parties as directed by Lender and in form and
substance supplied by Lender, setting forth all amounts due under the Note,
stating whether any Default or Event of Default has occurred hereunder, stating
whether any offsets or defenses exist against the Loan and containing such other
matters as Lender may reasonably require.
7.10 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.
7.11 Management Agreements. Borrower shall not modify, amend or
terminate any Management Agreement without the prior written consent of Lender.
In the event a Manager elects to terminate its services under the Management
Agreement as may be permitted in such Management Agreement, within thirty (30)
days following such termination Borrower shall enter into a new Management
Agreement in form and substance reasonably acceptable to Lender and the Rating
Agencies and with a manager acceptable to Lender and the Rating Agencies.
ARTICLE VIII
REPORTING COVENANTS
8.1 Financial Statements and Books and Records. Borrower shall keep
accurate books and records of account of each Property and its own financial
affairs sufficient to permit the preparation of financial statements therefrom
in accordance with generally accepted accounting principles, consistently
applied. Borrower is and shall continue to provide Lender with reporting
information which complies with the Commercial Real Estate Secondary Market and
Securitization Association Standards and in electronic format and such other
format as Lender may require. Lender and its duly authorized representatives
shall have the right to examine, copy and audit Borrower's records and books of
account at all reasonable times. The cost of such examination and audit shall be
at the expense of Lender, (x) unless there exists an Event of Default or (y) at
such other time as Lender has reasonable grounds to believe that Borrower's
financial statements are inaccurate or incomplete and such audit discloses a
material inaccuracy. Borrower agrees that it shall furnish to Lender its audited
balance sheet, dated as of October 1, 1998, on or before October 28, 1998, which
balance sheet Borrower presently anticipates will be, and when completed, must
be, consistent with the Properties' financial information previously delivered
to Lender in connection with the closing of the Loan. Prior to a Securitization
of the Loan, Borrower shall furnish to Lender and the Rating Agencies, upon
request from time to time, monthly operating statements and a current Rent Roll
(containing all of the information set forth in Section 5.1(ee)(i), above) for
each Property and, to the extent the tenant or tenants of such Property are
required to report sales, monthly sales reports for each retail Property.
Throughout the Loan term, Borrower shall also furnish to Lender and the Rating
Agencies (a) unaudited quarterly financial statements and operating statements
for the Properties together with unaudited annual financial and operating
statements for the twelve (12) months ending with such quarter, collectively,
(b) quarterly current Rent Rolls (containing all of the information set forth in
Section 5.1(ee)(i), above) for each Property, (c) to the extent the tenant or
tenants of such Property are required to report sales, current quarterly sales
reports for each retail Property, and (d) audited annual financial and operating
statements for all of the Properties, collectively, prepared by a `Big Six'
accounting firm or other independent certified public
44
accountant acceptable to Lender. Such annual financial statements shall
include, without limitation, (i) a balance sheet, (ii) a statement of income and
expenses reflecting the actual and complete results of the operation of each
Property for the prior fiscal year, and (iii) a statement of cash flow, each in
reasonable detail. Such financial statements shall be prepared in accordance
with generally accepted accounting principles, consistently applied. The
quarterly statements must be delivered to Lender within forty-five (45) days
following the respective quarter and the annual statements must be delivered to
Lender within ninety (90) days of the year end. In addition, upon Lender's or
the Rating Agencies' request from time to time, Borrower shall furnish or cause
to be furnished current annual financial statements on the Guarantor in a form
reasonably satisfactory to Lender, and on any person or entity having a direct
ownership interest in the Borrower, together with such other information
concerning the financial condition or operation of the Borrower and/or the
Property and/or Guarantor as may be reasonably requested by Lender. If any of
the aforementioned materials are not furnished to Lender within the applicable
time periods or Lender is dissatisfied with the contents of any of the foregoing
and has notified Borrower of its dissatisfaction, in addition to any other
rights and remedies of Lender contained herein, Lender shall have the right, but
not the obligation, to obtain the same by means of an audit by an independent
certified public accountant selected by Lender, in which event Borrower agrees
to pay, or to reimburse Lender for, any expense of such audit if such audit
discloses a material inaccuracy from the materials furnished by Borrower and
further agrees to provide all necessary information to said accountant and to
otherwise cooperate in the making of such audit.
8.2 Representations and Warranties. Borrower agrees that all financial
statements to be delivered to Lender pursuant to this Article VIII shall: (a) be
complete and correct in all material respects; (b) present fairly the financial
condition of the party, including all material liabilities; and (c) be prepared
in accordance with generally accepted accounting principles, consistently
applied. Borrower shall be deemed to warrant and represent that, as of the date
of delivery of any such financial statement, no Properties have been sold,
transferred, assigned, mortgaged, pledged or encumbered since the date of such
financial statement, except as disclosed by Borrower in a writing delivered to
Lender. Borrower agrees that all Rent Rolls and other information to be
delivered to Lender pursuant to this Article VIII shall not contain any material
misrepresentation or omission of a material fact.
ARTICLE IX
CASH MANAGEMENT AGREEMENT; RESERVE AND IMPOUND ACCOUNTS
9.1 Cash Management Agreement. Borrower and Lender shall enter into a
Cash Management Agreement (the "Cash Management Agreement") which will govern
the collection and distribution of revenues as generated from the Properties
throughout the term of the Loan. Pursuant to the Cash Management Agreement,
Borrower will establish separate accounts (the "Cash Management Accounts") with
a bank (the "Clearing Bank") designated by Borrower and acceptable to Lender
through which all rents and other receipts from the Properties (collectively the
"Revenues") will be cleared. All cash held in accounts under the Cash Management
Agreement which are under the dominion and control of the Lender or any other
accounts held by or on Lender's behalf and established pursuant to the Loan
Documents, shall be held in Permitted Investments. Until the earliest to occur
of (1) the date ("CS Event 1") three (3) months
45
prior to the Anticipated Repayment Date, (2) the date upon which the Lender
determines that the ratio of (a) Net Cash Flow for the immediate preceding
12-month period from ongoing and continuous operations of the Properties to (b)
the annual debt service on the Loan, has fallen below 1.15:1.00, as determined
by Lender (the "Minimum Coverage Ratio") (and Borrower fails to post Additional
Collateral as provided in the Cash Management Agreement) ("CS Event 2") or (3)
an Event of Default under the Loan Documents ("CS Event 3") (each, a "Sweep
Event"), the Clearing Bank will transfer all receipts daily from Lender's
controlled account into Borrower's account pursuant to the provisions of the
Cash Management Agreement. The period following a Cash Sweep Event shall be
referred to as the "Cash Management Period".
9.2 Tax and Insurance Impound Account. Borrower shall establish and
maintain at all times throughout the term of the Loan an impound account (the
"Impound Account") with Lender for payment of real estate taxes and assessments
and insurance on all the Properties and as additional security for the Loan.
Borrower shall, on the Closing Date, make an initial deposit in the Impound
Account reasonably determined by Lender to be necessary to ensure that there
will be on deposit with Lender an amount which, when added to the monthly
payments subsequently required to be deposited with Lender hereunder on account
of real estate taxes, assessments and insurance premiums, will result in there
being on deposit with Lender in the Impound Account an amount sufficient to pay
the next due installment of real estate taxes and assessments on the Properties
at least one (1) month prior to the earlier of (a) the delinquent date thereof
or (b) any such date by which the Borrower is required by law to pay same, and
the next due annual insurance premiums with respect to the Properties at least
one (1) month prior to the due date thereof. Commencing on the first monthly
payment date under the Note and continuing thereafter on each monthly payment
date under the Note, Borrower shall pay to Lender, concurrently with and in
addition to the monthly payment due under the Note and until the Loan is fully
paid and performed, deposits in an amount equal to one-twelfth (1/12) of the
amount of the annual real estate taxes and assessments that will next become due
and payable on the Properties, plus one-twelfth (1/12) of the amount of the
annual premiums that will next become due and payable on insurance policies
which Borrower is required to maintain hereunder, each as estimated and
determined by Lender. So long as no Event of Default has occurred, all sums in
the Impound Account shall be held by Beneficiary in the Impound Account to pay
said taxes and assessments before the same become delinquent. Borrower shall be
responsible for ensuring the receipt by Lender, at least thirty (30) days prior
to the respective due date for payment thereof, of all bills, invoices and
statements for all taxes and assessments to be paid from the Impound Account,
and so long as no Event of Default has occurred, Lender shall pay the
governmental authority or other party entitled thereto directly to the extent
funds are available for such purpose in the Impound Account. Borrower agrees
that it shall pay all said insurance premiums before the same become delinquent
directly to the party entitled thereto. So long as no Event of Default has
occurred, sums held in the Impound Account by Lender shall be disbursed by
Lender to Borrower within ten (10) Business Days after Borrower's request to
reimburse Borrower for the payment of said insurance premiums to the extent
funds are available for such purpose in the Impound Account. Borrower shall with
each reimbursement request (which shall not be more frequent than once in any
thirty (30) day period) submit copies of receipts, statements or invoices
evidencing payment of such insurance premiums acceptable to Lender. In the event
Borrower fails to pay said insurance premiums before the same become delinquent,
Lender shall have the right to make such payment to the party entitled thereto
on Borrower's behalf with the sums held by Lender in the Impound Account. In
making any payment from the Impound Account, Lender
46
shall be entitled to rely on any bill, statement or estimate procured from
the appropriate public office or insurance company or agent without any inquiry
into the accuracy of such bill, statement or estimate and without any inquiry
into the accuracy, validity, enforceability or contestability of any tax,
assessment, valuation, sale, forfeiture, tax lien or title or claim thereof. The
Impound Account shall not, unless otherwise explicitly required by applicable
law, be or be deemed to be escrow or trust funds, but, at Lender's option and in
Lender's discretion, may either be held in a separate account or be commingled
by Lender with the general funds of Lender.
9.3 Repair and Remediation Reserve.
------------------------------
Prior to the execution of this Loan Agreement, Lender has
caused each Property in the Property Pool to be inspected and such inspection
has revealed that certain Properties (each, a "Deferred Maintenance Property"
and collectively, the "Deferred Maintenance Properties") are in need of certain
maintenance, repairs and/or remedial or corrective work. Contemporaneously with
the execution hereof, Borrower has established with the Lender a reserve in the
amount of Seven Hundred Twenty-five Thousand Six Hundred and 00/100 Dollars
($725,600.00) (the "Repair and Remediation Reserve") by depositing such amount
with Lender. Borrower shall cause each of the items described in Schedule 4
attached hereto and made a part hereof (the "Deferred Maintenance") to be
completed, performed, remediated and corrected to the satisfaction of Lender and
as necessary to bring the Deferred Maintenance Properties into compliance with
all applicable laws, ordinances, rules and regulations on or before the
expiration of one hundred-eighty (180) days after the Closing Date, as such time
period may be extended by Lender in its reasonable discretion. Lender shall have
the right to inspect the work from time to time to insure that the work is being
completed in a good and workmanlike manner.
So long as no Default or Event of Default has occurred and is
continuing, all sums in the Repair and Remediation Reserve shall be held by
Lender in the Repair and Remediation Reserve to pay the costs and expenses of
completing the Deferred Maintenance. So long as no Default or Event of Default
has occurred and is continuing, Lender shall, to the extent funds are available
for such purpose in the Repair and Remediation Reserve, disburse to Borrower the
amount paid or incurred by Borrower in completing, performing, remediating or
correcting the Deferred Maintenance upon (a) the receipt by Lender of a written
request from Borrower for disbursement from the Repair and Remediation Reserve
and a certification by Borrower in the form annexed hereto as Exhibit D that the
Deferred Maintenance has been fully completed and that all Deferred Maintenance
work with respect to any Property for which funds are requested has been
completed in accordance with the terms of this Loan Agreement, (b) delivery to
Lender of invoices, receipts or other evidence satisfactory to Lender verifying
the costs of the Deferred Maintenance to be reimbursed, (c) if applicable,
delivery to Lender of any and all certifications from inspecting architects,
engineers or other consultants reasonably acceptable to Lender describing the
completed work, verifying the completion of the work and the value of the
completed work and, if applicable, certifying that the Deferred Maintenance
Properties are, as a result of such work, in compliance with all applicable
laws, ordinances rules and regulations relating to the Deferred Maintenance
so performed, (d) delivery to Lender of affidavits, lien waivers or other
evidence reasonably satisfactory to Lender showing that all materialmen,
laborers, subcontractors and any other parties who might or could claim
statutory or common law liens and are furnishing or have furnished materials or
labor to the Deferred Maintenance Properties have been paid all amounts due for
such labor and materials furnished to the Deferred Maintenance
47
Properties, and (e) the receipt by Lender of an administrative fee for each
disbursement request in an amount equal to all of Lender's out of pocket costs
and expenses plus Lender's then customary charge for performing such service,
but in no event less than $1,000.00. Lender shall not be required to make
advances from the Repair and Remediation Reserve more frequently than once in
any thirty (30) day period and for an amount less than $10,000. In making
payment from the Repair and Remediation Reserve Lender shall be entitled to rely
on the request from Borrower without any inquiry into the accuracy, validity or
contestability of any such amount. The Repair and Remediation Reserve shall not,
unless otherwise explicitly required by applicable law, be or be deemed to be
escrow or trust funds, but, at Lender's option and in Lender's discretion, may
either be held in a separate account or be commingled by Lender with the general
funds of Lender.
9.4 Replacement Reserve; Tenant Improvements and Leasing Commissions
----------------------------------------------------------------
Reserve.
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(a) During the continuance of a Cash Management Period,
Borrower shall establish and maintain at all times during such period a
replacement reserve (the "Replacement Reserve") with Lender for payment of
certain costs and expenses, incurred by Borrower or which may otherwise be
necessary, in connection with the repair and maintenance of the Properties,
including, but not limited to, the roofs, gutters, downspouts, paving, curbs,
driveways, ramps, exterior walls, exterior doors and doorways, windows,
elevators and mechanical and HVAC equipment (collectively, the "Repairs").
During the continuance of a Cash Management Period, Borrower shall pay Lender,
concurrently with and in addition to the monthly payment due under the Note, a
deposit to the Replacement Reserve in the amount determined by the formula set
forth in Schedule 3 for such reserve. Lender shall, to the extent funds are
available for such purpose in the Replacement Reserve, disburse to Borrower the
amount paid or incurred by Borrower in performing such Repairs within ten (10)
Business Days following: (i) the receipt by Lender of a written request from
Borrower for disbursement from the Replacement Reserve and a certification by
Borrower in the form attached hereto as Exhibit D that the applicable item of
Repair has been completed; (ii) the delivery to Lender of invoices, receipts or
other evidence satisfactory to Lender, verifying the cost of performing the
Repairs; (iii) for disbursement requests in excess of $150,000 in the aggregate
within any thirty (30) day period as to any single Property, the delivery to
Lender of affidavits, lien waivers or other evidence reasonably satisfactory to
Lender showing that all materialmen, laborers, subcontractors and any other
parties who might or could claim statutory or common law liens and are
furnishing or have furnished material or labor to the applicable Property have
been paid all amounts due for labor and materials furnished to such Property;
(iv) for disbursement requests in excess of $300,000 in the aggregate within any
thirty (30) day period as to any single Property, delivery to Lender of a
certification from an inspecting architect or other third party acceptable to
Lender describing the completed Repairs and verifying the completion of the
Repairs and the value of the completed Repairs; (v) delivery to Lender of a new
certificate of occupancy for the portion of the Improvements covered by such
Repairs, if said new certificate of occupancy is required by law, or a
certification by Borrower that no new certificate of occupancy is required; and
(vi) the receipt by Borrower of an administration fee for each disbursement
request in an amount equal to all of Lender's out of pocket costs and expenses
plus Lender's then customary charge for performing such services but in no event
less than $1,000. Lender shall not be required to make advances from the
Replacement Reserve more frequently than once in any thirty (30) day period
48
and for an amount less than $10,000. In making any payment from the
Replacement Reserve, Lender shall be entitled to rely on such request from
Borrower without any inquiry into the accuracy, validity or contestability of
any such amount. During any Cash Management Period, Lender may, at Lender's
expense, make or cause to be made an annual inspection at the Properties to
determine the need, as determined by Lender in its reasonable judgment, for
further Repairs of the Properties. In the event that such inspection reveals
that further Repairs of the Properties are required, Lender shall provide
Borrower with a written description of the required Repairs and Borrower shall
complete such Repairs to the reasonable satisfaction of Lender within ninety
(90) days after the receipt of such description from Lender, or such later
date as may be approved by Lender in its reasonable discretion. The
Replacement Reserve shall not, unless otherwise explicitly required by
applicable law, be or be deemed to be escrow or trust funds, but, at Lender's
option and in Lender's discretion, may either be held in a separate account or
be commingled by Lender with the general funds of Lender.
(b) During the continuance of a Cash Management Period,
Borrower shall establish and maintain at all times during such period a reserve
for tenant improvements and leasing commissions (the "TI/LC Reserve") with
Lender for payment of leasing commissions and tenant improvement costs and
expenses incurred by Borrower in connection with re-leasing the Properties
pursuant to Leases approved, or deemed approved, by Lender (collectively, the
"Leasing Costs"). During the continuance of a Cash Management Period, Borrower
shall pay Lender, concurrently with and in addition to the monthly payment due
under the Note, a deposit to the TI/LC Reserve in the amounts determined by the
formulas set forth in Schedule 3 for such reserves. Lender shall, to the extent
funds are available for such purpose in the TI/LC Reserve, disburse to Borrower
the amount paid or incurred by Borrower in performing such Leasing Costs within
ten (10) Business Days following: (i) the receipt by Lender of a written request
from Borrower for disbursement from the TI/LC Reserve and a certification by
Borrower in the form annexed as Exhibit D that (1) for Leasing Costs consisting
of commissions payable to brokers not affiliated with Borrower and at a rate not
greater than the then-current market rate, such leasing commission has been paid
by Borrower, and (2) for Leasing Costs consisting of amounts required to be
expended pursuant to the relevant Lease for tenant improvement or related costs,
said Leasing Costs have been incurred, (ii) the delivery to Lender of invoices,
receipts or other evidence satisfactory to Lender verifying the cost of such
Leasing Costs; (iii) for disbursement requests for Leasing Costs in excess of
$150,000 in the aggregate within any thirty (30) day period as to any single
Property, the delivery to Lender of affidavits, lien waivers or other evidence
reasonably satisfactory to Lender showing that all materialmen, laborers,
subcontractors and any other parties who might or could claim statutory or
common law liens and are furnishing or have furnished material or labor to the
property have been paid (or will be paid out of such disbursement) all amounts
due for labor and materials furnished to the applicable Property; (iv) for
disbursement requests for Leasing Costs in excess of $300,000 in the aggregate
within any thirty (30) day period as to any single Property (other than with
respect to leasing commissions), delivery to Lender of a certification from an
inspecting architect or other third party acceptable to Lender describing the
completed tenant improvement or other work, and verifying the completion and the
value thereof; (v) for disbursement requests for Leasing Costs in excess of
$300,000 in the aggregate within any thirty (30) day period as to any single
Property (other than with respect to leasing commissions), evidence satisfactory
to Lender that there exists sufficient funds in the TI/LC Reserve to complete
the tenant improvement or other work; (vi) delivery to Lender of a new
certificate of occupancy for the portion of the Improvements covered by such
49
Lease for the applicable Property, if said new certificate of occupancy was
required by law, or a certification by Borrower that no new certificate of
occupancy was required; (vii) for disbursement requests for Leasing Costs in
excess of $300,000 in the aggregate within any thirty (30) day period as to any
single Property (other than with respect to leasing commissions), delivery to
Lender of an estoppel certificate from the tenants of the relevant premises in
form and substance reasonably acceptable to Lender; and (viii) the receipt by
Lender of an administrative fee for each disbursement request in an amount equal
to all of Lender's out of pocket costs and expenses plus Lender's then customary
charge for performing such services but in no event less than $1,000. Lender
shall not be required to make advances from the TI/LC Reserve more frequently
than once in any thirty (30) day period and for an amount less than $10,000. In
making any payment from the TI/LC Reserve, Lender shall be entitled to rely on
such request from Borrower without any inquiry into the accuracy, validity or
contestability of any such amount. The TI/LC Reserve shall not, unless otherwise
explicitly required by applicable law, be or be deemed to be escrow or trust
funds, but, at Lender's option and in Lender's discretion, may either be held in
a separate account or be commingled by Lender with the general funds of Lender.
9.5 Environmental Reserve.
(a) Contemporaneously with the execution hereof, Borrower has
established with Lender a reserve in the amount of $300,000 (the "Environmental
Reserve") by depositing such amount with Lender to fund potential remediation
work as more particularly described in that certain Environmental Site
Assessment dated July 24, 1998 and prepared by Dames and Moore for Lender (the
"Environmental Report"; such work, the "Environmental Work"), with respect to
the Property located at 9401 Corbin Avenue, Lot # 43, Northridge, California
(identified as Property # 101 on Exhibit A attached hereto) to be performed and
completed to the satisfaction of Lender and as recommended in the Environmental
Report.
(b) So long as no Default or Event of Default has occurred and
is continuing, all sums in the Environmental Reserve shall be held by Lender in
the Environmental Reserve to pay the costs and expenses of completing the
Environmental Work. So long as no Default or Event of Default has occurred and
is continuing, Lender shall, to the extent funds are available for such purpose
in the Environmental Reserve, disburse to Borrower the amount paid or incurred
by Borrower in performing and completing the Environmental Work upon (i) the
receipt by Lender of a written request from Borrower for disbursement from the
Environmental Reserve and a certification by Borrower in the form annexed as
Exhibit D that the Environmental Work has been fully completed in accordance
with the terms of this Agreement, (ii) delivery to Lender of invoices, receipts
or other evidence satisfactory to Lender verifying the costs of the
Environmental Work to be reimbursed, (iii) delivery to Lender of a certification
from an inspecting architect, engineer or other consultant reasonably acceptable
to Lender describing the completed work, verifying the completion of the work
and the value of the completed work and, if applicable, certifying that such
work has been performed in compliance with all applicable laws, ordinances rules
and regulations relating to the Environmental Work so performed, (iv) delivery
to Lender of affidavits, lien waivers or other evidence reasonably satisfactory
to Lender showing that all materialmen, laborers, subcontractors and any other
parties who might or could claim statutory or common law liens and are
furnishing or have furnished materials or labor to the Property have been paid
(or will be paid out of such disbursement) all amounts due
50
for such labor and materials furnished to the Property, and (v) the receipt by
Lender of an administrative fee in an amount equal to all of Lender's out
of pocket costs and expenses plus Lender's then customary charge for performing
such services but in no event less than $1,000. Lender shall not be required to
make more than one (1) payment from the Environmental Reserve. In making the
payment from the Environmental Reserve, Lender shall be entitled to rely on such
request from Borrower without any inquiry into the accuracy, validity or
contestability of any such amount. The Environmental Reserve shall not, unless
otherwise explicitly required by applicable law, be or be deemed to be escrow or
trust funds, but, at Lender's option and in Lender's discretion, may either be
held in a separate account or be commingled by Lender with the general funds of
Lender.
9.6 Prepaid Rent Reserve
--------------------
(a) Contemporaneously with the execution hereof, Borrower has
established with Lender a reserve in the amount of $187,306 (the "Prepaid Rent
Reserve") by depositing with Lender an amount equal to two-thirds (2/3rds) of
the amount of rent paid quarterly in advance (i.e., paid prior to the period to
which such rent applies) for the Ground Leases listed on Schedule 5.1(ee)(iii)
(the "Quarterly Ground Leases"). Lender shall hold the Prepaid Rent Reserve
throughout the term of the Loan. Borrower shall provide to Lender a quarterly
certificate as to the amount of the rent paid under the Quarterly Ground Leases
more than thirty (30) days in advance, together with any other rents similarly
paid (i.e., paid prior to the period to which such rent applies) more than
thirty (30) days in advance under any other Leases (collectively, the "Prepaid
Rents"). The amount of the Prepaid Rent Reserve shall be adjusted quarterly by
Lender to reflect any increase or decrease in the amount of Prepaid Rents
collected by Borrower such that the amount of the Prepaid Rent Reserve shall
always equal the amount of Prepaid Rents. Borrower agrees that if at any time
the Prepaid Rent Reserve is less than the Prepaid Rents, Borrower shall deposit
with Lender such additional funds necessary to properly fund the Prepaid Rent
Reserve. So long as no Default or Event of Default has occurred and is
continuing, Lender shall disburse to Borrower any excess funds above and beyond
the amount required to be in the Prepaid Rent Reserve from time to time. Lender
shall not be required to make more than one (1) payment per ninety (90) day
period.
(b) The Prepaid Rent Reserve shall not, unless otherwise
explicitly required by applicable law, be or be deemed to be escrow or trust
funds, but, at Lender's option and in Lender's discretion, may either be held in
a separate account or be commingled by Lender with the general funds of Lender.
9.7 Interest Payable by Lender. Lender shall cause funds in the
Impound Account, the Repair and Remediation Reserve, the Replacement Reserve,
the TI/LC Reserve, and the Environmental Reserve, if any, to be deposited into
an interest bearing account (which shall be a Permitted Investment) of the
type customarily maintained by Lender or its servicing agent for the
investment of similar reserves, which account may not yield the highest
interest rate then available. All accounts must be and continue to be held
with a financial institution rated at least "A" by DCR and at least "Aa2" by
Moody's, or if not rated by DCR and Moody's, correspondingly by at least two
(2) Rating Agencies, or otherwise acceptable to DCR and Moody's. Interest
payable on such amounts shall be computed based on the daily outstanding
balance in such account. Such interest shall be calculated on a simple, non-
compounded interest
51
basis based solely on contributions made to such account by Borrower. All
interest earned on amounts contributed to such account shall be retained by
Lender and added to the balance in the Impound Account, the Repair and
Remediation Reserve, the Replacement Reserve, and the TI/LC Reserve, as
applicable, and shall be disbursed for payment of the items for which other
funds in such reserves are to be disbursed.
9.8 Pledge of Security Interest in Impound and Reserve Accounts.
-----------------------------------------------------------
(a) As additional security for the Secured Obligations,
Borrower hereby unconditionally and irrevocably assigns, conveys, pledges,
mortgages, transfers, delivers, deposits, sets over and confirms unto Lender,
and hereby grants to Lender a security interest in, (i) the Impound Account, the
Repair and Remediation Reserve, the Replacement Reserve, the TI/LC Reserve, the
Environmental Reserve, the Prepaid Rent Reserve, the Cash Management Accounts,
and any other reserve or escrow account established, pursuant to the terms
hereof or of any other Loan Documents (collectively, the "Reserves"), (ii) the
accounts into which the Reserves have been deposited, (iii) all insurance of
said accounts, (iv) all accounts, contract rights and general intangibles or
other rights and interests pertaining thereto, (v) all sums now or hereafter
therein or represented thereby, (vi) all replacements, substitutions or proceeds
thereof, (vii) all instruments and documents now or hereafter evidencing the
Reserves or such accounts, (viii) all powers, options, rights, privileges and
immunities pertaining to the Reserves (including the right to make withdrawals
therefrom), and (ix) all proceeds of the foregoing. Borrower hereby authorizes
and consents to the account into which the Reserves have been or will be
deposited being held in Lender's name or the name of any entity servicing the
Note for Lender and hereby acknowledges and agrees, that Lender, or at Lender's
election, such servicing agent, shall have exclusive control over said account.
Notice of the assignment and security interest granted to Lender herein may be
delivered by Lender at any time to the financial institution wherein the
Reserves have been established, and Lender, or such servicing entity, shall have
possession of all passbooks or other evidences of such accounts. Borrower hereby
assumes all risk of loss with respect to amounts on deposit in the Reserves
except to the extent such loss is caused by Lender's willful misconduct or gross
negligence. Borrower hereby knowingly, voluntarily and intentionally stipulates,
acknowledges and agrees that the advancement of the funds from the Reserves as
set forth herein is at Borrower's direction and is not the exercise by Lender of
any right of set-off or other remedy upon an Event of Default. Borrower hereby
waives all right to withdraw funds from the Reserves except as provided in the
Cash Management Agreement. If an Event of Default shall occur hereunder or under
any other of the Loan Documents, then Lender may, without notice or demand on
Borrower or Guarantor, at its option: (A) withdraw any or all of the funds
(including, without limitation, interest) then remaining in the Reserves and
apply the same, after deducting all costs and expenses of safekeeping,
collection and delivery (including, but not limited to, reasonable attorneys'
fees, costs and expenses) to the obligations of Borrower under the Loan
Documents in such manner or as Lender shall deem appropriate in its sole
discretion, and the excess, if any, shall be paid to Borrower, (B) exercise any
and all rights and remedies of a secured party under any applicable Uniform
Commercial Code, and/or (C) exercise any other remedies available at law or in
equity. No such use or application of the funds contained in the Reserves shall
be deemed to cure any Event of Default hereunder or under the other Loan
Documents.
52
(b) The Reserves are solely for the protection of Lender and
entail no responsibility on Lender's part beyond the payment of the respective
items for which they are held following receipt of bills, invoices or statements
therefor in accordance with the terms hereof and beyond the allowing of due
credit for the sums actually received. Upon assignment of the Note by Lender,
any funds in the Reserves shall be turned over to the assignee and any
responsibility of Lender, as assignor, with respect thereto shall terminate. If
the funds in the applicable Reserve shall exceed the amount of payments actually
applied by Lender for the purposes and items for which the applicable Reserve is
held, such excess may be credited by Lender on subsequent payments to be made
hereunder or, at the option of Lender, refunded to Borrower. If, however, the
applicable Reserve shall not contain sufficient funds to pay the sums required
by the dates on which such sums are required to be on deposit in such account,
Borrower shall, within ten (10) days after receipt of written notice thereof,
deposit with Lender the full amount of any such deficiency. If Borrower shall
fail to deposit with Lender the full amount of such deficiency as provided
above, Lender shall have the option, but not the obligation, to make such
deposit, and all amounts so deposited by Lender, together with interest thereon
at the Default Interest Rate from the date so deposited by Lender until actually
paid by Borrower, shall be immediately paid by Borrower on demand and shall be
secured by the Mortgages and by all of the other Loan Documents securing all or
any part of the Loan. Upon full payment of the Loan in accordance with its terms
or at such earlier time as Lender may elect, the balance of any or all of the
Reserves then in Lender's possession shall be paid over to Borrower and no other
party shall have any right or claim thereto.
(c) By exercising any of its rights or remedies under this
Section 9.8 (including, without limitation, taking possession of the Reserves),
Lender shall not be deemed to have exercised any equitable right of setoff, or
foreclosed any statutory banker's lien. Accordingly, the exercise of any or all
of Lender's rights and remedies under this Section 9.8 shall not in any way
prejudice or affect Lender's right to initiate and complete a judicial or
non-judicial foreclosure under the Mortgages. This Agreement evidences the
consensual granting of a personal property security interest in the Reserves as
permitted by any applicable Uniform Commercial Code as adopted and enacted by
the State or States where any of the Reserves are held (the "Uniform Commercial
Code").
ARTICLE X
DEFAULTS AND REMEDIES
10.1 Events of Default. The occurrence of any of the following events
(each an "Event of Default") shall be an Event of Default hereunder and under
each Loan Document:
(a) Borrower fails to punctually perform any covenant,
agreement or obligation under any Loan Document which requires payment of any
money to Lender at the time or within any applicable period set forth in such
Loan Document, or if no time or period is set forth in such Loan Document, then
within ten (10) Business Days of the date such payment is due (except that no
grace period or notic
53
(b) e period is provided for the payment of principal and
interest due on any Payment Date or on the Maturity Date), or following demand
if there is no due date.
(c) Borrower fails to perform any covenant, agreement,
obligation, term or condition set forth in Section 2.11 hereof, Section 7.3
hereof, or Article IV hereof.
(d) Borrower fails to perform any other Secured Obligation or
condition set forth in any Loan Document other than those otherwise described in
this Section 10.1 and, to the extent such failure or default is susceptible of
being cured, the continuance of such failure or default for thirty (30) days
after written notice thereof from Lender to Borrower; provided, however, that if
such default is susceptible of cure but such cure cannot be accomplished with
reasonable diligence within said period of time, and if Borrower commences to
cure such default promptly after receipt of notice thereof from Lender and
Lender's security is not otherwise materially impaired, and thereafter
prosecutes the curing of such default with reasonable diligence, such period of
time shall be extended for such period of time as may be necessary to cure such
default with reasonable diligence, but not to exceed an additional ninety (90)
days.
(e) Any representation or warranty made herein, in or in
connection with any application or in the Loan Commitment relating to the Loan
evidenced by the Note, or in any of the other Loan Documents to Lender by
Borrower, by any principal, general partner or managing member in Borrower or by
any indemnitor or guarantor (including Guarantor) under any indemnity or
guaranty executed in connection with the Loan is determined by Lender to have
been false or misleading in any material respect with respect to any one or more
Properties or otherwise with respect to the Loan at the time made.
(f) An Event of Default occurs under any of the other Loan
Documents.
(g) Borrower, any general partner or member in Borrower or any
indemnitor or guarantor (including Guarantor) under any indemnity or guaranty
executed in connection with the Loan becomes insolvent, or makes a transfer in
fraud of creditors, or makes an assignment for the benefit of creditors, or
files a petition in bankruptcy, or is voluntarily adjudicated insolvent or
bankrupt or admits in writing the inability to pay debts as they mature, or
petitions or applies to any tribunal for, or consents to or fails to contest the
appointment of, a receiver, trustee, custodian or similar officer for Borrower,
for any such general partner or member of Borrower or for any such indemnitor or
guarantor (including Guarantor) or for a substantial part of the assets of
Borrower, of any such general partner or member of Borrower or of any such
indemnitor or guarantor (including Guarantor), or commences any case, proceeding
or other action under any bankruptcy, reorganization, arrangement, readjustment
or debt, dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect with respect to Borrower, any general partner or
member in Borrower or any indemnitor or guarantor (including, but not limited
to, Guarantor).
(h) A petition is filed or any case, proceeding or other
action is commenced against Borrower, against any general partner or member of
Borrower or against any indemnitor or guarantor (including Guarantor) under any
indemnity or guaranty executed in connection with the Loan seeking to have an
order for relief entered against it as debtor or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts or other relief under any law relating to bankruptcy, insolvency,
arrangement, reorganization, receivership or
54
other debtor relief under any law or statute of any jurisdiction whether
now or hereafter in effect, or a court of competent jurisdiction enters an order
for relief against Borrower, against any general partner or member of Borrower
or against any indemnitor or guarantor (including Guarantor) under any indemnity
or guaranty executed in connection with the Loan, as debtor, or an order,
judgment or decree is entered appointing, with or without the consent of
Borrower, of any such general partner or member of Borrower or of any such
indemnitor or guarantor (including Guarantor), a receiver, trustee, custodian or
similar officer for Borrower, for any such general partner or member of Borrower
or for any such indemnitor or guarantor (including Guarantor), or for any
substantial part of any of the properties of Borrower, of any such general
partner or member of Borrower or of any such indemnitor or guarantor (including
Guarantor), and if any such event shall occur, such petition, case, proceeding,
action, order, judgment or decree shall not be dismissed within sixty (60) days
after being commenced.
(i) Any Property or any material part thereof is taken on
execution or other process of law (other than in the nature of eminent domain)
in any action against Borrower.
(j) Borrower fails to deliver the audited balance sheet as
required in Section 8.1 above on or before October 28, 1998, which balance sheet
must be consistent with the Properties' financial information previously
delivered to Lender in connection with the closing of the Loan.
10.2 Acceleration Upon Event of Default; Remedies. Upon the occurrence
and during the continuance of any Event of Default, 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 without any presentment,
demand, protest, notice, or action of any kind whatever (each of which is hereby
expressly waived by Borrower), whereupon the same shall become immediately due
and payable. Upon any such acceleration, payment of such accelerated amount
shall constitute a prepayment of the principal balance of the Note and any
applicable prepayment premium provided for in the Note shall then be immediately
due and payable.
10.3 Further Remedies. During the continuance of any Event of Default,
Lender shall have all rights, powers and remedies available under each of the
Loan Documents, or accorded by law, including, without limitation, the right to
resort to any or all security for any credit extended by Lender to Borrower
under any of the Loan Documents and to exercise any or all of the rights of a
Lender or secured party pursuant to the applicable law.
10.4 Repayment of Funds Advanced. Any amounts expended by Lender in
the exercise of its rights or remedies under this Agreement and the other Loan
Documents shall (except to the degree governed by a specific provision to the
contrary in this Agreement or the other Loan Documents) be due and payable
from Borrower to Lender ten (10) Business Days after Lender's demand therefor,
together with interest at the Applicable Interest Rate (as defined in the
Note) from the date incurred by Lender and at the Default Interest Rate (x)
commencing ten (10) Business Days after Lender's demand or (y) if applicable,
following the maturity or acceleration of the Loan, until paid. Lender shall
provide to Borrower copies of invoices, statements or other records
documenting such amounts to the extent available to Lender.
10.5 Rights Cumulative, No Waiver. All rights, powers and remedies of
Lender provided in this Agreement and in the other Loan Documents may be
exercised at any time by
55
Lender and from time to time after the occurrence and during the
continuance of any such breach or default, are cumulative and not exclusive, may
be pursued singularly, successively, or together at the sole discretion of
Lender, and shall be in addition to any other rights, powers or remedies
provided by law or equity. The failure to exercise any such right or remedy
shall in no event be construed as a waiver or a release thereof. Lender's
exercise of any right or remedy shall not constitute a cure of any Event of
Default unless all amounts then due and payable to Lender under the Loan
Documents are repaid and Borrower has cured all other Events of Default. No
waiver shall be implied from any failure of Lender to take, or any delay by
Lender in taking, action concerning any Event of Default or failure of condition
under the Loan Documents, or from any previous waiver of any similar or
unrelated Event of 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 XI
MISCELLANEOUS PROVISIONS
11.1 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.
11.2 Notices. All notices, demands and other communications under this
Agreement and the other Loan Documents shall be in writing and telecopied (with
a confirmation copy sent by overnight courier), mailed, messengered or sent by
overnight delivery service to the appropriate party at its telecopy number or
address set forth below (subject to change from time to time by written notice
to all other parties to this Agreement). All such notices and communications
shall be effective (a) upon receipt, when delivered by hand or overnight
delivery service, or if mailed, upon the first to occur of receipt or the
expiration of three (3) days after the deposit in the United States Postal
Service mail, postage prepaid 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, and (b) upon transmission, when delivered
by telecopy to the specified telecopy number (if a confirmation copy is also
sent by overnight courier).
Lender: Prudential Mortgage Capital Company, Inc.
100 Mulberry Street
Gateway Center Four, 9th Floor
Newark, New Jersey 07102-4069
Attn: Shane Tucker, SVP
Telecopy No.: (973) 802-4838
With a copy to: Prudential Mortgage Capital Company, Inc.
21261 Burbank Boulevard
Woodland Hills, California 91367-6699
Attn: Steve Mekeown
Telecopy No.: (818) 992-3790
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Borrower: Catellus Finance 1, L.L.C.
201 Mission Street, Suite 340
San Francisco, CA 94105
Attn: Stephen R. Koch
Telecopy No.: (415) 974-4502
11.3 Payment of Costs; Reimbursement to Lender. Borrower shall pay all
costs and expenses of every character reasonably incurred in connection with the
closing or administration of the Loan or otherwise attributable or chargeable to
Borrower as the owner of the Properties, including, without limitation,
appraisal fees, recording fees, documentary, stamp, mortgage or intangible
taxes, brokerage fees and commissions, title policy premiums and title search
fees, uniform commercial code/tax lien/litigation search fees, escrow fees and
reasonable attorneys' fees. Lender shall provide to Borrower copies of invoices,
statements or other records documenting such amounts to the extent available to
Lender. If Borrower defaults in any such payment, which default is not cured
within any applicable grace or cure period, Lender may pay the same and Borrower
shall reimburse Lender on demand for all such costs and expenses incurred or
paid by Lender, together with such interest thereon at the Default Interest Rate
from and after the date of Lender's making such payment until reimbursement
thereof by Borrower. Any such sums disbursed by Lender, together with such
interest thereon, shall be additional indebtedness of Borrower secured by the
Mortgages and by all of the other Loan Documents securing all or any part of the
Loan by the Note. Without limiting or waiving any other rights and remedies of
Lender hereunder, if Borrower fails to perform any of its covenants or
agreements contained in this Agreement or in any of the other Loan Documents and
such failure is not cured within any applicable grace or cure period, or if any
action or proceeding of any kind (including, but not limited to, any bankruptcy,
insolvency, arrangement, reorganization or other debtor relief proceeding) is
commenced which might affect Lender's interest in the Properties or Lender's
right to enforce its security, then Lender may, at its option, with or without
notice to Borrower, make any appearances, disburse any sums and take any actions
as may be necessary or desirable to protect or enforce the security of the
Mortgages or to remedy the failure of Borrower to perform its covenants and
agreements (without, however, waiving any default of Borrower). Borrower agrees
to pay on demand all expenses of Lender incurred with respect to the foregoing
(including, but not limited to, reasonable fees and disbursements of counsel),
together with interest thereon at the Default Interest Rate from and after the
date on which Lender incurs such expenses until reimbursement thereof by
Borrower. Any such expenses so incurred by Lender, together with interest
thereon as provided above, shall be additional indebtedness of Borrower secured
by the Mortgages and by all of the other Loan Documents securing all or any part
of the Loan. The necessity for any such actions and of the amounts to be paid
shall be determined by Lender in its reasonable discretion. This Section shall
not be construed to require Lender to incur any expenses, make any appearances
or take any actions.
11.4 Relationship of Parties. The relationship of Borrower and Lender
under this Agreement, and the other 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 any of the Properties. Notwithstanding any other provisions of this
Agreement or the other Loan Documents: (a) Lender is not, and shall not be
construed as, a partner, joint venturer, alter-ego, manager, controlling person
or other business associate or participant of any kind of Borrower, and Lender
does not intend to ever assume such status; (b) Lender does not intend to ever
assume any responsibility to any person for the quality,
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suitability, safety or condition of any of the Properties; and (c) Lender
shall not be deemed responsible for or a participant in any acts, omissions or
decisions of Borrower. Lender shall not be directly or indirectly liable or
responsible for any loss, claim, cause of action, liability, indebtedness,
damage or injury of any kind or character to any person or property arising from
any construction on, or occupancy or use of, the Properties, whether caused by
or arising from: (i) any defect in any building, structure, grading, fill,
landscaping or other improvements thereon or in any on-site or off-site
improvement or other facility therein or thereon; (ii) any act or omission of
Borrower or any of Borrower's agents, employees, independent contractors,
licensees or invitees; (iii) any accident in or on the Properties or any fire,
flood or other casualty or hazard thereon; (iv) the failure of Borrower, any of
Borrower's licensees, employees, invitees, agents, independent contractors or
other representatives to maintain any of the Properties in a safe condition; and
(v) any nuisance made or suffered on any part of any of the Properties.
11.5 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 the Loan Documents (and Lender may suspend or terminate all or
any portion of Lender's obligations under 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.
11.6 Attorneys' Fees. In the event legal action, suit or any proceeding
is commenced between Borrower and Lender regarding their respective rights and
obligations under this Agreement or any of the other Loan Documents, the
prevailing party shall be entitled to recover, in addition to damages or other
relief, costs and expenses, attorneys' fees and court costs. As used herein the
term "prevailing party" shall mean the party which obtains the principal relief
it has sought, whether by compromise settlement or judgment. If the party which
shall have commenced or instituted the action, suit or proceeding shall dismiss
or discontinue it without the concurrence of the other party, such other party
shall be deemed the prevailing party.
11.7 Loan Sales and Securitization; Disclosure of Information. Borrower
acknowledges that Lender may include all or portions of the Loan in one or more
future securitizations (collectively, the "Securitization"). Borrower shall
cooperate in good faith with Lender in effecting any such Securitization and in
implementing all requirements imposed by any Rating Agency involved in any
Securitization including, without limitation, all changes to the Loan,
including, but not limited to, any modifications to any documents evidencing or
securing the Loan secured hereby; provided, however, no such modification shall
amend the Initial Interest Rate or Extended Term Interest Rate payable under the
Note, the Anticipated Repayment Date or the Maturity Date, the amortization
schedule of the Note or any economic or other material term of the Loan.
Borrower will also agree to cooperate with Lender in connection with any
Securitization as required by any of the Rating Agencies or as reasonably
requested by Lender, in connection with Loan Document preparation, due
diligence, Lender's obtaining ratings and preliminary evaluations from all such
Rating Agencies or Lender's preparation of offering materials. Borrower
acknowledges that such cooperation may include, if necessary, Borrower
providing, at Borrower's expense, audited financials as well as updated
financial and other information on Borrower and the Properties. Reference in
this Agreement to the downgrade, disqualification or withdrawal of ratings by
the Rating Agencies shall be deemed
58
to refer to the Rating Agencies which have rated or, as indicated by
Lender, shall rate the Securitization securities. Lender shall be permitted to
share all information provided to Lender in connection with the Loan with the
investment banking firms, accounting firms, law firms, Rating Agencies and other
third-party advisors involved with any such Securitization. Lender and all such
third-party advisors shall be entitled to rely on any information supplied by,
or on behalf of, Borrower or Guarantor. Borrower and Guarantor shall indemnify
Lender and such third-parties, and any of their respective "controlling" persons
(as defined under the securities laws) from any loss, claim, cost, damage or
expense incurred by such parties and any of their respective "controlling"
persons that arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such information or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required or necessary in order to make the statements in such
information, or in light of the circumstances under which they were made, not
misleading. Borrower further acknowledges that any item submitted to Lender in
connection with the Loan may be delivered to a purchaser of securities or other
interest in the Loan in connection with the Securitization. All obligations of
Borrower and/or Guarantor under the Loan Documents to indemnify Lender shall
also run to the benefit of any purchaser of the Loan or interests therein in the
secondary market who has been identified by Lender (whether or not the identity
of such purchaser is known to Borrower prior to the Closing Date).
11.8 Certain Rights of Lender. Without affecting Borrower's liability
for the payment of any of the Loan, Lender may from time to time and without
notice to Borrower: (a) release any person liable for the payment of the Loan;
(b) accept additional real or personal property of any kind as security or
alter, substitute or release any property securing the Loan; (c) reconvey all or
any part of the Properties; (d) consent in writing to the making of any
subdivision map or plat thereof; (e) join in granting any easement therein; or
(f) enter into any agreement to subordinate the lien of any Loan Document.
11.9 Waiver; Discontinuance of Proceedings. Lender may waive any single
Event of Default by Borrower hereunder without waiving any other prior or
subsequent Default or Event of Default. Lender may remedy any Event of Default
by Borrower hereunder without waiving the default remedied. Neither the failure
by Lender to exercise, nor the delay by Lender in exercising, any right, power
or remedy upon any Event of Default by Borrower hereunder shall be construed as
a waiver of such default or as a waiver of the right to exercise any such right,
power or remedy at a later date. No single or partial exercise by Lender of any
right, power or remedy hereunder shall exhaust the same or shall preclude any
other or further exercise thereof, and every such right, power or remedy
hereunder may be exercised at any time and from time to time. No modification or
waiver of any provision hereof nor consent to any departure by Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by Lender, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose given. No notice to nor
demand on Borrower in any case shall of itself entitle Borrower to any other or
further notice or demand in similar or other circumstances. Acceptance by Lender
of any payment in an amount less than the amount then due on any of the Loan
shall be deemed an acceptance on account only and shall not in any way affect
the existence of an Event of Default hereunder. In case Lender shall have
proceeded to invoke any right, remedy or recourse permitted hereunder or under
the other Loan Documents and shall thereafter elect to discontinue or abandon
the same for any reason, Lender shall have the unqualified right to do so and,
in such an event, Borrower and Lender shall be restored to their
59
former positions with respect to the Loan, the Loan Documents, the
Properties and otherwise, and the rights, remedies, recourses and powers of
Lender shall continue as if the same had never been invoked.
11.10 Application of the Proceeds of the Note. To the extent that
proceeds of the Note are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against any of the
Properties, such proceeds have been advanced by Lender at Borrower's request and
Lender shall be subrogated to any and all rights, security interests and liens
owned by any owner or holder of such outstanding liens, security interests,
charges or encumbrances, irrespective of whether said liens, security interests,
charges or encumbrances are released.
11.11 Tax Service. Lender is authorized to secure in Lender's
reasonable discretion, at Borrower's expense, a tax service contract with a
third party vendor which shall provide property tax payment information on the
Properties satisfactory to Lender.
11.12 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.
11.13 Heirs, Successors and Assigns. The terms of this Agreement and of
the other Loan Documents shall bind and inure to the benefit of the heirs,
successors and assigns of the parties (including, but not limited to, any
purchaser of the Loan or any interests therein in connection with any
Securitization or otherwise). The foregoing sentence shall not be construed to
permit Borrower to assign the Loan except as otherwise permitted under this
Agreement or in the other Loan Documents.
11.14 Time. Time is of the essence of each and every term of this
Agreement.
11.15 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.
11.16 Governing Law. The Note, this Agreement, and each of the other
Loan Documents (unless otherwise provided in such other Loan Documents) shall be
governed by and construed in accordance with the laws of the State of New York
without reference to conflicts of law rules. It is the intent of the parties
hereto that the provisions of Section 5-1401 of the General Obligations Law of
the State of New York apply to this Agreement. Accordingly, in all respects,
including, without limitation, matters of construction, validity, enforceability
and performance, this Agreement, the Note and the other Loan Documents and the
obligations arising hereunder and thereunder shall be governed by, and construed
in accordance with, the laws of the state of New York applicable to contracts
made and performed in such state, and any applicable law of the United States of
America, except that at all times the provisions for enforcement of the power of
sale granted under the Mortgages and the creation, perfection and enforcement of
the security interests created pursuant thereto and hereunder and pursuant to
the other Loan Documents shall be governed by and construed according to the
laws of the state where the
60
Property is located. Except as provided in the immediately preceding
sentence, Borrower hereby unconditionally and irrevocably waives, to the fullest
extent permitted by law, any claim to assert that the law of any jurisdiction
other than New York governs this Agreement, the Note and the other Loan
Documents.
11.17 Consent to Jurisdiction. Borrower irrevocably submits to the
jurisdiction of: (a) any state or federal court sitting in the state of New
York, over any suit, action or proceeding, arising out of or relating to this
Agreement, the Note or the Loan; and (b) any state court sitting in the county
of the state where the applicable Property is located over any suit, action or
proceeding, brought by the trustee or Lender related to the exercise of the
power of sale under the applicable Mortgage or any action brought by Lender to
enforce its rights with respect to the Property. Borrower irrevocably waives, to
the fullest extent permitted by law, any objection that Borrower may now or
hereafter have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient forum.
11.18 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 current or 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 a Property or Properties shall include all or any
part of such Property or Properties. Any reference to the Loan Documents
includes any amendments, renewals or extensions now or hereafter approved by
Lender in writing.
11.19 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.
11.20 Counterparts. This Agreement and any of the other Loan Documents
(except for the Note) 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.
11.21 Advertising. Lender is authorized to state in advertising or
other press releases the fact that the type and amount of financing under the
Loan has been provided by Lender for Borrower on the Properties.
11.22 Maximum Interest. The provisions of this Agreement and of all
other Loan Documents between Borrower and Lender, whether now existing or
hereafter arising and whether written or oral, are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of demand or
acceleration of the maturity of the Note or otherwise, shall the amount paid, or
agreed to be paid ("Interest"), to Lender for the use, forbearance or retention
of the money loaned under the Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or fulfillment
of any provision hereof or of any agreement between Borrower and Lender shall,
at the time performance or fulfillment of such provision shall be due, exceed
the limit for Interest prescribed by law or otherwise transcend the limit of
validity prescribed by applicable law, then, ipso facto, the obligation to be
performed or fulfilled shall be reduced to such limit, and if, from any
circumstance whatsoever, Lender shall ever receive anything of value deemed
Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive
61
Interest shall be applied to the reduction of the principal balance owing under
the Note in the inverse order of its maturity (whether or not then due) or, at
the option of Lender, be paid over to Borrower, and not to the payment of
Interest. All Interest (including any amounts or payments deemed to be Interest)
paid or agreed to be paid to Lender shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full period
until payment in full of the principal balance of the Note so that the Interest
thereon for such full period will not exceed the maximum amount permitted by
applicable law. This Section will control all agreements between Borrower and
Lender.
11.23 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY 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 ANY COURSE OR CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), 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.
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Initials Initials
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as
of the date appearing on the first page of this Agreement.
"Lender" "Borrower"
PRUDENTIAL MORTGAGE CAPITAL CATELLUS FINANCE 1, L.L.C.,
COMPANY, INC. a Delaware limited liability company
By:_________________________ By: _____________________________
Name:_________________ Name:_____________________
Title:________________ Title: ___________________
Acknowledged and agreed as to
the provisions of Section 11.7
hereof.
By: ______________________________
"Guarantor" Name: ______________________
Title: _____________________
CATELLUS DEVELOPMENT CORPORATION,
a Delaware corporation
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EXHIBIT A - LIST OF PROPERTIES
THE PROPERTIES
Loan Agreement - Catellus Finance 1 LLC and Prudential Mortgage Capital Co. Inc.
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