\n LOAN AGREEMENT\n\n\n by and between\n\n\n CATELLUS FINANCE 1, L.L.C.,\n a Delaware limited liability company\n\n\n\n and\n\n\n\n PRUDENTIAL MORTGAGE CAPITAL COMPANY, INC.,\n a Delaware corporation\n\n\n Dated as of October 26, 1998\n\n \n TABLE OF CONTENTS\n\n Page\n\nARTICLE I DEFINITIONS............................................1\n\n\n 1.1 Defined Terms..............................................1\n\n\n 1.2 Exhibits and Schedules Incorporated........................7\n\n\nARTICLE II LOAN...................................................7\n\n\n 2.1 Loan.......................................................7\n\n\n 2.2 Interest Rate; Payment of Interest.........................7\n\n\n 2.3 Loan Documents.............................................7\n\n\n 2.4 Closing Date...............................................7\n\n\n 2.5 Anticipated Repayment Date.................................7\n\n\n 2.6 Maturity Date..............................................7\n\n\n 2.7 Full Repayment and Reconveyance............................7\n\n\n 2.8 Limitation on Borrower's Liability.........................7\n\n\n 2.9 Prepayment.................................................8\n\n\n 2.10 Defeasance.................................................8\n\n\n 2.11 Assignment and Assumption of Interest in Borrower; \n Transfer of Properties.....................................8\n\n\n 2.12 Substitution of Properties.................................9\n\n\n 2.13 Build to Suit Properties..................................13\n\n\n 2.14 Letters of Credit - Leasing...............................14\n\n\n 2.15 Expansion Rights..........................................15\n\n\n 2.16 GATX-Woodridge Property...................................17\n\n\nARTICLE III CONDITIONS OF LENDER'S OBLIGATION TO FUND LOAN........19\n\n\n 3.1 Conditions Precedent......................................19\n\n\n (a) Representations and Warranties True at Closing...19\n\n -i-\n\n \n TABLE OF CONTENTS\n (continued)\n Page\n\n (b) No Default or Event of Default...................19\n\n\n (c) Performance......................................19\n\n\n (d) Loan Documents...................................19\n\n\n (e) Zoning Compliance; Certificates of Compliance....19\n\n\n (f) Hazardous Materials..............................19\n\n\n (g) Property Inspection and Report...................20\n\n\n (h) Earthquake Report................................20\n\n\n (i) Title Insurance..................................20\n\n\n (j) Survey...........................................20\n\n\n (k) UCC-3 Certificate; Litigation and Bankruptcy \n Searches.........................................21\n\n\n (l) Documents........................................21\n\n\n (m) Insurance........................................21\n\n\n (n) Appraisal........................................21\n\n\n (o) Consents.........................................21\n\n\n (p) Financial Statements.............................21\n\n\n (q) Payment of Fees and Expenses.....................21\n\n\n (r) Leases...........................................21\n\n\n (s) Management Agreements............................22\n\n\n (t) Cash Management Agreement........................22\n\n\n (u) Reserve Accounts.................................22\n\n\n (v) Enforceability Opinions of Borrower's Counsel....22\n\n\n (w) Bankruptcy Nonconsolidation Opinion..............23\n\n\n (x) No Material Adverse Change.......................23\n\n\n (y) [Intentionally Deleted]..........................23\n\n\n -ii-\n\n \n TABLE OF CONTENTS\n (continued)\n Page\n\n (z) Funding of Deposits..............................24\n\n\nARTICLE IV INSURANCE.............................................24\n\n\n 4.1 Insurance.................................................24\n\n\nARTICLE V REPRESENTATIONS AND WARRANTIES........................27\n\n\n 5.1 Warranties of Borrower....................................27\n\n\n (a) Organization and Existence.......................27\n\n\n (b) Authorization....................................28\n\n\n (c) Valid Execution and Delivery.....................28\n\n\n (d) Enforceability...................................28\n\n\n (e) No Defenses......................................28\n\n\n (f) Defense of Usury.................................28\n\n\n (g) No Conflict\/Violation of Law.....................28\n\n\n (h) Compliance with Applicable Laws and Regulations..28\n\n\n (i) Consents Obtained................................29\n\n\n (j) No Litigation....................................29\n\n\n (k) Title............................................29\n\n\n (l) Permitted Exceptions.............................30\n\n\n (m) First Lien.......................................30\n\n\n (n) ERISA............................................30\n\n\n (o) Contingent Liabilities...........................30\n\n\n (p) No Other Obligations.............................30\n \n (q) Fraudulent Conveyance............................30\n\n\n (r) Investment Company Act...........................31\n\n\n (s) Access\/Utilities.................................31\n\n -iii-\n\n \n TABLE OF CONTENTS\n (continued)\n Page\n\n (t) Taxes Paid.......................................31\n\n\n (u) Single Tax Lot...................................31\n\n\n (v) Special Assessments..............................31\n\n\n (w) Flood Zone.......................................31\n\n\n (x) Seismic Exposure.................................31\n\n\n (y) Misstatements of Fact............................32\n\n\n (z) Condition of Improvements........................32\n\n\n (aa) No Insolvency or Judgment........................32\n\n\n (bb) No Condemnation..................................32\n\n\n (cc) No Labor or Materialmen Claims...................32\n\n\n (dd) No Purchase Options..............................32\n\n\n (ee) Leases...........................................33\n\n\n (ff) Appraisal........................................33\n\n\n (gg) Boundary Lines...................................33\n\n\n (hh) Survey...........................................34\n\n\n (ii) Forfeiture.......................................34\n\n\n (jj) No Broker........................................34\n\n\n (kk) Conviction of Criminal Acts......................34\n\n\n (ll) Security Agreement...............................34\n\n\n (mm) Homestead........................................34\n\n\nARTICLE VI ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES...........34\n\n\n 6.1 Representations and Warranties............................34\n\n\n 6.2 Notice of Violations Under Environmental Laws.............36\n\n\n 6.3 Transportation of Hazardous Substances....................36\n\n -iv-\n\n \n TABLE OF CONTENTS\n (continued)\n Page\n\n 6.4 Compliance with Environmental Laws........................36\n\n\n 6.5 Notice to Lender..........................................36\n\n 6.6 Indemnification...........................................37\n\n\n 6.7 Hazardous Substances Audit................................38\n\n\n 6.8 Maintenance Program.......................................38\n\n\n 6.9 Existing Remediation and Monitoring Programs..............39\n\n\nARTICLE VII ADDITIONAL REPRESENTATIONS AND WARRANTIES AND \n COVENANTS OF BORROWER.................................39\n\n\n 7.1 Expenses..................................................39\n\n\n 7.2 Compliance with Loan Documents............................39\n\n\n 7.3 Representations, Warranties and Covenants with Respect to \n Indebtedness, Operations and Fundamental Changes\n of Borrower; Maintenance of Separate Existence............39\n\n\n 7.4 Payment of Taxes..........................................42\n\n\n 7.5 Litigation................................................42\n\n\n 7.6 Indemnification of Lender.................................42\n\n\n 7.7 Change in Position........................................43\n\n\n 7.9 Further Assurances........................................43\n\n\n 7.10 Assignment................................................43\n\n\n 7.11 Management Agreements.....................................43\n\n\nARTICLE VIII REPORTING COVENANTS...................................44\n\n\n 8.1 Financial Statements and Books and Records................44\n\n\n 8.2 Representations and Warranties............................45\n\n\nARTICLE IX CASH MANAGEMENT AGREEMENT; RESERVE AND IMPOUND \n ACCOUNTS..............................................45\n\n\n 9.1 Cash Management Agreement.................................45\n\n\n -v-\n\n \n TABLE OF CONTENTS\n (continued)\n Page\n\n 9.2 Tax and Insurance Impound Account.........................45\n\n\n 9.3 Repair and Remediation Reserve............................46\n\n\n 9.4 Replacement Reserve; Tenant Improvements and Leasing \n Commissions Reserve.......................................48\n\n\n 9.5 Environmental Reserve.....................................50\n\n\n 9.6 Prepaid Rent Reserve......................................51\n\n\n 9.7 Interest Payable by Lender................................51\n\n\n 9.8 Pledge of Security Interest in Impound and Reserve \n Accounts..................................................51\n\n\nARTICLE X DEFAULTS AND REMEDIES.................................53\n\n\n 10.1 Events of Default.........................................53\n\n\n 10.2 Acceleration Upon Event of Default; Remedies..............55\n\n\n 10.3 Further Remedies..........................................55\n\n\n 10.4 Repayment of Funds Advanced...............................55\n\n\n 10.5 Rights Cumulative, No Waiver..............................55\n\n\nARTICLE XI MISCELLANEOUS PROVISIONS..............................56\n\n\n 11.1 No Third Parties Benefited................................56\n\n\n 11.2 Notices...................................................56\n\n 11.3 Payment of Costs; Reimbursement to Lender.................56\n\n\n 11.4 Relationship of Parties...................................57\n\n\n 11.5 Delay Outside Lender's Control............................58\n\n\n 11.6 Attorneys' Fees...........................................58\n\n\n 11.7 Loan Sales and Securitization; Disclosure of Information..58\n\n\n 11.8 Certain Rights of Lender..................................59\n\n\n 11.9 Waiver; Discontinuance of Proceedings.....................59\n\n\n 11.10 Application of the Proceeds of the Note...................59\n\n\n -vi-\n\n \n TABLE OF CONTENTS\n (continued)\n Page\n\n 11.11 Tax Service...............................................60\n\n\n 11.12 Severability..............................................60\n\n\n 11.13 Heirs, Successors and Assigns.............................60\n\n\n 11.14 Time......................................................60\n\n\n 11.15 Headings..................................................60\n\n\n 11.16 Governing Law.............................................60\n\n\n 11.17 Consent to Jurisdiction...................................61\n\n\n 11.18 Integration: Interpretation...............................61\n\n\n 11.19 Joint and Several Liability...............................61\n\n\n 11.20 Counterparts..............................................61\n\n\n 11.21 Advertising...............................................61\n\n\n 11.22 Maximum Interest..........................................61\n\n\n 11.23 WAIVER OF RIGHT TO TRIAL BY JURY..........................62\n\n\nEXHIBIT A - LIST OF PROPERTIES..............................................A-1\n\n\nEXHIBIT B - FORM OF PROMISSORY NOTE.........................................B-1\n\n\nEXHIBIT C - DOCUMENTS C-1\n\n\nEXHIBIT D - FORM OF CERTIFICATION...........................................D-1\n\n\nEXHIBIT E - FORM OF TENANT ESTOPPEL.........................................E-1\n\n\nEXHIBIT F - FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT...........F-1\n\n\nEXHIBIT G Legal Description of GATX-Woodridge Property.....................G-1\n\n\nSCHEDULE 1 FAIR MARKET VALUES, NOI AND ALLOCATED LOAN AMOUNTS..............S1-1\n\n\nSCHEDULE 2 MAJOR TENANTS\/LEASES............................................S2-1\n\n\nSCHEDULE 3 Reserve Calculations for Cash Management Periods................S3-1\n\n\n -vii-\n\n \n TABLE OF CONTENTS\n (continued)\n Page\n\nSchedule 4 Deferred Maintenance.............................................S4-1\n\n\nSCHEDULE 5.1(w) Flood Zones...........................................S5.1(w)-1\n\n\nSCHEDULE 5.1(ee)(ii) Lease Defaults..............................S5.1(ee)(ii)-1\n\n\nSCHEDULE 5.1(ee)(iii) Rent Paid More than 30 Days in Advance....S5.1(ee)(iii)-1\n\n\nSCHEDULE 5.1(ee)(v) Tenants Not in Occupancy.................. ...S5.1(ee)(v)-1\n\n\nSCHEDULE 5.1(ee)(ix) Tenant Affiliated Leases.....................S5.(ee)(ix)-1\n\n\n\n -viii-\n\n\n EXHIBIT 4.3\n\n LOAN AGREEMENT\n\n THIS LOAN AGREEMENT (this \"Agreement\") is executed as of October 26,\n1998, by and between CATELLUS FINANCE 1, L.L.C., a Delaware limited liability\ncompany (\"Borrower\") and PRUDENTIAL MORTGAGE CAPITAL COMPANY, INC., a Delaware\ncorporation (\"Lender\").\n\n RECITALS\n\n A. Borrower is the owner in fee simple of certain real properties\n(collectively, the \"Land\") and all present and future improvements thereon (but\nwith respect to certain ground leased properties, Borrower's interest to the\nimprovements may be limited to a conditional future interest) (collectively, the\n\"Improvements\") more particularly described in Exhibit A hereto (the Land and\nthe Improvements are collectively referred to as the \"Properties\").\n\n\n B. Borrower has applied to Lender for a loan to be made to Borrower and\nto be secured by the Properties and Lender is willing to make the loan to\nBorrower upon the terms and conditions hereinafter set forth and in full\nreliance upon the representations, warranties and covenants made by Borrower in\nthis Agreement.\n\n\n NOW, THEREFORE, Borrower and Lender in consideration of the mutual\ncovenants hereinafter set forth and intending to be legally bound hereby agree\nas follows:\n\n ARTICLE I\n\n DEFINITIONS\n\n 1.1 Defined Terms. The following capitalized terms generally used in\nthis Agreement shall have the meanings defined or referenced below. Certain\nother capitalized terms used only in specific Sections of this Agreement are\ndefined in such Sections.\n\n \"Agreement\" means this Loan Agreement as hereafter amended,\nsupplemented, replaced, modified or amended and restated from time to time.\n\n \"Allocated Loan Amount\" means the principal amount of the Loan\nallocated by Lender as Lender shall determine as to each individual Property\nincluded within the Property Pool and as set forth on Schedule 1 attached\nhereto, as revised from time to time to reflect any Properties added pursuant to\na Substitution.\n\n \"Anticipated Repayment Date\" means the date set forth in Section 2.5 of\nthis Agreement.\n\n \"Bankruptcy Code\" means the Bankruptcy Reform Act of 1978 (11 USC ss.\n101-1330) as hereinafter amended or recodified.\n\n \"Borrower\" means Catellus Finance 1, L.L.C., a Delaware limited\nliability company.\n\n \"Business Day\" shall mean any day other than a Saturday, Sunday, legal\nholiday or other day on which commercial banks in California or New York are\nauthorized or required by law to \n\n 1\n\n \nclose. All references in this Agreement to a \"day\" or a \"date\" shall be to a \ncalendar day unless specifically referenced as a Business Day.\n\n \"Cash Management Agreement\" means that certain Cash Management\nAgreement of even date herewith executed by and among Borrower, Lender, and\nManager.\n\n \"Closing Date\" means the date Lender releases or authorizes the escrow\nto release the Loan proceeds to Borrower.\n\n \"Collateral\" means all of the personal property collateral as described\nin the Mortgages.\n\n \"Construction Letters of Credit\" has the meaning given to such term in\nSection 2.13 of this Agreement.\n\n \"DCR\" means Duff & Phelps Credit Rating Co.\n\n \"Default\" means an event or circumstance which with the passage of time\nor the giving of notice or both, would constitute an Event of Default.\n\n \"Default Interest Rate\" has the meaning given to such term in Section\n1.07 of the Note.\n\n \"Defeasance Period\" has the meaning given to such term in Section 1.03 \nof the Note.\n\n \"DSCR\" means the ratio of the Underwritten Net Cash Flow to annual debt\nservice on the Loan, as determined by the Lender.\n\n \"Environmental Indemnity Agreement\" means that certain Hazardous\nSubstances Indemnity Agreement of even date herewith executed by Borrower and\nGuarantor, for the benefit of Lender.\n\n \"Environmental Laws\" has the meaning given to such term in Section 6.1\nof this Agreement.\n\n \"Environmental Reports\" has the meaning given to such terms in Section\n6.1 of this Agreement.\n\n \"Event of Default\" has the meaning given to such term in Section 10.1\nof this Agreement.\n\n \"Extended Term Rate\" has the meaning given to such term in Section\n4.03(b) of the Note.\n\n \"FMV\" means the appraised value of a Property, from time to time, as\ndetermined by a current third-party MAI appraisal reasonably satisfactory to\nLender. Such MAI appraisal must be dated no more than six (6) months prior to\nthe applicable FMV determination date and must be prepared by Cushman & Wakefield or other nationally recognized appraisal company.\n\n \"Governmental Authority\" means any domestic or foreign national, state\nor local government, any political subdivision thereof, any department, agency,\nauthority or bureau of \n\n 2\n\n \nany of the foregoing, or any other entity lawfully exercising executive, \nlegislative, judicial, regulatory or administrative functions of or pertaining \nto government, including the Federal Deposit Insurance Corporation, the Federal \nReserve Board, the Comptroller of the Currency, any central bank or any \ncomparable authority.\n\n\n \"Governmental Rule\" means any law, rule, regulation, ordinance, order,\ncode interpretation, judgment, decree, directive, guidelines, policy or similar\nform of decision of any Governmental Authority.\n\n\n \"Gross Income\" means all income actually received pursuant to any\nLease, except security deposits, rents paid more than thirty (30) days in\nadvance and not ratably allocable to the period under measurement, interest\nincome and refunds.\n\n\n \"Ground Leased Properties\" means Properties owned in fee simple by\nBorrower and leased by Borrower to a tenant pursuant to a ground lease as more\nparticularly identified on Exhibit A attached hereto.\n\n\n \"Guarantor\" means Catellus Development Corporation, a Delaware \ncorporation.\n\n\n \"Hazardous Substances\" has the meaning given to such term in Section\n6.1 of this Agreement.\n\n\n \"Impound Account\" has the meaning given to such term in Section 9.2 of\nthis Agreement.\n\n\n \"Improvements\" means all the improvements as described in the \nMortgages.\n\n\n \"Indemnity and Guaranty Agreement\" means that certain Indemnity and\nGuaranty Agreement dated of even date herewith executed by Guarantor in favor of\nLender.\n\n\n \"Independent Director\" has the meaning given to such term in Section\n7.3(x) of this Agreement.\n\n\n \"Initial Term Interest Rate\" has the meaning given to such term in\nSection 4.03(c) of the Note.\n\n\n \"Leases\" has the meaning given to such term in Section 3.1(r) of this \nAgreement.\n\n\n \"Lender\" means Prudential Mortgage Capital Company, Inc., a Delaware\ncorporation, its successors and\/or assigns, including, but not limited to, a\ntrustee for certificateholders in connection with a Securitization, which\ntrustee would thereupon be a \"Lender\" for purposes of this Agreement.\n\n\n \"Lender's Office\" means (a) initially, Lender's office located at 100\nMulberry Street, Gateway Center Four, 9th Floor, Newark, New Jersey 07102-4069,\nAttention: Shane Tucker, SVP, and (b) subsequently, such other office designated\nas such in writing by Lender to Borrower.\n\n 3\n\n \n \"Loan\" means the principal sum that Lender agrees to lend and Borrower\nagrees to borrow pursuant to the terms and conditions of this Agreement and the\nLoan Documents, which amount is THREE HUNDRED SEVENTY-THREE MILLION AND\n00\/100THS DOLLARS ($373,000,000.00), and as evidenced by the Note.\n\n\n \"Loan Commitment\" means the Loan Commitment dated August 28, 1998,\nexecuted by Lender and accepted by Borrower and Guarantor on August 28, 1998.\n\n\n \"Loan Documents\" means those documents, as hereafter amended,\nsupplemented, replaced, modified or amended and restated, properly executed and\nin recordable form, if necessary, listed in Exhibit C as Loan Documents (and\nsolely for purposes of Borrower's and Guarantor's representations and warranties\ncontained herein and, as applicable, in the Other Related Documents), and any\nother documents evidencing or securing the Loan (excluding the Other Related\nDocuments except as provided above).\n\n\n \"Lock-out Period\" has the meaning given to such term in Section 1.02(a)\nof the Note.\n\n\n \"Management Agreements\" has the meaning given to such term in Section\n3.1(s) of this Agreement.\n\n\n \"Manager\" has the meaning given to such term in Section 3.1(s) of this \nAgreement.\n\n\n \"Major Tenants\" has the meaning given to such term in Section 3.1(r) of\nthis Agreement.\n\n\n \"Maturity Date\" means November 11, 2028.\n\n\n \"Minimum Coverage Ratio\" has the meaning given to such term in Section\n9.1 of this Agreement.\n\n\n \"Monthly Payment Amount\" has the meaning given to such term in Section\n1.01(b) of the Note.\n\n\n \"Moody's\" means Moody's Investors Service, Inc.\n\n \"Mortgages\" means those Mortgages, Assignment of Leases and Rents,\nSecurity Agreement and Fixture Filing of even date herewith executed by\nBorrower, as mortgagor, for the benefit of Lender, as mortgagee, and those Deeds\nof Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing\nof even date herewith executed by Borrower, as trustor, for the benefit of\nLender, as beneficiary, encumbering the Properties, as hereafter amended,\nsupplemented, replaced, modified or amended and restated.\n\n\n \"Net Cash Flow\" has the meaning given to such term in the Cash\nManagement Agreement.\n\n\n \"NOI\" means, except as otherwise provided in the last paragraph of\nSection 2.12 below, the annual Gross Income realized from ongoing and continuing\noperations for a given Property or Properties, as applicable, for the twelve\n(12) month period prior to the Closing Date or such other applicable twelve (12)\nmonth period, as reasonably determined by Lender, less all \n\n 4\n\n \nnecessary and ordinary operating expenses (both fixed and variable) for\nsuch twelve (12) month period, including, without limitation, utilities,\nadministrative, cleaning, landscaping, security, repairs and maintenance, ground\nrent payments, management fees (computed at the higher of the actual management\nfees or at 3 1\/2% of Gross Income), replacement reserves, real estate and other\ntaxes, assessments and insurance, but excluding any deduction for federal, state\nand other income taxes, debt service expenses (except for assessment bonds),\ndepreciation or amortization of capital expenditures, and other similar non-cash\nitems. For purposes of determining NOI, ordinary operating expenses which have\nbeen prepaid will nonetheless be treated as a cost to be incurred. Documentation\nand calculation of NOI shall be certified by an officer of Borrower and shall be\nreasonably satisfactory to Lender.\n\n \"Note\" means that certain Promissory Note of even date herewith and in\nthe form of Exhibit B to this Agreement, in the original principal amount of the\nLoan, executed by Borrower in favor of Lender, as hereafter amended,\nsupplemented, replaced, modified or amended and restated.\n\n\n \"Other Related Documents\" means those documents, as hereafter amended,\nsupplemented, replaced, modified or amended and restated, properly executed and\nin recordable form, if necessary, listed in Exhibit C as Other Related\nDocuments.\n\n\n \"Payment Date\" has the meaning given to such term in Section 1.01(b) of\nthe Note.\n\n\n \"Permitted Exceptions\" has the meaning given to such term in Section\n3.1(i) of this Agreement.\n\n\n \"Permitted Investments\" has the meaning given to such term in the Cash \nManagement Agreement.\n\n\n \"Person\" shall mean any individual, sole proprietorship, partnership,\nlimited liability partnership, joint venture, trust, unincorporated\norganization, association, corporation, limited liability company, institution,\nentity, party or government (whether territorial, national, federal, state,\ncounty, city, municipal or otherwise, including, without limitation, any\ninstrumentality, division, agency, body or department thereof).\n\n\n \"Properties\" means the Properties described in Exhibit A (excluding as\nof the date hereof the Gillette Property and the GATX-Stockton Property as such\nterms are defined in Section 2.13 of this Agreement until such time as such\nProperties are included under the Mortgages, together with the Improvements\nthereon and such other real properties as may from time to time be added in the\nProperty Pool.\n\n\n \"Property\" means any one of the Properties in the Property Pool from \ntime to time.\n\n\n \"Property Condition Report\" has the meaning given to such term in\nSection 3.1(g) of this Agreement.\n\n\n \"Property Pool\" shall mean all of the Properties from time to time\nserving as security for the Loan.\n\n 5\n\n \n \"Prudential\" means Prudential Mortgage Capital Company, Inc., a\nDelaware corporation, and\/or any affiliated or related entity.\n\n\n \"Rating Agencies\" means the nationally recognized statistical rating\norganizations from time to time rating the securities issued in connection with\nthe Securitization of the Loan or any portion thereof, which are expected to be\nMoody's and DCR. Requirements of the Rating Agencies under this Agreement shall\nbe deemed to mean the requirements of Moody's and DCR or such other Rating\nAgency, as applicable.\n\n\n \"Rating Confirmation,\" with respect to the matter in question, shall\nmean that as a condition thereto the Rating Agencies shall have confirmed in\nwriting that (i) such investment, replacement or action shall not result, in and\nof itself, in a reduction, withdrawal or qualification of any rating then\nassigned to any outstanding securities (if the Securitization has occurred), or\n(ii) such investment, replacement or action would not result, in and of itself,\nin a reduction, withdrawal or qualification of any rating for proposed\nsecurities then under consideration by the Rating Agencies (if the\nSecuritization has not yet occurred); provided that if the Securitization has\nnot taken (or as certified by Lender, will not take) the form of a transaction\nrated by the Rating Agencies, then \"Rating Confirmation\" shall instead mean that\nthe matter in question shall be subject to the prior approval of the Lender,\nwhich approval shall not be unreasonably withheld or delayed unless otherwise\nprovided.\n\n\n \"Replaced Properties\" has the meaning given to such term in Section\n2.12 of this Agreement.\n\n\n \"Replacement Reserve\" has the meaning given to such term in Section\n9.4(a) of this Agreement.\n\n\n \"Reserves\" has the meaning given to such term in Section 9.8 of this \nAgreement.\n\n\n \"Secured Obligations\" has the meaning given to such term in the \nMortgages.\n\n\n \"Securitization\" has the meaning given to such term in Section 11.7 of \nthis Agreement.\n\n\n \"Substitute Property\" has the meaning given to such term in Section\n2.12 of this Agreement.\n\n\n \"Substitution\" has the meaning given to such term in Section 2.12 of \nthis Agreement.\n\n\n \"TI\/LC Reserve\" has the meaning given to such term in Section 9.4(b) of\nthis Agreement.\n\n\n \"Title Policies\" has the meaning given to such term in Section 3.1(i)\nof this Agreement.\n\n\n \"Underwritten Net Cash Flow\" means aggregate NOI from the Property or\nthe Properties less deductions for normalized capital expenditures and capital\nexpenditures reserves (but without duplication of replacement reserves as\ndescribed in the NOI definition), tenant improvement costs and leasing\ncommissions, and any reserves established with respect thereto. \n\n 6\n\n \nUnderwritten Net Cash Flow shall be determined by Lender pursuant to its\ncustomary practices and consistently applied for \"CMBS\" loans similar to the\nLoan.\n\n \"Yield Maintenance Charge\" has the meaning given to such term in\nSection 1.02(c) of the Note.\n\n\n 1.2 Exhibits and Schedules Incorporated. All exhibits and \nschedules attached hereto, are hereby incorporated into this Agreement.\n\n\n ARTICLE II\n\n LOAN\n\n\n 2.1 Loan. By and subject to the terms of this Agreement, Lender agrees\nto lend and Borrower agrees to borrow the principal sum of THREE HUNDRED\nSEVENTY-THREE MILLION AND 00\/100THS DOLLARS ($373,000,000.00), said sum to be\nevidenced by the Note. The Note shall be secured by, among other things, the\nMortgages and the Cash Management Agreement.\n\n\n 2.2 Interest Rate; Payment of Interest. Borrower shall pay interest on\nthe principal balance of the Loan outstanding from time to time under the Note\nat the rate and in accordance with the terms set forth in the Note.\n\n\n 2.3 Loan Documents. Borrower shall deliver to Lender concurrently with\nthis Agreement each of the Loan Documents, properly executed and in recordable\nform, as applicable.\n\n\n 2.4 Closing Date. The date of this Agreement and of the other Loan\nDocuments is for reference purposes only. The delivery and transfer to Lender of\nthe security under the Loan Documents and of Borrower's and Lender's obligations\nunder the Loan Documents shall be effective on the Closing Date.\n\n\n 2.5 Anticipated Repayment Date. The Anticipated Repayment Date of the \nLoan shall be November 11, 2008.\n\n\n 2.6 Maturity Date. On the Maturity Date, all outstanding principal,\ntogether with all accrued and unpaid interest and all other sums due and owing\nunder the Note and under this Agreement and the other Loan Documents shall be\nrepaid in full. All payments due under this Agreement at the Maturity Date shall\nbe paid in immediately available funds.\n\n\n 2.7 Full Repayment and Reconveyance. Upon receipt of all sums owing and\noutstanding under the Loan, Lender shall cause the Properties and the related\nCollateral to be released from the lien of the Mortgages and the other Loan\nDocuments; provided, however, that Lender shall have received all escrow,\nclosing and recording costs, the costs of preparing and delivering such\nreconveyance and any sums then due and payable under the Loan Documents.\n\n 7\n\n \n 2.8 Limitation on Borrower's Liability. Borrower shall have no personal\nliability for the repayment of the Loan or performance under the Loan Documents\nexcept as expressly provided in Section 1.05 of the Note, which provisions are\nincorporated herein by reference.\n\n\n 2.9 Prepayment. Borrower may not prepay the Loan in whole or in part \nexcept as otherwise expressly provided in the Note.\n\n\n 2.10 Defeasance. Borrower may cause all or a portion of the Properties\nto be released from the lien of the Mortgages in accordance with the provisions\nof Section 1.03 of the Note.\n\n\n 2.11 Assignment and Assumption of Interest in Borrower; Transfer of\nProperties. The obligations of Borrower under this Agreement and the other Loan\nDocuments may not be assigned by Borrower or assumed by any third party. The\nreceipt of loan payments, the cashing of such payment checks, or such similar\nacts by Lender shall not constitute a waiver of this prohibition. None of the\nProperties, nor any direct or indirect interest therein, nor in Borrower, may be\ntransferred, except that, as long as no Default or Event of Default has occurred\nand is continuing, there shall be a one-time right to transfer 100% of the\nbeneficial interest in Borrower (the \"REIT Transfer\") to a REIT (the \"REIT\nTransferee\"), provided that and immediately subsequent to such transfer, the\nREIT Transferee shall have a book value net worth of no less than\n$150,000,000.00 or a market value equity of no less than $150,000,000.00 as\nreasonably determined by Lender based on asset values established by third-party\nMAI appraisals of the Properties acceptable to Lender in its reasonable\ndiscretion less all existing liabilities and debts of the REIT Transferee, and\nGuarantor shall reaffirm (and shall not be released from) its guarantor\nobligations and liabilities under any guaranty or indemnity agreement executed\nby Guarantor in connection with the Loan and the REIT Transferee executes new\nguaranty and indemnity agreements substantially in the form of the Other Related\nDocuments. In addition, the following conditions to the REIT Transfer must be\nsatisfied: (a) Guarantor owns at least 51% of the economic interest in the REIT\nTransferee at the time of the REIT Transfer and the REIT Transferee is managed\nand controlled directly or indirectly by Guarantor and shall continue to be so\nowned, managed and controlled, (b) Guarantor expressly covenants in writing that\nso long as any part of the Loan remains outstanding it shall continue to own at\nleast 51% of the economic interest in the REIT Transferee and shall continue to\nmanage and directly or indirectly control the REIT Transferee, (c) at the time\nof the REIT Transfer, the Loan shall have a ratio of (i) aggregate NOI from the\nProperties for the prior twelve (12) month period (adjusted by Lender to the\nextent Lender reasonably determines that such aggregate NOI will not continue\nfor the next twelve (12) months) to (ii) annual debt service on the Loan, of no\nless than 1.65:1.00 and Lender reasonably believes that the loan-to-value ratio\nof the Loan is no higher than 72.5%, and (d) the Rating Agencies are provided\nwith an opinion of counsel acceptable to the Rating Agencies (or to Lender if\nthe Loan has not been securitized) providing that as a result of such transfer,\nBorrower remains a single-purpose, bankruptcy remote entity. Borrower shall also\ndeliver such other documents, certificates and opinions as required by the\nRating Agencies or the Lender, including, but not limited to, a\nnon-consolidation opinion acceptable to the Rating Agencies and Lender. In\naddition to a $100,000 (the \"Base Review Fee\") non-refundable processing fee for\nthe REIT Transfer and for any transfer requiring Lender's consent or Rating\nConfirmation, Borrower shall pay (in addition to the Base Review Fee, where\napplicable) the fees and expenses relating to the review and processing of all\ntransfers (other than incidental share transfers in Guarantor), including, but\nnot limited to, the reasonable costs of Lender's \n\n 8\n\n \noutside legal counsel and Rating Agency fees, cost and expenses (including,\nwithout limitation, legal expenses). Whether or not the proposed transfer is\napproved, Lender will retain the Base Review Fee and Borrower shall remain\nliable for all other fees and expenses. Following such a permitted assumption of\nthe Loan, Borrower or the approved assignee shall have no further right to\nassign the Loan.\n\nNotwithstanding the foregoing, transfers of shareholder interests in Guarantor\nshall be permitted unless such transfer causes a \"Change of Control\" in which\ncase, prior to Securitization, Lender's prior written consent shall be required\n(which may include consideration of the impact such transfer will have on the\nRating Agencies review, analysis and concerns in connection with a\nSecuritization) and, after the Securitization, Lender shall require a Rating\nConfirmation and it shall be a further pre-condition to the transfer that causes\na Change in Control that Prudential (so long as Prudential holds a majority of\nthe face value of the securities issued in connection with the Securitization)\nprovides its prior written consent. Borrower acknowledges and agrees that\nPrudential's decision to approve or disapprove of any transfer shall be in\nPrudential's sole and absolute discretion. For purposes of this Section 2.11, a\n ------------\n\"Change of Control\" shall be deemed to occur in the event that any one or more\nof the following events shall occur: (a) more than 45% of the legal or\nbeneficial voting shareholder interests in Guarantor are acquired in one\ntransfer or over time, in related transfers to or at the direction of one or\nmore affiliated Persons or their designees, (b) during any consecutive eighteen\n(18) month period, individuals who at the beginning of such period constituted\nthe board of directors of Guarantor (together with any new directors whose\nelection to such board of directors or whose nomination for election was made or\napproved by a vote of the majority of the directors then still in office who\nwere either directors at the beginning of such period or whose election or\nnomination for election was previously so approved) cease for any reason to\nconstitute a majority of the board of directors of Guarantor then in office, or\n(c) the stockholders of Guarantor approve a merger or consolidation (unless\nGuarantor is the surviving entity) or liquidation, dissolution or the sale of\nsubstantially all of Guarantor's assets.\n\n\nThe failure to obtain Lender's prior written consent to any transfer where\nLender's prior written consent is required hereunder shall give Lender the\nright, at Lender's sole option, to declare an Event of Default, to accelerate\nthe Loan and to declare the Loan immediately due and payable.\n\n\n 2.12 Substitution of Properties. From and after the date twelve (12)\nmonths after the Closing Date, Borrower from time to time (not to exceed six (6)\noccasions) may offer to Lender as collateral for the Loan (a \"Substitution\") one\nor more substitute properties (each, a \"Substitute Property\" and, collectively,\n\"Substitute Properties\"; each Substitute Property to be considered a Property\nfor all purposes of this Agreement) as replacements for Properties (\"Replaced\nProperties\"), subject to there then being no Default or Event of Default\n(excepting non-monetary defaults relating solely to the Replaced Property,\nincluding, but not limited to, a breach of one or more representations or\nwarranties, but not excepting any default relating to financial statements or\ntheir delivery or representations or warranties in respect thereof) and subject\nfurther to the satisfaction of all the conditions set forth below with respect\nto each Substitution and to Borrower making the representations and warranties\nin Section 5.1 hereof as to each Substitute Property and to Borrower satisfying\nthe closing conditions of Section 3.1 hereof as to each Substitute Property. Any\nproposed Substitution shall be submitted by Borrower to Lender in writing,\ntogether with copies of all reports and other due diligence materials necessary\nto enable \n\n 9\n\n \nLender to ascertain compliance with the conditions below, at least\nninety (90) days prior to the proposed date of Substitution. No Substitute\nProperty may qualify as a Replaced Property and, after giving effect to the\nSubstitution, no Property may share its tax parcel with any property not secured\nby the applicable Mortgage. No Property may be substituted if it includes\nproperty which is needed to comply with a tenant's expansion right from an\nadjoining Property onto such Property unless all of the Properties related to\nthe tenant's expansion right are contemporaneously substituted.\n\n\n (a) For each Substitution, the Substitute Property or\nSubstitute Properties must have an aggregate NOI of not less than the greater of\n(i) the aggregate NOI of the Replaced Property or Properties as of the Closing\nDate as set forth on Schedule 1 attached hereto, and (ii) the aggregate NOI of\nthe Replaced Property or Replaced Properties for the immediately preceding 12\nmonth period;\n\n\n (b) For each Substitution, the Substitute Property or\nSubstitute Properties must have an aggregate FMV of not less than the greater of\n(i) the FMV of the Replaced Property or Replaced Properties as of the Closing\nDate as set forth on Schedule 1 attached hereto, and (ii) the FMV of the\nReplaced Property or Replaced Properties immediately prior to the Substitution;\n\n\n (c) As evidenced by estoppel certificates reasonably\nacceptable to Lender and the Rating Agencies, all tenants in each Substitute\nProperty that lease more than 20,000 s.f. (or whose rent constitute greater than\nthirty percent (30%) of the Gross Income for the Substitute Property) must be\noccupying their space, open for business and paying rent (after any free rent,\ncredit or rent abatement periods) and not in arrears more than 30 days, and all\nfree rent or rental grace periods shall have expired, and the tenants shall not\nbe in bankruptcy (provided, however, the impact of any tenant not qualifying\nunder this subparagraph (c) would be the disqualification of the income\nassociated with that tenant for purposes of calculating NOI, or establishing FMV\nfor the affected Substitute Property, not the elimination of the property as a\npotential Substitute Property);\n\n\n (d) With respect to each Substitute Property, leases affecting\nat least 90% of the net rentable area must have average remaining terms of five\n(5) years or more, as of the date of Substitution;\n\n\n (e) Borrower must hold fee title to the Substitute Properties\nand the Substitute Properties must be free of all encumbrances, easements and\nother title exceptions (except those expressly permitted by Lender in its\nreasonable discretion);\n\n\n (f) Borrower must continue to be a bankruptcy-remote single\npurpose entity and, immediately prior to each such Substitution, Borrower shall\ndeliver bankruptcy (including, but not necessarily limited to,\nnon-consolidation) and other legal opinions as reasonably required by Lender;\n\n\n (g) Borrower must deliver an environmental report for each\nSubstitute Property in form, findings and substance acceptable to Lender in its\nreasonable discretion and the Rating Agencies;\n\n 10\n\n \n (h) Borrower must (i) deliver to Lender and the Rating\nAgencies an engineering report (including, but not limited to, analysis of\nseismic risk for any Substitute Property situated in a seismic zone, and which\nanalysis must show that the Substitute Property does not have a probable maximum\nloss percentage that exceeds the probable maximum loss percentage of the\nReplaced Property and in no event shall such Substitute Property have a probable\nmaximum loss of more than 15%) in form, findings and substance acceptable to\nLender and the Rating Agencies in their reasonable discretion, and (ii) deposit\n125% of estimated deferred maintenance cost (if any) into a reserve account with\nLender where the estimated cost of such deferred maintenance exceeds $100,000\nper Substitute Property;\n\n\n (i) Each Substitute Property must comply with all title, land\nuse, legal, environmental and insurance requirements provided in the Loan\nDocuments, and Lender must receive title insurance, surveys, casualty insurance,\nand other due diligence items, all acceptable to Lender in its reasonable\ndiscretion; and with respect to the remaining Properties encumbered by the\napplicable Mortgage, Borrower shall provide Lender with title insurance\nendorsements reasonably acceptable to Lender to the effect that such release\nwill not impair the priority of such Mortgage on the remaining Properties\nencumbered by the Mortgage;\n\n\n (j) After giving effect to the Substitution, not more than\nsixty (60%) percent of the rentable square footage of the Property Pool would be\nlocated in Los Angeles, Riverside, San Bernardino and Orange Counties in\nCalifornia;\n\n\n (k) The Rating Agencies must have confirmed in writing that\nsuch Substitution would not result in a downgrade, qualification, or withdrawal\nof the ratings of the securities issued pursuant to any Securitization. Except\nas provided in Subsection 2.12 (m) and Section 2.15 below, however, Rating\nAgency confirmation shall not be so required if all of the following conditions\nare satisfied:\n\n\n (i) The Replaced Property's Allocated Loan Amount is\nnot among that of the top ten (10) Properties ranked by Allocated Loan Amount\nas set forth on Schedule 1 attached hereto;\n\n\n (ii) The Allocated Loan Amount of the Replaced Property\nis less than five percent (5%) of the then-current principal amount of the\nLoan immediately preceding the proposed Substitution; and\n\n\n (iii) After giving effect to the proposed Substitution,\nthe aggregate Allocated Loan Amount for all Substitute Properties substituted\nsince the Closing Date is less than 15% of the original principal amount of\nthe Loan for all Properties as of the Closing Date.\n\n\nIf the Substitution is to occur prior to the Securitization, the Substitution is\nsubject to Lender's prior written consent. Borrower acknowledges and agrees that\nLender's decision to approve or disapprove of any Substitution shall be in\nLender's reasonable discretion, which may include consideration of the impact\nsuch Substitution will have on the Rating Agencies review, analysis and concerns\nin connection with a Securitization.\n\n\n (l) The Substitute Property must be income producing and\ndeveloped property and similar in quality, nature and property type to the\nReplaced Property (\"Like for \n\n 11\n\n \nLike\") (except for the Property at 224 South Michigan Avenue, Chicago,\nIllinois and the Properties known as Home Depot, Pak N' Save and Kmart, all\nlocated in Emeryville, California (identified as Properties numbered 67, 69, 70\nand 71, respectively, on Exhibit A attached hereto) for which Substitute\nProperties may be either industrial, office (except office Properties may not be\nsubstituted for retail Properties), research & development or grocery anchored\nretail properties);\n\n\n (m) Notwithstanding the \"Like for Like\" provisions of\nSubsection 2.12 (l), above, up to 30% of the Allocated Loan Amounts of the\nGround Leased Properties and the \"credit tenant properties\" (i.e., those\nProperties substantially leased to a tenant whose credit is rated BBB- or better\nby one of the Rating Agencies) may be replaced by other Substitute Properties,\nprovided in all such Substitutions (i.e., notwithstanding any provision in the\nLoan Documents to the contrary), Rating Confirmation is obtained.\n\n\n (n) Borrower shall deliver certain other closing documents as\nmay be described in the applicable private placement memorandum or other\ndisclosure documents and shall execute required Loan Documents (including, but\nnot limited to, such mortgages, deeds of trust, and UCC-1 financing statements\nas may be necessary to encumber the Substitute Properties in a manner consistent\nwith the other Properties in the Property Pool) and revisions thereto and to\ndeliver other documents, opinions and certificates reasonably required by\nLender;\n\n\n (o) At the time of each Substitution request, Borrower shall\npay a non-refundable Substitution servicing fee of $15,000 per building per\nSubstitute Property;\n\n\n (p) Upon giving effect to the Substitution, the aggregate\nAllocated Loan Amount of the Replaced Properties as of the Closing Date shall\nnot exceed thirty percent (30%) of the principal amount of the Loan as of the\nClosing Date; and\n\n\n (q) After giving effect to the Substitution, and unless Rating\nConfirmation is otherwise obtained, there shall remain in the Property Pool a\nminimum total of at least ninety-five (95) Properties less the number of\nProperties which were released pursuant to a Partial Defeasance in accordance\nwith Section 1.03 of the Note.\n\n\n (r) Borrower shall deliver to Lender and the Rating Agencies\nan opinion of counsel for Borrower or Lender, at Borrower's expense, in form and\nsubstance and delivered by counsel reasonably satisfactory to Lender and the\nRating Agencies, that the Substitution will not cause the Trust (as defined in\nthe Note) to (i) fail to qualify as a \"real estate mortgage investment conduit\"\n(a \"REMIC\"), within the meaning of Section 860D of the Internal Revenue Code of\n1986, as amended from time to time or any successor statute (the \"Code\"), or\n(ii) be subject to any \"prohibited transaction\" tax as defined in Section 860F\nof the Code.\n\n\nBorrower shall pay all fees, costs and expenses, including, but not limited to,\nlegal fees, incurred by Lender and the Rating Agencies, in connection with the\nmatters set forth in this Section 2.12.\n ------------\n\nFor purposes of this Section 2.12, the definition of NOI as set forth in Section\n -------\n1.1 above, shall be used, except that (x) the applicable twelve (12) month\n---\nperiod referred to in said definition shall be the twelve (12) month period\nprior to the Substitution and (y) stabilized occupancy, as \n\n 12\n\n \nreasonably determined by Lender, shall be assumed for the purposes of \ncalculating operating expenses.\n\n\nWith respect to any Substitution, no more than two (2) Replaced Properties may\nbe substituted for any one (1) Substitute Property unless Rating Confirmation is\nobtained. In the event that the Substitution involves one (1) Replaced Property\nfor one (1) Substitute Property, the Substitute Property shall be assigned the\nAllocated Loan Amount of the Replaced Property. In the event that the\nSubstitution involves more Replaced Properties than Substitute Properties, or\nmore Substitute Properties than Replaced Properties, than the total Allocated\nLoan Amounts of the Replaced Properties shall be reallocated proportionately\namong the Substitute Properties based on the FMV of the Substitute Properties at\nthe time of Substitution and as adjusted by Lender in its reasonable discretion\nbased on DSCR of the Substitute Properties.\n\n\nNotwithstanding anything in this Section 2.12, Section 2.15 or Section 2.16 to\nthe contrary, in determining whether the conditions for a Substitution or a\nRelease, as applicable, have been satisfied under this Section 2.12 (or under\nSection 3.1 to the extent incorporated herein), Section 2.15, or under Section\n2.16, if at the time the Substitution or Release occurs the Loan is held by a\nREMIC or by an entity that qualifies for treatment as a \"grantor trust\" under\nthe Code, all conditions contained herein (or under Section 3.1 to the extent\nincorporated herein), Section 2.15 or under Section 2.16, which provide for the\nexercise of discretion by the Lender (i.e., by requiring that documents or other\nitems be \"reasonably acceptable to the Lender\" or \"acceptable to the Lender in\nits reasonable discretion\" or \"acceptable to Lender in its sole discretion\", or\nthrough use of words with similar import) shall be construed as permitting the\nLender to reject a document or other item only if such document or other item\nfails to satisfy generally-applicable underwriting standards for securitized\ncommercial mortgage loans, determined at the time such Substitution or Release\noccurs.\n\n\n 2.13 Build to Suit Properties. With respect to each of the Gillette\nbuild-to-suit property in Romeoville, Illinois (identified as Property #54 on\nExhibit A attached hereto and herein the \"Gillette Property\") and the GATX\nproperty in Stockton, California (identified as Property #52 on Exhibit A\nattached hereto and herein the \"GATX-Stockton Property\"), Borrower shall provide\nto Lender on the Closing Date, irrevocable, unconditional letters of credit in\nthe amount of $16,400,000 for the Gillette Property (the \"Gillette Letter of\nCredit\") and $13,600,000 for the GATX-Stockton Property (the \"GATX-Stockton\nLetter of Credit\" and together with the Gillette Letter of Credit, the\n\"Construction Letters of Credit\"), which Construction Letters of Credit must be\nfrom an issuer, must have an account party and expiry date (which must provide\nthat, prior to its expiration from time to time, it shall be automatically\nextended for another term if the Return Conditions have not yet been satisfied\nat such time), and in all other respects must be in form and substance,\nacceptable to Lender and the Rating Agencies. Without limiting the foregoing,\nthe issuer of the Construction Letters of Credit as well as the Leasing Letters\nof Credit (as defined below) must be and continue to be from issuers rated at\nleast \"A\" by DCR and at least \"Aa2\" by Moody's, or, if not rated by DCR and\nMoody's, correspondingly by at least two (2) Rating Agencies, or otherwise\nacceptable to DCR and Moody's. If there is no Event of Default, and provided the\nfollowing conditions (including there being no Event of Default, the \"Return\nConditions\") are satisfied prior to December 31, 1999 or, with respect to the\nGillette Letter of Credit, prior to March 31, 2000 (the \"Return Dates\") in the\nevent the tenant under the Gillette Property lease exercises its option to have\nthe additional improvements constructed pursuant to \n\n 13\n\n \nSection 18 of the lease on the Gillette Property, the applicable\nConstruction Letter of Credit shall be returned upon (a) completion of\nconstruction related to such respective property, as evidenced by a certificate\nof occupancy acceptable to Lender, (b) acceptance and occupancy of the\nrespective property by the tenants thereof, (c) commencement of rent payments by\nthe tenants (after the expiration of any free rent, credit or grace period), (d)\nreceipt of an estoppel certificate and, if requested by Lender, a subordination,\nnon-disturbance agreement, from the tenants thereof in form and substance\nreasonably acceptable to Lender, (e) Lender obtaining a valid first mortgage\nlien on the respective property which would be cross-defaulted and\ncross-collateralized with the other Properties in the Property Pool, (f) title\nto the respective property shall be vested in Borrower, (g) title insurance\nendorsements and other reasonable evidence that all streets and roads reasonably\nnecessary for access to and full use, occupancy and operation of the respective\nproperty have been completed, have been dedicated and accepted by the\nappropriate municipal authority and are open and available, and (h) delivery to\nLender of acceptable title insurance (which shall provide, among other things,\naffirmative coverage as to mechanics' liens and that such property does not\nshare its tax parcel with any other property), survey, property insurance, legal\nopinions and such other certificates, opinions and documents reasonably\nrequested by Lender, including, but not limited to, third party engineering,\nenvironmental and MAI appraisals (if not previously delivered), and payment to\nLender and the Rating Agencies of all fees, costs and expenses (including, but\nnot limited to, legal fees and expenses) incurred by Lender and the Rating\nAgencies in respect of the matters set forth in this Section. In the event the\nReturn Conditions are not or will not be satisfied as to either or both of the\nrespective properties on or prior to the respective Return Date, Borrower shall\nhave the option to make a Substitution with respect to the applicable property\nin accordance with Section 2.12 above to the same extent as if the applicable\nproperty were in the Property Pool, and such Substitution shall reduce the\nnumber of remaining Substitutions available to Borrower accordingly. A\nSubstitution exercised pursuant to this Section shall require Rating\nConfirmation. Borrower must exercise such option by providing written notice to\nLender at least one-hundred (100) days prior to the applicable Return Date. If\nBorrower fails to timely exercise its Substitution option or fails to fully\nsatisfy all of the requirements for a Substitution in accordance with Section\n2.12 above after exercising its option at least ten (10) Business Days prior to\nthe applicable Return Date, Borrower shall make a partial prepayment of the Loan\nin an amount equal to: (i) 125% of the Allocated Loan Amount for the applicable\nProperties, plus (ii) a Yield Maintenance Charge (as defined in the Note). If\nBorrower fails to make such prepayment prior to the applicable Return Date,\nLender shall be entitled to draw on the respective Construction Letter of Credit\nand apply the proceeds thereof to the Loan and to the Yield Maintenance Charge.\nBorrower agrees that in the event the amount of a Construction Letter of Credit\nis insufficient to satisfy the amount due in connection with such partial\nprepayment as set forth in clauses (i) and (ii) above, Borrower shall\nimmediately pay to Lender additional funds to satisfy such shortfall. If the\nletters of credit described in Sections 2.13 and 2.14 are not extended, Lender\nmay draw upon them to avoid their expiration. Similarly, the letters of credit\ndescribed in Sections 2.13 and 2.14 may be drawn upon in the event that the\nrequisite issuer ratings as hereinabove set forth are not maintained and the\nletters of credit described in Sections 2.13 and 2.14 are not promptly replaced\nafter written notice from Lender (with replacements acceptable to Lender and the\nRating Agencies).\n\n 2.14 Letters of Credit - Leasing . With respect to each of the Union\nCity, California property located at 2900 Faber Street (identified as Property\n#5 on Exhibit A attached hereto and herein the \"Union City Property\") and the\nTustin, California property (identified as Property #44 \n\n 14\n\n \non Exhibit A attached hereto and herein the \"Tustin Property\"), Borrower\nshall provide to Lender on the Closing Date, irrevocable, unconditional letters\nof credit in the amount of $2,500,000 for the Union City Property (the \"Union\nCity Letter of Credit\") and $1,100,000 for the Tustin Property (the \"Tustin\nLetter of Credit\" and together with the Union City Letter of Credit, the\n\"Leasing Letters of Credit\"), which Leasing Letters of Credit must be from an\nissuer, must have an account party and expiry date, and in all other respects\nmust be in form and substance, acceptable to Lender and the Rating Agencies.\nEach Leasing Letter of Credit must have a term of no less than twelve (12)\nmonths, and must provide that prior to its expiration it shall be automatically\nextended for one or more terms of another twelve (12) months each if the Leasing\nReturn Conditions have not yet been satisfied at such time. If there is no Event\nof Default, and provided the following conditions (including there being no\nEvent of Default, the \"Leasing Return Conditions\") are satisfied prior to March\n1, 2000 or, if Borrower, at Lender's option, is required to extend the terms of\neither or both Leasing Letters of Credit for an additional term of twelve (12)\nmonths, prior to March 1, 2001 (as applicable, the \"Leasing Return Dates\"),\nprovided that all of the Leasing Return Conditions shall have been satisfied\nprior to such extended date, the applicable Leasing Letter of Credit shall be\nreturned upon (a) the leasing to unaffiliated third parties of no less than\nninety percent (90%) of the space at the respective Property, with a lease term\nof no less than five (5) years (taking into account termination options, if\nany), and at rents no less than the then prevailing market rental rate for the\narea in which the Property is situated, (b) acceptance and occupancy of the\nrespective Property by the tenants thereof, (c) commencement of rent payments by\nthe tenants (after the expiration of any free rent, credit or grace period), (d)\nreceipt of an estoppel certificate from the tenants thereof in form and\nsubstance reasonably acceptable to Lender and the Rating Agencies, and (e)\npayment to Lender and the Rating Agencies of all fees, costs and expenses\n(including, but not limited to, legal fees and expenses) incurred by Lender and\nthe Rating Agencies in respect of the matters set forth in this Section. In the\nevent the Leasing Return Conditions are not or will not be satisfied as to\neither or both of the respective Properties on or prior to the Leasing Return\nDate, Borrower shall have the option to make a Substitution with respect to the\napplicable property subject to and in accordance with Section 2.12 above and\nsuch Substitution shall reduce the number of remaining Substitutions available\nto Borrower accordingly. Borrower must exercise such option by providing written\nnotice to Lender at least one-hundred (100) days prior to the applicable Leasing\nReturn Date. If Borrower fails to exercise its Substitution option or fails to\nfully satisfy all of the requirements for a Substitution in accordance with\nSection 2.12 above after exercising its option at least ten (10) Business Days\nprior to the applicable Leasing Return Date, Borrower shall make a partial\nprepayment of the Loan in an amount equal to: (i) 125% of the Allocated Loan\nAmount for the applicable Properties, plus (ii) a Yield Maintenance Charge (as\ndefined in the Note). If Borrower fails to make such prepayment prior to the\napplicable Leasing Return Date, Lender shall be entitled to draw on the\nrespective Leasing Letter of Credit and apply the proceeds thereof to the Loan\nand to the Yield Maintenance Charge. Borrower agrees that in the event the\namount of a Leasing Letter of Credit is insufficient to satisfy the amount due\nin connection with such partial prepayment as set forth in clauses (i) and (ii)\nabove, Borrower shall immediately pay to Lender additional funds to satisfy such\nshortfall.\n\n 2.15 Expansion Rights.\n\n (a) If any tenant under a Lease exercises its option as\npresently set forth in its lease to lease additional land and\/or improvements\n(the \"Expansion Land\" and the portion of \n\n 15\n\n \neach of such Properties excluding the Expansion Land is hereinafter the\n\"Remaining Property\") presently constituting a portion of any of those\nProperties designated on Exhibit A hereto as IL1970104 (Gillette\/IL), CA0712430\n(Pepsi\/Ontario, CA), CA0010612 (Office Depot\/Fremont, CA) and IL1970335\n(GATX\/IL) (collectively, the \"Expansion Properties\") and to have Borrower\nconstruct thereon additional improvements (such improvements being hereinafter\nreferred to as the \"Expansion Improvements\", and the Expansion Land and the\nExpansion Improvements being hereinafter referred to as the \"Expansion\nPremises\"), Borrower shall have the right, exercised by written notice to\nLender, to have the Expansion Premises considered Substitute Properties and to\nhave Properties designated by Borrower released from the Property Pool as if\nsuch Properties were Replaced Properties (subject to the limitations, exceptions\nand conditions set forth below in this Section 2.15(a) and Section 2.12 above)\nprovided (i) no Event of Default exists as of the date of the Substitution, (ii)\nthe Expansion Improvements have been completed as evidenced by a certificate of\noccupancy reasonably acceptable to Lender, (iii) the Expansion Improvements have\nbeen accepted and occupied by the tenant thereof, (iv) commencement of rent\npayments by the tenant (after the expiration of any free rent, credit or grace\nperiod) has occurred, (v) Lender has received an estoppel certificate from the\ntenant thereof in form and substance reasonably acceptable to Lender, (vi) title\nto the Expansion Improvements shall be vested in Borrower, (vii) Borrower\ndelivers to Lender title insurance endorsements or other evidence reasonably\nacceptable to Lender that all mechanics and materialmen have been paid in\nconnection with the construction and that no mechanics' liens exist with respect\nto the Expansion Premises and (viii) Lender shall have received a Rating\nConfirmation in respect of the Substitution involving the Expansion Premises.\nBorrower shall have the right to exercise the option granted in this Section\nwith respect to the Expansion Premises of one or more tenants in a single\nSubstitution; provided, however, that all Substitutions under this Section shall\nreduce the number of remaining Substitutions available to Borrower accordingly.\nThe terms and conditions for Substitution set forth in Section 2.12 hereof shall\napply with respect to Substitutions applicable to Expansion Premises.\nDetermination of NOI and FMV, and the allocation thereof as between the\nExpansion Premises and the balance of the Property of which the Expansion\nPremises are a part, shall be made by Lender exercising reasonable discretion.\n\n (b) If any tenant with the option to lease Expansion Land\nwaives its option, or the option is otherwise terminated or expires, which\nwaiver, termination or expiration is evidenced by a tenant estoppel reasonably\nacceptable to Lender, Borrower shall have the right, exercised by written notice\nto Lender, to have the Expansion Land considered a potential Replaced Property\nand to have such Expansion Land designated by Borrower released from the\nProperty Pool as if such Expansion Land was a Replaced Property (subject to the\nlimitations, exceptions and conditions set forth below in this Section 2.15(b),\n2.15(c) below and Section 2.12 above) provided (i) no Event of Default exists as\nof the date of the Substitution, (ii) Lender shall have received a Rating\nConfirmation in respect of the Substitution involving the Expansion Land, and\n(iii) Section 2.12(l) shall not be applicable; however, the Substitute\nProperties must be income producing industrial, office\/research and development\nor grocery anchored retail properties. Borrower shall have the right to exercise\nthe option granted in this Section with respect to the Expansion Land of one or\nmore tenants in a single Substitution; provided, however, that all Substitutions\nunder this Section shall reduce the number of remaining Substitutions available\nto Borrower accordingly. The terms and conditions for Substitution set forth in\nSection 2.12 hereof shall apply with respect to Substitutions applicable to\nExpansion Land. Determination of NOI, FMV and the Allocated Loan Amount, and the\nallocation thereof \n\n 16\n\n \nas between the Expansion Land and the balance of the Property of which the \nExpansion Land is a part, shall be made by Lender exercising reasonable \ndiscretion.\n\n\n (c) The Remaining Property and\/or Borrower shall be in\ncompliance with the following as an additional condition precedent to\nSubstitutions applicable to Expansion Land:\n\n\n (i) The Remaining Property shall comply with all \napplicable zoning, land use and similar laws, rules, regulations and ordinances \nof all Governmental Authorities having or claiming jurisdiction thereover, and \nall other applicable laws, with each such determination assuming the separate \nownership and operation of the Remaining Property;\n\n (ii) Borrower must provide evidence reasonably\nacceptable to Lender that (1) all zoning and subdivision approvals of\nGovernmental Authorities having jurisdiction as necessary to create legally\nidentifiable tracts of real property, and separate tax and zoning lots for all\nreal property taxes, have been granted in respect of the Remaining Property; and\n(2) from and after the Substitution of the Replaced Property, no acts relating\nto development, further subdivision, construction or use on the Replaced\nProperty can affect in any respect the compliance of the Remaining Property with\nall Governmental Rules;\n\n (iii) Borrower must provide evidence reasonably\nsatisfactory to Lender that, following any such Substitution, the Remaining\nProperty shall have available to it all necessary utility and other services for\nthe development, use, occupancy and operation of the Remaining Property, and\nadequate, free, unimpeded and unencumbered access for pedestrian and vehicular\ningress and egress onto all adjacent public roads;\n\n (iv) Borrower must provide Lender with an updated\nsurvey of the Remaining Property, reasonably satisfactory to Lender,\nprepared by a registered land surveyor for the state in which the Remaining\nProperty is located, and certified to the Lender, its successors and assigns,\nand the title insurer in form reasonably acceptable to Lender, containing metes\nand bounds legal descriptions of the Remaining Property;\n\n (v) Borrower provides Lender with an opinion of\ncounsel reasonably satisfactory to Lender, which opinion shall be in form\nand substance reasonably satisfactory to Lender, or other evidence reasonably\nsatisfactory to Lender, that the lien of the applicable Mortgage is and\ncontinues to constitute a valid lien on the Remaining Property; and\n\n (vi) Borrower shall procure from the title insurer\ninsuring the lien of the Mortgages an endorsement to Lender's title\ninsurance policy reasonably acceptable to Lender which shall provide, inter\nalia, that the lien and priority of the applicable Mortgage on the Remaining\nProperty shall be unaffected as a result of the release of the Replaced\nProperty.\n\n 2.16 GATX-Woodridge Property. Upon satisfaction of the following terms\nand conditions, Lender shall release from the Mortgages (the \"Release\") that\ncertain parcel (the \"Outparcel\") consisting of a portion of the Property known\nas the GATX-Woodridge Property (identified as Property #53 on Exhibit A hereto),\nwhich Outparcel is further described on Exhibit G hereto:\n\n 17\n\n \n (a) The Outparcel is not required to be included within the\nGATX-Woodridge Property for purposes of any Governmental Rule or necessary or\nappropriate to satisfy or facilitate the requirements or terms of any Lease;\n\n\n (b) The Outparcel is simultaneously with the Release being\ntransferred (the \"Conveyance\") to a third party, including, without limitation,\nGuarantor;\n\n\n (c) Borrower shall have given to Lender a written request for\nthe Release accompanied by all evidence, information and other items required by\nthis Section, not less than sixty (60) days prior to the desired Release date;\n\n\n (d) Each of the Outparcel and the remaining portion of the\nGATX-Woodridge Property (the \"Remaining GATX-Woodridge Property\"), including,\nbut not limited to, all improvements thereon, and the Release and the Conveyance\nshall be in compliance with all applicable zoning, land use and other\nGovernmental Rules of all Governmental Authorities, with each assuming that the\nresult of the Conveyance is the separate ownership and operation of the\nOutparcel and the Remaining GATX-Woodridge Property (collectively, the \"GATX\nProperties\");\n\n\n (e) Following the Release the Remaining GATX-Woodridge\nProperty will retain the Allocated Loan Amount of the GATX-Woodridge Property;\n\n\n (f) Borrower provides Lender with evidence reasonably\nacceptable to Lender that (i) all zoning and subdivision approvals of\nGovernmental Authorities have been granted so that each of the GATX Properties\nconstitute separate legal and real estate tax parcels and lots, and (ii) from\nand after the Release, no acts relating to development, subdivision,\nconstruction or use on the Outparcel can affect in any respect the compliance of\nthe Remaining GATX-Woodridge Property with all applicable Governmental Rules;\n\n\n (g) Borrower provides evidence reasonably satisfactory to\nLender that, following the Release, the Remaining GATX-Woodridge Property shall\nhave available to it all necessary utility and other services for the\ndevelopment, use, occupancy and operation of the Remaining GATX-Woodridge\nProperty, and adequate, free, unimpeded and unencumbered access for pedestrian\nand vehicular ingress and egress onto all adjacent public roads at such\nlocations as are reasonably necessary for the development, use, occupancy and\noperation of the Remaining GATX-Woodridge Property;\n\n\n (h) Borrower provides Lender with an updated survey of the\nRemaining GATX-Woodridge Property reasonably satisfactory to Lender, prepared by\na registered Illinois land surveyor and certified to Lender, its successors and\nassigns, and the title insurer in form reasonably acceptable to Lender,\ncontaining (i) only such encroachments, exceptions and state of facts as are (A)\nset forth in the Title Policy insuring the applicable Mortgage or (B) approved\nby Lender in writing in its reasonable discretion; and (ii) metes and bounds\nlegal descriptions of each of the Outparcel and the Remaining GATX-Woodridge\nProperty;\n\n\n (i) Borrower shall procure from the Title Company insuring the\nlien of the applicable Mortgage an endorsement to Lender's title insurance\npolicy reasonably acceptable to Lender which shall provide, inter alia, that the\nlien and priority of the applicable Mortgage on the \n\n 18\n\n \nRemaining GATX-Woodridge Property shall be unaffected as a result of the\nRelease of the Outparcel and continues to constitute a valid first lien,\ntogether with such other matters as Lender shall reasonably require;\n\n (j) No Event of Default exists under the Loan Documents; \nand\n\n\n (k) Borrower pays all of Lender's fees and expenses\n(including, without limitation, attorneys' fees and expenses) incurred in\nconnection with the Release of such Outparcel.\n\n\n ARTICLE III\n\n CONDITIONS OF LENDER'S OBLIGATION TO FUND LOAN\n\n\n 3.1 Conditions Precedent. Lender's obligation to fund the Loan\nhereunder is subject to the fulfillment to Lender's satisfaction of each of the\nfollowing conditions precedent:\n\n\n (a) Representations and Warranties True at Closing. The\nrepresentations and warranties contained in Article V of this Agreement or\notherwise made by or on behalf of Borrower in any of the Loan Documents or in\nany certificate, written statement or other writing given in connection with the\nLoan (including, but not limited to, all financial and operating statements),\ntaken as a whole, shall be true and correct on and as of the Closing Date with\nthe same effect as if made at such time.\n\n\n (b) No Default or Event of Default. There shall exist no\nDefault or Event of Default, as defined in this Agreement.\n\n\n (c) Performance. Borrower shall have performed and complied\nwith all agreements and conditions contained herein required to be performed and\ncomplied with by Borrower prior to or on the Closing Date.\n\n\n (d) Loan Documents. Lender shall have received all Loan\nDocuments, Other Related Documents, instruments, policies, and forms of evidence\nor other materials required or requested by Lender under the terms of this\nAgreement or any of the Loan Documents.\n\n\n (e) Zoning Compliance; Certificates of Compliance. Borrower\nshall have delivered to Lender, and Lender shall have received and approved the\nfollowing items: (i) zoning compliance letters from the proper zoning authority\nor other evidence reasonably acceptable to Lender as to each Property's\ncompliance with zoning or use restriction laws; and (ii) copies of a certificate\nof occupancy acceptable to Lender and such other evidence of completion\nreasonably acceptable to Lender in accordance with the applicable building laws\npertaining to each Property.\n\n\n (f) Hazardous Materials. With respect to each of the\nProperties, Lender shall have received a Phase I environmental assessment report\nand such other additional reports (including, without limitation, a Phase II\nenvironmental assessment report) requested by Lender based on the findings of\nthe Phase I environmental assessment report from a licensed engineer acceptable\nto Lender, all in form and substance satisfactory to Lender in its sole\ndiscretion.\n\n 19\n\n \n (g) Property Inspection and Report. Lender shall have received\nand approved from a professional building inspector acceptable to Lender,\nreports (the \"Property Condition Report\") stating that each of the Properties is\nstructurally sound and is in good order and repair, and setting forth\nrecommendations of remedial repairs, capital improvements and replacements which\nshould be undertaken.\n\n\n (h) Earthquake Report. Lender shall have received and approved\nfrom licensed engineers acceptable to Lender, reports with respect to the\nProperties designated by Lender stating the maximum probable loss to such\nProperty resulting from seismic events. The reports should include, but shall\nnot be limited to, a soil analysis, structural analysis, and soil-structure\ninteraction analysis, proximity to known faults and seismic history.\n\n\n (i) Title Insurance. Borrower shall have delivered to Lender\nsurveys acceptable to Lender and lender's A.L.T.A. extended coverage policies of\ntitle insurance with Form 1 coverage, together with such endorsements and\nreinsurance as required by Lender (such policies, endorsements and reinsurance\nbeing hereinafter referred to as the \"Title Policies\"), in the amount of the\nLoan and issued by First American Title Insurance Company (the \"Title Company\"),\nfully paid and in form and substance reasonably satisfactory to Lender, insuring\nthat Borrower is the owner of the Properties in fee simple, and that the\nMortgages are valid first liens on the Properties in favor of Lender, free and\nclear of all liens, encumbrances and exceptions to title whatsoever, other than\n(i) current real property taxes not delinquent, and (ii) such exceptions to\ntitle which appear in the final Title Policies accepted by Lender in connection\nwith the closing of the Loan (excepting therefrom all pre-printed and\/or\nstandard exceptions) or as are otherwise approved in writing by Lender\n(collectively, the \"Permitted Exceptions\"). The Title Policies shall effect full\ncoverage against losses arising out of encroachments on boundary, setback lines\nor easements, against losses from existing mechanics' or materialmen's liens and\nsubsequent mechanics' and materialmen's liens which may gain priority over the\nMortgages and against such other losses with respect to which Lender may request\ncoverage, and shall be issued without any creditors' rights exception, general\nsurvey exception, or general exception as to rights of parties in possession.\nThe title insurance policy shall include, in addition to all coverages required\nby Lender after review of title matters, the following endorsements (if\navailable in the jurisdiction of the Property) or coverages: ALTA Form 9\ncomprehensive endorsements; ALTA Form 3.1 zoning completed structure (with\nparking) endorsement; omission of creditors' rights exclusion; damage to\nimprovements situated on easements (similar to CLTA 103.1 and 103.3); access\nendorsement (similar to CLTA Form 103.7); contiguity endorsement (similar to\nCLTA Form 116.4), Aggregation Endorsement (ALTA Form 12), First Loss\nEndorsement, and where appropriate; separate tax lot endorsement; survey\nreading, and land same as survey endorsement (similar to CLTA Form 116.1);\nSubdivision Map Act (CLTA 116.7); usury endorsement; variable rate loan\nendorsement; mechanic's lien coverage; gap coverage; tie-in coverage, a waiver\nof arbitration; and such other endorsements as Lender may require.\n\n\n (j) Survey. Borrower shall have furnished to Lender four (4)\ncopies of a survey with respect to each of the Properties (i) prepared and dated\nnot more than two (2) months prior to the Closing Date by a registered surveyor\nreasonably satisfactory to Lender, (ii) certified as correct and otherwise\nmeeting the detailed survey requirements set forth in Attachment 2 of the Loan\nCommitment, and (iii) sufficient to allow the Title Company to issue the Title\nPolicy without a general survey exception.\n\n 20\n\n \n (k) UCC-3 Certificate; Litigation and Bankruptcy Searches.\nLender shall have received a Certificate(s) of the Secretary of State of each\nstate in which the Properties are located responding to a UCC-3 Request(s) for\nInformation and certifying that there is not on file with the Secretary of\nState's Office any effective financing statements, statements of assignments,\nfederal or state tax liens, attachment liens or other security interests\nperfectible by the filing of a UCC-1 financing statement with respect to\nBorrower, Guarantor, the Collateral or the Properties. Lender shall also have\nreceived litigation and bankruptcy searches with respect to Borrower and\nGuarantor in each county in which any of the Properties are located as Lender\nshall require.\n\n\n (l) Documents. Lender shall have received from Borrower, such\ncertificates, opinions and other documents as Lender may reasonably request and\nas are consistent with the provisions of this Agreement and the other Loan\nDocuments, including, but not limited to, documents evidencing the organization,\nexistence and authority of Borrower and Guarantor, and the authority of the\npersons executing this Agreement and the other Loan Documents to execute the\nsame for and on behalf of Borrower and Guarantor.\n\n\n (m) Insurance. Borrower shall have delivered to Lender an\noriginal ACORD 27 (Evidence of Property Insurance) and an ACORD 25 (Certificate\nof Insurance) or other Lender approved equivalent listing all coverages and\npolicies of insurance for the Properties as required by Article IV of this\nAgreement.\n\n\n (n) Appraisal. Lender shall have received a third-party MAI\nappraisal of each of the Properties satisfactory to Lender in its sole\ndiscretion.\n\n\n (o) Consents. Borrower shall have furnished to Lender evidence\nreasonably satisfactory to Lender establishing that Borrower has obtained or\nwill apply for in a timely manner and in the ordinary course of business all\nconsents, permits and approvals from any and all Governmental Authorities having\njurisdiction over Borrower and\/or the Properties, which are required in\nconnection with the Properties.\n\n\n (p) Financial Statements. Lender shall have received\noriginally signed and dated, audited annual financial statements for Guarantor\ndated as of December 31, 1997 and unaudited monthly financial statements for\nGuarantor dated as of September 30, 1998.\n\n\n (q) Payment of Fees and Expenses. Borrower shall have paid to\nLender on or before the Closing Date all fees and the expenses required by\nLender in connection with the Loan as provided in the Loan Commitment.\n\n\n (r) Leases. Borrower shall have provided Lender with copies of\nall leases, concessions, licenses, occupancy agreements, and the like in effect\nwith respect to the Properties (the \"Leases\"), and any amendments and lease\nguarantees thereto, and a schedule (certified by Borrower to be complete and\ncorrect) setting forth the income, rents, prepaid rentals, security deposits,\nguarantees or evidence of security or guarantee paid or given in connection\ntherewith, expiration dates, extension options and all other information\npertaining to such leases as Lender shall require. Borrower shall cause all\ntenants, concessionaires, licensees, occupants, and the like to provide estoppel\ncertificates and, if required by Lender, shall obtain lease\n\n 21\n\n \nsubordination\/attornment agreements (which certificates and agreements shall be\nin form and substance acceptable to Lender in its sole discretion). Borrower and\nGuarantor shall have exercised (i) their best commercially reasonable efforts to\ncause to be provided to Lender estoppel certificates (in the form set forth as\nExhibit E hereto and made a part hereof) acceptable to Lender from all tenants\nin respect of the Properties, and (ii) in any event, cause to be provided to\nLender and the Rating Agencies estoppel certificates acceptable to Lender and\nthe Rating Agencies in respect of the leased premises set forth on Schedule 2\nattached hereto and made a part hereof (collectively, the \"Major Tenants\") and\nfrom tenants other than the Major Tenants which represent at least seventy\npercent (70%) of the rentable improved square footage (exclusive of the square\nfootage attributable to the Major Tenants). Notwithstanding the foregoing, in\nconnection with that certain Property located in Chicago, Illinois (identified\nas Property #67 on Exhibit A), Borrower shall deliver estoppels from Tenants\nrepresenting not less than 50% of the net rentable space of such Property. With\nrespect to all remaining tenants, Borrower shall furnish an estoppel for such\ntenants' occupancy. In addition, Borrower and Guarantor shall have exercised\ntheir best commercially reasonable efforts to cause to be provided to Lender\nSubordination, Non-Disturbance and Attornment Agreements in the form set forth\nas Exhibit F attached hereto and made a part hereof, from certain tenants as\ndesignated in writing by Lender. All present Leases and all amendments,\nmodifications or terminations of any Leases, shall be subject to Lender's\napproval.\n\n\n (s) Management Agreements. Borrower shall have provided Lender\nwith copies of all management agreements in effect at the Properties (the\n\"Management Agreements\"), which shall be in form and substance reasonably\nacceptable to Lender and with managers (collectively, the \"Manager\") acceptable\nto Lender. Borrower shall cause the Manager to consent to the assignment by\nBorrower of the Management Agreements to Lender, and to subordinate the\nManagement Agreements (and all payments thereunder) to the Loan Documents,\npursuant to an agreement in form and substance acceptable to Lender.\n\n\n (t) Cash Management Agreement. Borrower shall have executed\nand delivered the Cash Management Agreement to Lender and Borrower shall have\ncomplied with all of the requirements set forth in the Cash Management\nAgreement.\n\n\n (u) Reserve Accounts. Borrower shall have established all of\nthe impound and reserve accounts with Lender as required in Article IX.\n\n\n (v) Enforceability Opinions of Borrower's Counsel. Borrower\nshall furnish Lender (or cause to be furnished at Borrower's expense) an opinion\nof legal counsel from attorneys admitted to practice in each and all of the\nrespective states in which any of the Properties are located and shall also\nfurnish an opinion from an attorney admitted to practice in the State of New\nYork (which shall be the State governing the contractual obligations hereunder\nand under the Loan Documents, except as otherwise specifically provided in the\nLoan Documents), each of whom shall be retained by Borrower and acceptable to\nLender, which opinions shall be in form and substance acceptable to Lender. Said\nopinions shall be dated as of the Closing Date, and shall cover, without\nlimitation, the following matters:\n\n\n (i) the due organization, valid legal existence and good\nstanding of Borrower and Guarantor;\n\n 22\n\n \n (ii) the due authorization, execution, delivery,\nvalidity, binding effect and enforceability of the Loan Documents, guaranties,\nand indemnification agreements (including, without limitation, choice of law)\nin accordance with their terms; (iii) that the Loan complies with applicable\nusury laws;\n\n\n (iv) the existence of, or the nonexistence of, any \nrequirement for any consent of any governmental authority in connection\nwith the execution, delivery or performance of the Loan Documents, guaranties,\nand indemnification agreements;\n\n (v) the fact that the Loan Documents, guaranties, and\nindemnification agreements and the execution thereof and the performance of the \nobligations thereunder do not conflict with or violate any applicable laws, \nagreements or restrictions;\n\n\n (vi) that the Mortgages are in form sufficient to\ncreate a lien on the Properties in favor of the trustee thereunder for the\nbenefit of Lender as beneficiary and the security agreement contained in each\nMortgage is in form sufficient to create a lien to the Collateral in favor of\nLender; and\n\n\n (vii) such other matters incident to the Loan as\nLender may request.\n\n\n (w) Bankruptcy Nonconsolidation Opinion. Borrower shall\nfurnish an opinion of counsel acceptable to Lender, dated as of the Closing\nDate, that the assets of Borrower (and its partners or members and, if\napplicable, any affiliated Manager) will not be substantially consolidated with\nthe assets of any other affiliated person or entity, including, without\nlimitation, Guarantor or any partner or member of Borrower, if any, in the event\nof a bankruptcy or insolvency proceeding of any such person or entity.\n\n\n (x) No Material Adverse Change. Borrower shall have delivered\nto Lender written certification, dated as of the Closing Date, and Lender shall\nbe independently satisfied, as to the following matters: (i) from and after the\ndate of any inspection of the Properties acceptable to Lender, no portion\nthereof shall (1) have been damaged and not repaired to Lender's satisfaction,\n(2) have been taken in condemnation or other like proceedings, or (3) have\nbecome the subject of any pending condemnation proceeding or litigation; (ii)\nthe Properties have not been impaired and the values of the Properties have not\nbeen reduced and are free from settling and other structural defects; (iii) from\nand after the date of the Loan application, neither Borrower nor any general\npartner, member, shareholder or principal of Borrower, nor any Guarantor nor any\nProperty, has been involved in any action or proceeding (criminal or civil)\nwhich materially and adversely affects the Properties or Borrower's (or\nGuarantor's, as applicable) ability to repay the Loan (in each case as\ndetermined by Lender), or any bankruptcy, reorganization, insolvency or similar\nproceeding; and (iv) from and after the date of the most recent financial\nstatements for such person or entity delivered to Lender, no material adverse\nchange has occurred with respect to Borrower, Guarantor or any other person\n(provided, however, if the Guarantor incurs debt unrelated to the Properties, no\nadverse change shall be deemed to have occurred).\n\n\n (y) [Intentionally Deleted].\n\n 23\n\n \n (z) Funding of Deposits. All amounts required to be deposited\nby Borrower under the Loan Documents have been deposited and are held by or on\nbehalf of Lender, and there are no deficiencies with respect thereto.\n\n\n ARTICLE IV\n\n INSURANCE\n\n\n 4.1 Insurance. Borrower shall, at Borrower's expense, maintain in force\nand effect on each Property in the Property Pool at all times the following\ninsurance:\n\n\n (a) Insurance against loss or damage to each Property by fire,\nwindstorm, tornado and hail and against loss and damage by such other, further\nand additional risks as may be now or hereafter embraced by an \"all-risk\" or\n\"special form\" form of insurance policy. The amount of such insurance shall be\nnot less than one hundred percent (100%) of the full replacement cost (insurable\nvalue) of the Improvements (as established by an MAI appraisal) situated on such\nProperty, without reduction for depreciation, provided, however, that such\ninsurance may be carried under blanket insurance policies approved by Lender\ncovering the Properties and other properties with liability limits of less than\nthe aggregate replacement cost of all Improvements as long as Lender has\nreasonably determined that the amount of such insurance is adequate under the\ncircumstances. Full replacement cost, as used herein, means, with respect to\neach of the Improvements, the cost of replacing such Improvements without regard\nto deduction for depreciation, exclusive of the cost of excavations, foundations\nand footings below the lowest basement floor. Borrower shall also maintain\ninsurance against loss or damage to such furniture, furnishings, fixtures,\nequipment and other items (whether personalty or fixtures) included in such\nProperty and owned by Borrower from time to time, to the extent applicable, in\nthe amount of the cost of replacing the same. The maximum deductible for any\nProperty covered by such policy shall be $100,000.00, or as consented to by\nLender, such consent not to be unreasonably withheld.\n\n\n (b) Commercial General Liability Insurance against claims for\npersonal injury, bodily injury, death and property damage occurring on, in or\nabout each of the Properties in amounts not less than $1,000,000.00 per\noccurrence and $2,000,000.00 in the aggregate plus umbrella coverage in an\namount not less than $100,000,000.00. During any construction on the respective\nProperty, Borrower's general contractor for such construction shall also provide\nthe insurance, on a primary basis only, as required in this Subsection (b).\nLender hereby retains the right to periodically review the amount of said\nliability insurance being maintained by Borrower and to require an increase in\nthe amount of said liability insurance should Lender deem an increase to be\nreasonably prudent under then existing circumstances.\n\n\n (c) Boiler and machinery insurance is required if steam\nboilers or other pressure-fired vessels are in operation at the Property.\nMinimum liability coverage per accident must equal the replacement cost\n(insurable value) of the Improvements housing such boiler or pressure-fired\nmachinery.\n\n 24\n\n \n (d) If the Improvements or any part thereof are situated in an\narea now or subsequently designated by the Federal Emergency Management Agency\n(\"FEMA\") as a special flood hazard area (Zone A or Zone V), flood insurance in\nan amount equal to the minimum amount required, under the terms of coverage, to\ncompensate for any damage or loss on a replacement basis (or the unpaid balance\nof the Allocated Loan Amount for such Property if replacement cost coverage is\nnot available for the type of building insured). The flood insurance requirement\nwill be waived if: (A) although a portion of the land may be in the Special\nFlood Hazard Area, no portion of the Improvements situated on such land are in\nthe Special Flood Hazard Area; or (B) Lender receives a letter from FEMA stating\nthat its maps have been amended so that the Property is no longer in a Special\nFlood Hazard Area. In the event there occurs, from time to time, any loss on any\nproperty which is not part of the Property Pool and which loss reduces the\nannual aggregate coverage available for claim payments under Borrower's blanket\ninsurance policies, Borrower agrees that it shall repurchase, from time to time,\nthe amount of insurance necessary to provide the required coverages under this\nArticle IV within thirty (30) days after the occurrence of such loss.\n\n\n (e) During the period of any construction, renovation or\nalteration of the Improvements which exceeds the lesser of 10% of the principal\namount of the Allocated Loan Amount for such Property or $500,000.00, at\nLender's request, a completed value, \"All Risk\" Builder's Risk form, or \"Course\nof Construction\" insurance policy in non-reporting form, in an amount approved\nby Lender, may be required. During the period of any construction of any\naddition to the existing Improvements, a completed value, \"All Risk\" Builder's\nRisk form or \"Course of Construction\" insurance policy in non-reporting form, in\nan amount approved by Lender, shall be required. These requirements may be met\nby an endorsement to the policy described in Section 4.1(a). In the event there\noccurs, from time to time, any loss on any property which is not part of the\nProperty Pool and which loss reduces the annual aggregate coverage available for\nclaim payments under Borrower's blanket insurance policies, Borrower agrees that\nit shall repurchase, from time to time, the amount of insurance necessary to\nprovide the required coverages under this Article IV within thirty (30) days\nafter the occurrence of such loss.\n\n\n (f) When required by any applicable Governmental Authority or\nGovernmental Rule, Worker's Compensation and Employer's Liability Insurance\ncovering all persons subject to the workers' compensation laws of the state in\nwhich the applicable Property is located.\n\n\n (g) Rent loss insurance in amounts sufficient to compensate\nBorrower for all income losses incurred from insured perils during a period of\nnot less than eighteen (18) months. The amount of coverage shall be adjusted\nannually to reflect any increase in the current rent levels payable during the\nsucceeding twelve-(12) month period. In addition, Borrower shall maintain rent\nloss insurance of not less than $10,000,000, with no annual aggregate, to\ncompensate Borrower for all income loss incurred from earthquake loss (whether\nor not Borrower maintains earthquake insurance) during a period of not less than\neighteen (18) months.\n\n\n (h) Sinkhole, Mine Subsidence and\/or Earthquake insurance\nshall be required in the amount of $50,000,000 for those Properties (including\nall other real property owned by Borrower and encumbered by other deeds of trust\nor mortgages securing the Loan) located within \n\n 25\n\n \nCalifornia, to the extent that such coverage is available at commercially\nreasonable rates. The earthquake insurance policy shall have a deductible of not\nmore than five percent (5%) or such greater amount as may be commercially\nreasonable under the then-existing circumstances. Lender agrees that Borrower\nshall not be required to carry earthquake insurance with respect to the Ground\nLeased Properties.\n\n (i) Environmental insurance, which shall not be required as of\nthe Closing Date but if subsequently required for any of the Properties, must be\nfrom a carrier and in form and substance satisfactory to Lender and the Rating\nAgencies and must provide protection for preexisting, but undetected,\nenvironmental contamination, as well as for liabilities resulting from\ncontamination that occurs during the policy term.\n\n\n (j) Such other insurance on the Property or on any replacements\nor substitutions thereof or additions thereto as may from time to time be\nrequired by Lender against other insurable hazards or casualties which at the\ntime are commonly insured against in the case of property similarly situated,\ndue regard being given to the height and type of buildings, their\nconstruction, location, use and occupancy.\n\n\n (1) All such insurance shall (i) be with insurers\nfully licensed and authorized to do business in the state within which such\nProperty is located (other than insurers providing coverage for loss as a result\nof earthquake in California) and who have and maintain a rating of (A) at least\n\"A\" if rated by DCR, and if not rated by DCR, then similarly rated by two\nnationally recognized statistical rating agencies, and (B) at least \"A2\" if\nrated by Moody's; (ii) contain the complete address of the Property (or a\ncomplete legal description); (iii) be for terms of at least one year; (iv) be\nsubject to the reasonable approval of Lender as to insurance companies, amounts,\ncontent, forms of policies, method by which premiums are paid and expiration\ndates; and (v) include EXACTLY the following standard, non-contributory,\nmortgagee clause naming:\n\n Prudential Mortgage Capital Company, Inc.,\n\n its successors and assigns ATIMA\n\n c\/o Prudential Mortgage Loan Servicing\n\n P.O. Box 10387\n Van Nuys, California 91401,\n\n\n\n(A) as an additional insured under all liability (primary and excess liability)\ninsurance policies, (B) as the first mortgagee on all property insurance\npolicies, and (C) as the lender's loss payee on all loss of rents or loss of\nbusiness income insurance policies.\n\n\n Borrower shall deliver to Lender evidence that said insurance\npolicies have been obtained as required above and certified copies of such\ninsurance policies and original certificates of insurance signed by an\nauthorized agent of the applicable insurance companies evidencing such insurance\nsatisfactory to Lender. Borrower shall renew all such insurance and \n\n 26\n\n \ndeliver to Lender certificates evidencing such renewals at least twenty\n(20) days before any such insurance shall expire and deliver originals or\ncertified copies of the insurance policies within sixty (60) days of the\neffective date of such policies. Borrower further agrees that each such\ninsurance policy: (i) shall provide for at least thirty (30) days' prior written\nnotice to Lender prior to any policy reduction or cancellation for any reason;\n(ii) shall contain an endorsement or agreement by the insurer that any loss\nshall be payable to Lender in accordance with the terms of such policy\nnotwithstanding any act or negligence of Borrower which might otherwise result\nin forfeiture of such insurance; (iii) shall waive all rights of subrogation\nagainst Lender; and (iv) may be in the form of a blanket policy. The blanket\npolicy must properly identify and fully protect the applicable Properties as if\na separate policy were issued for 100% of replacement cost at the time of loss\nand otherwise meet all of Lender's applicable insurance requirements set forth\nin this Article IV. Borrower represents that it has, and covenants that it shall\nmaintain throughout the term of the Loan, an ordinance or law coverage\nendorsement for any Property or Improvements which constitute a legal\nnon-conforming use under applicable building, zoning or land use laws or\nordinances, which endorsement will contain Coverage A: \"Loss Due to Operation of\nLaw\" (with a minimum liability limit equal to Replacement Cost With Agreed Value\nEndorsement established at no less than 150% of the Allocated Loan Amount for\nsuch Property), Coverage B: \"Demolition Cost\" and Coverage C: \"Increased Cost of\nConstruction\" coverages. The delivery to Lender of the insurance policies (if\nrequired by Lender) or the certificates of insurance as provided above shall\nconstitute an assignment of all proceeds payable under such insurance policies\nrelating to such Properties by Borrower to Lender as further security for the\nLoan and to be applied or disbursed as provided in the Mortgages. In the event\nof foreclosure of the applicable Mortgage, or other transfer of title to the\nsubject Property in extinguishment in whole or in part of the Loan, all right,\ntitle and interest of Borrower in and to all proceeds payable under such\npolicies then in force concerning the subject Property shall thereupon vest in\nthe purchaser at such foreclosure, or in Lender or other transferee in the event\nof such other transfer of title. Approval of any insurance by Lender shall not\nbe a representation of the solvency of any insurer or the sufficiency of any\namount of insurance. In the event Borrower fails to provide, maintain, keep in\nforce or deliver and furnish to Lender the policies of insurance required by\nthis Article IV or evidence of their renewal as required herein, Lender may, but\nshall not be obligated to, procure such insurance and Borrower shall pay all\namounts advanced by Lender therefor, together with interest thereon at the\nDefault Interest Rate from and after the date advanced by Lender until actually\nrepaid by Borrower, promptly upon demand by Lender. Any amounts so advanced by\nLender, together with interest thereon, shall be secured by the Mortgages and by\nall of the other Loan Documents securing all or any part of the Loan. Lender\nshall not be responsible for nor incur any liability for the insolvency of the\ninsurer or other failure of the insurer to perform, even though Lender has\ncaused the insurance to be placed with the insurer after failure of Borrower to\nfurnish such insurance. If Borrower shall obtain insurance for the Properties in\naddition to that required by Lender, Borrower agrees that it shall name Lender\nas an additional insured on such additional insurance and shall provide Lender\nwith complete copies of all policies evidencing such insurance.\n\n 27\n\n \n ARTICLE V\n\n REPRESENTATIONS AND WARRANTIES\n\n\n 5.1 Warranties of Borrower. Borrower, for itself and its successors and\nassigns, does hereby represent, warrant and covenant to and with Lender, its\nsuccessors and assigns, that:\n\n\n (a) Organization and Existence. Borrower is duly organized and\nvalidly existing as a limited liability company in good standing under the laws\nof the State of Delaware and in all other jurisdictions in which any Property is\nlocated or in which Borrower is transacting business. Borrower has the power and\nauthority to execute, deliver and perform the obligations imposed on it under\nthe Loan Documents and to consummate the transactions contemplated by the Loan\nDocuments.\n\n\n (b) Authorization. Borrower has taken all necessary actions\nfor the authorization of the borrowing on account of the Loan, and for the\nexecution and delivery of the Loan Documents, including, without limitation,\nthat those members of Borrower whose approval is required by the terms of\nBorrower's organizational documents have duly approved the transactions\ncontemplated by the Loan Documents and have authorized execution and delivery\nthereof by the respective signatories. To the best of Borrower's knowledge, no\nother consent by any local, state or federal agency is required in connection\nwith the execution and delivery of the Loan Documents.\n\n\n (c) Valid Execution and Delivery. All of the Loan Documents\nrequiring execution by Borrower have been duly and validly executed and\ndelivered by Borrower.\n\n\n (d) Enforceability. All of the Loan Documents constitute\nvalid, legal and binding obligations of Borrower and are fully enforceable\nagainst Borrower in accordance with their terms by Lender and its successors,\ntransferees and assigns, subject only to bankruptcy laws, creditors' rights, and\ngeneral principles of equity.\n\n\n (e) No Defenses. The Note, the Mortgages and the other Loan\nDocuments are not subject to any right of rescission, set-off, counterclaim or\ndefense, nor would the operation of any of the terms of the Note, the Mortgages\nor any of the other Loan Documents, or the exercise of any right thereunder,\nrender such documents unenforceable, in whole or in part, or subject to any\nright of rescission, set-off, counterclaim or defense, including the defense of\nusury.\n\n\n (f) Defense of Usury. Borrower knows of no facts that would\nsupport a claim of usury to defeat or avoid its obligation to repay the\nprincipal of, interest on, and other sums or amounts due and payable under, the\nLoan Documents.\n\n\n (g) No Conflict\/Violation of Law. The execution, delivery and\nperformance of the Loan Documents by Borrower will not cause or constitute a\ndefault under or conflict with the organizational documents of Borrower, any\nGuarantor or any general partner or managing member of Borrower or any\nGuarantor. The execution, delivery and performance of the obligations imposed on\nBorrower under the Loan Documents will not cause Borrower to be in default,\nincluding after due notice or lapse of time or both, under the provisions of any\nagreement, judgment or order to which Borrower is a party or by which Borrower\nis bound.\n\n 28\n\n \n (h) Compliance with Applicable Laws and Regulations. All of\nthe Improvements and the use of the Properties by Borrower comply with, and\nshall remain in compliance with, all applicable statutes, rules, regulations and\nprivate covenants now or hereafter relating to the ownership, construction, use\nor operation of the Properties, including all applicable statutes, rules and\nregulations pertaining to requirements for equal opportunity,\nanti-discrimination, fair housing, environmental protection, zoning (including,\nwithout limitation, parking requirements) and land use, and no notices of\nviolation or non-compliance have been issued by any Governmental Authority\nrelating to any of the foregoing that remain outstanding. All of the\nImprovements comply with, and shall remain in compliance with, applicable\nhealth, fire and building codes. There is no evidence of any illegal activities\nrelating to controlled substances on any of the Properties. All certifications,\npermits, licenses and approvals, including, without limitation, certificates of\ncompletion and occupancy permits required for the legal use, occupancy and\noperation of the Properties as currently conducted have been obtained and are in\nfull force and effect. All of the Improvements comply with all material\nrequirements of any applicable zoning and subdivision laws and ordinances, and\nno Improvements (other than the Improvements located at 210 Fallon Street,\nOakland, California (identified as Property #73 on Exhibit A attached hereto),\nthe Improvements located at 324 West Blueridge, Orange, California (identified\nas Property #42 on Exhibit A attached hereto), the Improvements located at 12865\nAnn Street, Santa Fe Springs, California (identified as Property #77 on Exhibit\nA attached hereto), the Improvements located at 1200 Edinger Avenue, Tustin,\nCalifornia (identified as Property #44 on Exhibit A attached hereto), the\nImprovements located at 14352 Franklin Avenue, Tustin, California (identified as\nProperty #45 on Exhibit A attached hereto), the Improvements located at 1311\nEast Valencia, Tustin, California (identified as Property #64 on Exhibit A\nattached hereto), the Improvements located at 1361 Valencia, Tustin, California\n(identified as Property #65 on Exhibit A attached hereto), the Improvements\nlocated at 15222 Del Amo, Tustin, California (identified as Property #66 on\nExhibit A attached hereto), the Improvements located at 1100 Edinger St.,\nTustin, California (identified as Property #72 on Exhibit A attached hereto) and\nfor which Properties Borrower has law and ordinance insurance coverage),\nconstitute a legal nonconforming use under any of such laws and ordinances.\n\n\n (i) Consents Obtained. All consents, approvals,\nauthorizations, orders or filings with any court or governmental agency or body,\nif any, required for the execution, delivery and performance of the Loan\nDocuments by Borrower have been obtained or made.\n\n\n (j) No Litigation. There are no pending actions, suits or\nproceedings, arbitrations or governmental investigations against any of the\nProperties, Borrower, or Guarantor, an adverse outcome of which would materially\naffect Borrower's performance under the Note, the Mortgages, or the other Loan\nDocuments.\n\n\n (k) Title. Borrower has good, marketable and indefeasible fee\nsimple title to all of the Land and all Improvements thereon (but subject to the\nterms of the leases for the Ground Leased Properties which may limit Borrower's\ninterest to certain Improvements to a conditional future interest), subject only\nto the Permitted Exceptions. Except for the Permitted Exceptions, the possession\nof each of the Properties is peaceful and undisturbed and title thereto is not\ndisputed or questioned to the best of Borrower's knowledge. Further, Borrower\nhas full power and lawful authority to grant, bargain, sell, convey, assign,\ntransfer, encumber and mortgage its interest in the Properties under the Loan\nDocuments. Borrower will preserve its \n\n 29\n\n \ninterest in and title to the Properties and will warrant and defend the\nsame to Lender against any and all claims whatsoever and will warrant and defend\nthe validity and priority of the lien and security interest created under the\nLoan Documents against the claims of all persons and parties whomsoever, subject\nto the Permitted Exceptions. The foregoing warranty of title shall survive the\nforeclosure of the applicable Mortgage and shall inure to the benefit of and be\nenforceable by Lender in the event Lender acquires title to such Property\npursuant to any foreclosure.\n\n\n (l) Permitted Exceptions. The Permitted Exceptions do not and\nwill not materially and adversely affect (1) the ability of Borrower to pay in\nfull the principal and interest on the Note in a timely manner or (2) the use of\nthe applicable Property for the use currently being made thereof, the operation\nof the applicable Property as currently being operated or the value of the\napplicable Property other than as reflected in the appraisals of the Properties.\n\n\n (m) First Lien. Except with respect to the Gillette Property\nand to the GATX-Stockton Property, upon the execution by Borrower and the\nrecording of the Mortgages, and upon the execution and filing of UCC-1 financing\nstatements or amendments thereto, Lender will have a valid first lien on each of\nthe Properties and a valid first security interest in all Collateral, subject to\nno liens, charges or encumbrances other than the Permitted Exceptions. No\nProperty secures any indebtedness or obligation other than as created under or\npursuant to the Loan Documents and for taxes and assessments not yet delinquent.\n\n\n (n) ERISA. Borrower has made and shall continue to make all\nrequired contributions to all employee benefit plans, if any, and Borrower has\nno knowledge of any material liability which has been incurred by Borrower which\nremains unsatisfied for any taxes or penalties with respect to any employee\nbenefit plan or any multi-employer plan, and each such plan has been\nadministered in compliance with its terms and the applicable provisions of the\nEmployee Retirement Income Security Act of 1974, as amended (\"ERISA\") and any\nother federal or state law.\n\n\n (o) Contingent Liabilities. Borrower has no known material \ncontingent liabilities.\n\n\n (p) No Other Obligations. Borrower has no material financial\nobligation under any indenture, mortgage, loan agreement or other agreement or\ninstrument to which Borrower is a party or by which Borrower or any of the\nProperties is otherwise bound, other than obligations incurred in the ordinary\ncourse of the operation of such Property and other than obligations under the\nMortgages and the other Loan Documents.\n\n\n (q) Fraudulent Conveyance. Borrower (i) has not entered into\nthe Loan or any Loan Document with the actual intent to hinder, delay, or\ndefraud any creditor and (ii) received fair value in exchange for its\nobligations under the Loan Documents. Giving effect to the Loan contemplated by\nthe Loan Documents, the fair saleable value of the Borrower's assets exceed and\nwill, immediately following the execution and delivery of the Loan Documents,\nexceed Borrower's total liabilities, including, without limitation,\nsubordinated, unliquidated, disputed or contingent liabilities. The fair\nsaleable value of Borrower's assets is and will, immediately following the\nexecution and delivery of the Loan Documents, be greater than Borrower's\nprobable liabilities, including the maximum amount of its contingent liabilities\nor its debts as \n\n 30\n\n \nsuch debts become absolute and matured. Borrower's assets do not and,\nimmediately following the execution and delivery of the Loan Documents will not,\nconstitute unreasonably small capital to carry out its business as conducted or\nas proposed to be conducted. Borrower does not intend to, and does not believe\nthat it will, incur debts and liabilities (including, without limitation,\ncontingent liabilities and other commitments) beyond its ability to pay such\ndebts as they mature (taking into account the timing and amounts to be payable\non or in respect of obligations of Borrower).\n\n (r) Investment Company Act. Borrower is not: (i) an\n\"investment company\" or a company \"controlled\" by an \"investment company,\"\nwithin the meaning of the Investment Company Act of 1940, as amended; (ii) a\n\"holding company\" or a \"subsidiary company\" of a \"holding company\" or an\n\"affiliate\" of either a \"holding company\" or a \"subsidiary company\" within the\nmeaning of the Public Utility Holding Company Act of 1935, as amended; or (iii)\nsubject to any other federal or state law or regulation which purports to\nrestrict or regulate its ability to borrow money.\n\n\n (s) Access\/Utilities. Each of the Properties has adequate\nrights of access to public ways and is served by adequate water, sewer, sanitary\nsewer and storm drain facilities. All public utilities necessary to the\ncontinued use and enjoyment of each of the Properties as presently used and\nenjoyed are located in the public right-of-way abutting such Property, and all\nsuch utilities are connected so as to serve such Property without passing over\nother property or, if such utilities must cross other property, Borrower holds\neasements for such utilities that are insured by the Title Policy insuring the\nlien of the Mortgage on the Property. Except for the Gillette Property and the\nGATX-Stockton Property, all streets, roads, highways, bridges and waterways\nnecessary for access to and full use, occupancy, operation and disposition of\nthe Land and the Improvements have been completed, have been dedicated and\naccepted by the appropriate municipal authority and are open and available to\nthe land and the Improvements without further condition or cost to Borrower.\n\n\n (t) Taxes Paid. Borrower has filed or has caused to be filed\nall federal, state, county and municipal tax returns required to have been filed\nby Borrower, and has paid, or has caused to be paid, all taxes which have become\ndue pursuant to such returns or to any notice of assessment received by Borrower\n, and Borrower has no knowledge of any basis for additional assessment with\nrespect to such taxes. Further, each of the Properties is free from delinquent\nwater charges, sewer rents, taxes and assessments.\n\n\n (u) Single Tax Lot. Except as disclosed in the Title Policies,\neach Property consists of a single lot or multiple tax lots; other than the\nGATX-Woodridge Property, no portion of said tax lot(s) covers property other\nthan the applicable Property or a portion of the applicable Property and no\nportion of such Property lies in any other tax lot.\n\n\n (v) Special Assessments. To Borrower's knowledge, there are no\npending or, proposed special or other assessments for public improvements or\notherwise affecting any of the Properties, nor, to the knowledge of Borrower,\nare there any contemplated improvements to any of the Properties that may result\nin such special or other assessments.\n\n 31\n\n \n (w) Flood Zone. Except as disclosed in Schedule 5.1(w), none\nof the Improvements are located in a special flood hazard area as defined by the\nFederal Insurance Administration.\n\n\n (x) Seismic Exposure. Each Property is either not located in\nZone 3 or Zone 4 of the \"Seismic Zone Map of the U.S.\" or all assumptions and\nassessments of the applicable Improvements set forth in the seismic study of\nsuch Improvements submitted to Lender are true and correct in all material\nrespects and show a probable maximum loss (as a percentage of the current\nbuilding replacement cost and based on a 50 year building life expectancy\nperiod) of less than 15%, with the exception of Properties #68, #69, #70 and #71\nas identified on Exhibit A attached hereto.\n\n\n (y) Misstatements of Fact. No statement of fact made in the\nLoan Documents contains any untrue statement of a material fact or omits to\nstate any material fact necessary to make statements contained herein or therein\nnot misleading. There is no material fact presently known to Borrower which has\nnot been disclosed which adversely affects, nor as far as Borrower can foresee,\nmight adversely affect the business, operations or condition (financial or\notherwise) of Borrower.\n\n\n (z) Condition of Improvements. To the knowledge of the\nBorrower, and except as disclosed in the Property Condition Reports or otherwise\ndisclosed in writing to Lender: none of the Properties has been damaged by fire,\nwater, wind or other cause of loss which damage has not been fully restored; all\nof the Improvements are structurally sound, in good repair and free of defects\nin materials and workmanship and have been constructed and installed in\nsubstantial compliance with the plans and specifications relating thereto; and\nall major building systems located within the Improvements, including, without\nlimitation, the heating and air conditioning systems and the electrical and\nplumbing systems, are in good working order and condition.\n\n\n (aa) No Insolvency or Judgment. Neither Borrower, any member\nof Borrower, nor Guarantor is currently (i) the debtor in any completed or\npending bankruptcy, reorganization or insolvency proceeding; or (ii) the subject\nof any judgment unsatisfied of record or docketed in any court of the state in\nwhich any of the Properties are located or in any other court located in the\nUnited States. The proposed Loan will not render Borrower or any member of\nBorrower insolvent. As used in this Agreement, the term \"insolvent\" means that\nthe sum total of all of an entity's liabilities (whether secured or unsecured,\ncontingent or fixed, or liquidated or unliquidated) is in excess of the value of\nall such entity's non-exempt assets, i.e., all of the assets of the entity that\nare available to satisfy claims of creditors.\n\n\n (bb) No Condemnation. No part of any property subject to the\nLoan Documents has been taken in condemnation or other like proceeding to an\nextent which would impair the value of such Property, the Mortgages or the Loan\nor the usefulness of such property for the purposes contemplated by the loan\napplication relating to the Loan, nor is any proceeding pending, or to\nBorrower's knowledge, threatened or contemplated for the partial or total\ncondemnation or taking of any of the Properties.\n\n 32\n\n \n (cc) No Labor or Materialmen Claims. All parties furnishing\nlabor and materials to the Properties have been paid in full with respect to all\namounts currently due and payable and, except for such liens or claims insured\nagainst by the policies of title insurance to be issued in connection with the\nLoan, there are no mechanics', laborers' or materialmen's liens or claims\noutstanding for work, labor or materials affecting any of the Properties,\nwhether prior to, equal with or subordinate to the lien of the applicable\nMortgage.\n\n\n (dd) No Purchase Options. Except as set forth in the Leases,\nno tenant, person, party, firm, corporation or other entity has an option to\npurchase any of the Properties, any portion thereof or any interest therein.\n\n (ee) Leases.\n\n (i) Borrower has delivered a true, correct and\ncomplete schedule (such schedule, together with any attached exhibits, the\n\"Rent Roll\") of all Leases affecting the Properties as of the date thereof,\nwhich accurately and completely sets forth in all material respects for each\nsuch Lease, the following: the name of the tenant, the lease expiration date,\nextension and renewal provisions, the base, additional and percentage rent\npayable, the security deposit held thereunder, the square footage, the building\nname, and suite location.\n\n (ii) Each Lease constitutes the legal, valid and \nbinding obligation of Borrower and, to the best of Borrower's knowledge and\nbelief, is enforceable against the tenant thereof. To the best of Borrower's\nknowledge, except as disclosed in Schedule 5.1(ee)(ii), no default exists, or\nwith the passing of time or the giving of notice or both would exist, under any\nLease which would, in the aggregate, have a material adverse effect on Borrower\nor the Property.\n\n (iii) Except as disclosed in Schedule 5.1(ee)(iii), \nno tenant under any Lease has, as of the date hereof, paid base rent more\nthan thirty (30) days in advance, and the rents under such Leases have not been\nwaived, released, or otherwise discharged or compromised.\n\n (iv) Other than the Gillette Property and the \nGATX-Stockton Property, all work to be performed by Borrower under the\nLeases has been substantially performed, all contributions to be made by\nBorrower to the tenants thereunder have been made and all other conditions\nprecedent to each such tenant's obligations thereunder have been satisfied.\n\n (v) Except as disclosed in Schedule 5.1(ee)(v), each\ntenant under a Lease has entered into occupancy of\nthe demised premises.\n\n (vi) Borrower has delivered to Lender true, correct \nand complete copies of all leases described in the Rent Roll.\n\n (vii) To the best of Borrower's knowledge and belief, \neach tenant is free from bankruptcy, reorganization or arrangement\nproceedings or a general assignment for the benefit of creditors.\n\n (viii) No Lease provides any party with the right to\nobtain a lien upon any of the Properties superior to\nthe lien of the Mortgages.\n\n 33\n\n \n (ix) No tenant under any Lease, except as disclosed in\nSchedule 5.1(ee)(ix), is affiliated with Guarantor.\n\n\n (ff) Appraisal. Other than the Gillette Property and the\nGATX-Stockton Property, all requirements and conditions of the appraisals of the\nProperties submitted to Lender, upon which the values of the Properties were\nconditioned, have been fully satisfied.\n\n\n (gg) Boundary Lines. Except as disclosed in the Title\nPolicies, all of the Improvements which were included in determining the\nappraised value of the Properties lie wholly within the boundaries and building\nrestriction lines of the applicable Property, and no improvements on adjoining\nproperties encroach upon such Property, and no easements or other encumbrances\nupon such Property encroach upon any of the Improvements, so as to affect the\nvalue or marketability of such Property except those which are insured against\nby title insurance.\n\n\n (hh) Survey. Each of the surveys of the Properties delivered\nto Lender in connection with the Loan, has been performed by a duly licensed\nsurveyor or registered professional engineer in the jurisdiction in which the\nrelevant Property is situated, is certified to Lender, its successors and\nassigns, and the title insurance company, and is materially in accordance with\nthe most current minimum standards for title surveys as determined by the\nAmerican Land Title Association, with the signature and seal of a licensed\nengineer or surveyor affixed thereto, and does not fail to reflect any material\nmatter affecting such Property or the title thereto. All curb cuts, driveways\nand traffic signals shown on the survey delivered to Lender are existing and\nhave been fully approved by the appropriate governmental authority.\n\n\n (ii) Forfeiture. There has not been and shall never be\ncommitted by Borrower nor, to Borrower's knowledge, has there been any other\nperson in occupancy of or involved with the operation or use of any of the\nProperties, any act or omission affording the federal government or any state or\nlocal government the right of forfeiture as against any of the Properties or any\npart thereof or any monies paid in performance of Borrower's obligations under\nany of the Loan Documents.\n\n\n (jj) No Broker. No financial advisors, brokers, underwriters, \nplacement agents, agents or finders have been dealt with by Borrower in\nconnection with the Loan.\n\n (kk) Conviction of Criminal Acts. Neither Borrower nor \nGuarantor has ever been convicted of a crime and neither is currently the\nsubject of any pending or, to Borrower's knowledge, threatened criminal\ninvestigation or proceeding.\n\n (ll) Security Agreement. There are no security agreements or\nfinancing statements affecting any of the Properties other than (i) as disclosed\nin writing to Lender prior to the date hereof and (ii) the security agreements\nand financing statements created in favor of Lender.\n\n\n (mm) Homestead. None of the Properties form a part of any\nproperty owned, used or claimed by Borrower as a residence or business homestead\nand are exempt from forced sale under the laws of the State in which any of the\nProperties are located. Borrower hereby disclaims and renounces each and every\nclaim to all or any portion of any Property as a \n\n 34\n\n \nhomestead. Each Property is used and occupied for commercial purposes in \naccordance with all applicable laws.\n\n\n ARTICLE VI\n\n ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES\n\n\n 6.1 Representations and Warranties. Borrower hereby represents and\nwarrants to Lender that, as of the date hereof, and except as disclosed in the\nenvironmental assessment reports for the Properties delivered to Lender (the\n\"Environmental Reports\") (but without limiting Borrower's liability with respect\nthereto): (a) to the best of Borrower's knowledge, information and belief, none\nof Borrower nor any of the Properties nor any tenant at any of Properties nor\nthe operations conducted thereon is in direct or indirect violation of any\nlocal, state or federal law, rule or regulation or common law duty pertaining to\nhuman health, natural resources or the environment, including, without\nlimitation, the Comprehensive Environmental Response, Compensation and Liability\nAct of 1980 (42 U.S.C. ss.9601 et seq.) as same may be amended \"CERCLA\"), the\nResource Conservation and Recovery Act of 1976 (42 U.S.C. ss.6901 et seq.), the\nFederal Water Pollution Control Act (33 U.S.C. ss.1251 et seq.), the Clean Air\nAct (42 U.S.C. ss.7401 et seq.), the Emergency Planning and\nCommunity-Right-to-Know Act (42 U.S.C. ss.11001 et seq.), the Endangered Species\nAct (16 U.S.C. ss.1531 et seq.), the Toxic Substances Control Act (15 U.S.C.\nss.2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss.651 et\nseq.) and the Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et\nseq.), regulations promulgated pursuant to said laws, all as amended from time\nto time (collectively, the \"Environmental Law\" or \"Environmental Laws\"); (b) no\nhazardous, toxic or harmful substances, wastes, materials, pollutants or\ncontaminants (including, without limitation, asbestos or asbestos-containing\nmaterials, lead based paint, polychlorinated biphenyls, petroleum or petroleum\nproducts or byproducts, flammable explosives, radioactive materials, infectious\nsubstances, radon gas or raw materials which include hazardous constituents) or\nany other substances or materials which are included under or regulated by\nEnvironmental Laws (collectively, \"Hazardous Substances\") are located on, in or\nunder or have been handled, generated, stored, processed or disposed of on or\nreleased or discharged from any of the Properties (including underground\ncontamination), except for those substances used and\/or disposed of by Borrower\nor any tenant in the ordinary course of their respective businesses and in\ncompliance with all Environmental Laws; (c) none of the Properties are subject\nto any private or governmental lien or judicial or administrative notice or\naction arising under Environmental Laws; (d) to Borrower's knowledge,\ninformation or belief, there is no pending nor threatened litigation arising\nunder Environmental Laws affecting Borrower or any of the Properties; there are\nno and have been no existing or closed underground storage tanks or other\nunderground storage receptacles for Hazardous Substances or landfills or dumps\non any of the Properties; (e) Borrower has received no notice of, and to the\nbest of Borrower's knowledge, there exists no investigation, action, proceeding\nor claim by any agency, authority or unit of government or by any third party\nwhich could result in any liability, penalty, sanction or judgment under any\nEnvironmental Laws with respect to any condition, use or operation of any of the\nProperties, nor does Borrower know of any basis for an investigation, action,\nproceeding or claim; (f) Borrower has received no notice of and, to the best of\nBorrower's knowledge, there has been no claim by any party that any use,\noperation or condition of any of the Properties has caused any nuisance or any\nother liability or adverse condition on any other property, nor does Borrower\nknow of any \n\n 35\n\n \nbasis for such an investigation, action, proceeding or claim; and (g) to\nthe best of Borrower's knowledge, radon is not present at any of the Properties\nin excess or in violation of any applicable thresholds or standards or in\namounts that require under applicable law disclosure to any tenant or occupant\nof or invitee to any of the Properties or to any governmental agency or the\ngeneral public. Borrower further represents and warrants that all Environmental\nReports meet the requirements of the American Society for Testing and Materials,\nand if any such report revealed any circumstance or condition with respect to\nany Property that rendered such Property in violation of any Environmental Law,\nthen (1) the same has been remediated in all material respects, (2) sufficient\nfunds have been escrowed for purposes of effecting such remediation or (3)\nBorrower is currently taking action with respect to such circumstances or\nconditions as have been recommended by the Environmental Report or are required\nby the applicable governmental regulatory authority (including implementation of\nan operations and maintenance plan).\n\n 6.2 Notice of Violations Under Environmental Laws. Except as disclosed\nin the Environmental Reports (but without limiting Borrower's liability with\nrespect thereto), Borrower has not received nor to the best of Borrower's\nknowledge, information and belief has there been issued with respect to any of\nthe Properties, any notice, notification, demand, request for information,\ncitation, summons, or order in any way relating to any actual, alleged or\npotential violation or liability arising under Environmental Laws.\n\n\n 6.3 Transportation of Hazardous Substances. None of the Properties, nor\nto the best of Borrower's knowledge, information and belief any property to\nwhich Borrower has, in connection with the maintenance or operation of the\nProperties, directly or indirectly transported or arranged for the\ntransportation of any Hazardous Substances, is listed or, to the best of\nBorrower's knowledge, information and belief, proposed for listing on the\nNational Priorities List promulgated pursuant to CERCLA, on CERCLIS (as defined\nin CERCLA) or on any similar federal or state list of sites requiring\nenvironmental investigation or clean-up.\n\n\n 6.4 Compliance with Environmental Laws. Borrower shall comply with all\napplicable Environmental Laws. Borrower shall keep or cause each of the\nProperties to be kept free from Hazardous Substances (except those substances\nused and\/or disposed of by Borrower or any tenant in the ordinary course of\ntheir respective businesses in compliance with all Environmental Laws) and in\ncompliance with all Environmental Laws. Borrower shall not itself, and shall not\nallow any tenant under any Lease to, install or use any underground storage\ntanks in violation of Environmental Laws, and in all Leases executed after the\nClosing Date, shall expressly prohibit the use, generation, handling, storage,\nproduction, processing and disposal of Hazardous Substances by all tenants in\nquantities or conditions that would violate or give rise to any obligation to\ntake remedial or other action under any applicable Environmental Laws. Borrower\nshall enforce such prohibitions against any Tenant under any Lease. Without\nlimiting the generality of the foregoing, Borrower shall not install in the\nImprovements or permit to be installed in the Improvements any asbestos or\nasbestos-containing material.\n\n\n 6.5 Notice to Lender. Borrower shall promptly notify Lender if Borrower\nshall become aware of (a) the actual or potential existence of any Hazardous\nSubstances on any of the Properties other than those occurring in the ordinary\ncourse of Borrower's or any tenant's business which do not violate Environmental\nLaws, (b) any direct or indirect violation of any Environmental Laws, (c) any\nlien, action or notice affecting any of the Properties or Borrower \n\n 36\n\n \nresulting from any violation or alleged violation of or liability or\nalleged liability under any Environmental Laws, (d) the institution of any\ninvestigation, inquiry or proceeding concerning Borrower or any of the\nProperties pursuant to any Environmental Laws or otherwise relating to Hazardous\nSubstances affecting Borrower or any of the Properties, or (e) the discovery of\nany occurrence, condition or state of facts which would render any\nrepresentation or warranty contained in this Article VI incorrect in any\nmaterial respect if made at the time of such discovery. Immediately upon receipt\nof same, Borrower, shall deliver to Lender copies of any and all requests for\ninformation, complaints, citations, summonses, orders, notices, reports or other\ncommunications, documents or instruments in any way relating to any actual,\nalleged or potential violation or liability of any nature whatsoever arising\nunder Environmental Laws and relating to any of the Properties or to Borrower.\nBorrower shall remedy or cause to be remedied in a timely manner (and in any\nevent within the time period required by applicable Environmental Laws) any\nviolation of Environmental Laws. Without limiting the foregoing, Borrower shall,\npromptly and regardless of the source of the contamination or threat to the\nenvironment or human health, at its own expense, take all actions as shall be\nnecessary or prudent, for the clean-up of any and all portions of the affected\nProperty or other affected property, including, without limitation, all\ninvestigative, monitoring, removal, containment and remedial actions in\naccordance with all applicable Environmental Laws (and in all events in a manner\nsatisfactory to Lender) and shall further pay or cause to be paid, at no expense\nto Lender, all clean-up, administrative and enforcement costs of applicable\ngovernmental agencies which may be asserted against the affected Property. In\nthe event Borrower fails to do so, Lender may, but shall not be obligated to,\ncause the affected Property or other affected property to be freed from\nHazardous Substances in conformance with Environmental Laws and any and all\ncosts and expenses incurred by Lender in connection therewith, together with\ninterest thereon at the Default Interest Rate from the date incurred by Lender\nuntil actually paid by Borrower, shall be immediately paid by Borrower on demand\nand shall be secured by the Mortgages and by all of the other Loan Documents\nsecuring all or any part of the Loan; and Borrower hereby grants to Lender and\nits agents and employees access to the Properties and a license to remove any\nitems deemed by Lender to be Hazardous Substances and to do all things Lender\nshall deem necessary to bring the Properties into conformance with Environmental\nLaws.\n\n 6.6 Indemnification. Borrower covenants and agrees, at Borrower's sole\ncost and expense, to indemnify, defend (at trial and appellate levels, and with\nattorneys, consultants and experts acceptable to Lender), and hold Lender\nharmless from and against any and all liens, damages (including, without\nlimitation, punitive or exemplary damages), losses, liabilities (including,\nwithout limitation, strict liability), obligations, settlement payments,\npenalties, fines, assessments, citations, directives, claims, litigation,\ndemands, defenses, judgments, suits, proceedings, costs, disbursements or\nexpenses of any kind or of any nature whatsoever (including, without limitation,\nreasonable attorneys', consultants' and experts' fees and disbursements actually\nincurred in investigating, defending, settling or prosecuting any claim,\nlitigation or proceeding) which may at any time be imposed upon, incurred by or\nasserted against Lender or any of the Properties, and arising directly or\nindirectly from or out of: (a) any violation or alleged violation of, or\nliability or alleged liability under, any Environmental Law with respect to\nBorrower or any of the Properties; (b) the presence, release or threat of\nrelease of or exposure to any Hazardous Substances on, in, under or affecting\nany Property or any portion of such Property and\/or any surrounding areas,\nregardless of whether or not caused by or within the control of Borrower; (c)\nany transport, treatment, recycling, storage, disposal or arrangement \n\n 37\n\n \ntherefor of Hazardous Substances whether on the Property, originating from\nthe Property, or otherwise associated with Borrower or any operations conducted\non the Property at any time; (iv) the failure by Borrower to comply fully with\nthe terms and conditions of this Article VI; (v) the breach of any\nrepresentation or warranty contained in this Article VI; (vi) the enforcement of\nthis Article VI, including, without limitation, the cost of assessment,\ninvestigation, containment, removal and\/or remediation of any and all Hazardous\nSubstances from any Property or any portion of such Property or any surrounding\nareas, the cost of any actions taken in response to the presence, release or\nthreat of release of any Hazardous Substances on, in, under or affecting any\nportion of a Property or any surrounding areas to prevent or minimize such\nrelease or threat of release so that it does not migrate or otherwise cause or\nthreaten danger to present or future public health, safety, welfare or the\nenvironment, and costs incurred to comply with Environmental Laws in connection\nwith any Property or any portion of such Property or any surrounding areas. The\nindemnity set forth in this Section 6.6 shall also include any diminution in the\nvalue of the security afforded by the Properties or any future reduction in the\nsales price of the Properties by reason of any matter set forth in this Article\nVI. The foregoing indemnity shall specifically not include any such costs\nrelating to Hazardous Substances which are initially placed on, in or under any\nof the Properties after foreclosure or other taking of title to such Properties\nby Lender or its successor or assigns. Lender's rights under this Section 6.6\nshall survive payment in full of the Loan, taking of title to the Properties by\nLender or its successors or assigns and foreclosure of the Mortgages, and shall\nbe in addition to all other rights of Lender under the Mortgages, the Note and\nthe other Loan Documents.\n\n 6.7 Hazardous Substances Audit. Upon Lender's request, at any time\nafter the occurrence of an Event of Default or at such other time as Lender has\nreasonable grounds to believe that Hazardous Substances are or have been\nreleased, stored or disposed of on any Property in violation of Environmental\nLaws, or on property contiguous with such Property, or that such Property may be\nin violation of the Environmental Laws, Borrower shall perform or cause to be\nperformed, at Borrower's sole cost and expense and in scope, form and substance\nsatisfactory to Lender, an inspection or audit of such Property prepared by a\nhydrogeologist or environmental engineer or other appropriate consultant\napproved by Lender indicating the presence or absence of Hazardous Substances on\nsuch Property, the compliance or non-compliance status of such Property and the\noperations conducted thereon with applicable Environmental Laws, or an\ninspection or audit of such Property prepared by an engineering or consulting\nfirm approved by Lender indicating the presence or absence of friable asbestos\nor substances containing asbestos on such Property. If Borrower fails to provide\nreports of such inspection or audit within forty-five (45) days after such\nrequest, Lender may order the same, and Borrower hereby grants to Lender and its\nemployees and agents access to such Property and an irrevocable license to\nundertake such inspection or audit. The cost of such inspection or audit,\ntogether with interest thereon at the Default Interest Rate from the date\nincurred by Lender until actually paid by Borrower, shall be immediately paid by\nBorrower on demand and shall be secured by the Mortgages and by all of the other\nLoan Documents securing all or any part of the Loan.\n\n\n 6.8 Maintenance Program. Borrower covenants and agrees to maintain and\nadhere to all operations and maintenance programs presently in place at any of\nthe Properties (the \"Maintenance Program\") with respect to asbestos containing\nmaterials (\"ACM's\"), consistent with \"Guidelines for Controlling\nAsbestos-Containing Materials in Buildings\" (USEPA, 1985) \n\n 38\n\n \nand other relevant guidelines, and any such Maintenance Program will\ncontinuously remain in effect until the Loan secured hereby is repaid in full.\nIn furtherance of the foregoing, Borrower shall inspect and maintain all ACM's\non a regular basis and ensure that all ACM's shall be maintained in a condition\nthat prevents exposure of residents to ACM's at all times. Without limiting the\ngenerality of the preceding sentence, Lender may require (a) periodic notices or\nreports to Lender in form, substance and at such intervals as Lender may\nspecify, (b) an amendment to such Maintenance Program to address changing\ncircumstances, laws or other matters, (c) at Borrower's sole expense,\nsupplemental examination of any Property by consultants specified by Lender, and\n(d) variation of the Maintenance Program in response to the reports provided by\nany such consultants.\n\n 6.9 Existing Remediation and Monitoring Programs. Without limiting any\nof Borrower's other representations, warranties or covenants in this Article VI,\nBorrower covenants that it shall continue to timely comply with the terms and\nprovisions of the existing remediation and monitoring programs with respect to\nthe Properties located at the Emeryville, California Property (identified as\nProperties #69, #70 and #71 on Exhibit A attached hereto) (ground water\ncontamination); 4790 West Pico Boulevard, Los Angeles, California (identified as\nProperty #74 on Exhibit A attached hereto) (methane gas); 1310 University\nAvenue, Berkeley, California (identified as Property #68 on Exhibit A attached\nhereto) (asbestos O&M plan); 1200 Edinger Avenue, Tustin, California (identified\nas Property #44 on Exhibit A attached hereto) (asbestos O&M plan); 224 South\nMichigan Avenue, Chicago, Illinois (identified as Property #67 on Exhibit A\nattached hereto) (asbestos O&M plan); and 9401 Corbin Avenue, Lot #43,\nNorthridge, California (identified as Property #101 on Exhibit A attached\nhereto) (environmental remediation). Notwithstanding the terms and provisions\ncontained in any remediation and monitoring program with respect to such\nProperties, as between Borrower and Lender, Borrower shall remain responsible\nfor complying with all Environmental Laws and indemnifying Lender for any\nlosses, claims and expenses as set forth in this Article VI. In connection with\nthe Property located at 9401 Corbin Avenue, Lot # 43, Northridge, California,\nBorrower shall also establish the Environmental Reserve as set forth in Section\n9.5 below.\n\n\n ARTICLE VII\n\n ADDITIONAL REPRESENTATIONS AND WARRANTIES\n AND COVENANTS OF BORROWER\n\n\n 7.1 Expenses. Borrower shall pay on the Closing Date or within ten (10)\nBusiness Days after Lender's demand therefor, as appropriate: (a) all of\nLender's fees, costs and expenses in connection with the Loan, including,\nwithout limitation, Lender's legal fees, expenses and disbursements, the costs\nof appraisals, environmental studies, engineering reports, title insurance,\nsurveys, mortgage recording taxes and fees, filing and other recording fees and\ncharges, inspection fees, credit report fees, environmental report charges,\ntaxes, tax and insurance fees and escrow fees and all other usual and customary\nloan closing expenses (collectively, \"Expenses\"); (b) all Expenses incurred in\nconnection with the enforcement or satisfaction by Lender of any of Borrower's\nobligations under this Agreement or the other Loan Documents; and (c) all\nExpenses incurred in the successful prosecution or defense of any action in any\nway related to any of the Loan Documents, including, without limitation, any\naction for declaratory relief; together with interest thereon until paid, at the\nDefault Rate. Lender shall provide to Borrower copies of \n\n 39\n\n \ninvoices, statements or other records documenting such amounts to the extent \navailable to Lender.\n\n 7.2 Compliance with Loan Documents. Borrower will duly observe and \nperform in all material respects the Secured Obligations.\n\n\n 7.3 Representations, Warranties and Covenants with Respect to\nIndebtedness, Operations and Fundamental Changes of Borrower; Maintenance of\nSeparate Existence. Borrower represents, warrants and covenants as of the date\nhereof and until such time as the Loan is paid in full, that Borrower:\n\n\n (a) will not, nor will any partner, limited or general, member\nor shareholder thereof, as applicable, amend, modify or otherwise change its\npartnership certificate, partnership agreement, articles of incorporation,\nby-laws, operating agreement, articles of organization, or other formation\nagreement or document, as applicable, in any material term or manner, or in a\nmanner which adversely affects Borrower's existence as a single purpose entity;\n\n\n (b) will not liquidate or dissolve (or suffer any liquidation\nor dissolution), or enter into any transaction of merger or consolidation or\nacquire by purchase or otherwise all or substantially all the business or assets\nof, or any stock or other evidence of beneficial ownership of any entity;\n\n\n (c) has not and will not guarantee, pledge its assets for the\nbenefit of, or otherwise become liable on or in connection, with any obligation\nof any other person or entity;\n\n\n (d) does not own and will not own any asset other than (i) the\nProperties, (ii) Collateral and (iii) other incidental personal property\nnecessary for the operation of the Properties;\n\n\n (e) is not engaged and will not engage, either directly or\nindirectly, in any business other than the ownership, leasing, management and\noperation of the Properties;\n\n\n (f) will not enter into any contract or agreement with any\ngeneral partner, principal, affiliate or member of Borrower, as applicable, or\nany affiliate of any general partner, principal or member of Borrower, except\nupon terms and conditions that are intrinsically fair and substantially similar\nto those that would be available on an arms-length basis with third parties\nother than an affiliate;\n\n\n (g) has not incurred and will not incur any debt, secured or\nunsecured, direct or contingent (including guaranteeing any obligation), other\nthan (i) the Loan, and (ii) advances or trade payables or accrued expenses\nincurred in the ordinary course of business of operating the Properties; and has\nnot incurred and will not incur any debt secured (senior, subordinate or pari\npassu) by the Properties;\n\n\n (h) has not made and will not make any loans or advances to\nany third party (including, but not limited to, any affiliate) except to tenants\nof the Properties for tenant improvements, repairs or furniture, fixtures and\nequipment (which loans shall constitute Collateral);\n\n 40\n\n \n (i) is solvent and is able to pay its debts from its assets as\nthe same become due and that the Loan and the transactions contemplated by this\nAgreement will not cause Borrower to be insolvent;\n\n\n (j) has done or caused to be done and will do all things \nnecessary to preserve its existence;\n\n\n (k) will conduct and operate its business in its own name and \nas presently conducted and operated;\n\n\n (l) will maintain financial statements, books and records and\nbank accounts separate from those of its affiliates, including, without\nlimitation, its general partners or members, as applicable ;\n\n\n (m) will be, and at all times will hold itself out to the\npublic as, a legal entity separate and distinct from any other entity\n(including, without limitation, any affiliate, general partner or member, as\napplicable, or any affiliate of any general partner or member of the Borrower,\nas applicable);\n\n\n (n) will maintain adequate capital for the normal obligations\nreasonably foreseeable in a business of its size and character and in light of\nits contemplated business operations;\n\n\n (o) will not seek the dissolution or winding up, in whole or \nin part, of the Borrower;\n\n\n (p) shall maintain its principal executive office and\ntelephone and facsimile numbers separate from that of any affiliate and shall\nconspicuously identify such office and numbers as its own and shall use its own\nstationery, invoices and checks which reflect its address, telephone number and\nfacsimile number, as appropriate (which, however, may be within the premises of\nand leased from an affiliate so long as overhead for such shared office space is\nallocated fairly and reasonably);\n\n\n (q) will not commingle the funds and other assets of Borrower\nwith those of any general partner, member, affiliate, principal or any other\nperson;\n\n\n (r) has and will maintain its assets in such a manner that it\nis not unreasonably costly or difficult to segregate, ascertain or identify its\nindividual assets from those of any affiliate or any other person;\n\n\n (s) does not and will not hold itself out to be responsible\nfor the debts or obligations of any other person;\n\n (t) will not do any act which would make it impossible to\ncarry on the ordinary business of Borrower;\n\n 41\n\n \n (u) will not possess or assign any of the Properties or\nincidental personal property necessary for the operation of the Properties for\nother than a business or company purpose;\n\n\n (v) will not sell, encumber or otherwise dispose of all or\nsubstantially all of the Properties or incidental personal property necessary\nfor the operation of the Properties;\n\n\n (w) will not hold title to Borrower's assets other than in\nBorrower's name;\n\n\n (x) will be managed by a board of directors, which board will\ngovern the operations of the Borrower; at least two (2) of the directors shall\nserve as an \"Independent Director,\" whose consent shall be required for, among\nother things and as expressly provided in Borrower's formation documents, any\nmerger, consolidation, dissolution or bankruptcy of Borrower, and for any sale\nor transfer of all or substantially all of the assets of Borrower. \"Independent\nDirector\" shall mean a person who is not, and has not within the past 5 years\nbeen (i) an officer, director, employee or 10% stockholder of, or any affiliate\nof, Borrower or Guarantor (other than a person who would otherwise be\ndisqualified under this clause (i) solely as a result of serving as an\nindependent director of another entity that is an affiliate of Borrower or\nGuarantor), (ii) a member of the immediate family of any such person or of any\naffiliate of Borrower or Guarantor or (iii) a professional retained by Borrower\nor Guarantor (other than such person's retention as an Independent Director of\nBorrower); and\n\n\n (y) will not institute proceedings to be adjudicated bankrupt\nor insolvent; or consent to the institution of bankruptcy or insolvency\nproceedings against it; or file a petition seeking, or consent to,\nreorganization or relief under any applicable federal or state law relating to\nbankruptcy; or consent to the appointment of a receiver, liquidator, assignee,\ntrustee, sequestrator (or other similar official) of the Borrower or a\nsubstantial part of Borrower's property; or make any assignment for the benefit\nof creditors; or admit in writing its inability generally, to pay its debts as\nthey become due; or take any action in furtherance of any such action.\n\n\n 7.4 Payment of Taxes. Borrower will pay, or cause to be paid pursuant\nto the provisions of Section 9.2 below, all taxes, assessments, or other\ngovernmental charges levied upon any of the Properties or its other assets, or\nin respect of its income before the same become delinquent, except that it will\nhave the right to contest the assessment and payment of such taxes, assessments\nand other charges in the manner provided in the Mortgages.\n\n\n 7.5 Litigation. Borrower will give Lender prompt written notice of (a)\nany litigation or claims of any kind which, to its knowledge, might subject\nBorrower to any liability which may materially and adversely affect Borrower's\nability to repay the Loan, whether covered by insurance or not, and in any event\nany litigation in which the plaintiffs' claims exceed $500,000 and (b) all\ncomplaints and charges filed by any governmental agency materially adversely\naffecting any of the Properties or the Collateral, or exercising supervision or\ncontrol of Borrower, or its business or assets.\n\n\n 7.6 Indemnification of Lender. Borrower hereby agrees to defend,\nprotect, indemnify and hold Lender, its directors, officers, employees, agents,\nsuccessors and assigns (including, \n\n 42\n\n \nwithout limitation, any participants in the Loan), harmless from and\nagainst any and all losses, liabilities, fines, claims, actions, judgments,\ncosts, expenses or damages, to the extent such losses, liabilities, fines,\nclaims, actions, judgments, costs, expenses or damages do not arise out of\nLender's willful misconduct or gross negligence (as finally determined by a\ncourt of competent jurisdiction) asserted against Lender by any person, entity\nor Governmental Authority arising out of or in connection with Borrower's\nownership or use of any of the Properties, including, but not limited to, any\nliens (i.e., judgments, mechanics' and materialmen's liens, or otherwise),\ncharges and encumbrances filed against any Property, and from any claims and\ndemands for damages or injury, including claims for property damage, personal\ninjury or wrongful death, arising out of or in connection with any accident or\nfire or other casualty on the Properties or any nuisance made or suffered\nthereon, including, without limitation, in any case, reasonable attorneys' fees,\ncosts and expenses as aforesaid, whether at pretrial, trial or appellate level,\nand such indemnity shall survive payment in full of the Loan. Lender will be\nentitled to appear in any action or proceeding to defend itself against such\nclaims, and all costs incurred by Lender in connection therewith, including\nreasonable attorney's fees, shall be paid by Borrower to Lender upon request.\nLender shall, at its option, and subject to Borrower's reasonable prior written\napproval, be entitled to settle or compromise any asserted claim against it, and\nsuch settlement shall be binding upon Borrower for purposes of this\nindemnification. Payment thereof by Lender or the payment by Lender of any such\njudgment or claim successfully perfected against Lender shall bear interest at\nthe Default Interest Rate and shall be payable within ten (10) Business Days\nafter Lender's demand therefor. Lender shall provide copies of invoices,\nstatements or other records documenting such amounts to the extent available to\nLender.\n\n 7.7 Change in Position. Borrower agrees immediately to inform Lender of\nany material adverse change in the financial condition of Borrower and\/or any\ntransfer of ownership of any material assets of Borrower or any change in the\nlocation of Borrower's principal executive office.\n\n\n 7.8 Secondary Financing. Secondary financing of any type encumbering\nany Property or the Collateral, or any portion thereof, is prohibited without\nthe prior written consent of Lender, which consent shall be in Lender's absolute\ndiscretion.\n\n\n 7.9 Further Assurances. Borrower shall, on the request of Lender and at\nthe expense of Borrower: (a) promptly correct any defect, error or omission\nwhich may be discovered in the contents of this Agreement or in the contents of\nany of the other Loan Documents; (b) promptly execute, acknowledge, deliver and\nrecord or file such further instruments (including, without limitation, further\nmortgages, deeds of trust, security deeds, security agreements, financing\nstatements, continuation statements and assignments of rents or leases) and\npromptly do such further acts as may be necessary to carry out the purposes of\nthis Agreement and the other Loan Documents and to subject to the liens and\nsecurity interests hereof and thereof any property intended by the terms hereof\nand thereof to be covered hereby and thereby, including specifically, but\nwithout limitation, any renewals, additions, substitutions, replacements or\nappurtenances to the Properties; (c) promptly execute, acknowledge, deliver,\nprocure and record or file any document or instrument (including specifically,\nwithout limitation, any financing statement) deemed advisable by Lender to\nprotect, continue or perfect the liens or the security interests hereunder\nagainst the rights or interests of third persons; and (d) promptly furnish to\nLender, upon Lender's request, a duly acknowledged written statement and\nestoppel certificate \n\n 43\n\n \naddressed to such party or parties as directed by Lender and in form and\nsubstance supplied by Lender, setting forth all amounts due under the Note,\nstating whether any Default or Event of Default has occurred hereunder, stating\nwhether any offsets or defenses exist against the Loan and containing such other\nmatters as Lender may reasonably require.\n\n 7.10 Assignment. Without the prior written consent of Lender, Borrower\nshall not assign Borrower's interest under any of the Loan Documents, or in any\nmonies due or to become due thereunder, and any assignment without such consent\nshall be void.\n\n 7.11 Management Agreements. Borrower shall not modify, amend or\nterminate any Management Agreement without the prior written consent of Lender.\nIn the event a Manager elects to terminate its services under the Management\nAgreement as may be permitted in such Management Agreement, within thirty (30)\ndays following such termination Borrower shall enter into a new Management\nAgreement in form and substance reasonably acceptable to Lender and the Rating\nAgencies and with a manager acceptable to Lender and the Rating Agencies.\n\n\n ARTICLE VIII\n\n REPORTING COVENANTS\n\n\n 8.1 Financial Statements and Books and Records. Borrower shall keep\naccurate books and records of account of each Property and its own financial\naffairs sufficient to permit the preparation of financial statements therefrom\nin accordance with generally accepted accounting principles, consistently\napplied. Borrower is and shall continue to provide Lender with reporting\ninformation which complies with the Commercial Real Estate Secondary Market and\nSecuritization Association Standards and in electronic format and such other\nformat as Lender may require. Lender and its duly authorized representatives\nshall have the right to examine, copy and audit Borrower's records and books of\naccount at all reasonable times. The cost of such examination and audit shall be\nat the expense of Lender, (x) unless there exists an Event of Default or (y) at\nsuch other time as Lender has reasonable grounds to believe that Borrower's\nfinancial statements are inaccurate or incomplete and such audit discloses a\nmaterial inaccuracy. Borrower agrees that it shall furnish to Lender its audited\nbalance sheet, dated as of October 1, 1998, on or before October 28, 1998, which\nbalance sheet Borrower presently anticipates will be, and when completed, must\nbe, consistent with the Properties' financial information previously delivered\nto Lender in connection with the closing of the Loan. Prior to a Securitization\nof the Loan, Borrower shall furnish to Lender and the Rating Agencies, upon\nrequest from time to time, monthly operating statements and a current Rent Roll\n(containing all of the information set forth in Section 5.1(ee)(i), above) for\neach Property and, to the extent the tenant or tenants of such Property are\nrequired to report sales, monthly sales reports for each retail Property.\nThroughout the Loan term, Borrower shall also furnish to Lender and the Rating\nAgencies (a) unaudited quarterly financial statements and operating statements\nfor the Properties together with unaudited annual financial and operating\nstatements for the twelve (12) months ending with such quarter, collectively,\n(b) quarterly current Rent Rolls (containing all of the information set forth in\nSection 5.1(ee)(i), above) for each Property, (c) to the extent the tenant or\ntenants of such Property are required to report sales, current quarterly sales\nreports for each retail Property, and (d) audited annual financial and operating\nstatements for all of the Properties, collectively, prepared by a `Big Six'\naccounting firm or other independent certified public \n\n 44\n\n \naccountant acceptable to Lender. Such annual financial statements shall\ninclude, without limitation, (i) a balance sheet, (ii) a statement of income and\nexpenses reflecting the actual and complete results of the operation of each\nProperty for the prior fiscal year, and (iii) a statement of cash flow, each in\nreasonable detail. Such financial statements shall be prepared in accordance\nwith generally accepted accounting principles, consistently applied. The\nquarterly statements must be delivered to Lender within forty-five (45) days\nfollowing the respective quarter and the annual statements must be delivered to\nLender within ninety (90) days of the year end. In addition, upon Lender's or\nthe Rating Agencies' request from time to time, Borrower shall furnish or cause\nto be furnished current annual financial statements on the Guarantor in a form\nreasonably satisfactory to Lender, and on any person or entity having a direct\nownership interest in the Borrower, together with such other information\nconcerning the financial condition or operation of the Borrower and\/or the\nProperty and\/or Guarantor as may be reasonably requested by Lender. If any of\nthe aforementioned materials are not furnished to Lender within the applicable\ntime periods or Lender is dissatisfied with the contents of any of the foregoing\nand has notified Borrower of its dissatisfaction, in addition to any other\nrights and remedies of Lender contained herein, Lender shall have the right, but\nnot the obligation, to obtain the same by means of an audit by an independent\ncertified public accountant selected by Lender, in which event Borrower agrees\nto pay, or to reimburse Lender for, any expense of such audit if such audit\ndiscloses a material inaccuracy from the materials furnished by Borrower and\nfurther agrees to provide all necessary information to said accountant and to\notherwise cooperate in the making of such audit.\n\n 8.2 Representations and Warranties. Borrower agrees that all financial\nstatements to be delivered to Lender pursuant to this Article VIII shall: (a) be\ncomplete and correct in all material respects; (b) present fairly the financial\ncondition of the party, including all material liabilities; and (c) be prepared\nin accordance with generally accepted accounting principles, consistently\napplied. Borrower shall be deemed to warrant and represent that, as of the date\nof delivery of any such financial statement, no Properties have been sold,\ntransferred, assigned, mortgaged, pledged or encumbered since the date of such\nfinancial statement, except as disclosed by Borrower in a writing delivered to\nLender. Borrower agrees that all Rent Rolls and other information to be\ndelivered to Lender pursuant to this Article VIII shall not contain any material\nmisrepresentation or omission of a material fact.\n\n\n ARTICLE IX\n\n CASH MANAGEMENT AGREEMENT; RESERVE AND IMPOUND ACCOUNTS\n\n\n 9.1 Cash Management Agreement. Borrower and Lender shall enter into a\nCash Management Agreement (the \"Cash Management Agreement\") which will govern\nthe collection and distribution of revenues as generated from the Properties\nthroughout the term of the Loan. Pursuant to the Cash Management Agreement,\nBorrower will establish separate accounts (the \"Cash Management Accounts\") with\na bank (the \"Clearing Bank\") designated by Borrower and acceptable to Lender\nthrough which all rents and other receipts from the Properties (collectively the\n\"Revenues\") will be cleared. All cash held in accounts under the Cash Management\nAgreement which are under the dominion and control of the Lender or any other\naccounts held by or on Lender's behalf and established pursuant to the Loan\nDocuments, shall be held in Permitted Investments. Until the earliest to occur\nof (1) the date (\"CS Event 1\") three (3) months \n\n 45\n\n \nprior to the Anticipated Repayment Date, (2) the date upon which the Lender\ndetermines that the ratio of (a) Net Cash Flow for the immediate preceding\n12-month period from ongoing and continuous operations of the Properties to (b)\nthe annual debt service on the Loan, has fallen below 1.15:1.00, as determined\nby Lender (the \"Minimum Coverage Ratio\") (and Borrower fails to post Additional\nCollateral as provided in the Cash Management Agreement) (\"CS Event 2\") or (3)\nan Event of Default under the Loan Documents (\"CS Event 3\") (each, a \"Sweep\nEvent\"), the Clearing Bank will transfer all receipts daily from Lender's\ncontrolled account into Borrower's account pursuant to the provisions of the\nCash Management Agreement. The period following a Cash Sweep Event shall be\nreferred to as the \"Cash Management Period\".\n\n 9.2 Tax and Insurance Impound Account. Borrower shall establish and\nmaintain at all times throughout the term of the Loan an impound account (the\n\"Impound Account\") with Lender for payment of real estate taxes and assessments\nand insurance on all the Properties and as additional security for the Loan.\nBorrower shall, on the Closing Date, make an initial deposit in the Impound\nAccount reasonably determined by Lender to be necessary to ensure that there\nwill be on deposit with Lender an amount which, when added to the monthly\npayments subsequently required to be deposited with Lender hereunder on account\nof real estate taxes, assessments and insurance premiums, will result in there\nbeing on deposit with Lender in the Impound Account an amount sufficient to pay\nthe next due installment of real estate taxes and assessments on the Properties\nat least one (1) month prior to the earlier of (a) the delinquent date thereof\nor (b) any such date by which the Borrower is required by law to pay same, and\nthe next due annual insurance premiums with respect to the Properties at least\none (1) month prior to the due date thereof. Commencing on the first monthly\npayment date under the Note and continuing thereafter on each monthly payment\ndate under the Note, Borrower shall pay to Lender, concurrently with and in\naddition to the monthly payment due under the Note and until the Loan is fully\npaid and performed, deposits in an amount equal to one-twelfth (1\/12) of the\namount of the annual real estate taxes and assessments that will next become due\nand payable on the Properties, plus one-twelfth (1\/12) of the amount of the\nannual premiums that will next become due and payable on insurance policies\nwhich Borrower is required to maintain hereunder, each as estimated and\ndetermined by Lender. So long as no Event of Default has occurred, all sums in\nthe Impound Account shall be held by Beneficiary in the Impound Account to pay\nsaid taxes and assessments before the same become delinquent. Borrower shall be\nresponsible for ensuring the receipt by Lender, at least thirty (30) days prior\nto the respective due date for payment thereof, of all bills, invoices and\nstatements for all taxes and assessments to be paid from the Impound Account,\nand so long as no Event of Default has occurred, Lender shall pay the\ngovernmental authority or other party entitled thereto directly to the extent\nfunds are available for such purpose in the Impound Account. Borrower agrees\nthat it shall pay all said insurance premiums before the same become delinquent\ndirectly to the party entitled thereto. So long as no Event of Default has\noccurred, sums held in the Impound Account by Lender shall be disbursed by\nLender to Borrower within ten (10) Business Days after Borrower's request to\nreimburse Borrower for the payment of said insurance premiums to the extent\nfunds are available for such purpose in the Impound Account. Borrower shall with\neach reimbursement request (which shall not be more frequent than once in any\nthirty (30) day period) submit copies of receipts, statements or invoices\nevidencing payment of such insurance premiums acceptable to Lender. In the event\nBorrower fails to pay said insurance premiums before the same become delinquent,\nLender shall have the right to make such payment to the party entitled thereto\non Borrower's behalf with the sums held by Lender in the Impound Account. In\nmaking any payment from the Impound Account, Lender \n\n 46\n\n \nshall be entitled to rely on any bill, statement or estimate procured from\nthe appropriate public office or insurance company or agent without any inquiry\ninto the accuracy of such bill, statement or estimate and without any inquiry\ninto the accuracy, validity, enforceability or contestability of any tax,\nassessment, valuation, sale, forfeiture, tax lien or title or claim thereof. The\nImpound Account shall not, unless otherwise explicitly required by applicable\nlaw, be or be deemed to be escrow or trust funds, but, at Lender's option and in\nLender's discretion, may either be held in a separate account or be commingled\nby Lender with the general funds of Lender.\n\n 9.3 Repair and Remediation Reserve.\n ------------------------------\n\n Prior to the execution of this Loan Agreement, Lender has\ncaused each Property in the Property Pool to be inspected and such inspection\nhas revealed that certain Properties (each, a \"Deferred Maintenance Property\"\nand collectively, the \"Deferred Maintenance Properties\") are in need of certain\nmaintenance, repairs and\/or remedial or corrective work. Contemporaneously with\nthe execution hereof, Borrower has established with the Lender a reserve in the\namount of Seven Hundred Twenty-five Thousand Six Hundred and 00\/100 Dollars\n($725,600.00) (the \"Repair and Remediation Reserve\") by depositing such amount\nwith Lender. Borrower shall cause each of the items described in Schedule 4\nattached hereto and made a part hereof (the \"Deferred Maintenance\") to be\ncompleted, performed, remediated and corrected to the satisfaction of Lender and\nas necessary to bring the Deferred Maintenance Properties into compliance with\nall applicable laws, ordinances, rules and regulations on or before the\nexpiration of one hundred-eighty (180) days after the Closing Date, as such time\nperiod may be extended by Lender in its reasonable discretion. Lender shall have\nthe right to inspect the work from time to time to insure that the work is being\ncompleted in a good and workmanlike manner.\n\n\n So long as no Default or Event of Default has occurred and is\ncontinuing, all sums in the Repair and Remediation Reserve shall be held by\nLender in the Repair and Remediation Reserve to pay the costs and expenses of\ncompleting the Deferred Maintenance. So long as no Default or Event of Default\nhas occurred and is continuing, Lender shall, to the extent funds are available\nfor such purpose in the Repair and Remediation Reserve, disburse to Borrower the\namount paid or incurred by Borrower in completing, performing, remediating or\ncorrecting the Deferred Maintenance upon (a) the receipt by Lender of a written\nrequest from Borrower for disbursement from the Repair and Remediation Reserve\nand a certification by Borrower in the form annexed hereto as Exhibit D that the\nDeferred Maintenance has been fully completed and that all Deferred Maintenance\nwork with respect to any Property for which funds are requested has been\ncompleted in accordance with the terms of this Loan Agreement, (b) delivery to\nLender of invoices, receipts or other evidence satisfactory to Lender verifying\nthe costs of the Deferred Maintenance to be reimbursed, (c) if applicable,\ndelivery to Lender of any and all certifications from inspecting architects,\nengineers or other consultants reasonably acceptable to Lender describing the\ncompleted work, verifying the completion of the work and the value of the\ncompleted work and, if applicable, certifying that the Deferred Maintenance\nProperties are, as a result of such work, in compliance with all applicable\nlaws, ordinances rules and regulations relating to the Deferred Maintenance \nso performed, (d) delivery to Lender of affidavits, lien waivers or other\nevidence reasonably satisfactory to Lender showing that all materialmen,\nlaborers, subcontractors and any other parties who might or could claim\nstatutory or common law liens and are furnishing or have furnished materials or\nlabor to the Deferred Maintenance Properties have been paid all amounts due for\nsuch labor and materials furnished to the Deferred Maintenance \n\n 47\n\n \nProperties, and (e) the receipt by Lender of an administrative fee for each\ndisbursement request in an amount equal to all of Lender's out of pocket costs\nand expenses plus Lender's then customary charge for performing such service,\nbut in no event less than $1,000.00. Lender shall not be required to make\nadvances from the Repair and Remediation Reserve more frequently than once in\nany thirty (30) day period and for an amount less than $10,000. In making\npayment from the Repair and Remediation Reserve Lender shall be entitled to rely\non the request from Borrower without any inquiry into the accuracy, validity or\ncontestability of any such amount. The Repair and Remediation Reserve shall not,\nunless otherwise explicitly required by applicable law, be or be deemed to be\nescrow or trust funds, but, at Lender's option and in Lender's discretion, may\neither be held in a separate account or be commingled by Lender with the general\nfunds of Lender.\n\n\n 9.4 Replacement Reserve; Tenant Improvements and Leasing Commissions\n ----------------------------------------------------------------\nReserve.\n-------\n\n (a) During the continuance of a Cash Management Period,\nBorrower shall establish and maintain at all times during such period a\nreplacement reserve (the \"Replacement Reserve\") with Lender for payment of\ncertain costs and expenses, incurred by Borrower or which may otherwise be\nnecessary, in connection with the repair and maintenance of the Properties,\nincluding, but not limited to, the roofs, gutters, downspouts, paving, curbs,\ndriveways, ramps, exterior walls, exterior doors and doorways, windows,\nelevators and mechanical and HVAC equipment (collectively, the \"Repairs\").\nDuring the continuance of a Cash Management Period, Borrower shall pay Lender,\nconcurrently with and in addition to the monthly payment due under the Note, a\ndeposit to the Replacement Reserve in the amount determined by the formula set\nforth in Schedule 3 for such reserve. Lender shall, to the extent funds are\navailable for such purpose in the Replacement Reserve, disburse to Borrower the\namount paid or incurred by Borrower in performing such Repairs within ten (10)\nBusiness Days following: (i) the receipt by Lender of a written request from\nBorrower for disbursement from the Replacement Reserve and a certification by\nBorrower in the form attached hereto as Exhibit D that the applicable item of\nRepair has been completed; (ii) the delivery to Lender of invoices, receipts or\nother evidence satisfactory to Lender, verifying the cost of performing the\nRepairs; (iii) for disbursement requests in excess of $150,000 in the aggregate\nwithin any thirty (30) day period as to any single Property, the delivery to\nLender of affidavits, lien waivers or other evidence reasonably satisfactory to\nLender showing that all materialmen, laborers, subcontractors and any other\nparties who might or could claim statutory or common law liens and are\nfurnishing or have furnished material or labor to the applicable Property have\nbeen paid all amounts due for labor and materials furnished to such Property;\n(iv) for disbursement requests in excess of $300,000 in the aggregate within any\nthirty (30) day period as to any single Property, delivery to Lender of a\ncertification from an inspecting architect or other third party acceptable to\nLender describing the completed Repairs and verifying the completion of the\nRepairs and the value of the completed Repairs; (v) delivery to Lender of a new\ncertificate of occupancy for the portion of the Improvements covered by such\nRepairs, if said new certificate of occupancy is required by law, or a\ncertification by Borrower that no new certificate of occupancy is required; and\n(vi) the receipt by Borrower of an administration fee for each disbursement\nrequest in an amount equal to all of Lender's out of pocket costs and expenses\nplus Lender's then customary charge for performing such services but in no event\nless than $1,000. Lender shall not be required to make advances from the\nReplacement Reserve more frequently than once in any thirty (30) day period \n\n 48\n\n \nand for an amount less than $10,000. In making any payment from the\nReplacement Reserve, Lender shall be entitled to rely on such request from\nBorrower without any inquiry into the accuracy, validity or contestability of\nany such amount. During any Cash Management Period, Lender may, at Lender's\nexpense, make or cause to be made an annual inspection at the Properties to\ndetermine the need, as determined by Lender in its reasonable judgment, for\nfurther Repairs of the Properties. In the event that such inspection reveals\nthat further Repairs of the Properties are required, Lender shall provide\nBorrower with a written description of the required Repairs and Borrower shall\ncomplete such Repairs to the reasonable satisfaction of Lender within ninety\n(90) days after the receipt of such description from Lender, or such later\ndate as may be approved by Lender in its reasonable discretion. The\nReplacement Reserve shall not, unless otherwise explicitly required by\napplicable law, be or be deemed to be escrow or trust funds, but, at Lender's\noption and in Lender's discretion, may either be held in a separate account or\nbe commingled by Lender with the general funds of Lender.\n\n (b) During the continuance of a Cash Management Period,\nBorrower shall establish and maintain at all times during such period a reserve\nfor tenant improvements and leasing commissions (the \"TI\/LC Reserve\") with\nLender for payment of leasing commissions and tenant improvement costs and\nexpenses incurred by Borrower in connection with re-leasing the Properties\npursuant to Leases approved, or deemed approved, by Lender (collectively, the\n\"Leasing Costs\"). During the continuance of a Cash Management Period, Borrower\nshall pay Lender, concurrently with and in addition to the monthly payment due\nunder the Note, a deposit to the TI\/LC Reserve in the amounts determined by the\nformulas set forth in Schedule 3 for such reserves. Lender shall, to the extent\nfunds are available for such purpose in the TI\/LC Reserve, disburse to Borrower\nthe amount paid or incurred by Borrower in performing such Leasing Costs within\nten (10) Business Days following: (i) the receipt by Lender of a written request\nfrom Borrower for disbursement from the TI\/LC Reserve and a certification by\nBorrower in the form annexed as Exhibit D that (1) for Leasing Costs consisting\nof commissions payable to brokers not affiliated with Borrower and at a rate not\ngreater than the then-current market rate, such leasing commission has been paid\nby Borrower, and (2) for Leasing Costs consisting of amounts required to be\nexpended pursuant to the relevant Lease for tenant improvement or related costs,\nsaid Leasing Costs have been incurred, (ii) the delivery to Lender of invoices,\nreceipts or other evidence satisfactory to Lender verifying the cost of such\nLeasing Costs; (iii) for disbursement requests for Leasing Costs in excess of\n$150,000 in the aggregate within any thirty (30) day period as to any single\nProperty, the delivery to Lender of affidavits, lien waivers or other evidence\nreasonably satisfactory to Lender showing that all materialmen, laborers,\nsubcontractors and any other parties who might or could claim statutory or\ncommon law liens and are furnishing or have furnished material or labor to the\nproperty have been paid (or will be paid out of such disbursement) all amounts\ndue for labor and materials furnished to the applicable Property; (iv) for\ndisbursement requests for Leasing Costs in excess of $300,000 in the aggregate\nwithin any thirty (30) day period as to any single Property (other than with\nrespect to leasing commissions), delivery to Lender of a certification from an\ninspecting architect or other third party acceptable to Lender describing the\ncompleted tenant improvement or other work, and verifying the completion and the\nvalue thereof; (v) for disbursement requests for Leasing Costs in excess of\n$300,000 in the aggregate within any thirty (30) day period as to any single\nProperty (other than with respect to leasing commissions), evidence satisfactory\nto Lender that there exists sufficient funds in the TI\/LC Reserve to complete\nthe tenant improvement or other work; (vi) delivery to Lender of a new\ncertificate of occupancy for the portion of the Improvements covered by such\n\n 49\n\n \nLease for the applicable Property, if said new certificate of occupancy was\nrequired by law, or a certification by Borrower that no new certificate of\noccupancy was required; (vii) for disbursement requests for Leasing Costs in\nexcess of $300,000 in the aggregate within any thirty (30) day period as to any\nsingle Property (other than with respect to leasing commissions), delivery to\nLender of an estoppel certificate from the tenants of the relevant premises in\nform and substance reasonably acceptable to Lender; and (viii) the receipt by\nLender of an administrative fee for each disbursement request in an amount equal\nto all of Lender's out of pocket costs and expenses plus Lender's then customary\ncharge for performing such services but in no event less than $1,000. Lender\nshall not be required to make advances from the TI\/LC Reserve more frequently\nthan once in any thirty (30) day period and for an amount less than $10,000. In\nmaking any payment from the TI\/LC Reserve, Lender shall be entitled to rely on\nsuch request from Borrower without any inquiry into the accuracy, validity or\ncontestability of any such amount. The TI\/LC Reserve shall not, unless otherwise\nexplicitly required by applicable law, be or be deemed to be escrow or trust\nfunds, but, at Lender's option and in Lender's discretion, may either be held in\na separate account or be commingled by Lender with the general funds of Lender.\n\n\n 9.5 Environmental Reserve.\n\n\n (a) Contemporaneously with the execution hereof, Borrower has\nestablished with Lender a reserve in the amount of $300,000 (the \"Environmental\nReserve\") by depositing such amount with Lender to fund potential remediation\nwork as more particularly described in that certain Environmental Site\nAssessment dated July 24, 1998 and prepared by Dames and Moore for Lender (the\n\"Environmental Report\"; such work, the \"Environmental Work\"), with respect to\nthe Property located at 9401 Corbin Avenue, Lot # 43, Northridge, California\n(identified as Property # 101 on Exhibit A attached hereto) to be performed and\ncompleted to the satisfaction of Lender and as recommended in the Environmental\nReport.\n\n\n (b) So long as no Default or Event of Default has occurred and\nis continuing, all sums in the Environmental Reserve shall be held by Lender in\nthe Environmental Reserve to pay the costs and expenses of completing the\nEnvironmental Work. So long as no Default or Event of Default has occurred and\nis continuing, Lender shall, to the extent funds are available for such purpose\nin the Environmental Reserve, disburse to Borrower the amount paid or incurred\nby Borrower in performing and completing the Environmental Work upon (i) the\nreceipt by Lender of a written request from Borrower for disbursement from the\nEnvironmental Reserve and a certification by Borrower in the form annexed as\nExhibit D that the Environmental Work has been fully completed in accordance\nwith the terms of this Agreement, (ii) delivery to Lender of invoices, receipts\nor other evidence satisfactory to Lender verifying the costs of the\nEnvironmental Work to be reimbursed, (iii) delivery to Lender of a certification\nfrom an inspecting architect, engineer or other consultant reasonably acceptable\nto Lender describing the completed work, verifying the completion of the work\nand the value of the completed work and, if applicable, certifying that such\nwork has been performed in compliance with all applicable laws, ordinances rules\nand regulations relating to the Environmental Work so performed, (iv) delivery\nto Lender of affidavits, lien waivers or other evidence reasonably satisfactory\nto Lender showing that all materialmen, laborers, subcontractors and any other\nparties who might or could claim statutory or common law liens and are\nfurnishing or have furnished materials or labor to the Property have been paid\n(or will be paid out of such disbursement) all amounts due \n\n 50\n\n \nfor such labor and materials furnished to the Property, and (v) the receipt by \nLender of an administrative fee in an amount equal to all of Lender's out\nof pocket costs and expenses plus Lender's then customary charge for performing\nsuch services but in no event less than $1,000. Lender shall not be required to\nmake more than one (1) payment from the Environmental Reserve. In making the\npayment from the Environmental Reserve, Lender shall be entitled to rely on such\nrequest from Borrower without any inquiry into the accuracy, validity or\ncontestability of any such amount. The Environmental Reserve shall not, unless\notherwise explicitly required by applicable law, be or be deemed to be escrow or\ntrust funds, but, at Lender's option and in Lender's discretion, may either be\nheld in a separate account or be commingled by Lender with the general funds of\nLender.\n\n 9.6 Prepaid Rent Reserve\n --------------------\n\n (a) Contemporaneously with the execution hereof, Borrower has\nestablished with Lender a reserve in the amount of $187,306 (the \"Prepaid Rent\nReserve\") by depositing with Lender an amount equal to two-thirds (2\/3rds) of\nthe amount of rent paid quarterly in advance (i.e., paid prior to the period to\nwhich such rent applies) for the Ground Leases listed on Schedule 5.1(ee)(iii)\n(the \"Quarterly Ground Leases\"). Lender shall hold the Prepaid Rent Reserve\nthroughout the term of the Loan. Borrower shall provide to Lender a quarterly\ncertificate as to the amount of the rent paid under the Quarterly Ground Leases\nmore than thirty (30) days in advance, together with any other rents similarly\npaid (i.e., paid prior to the period to which such rent applies) more than\nthirty (30) days in advance under any other Leases (collectively, the \"Prepaid\nRents\"). The amount of the Prepaid Rent Reserve shall be adjusted quarterly by\nLender to reflect any increase or decrease in the amount of Prepaid Rents\ncollected by Borrower such that the amount of the Prepaid Rent Reserve shall\nalways equal the amount of Prepaid Rents. Borrower agrees that if at any time\nthe Prepaid Rent Reserve is less than the Prepaid Rents, Borrower shall deposit\nwith Lender such additional funds necessary to properly fund the Prepaid Rent\nReserve. So long as no Default or Event of Default has occurred and is\ncontinuing, Lender shall disburse to Borrower any excess funds above and beyond\nthe amount required to be in the Prepaid Rent Reserve from time to time. Lender\nshall not be required to make more than one (1) payment per ninety (90) day\nperiod.\n\n\n (b) The Prepaid Rent Reserve shall not, unless otherwise\nexplicitly required by applicable law, be or be deemed to be escrow or trust\nfunds, but, at Lender's option and in Lender's discretion, may either be held in\na separate account or be commingled by Lender with the general funds of Lender.\n\n\n 9.7 Interest Payable by Lender. Lender shall cause funds in the\nImpound Account, the Repair and Remediation Reserve, the Replacement Reserve,\nthe TI\/LC Reserve, and the Environmental Reserve, if any, to be deposited into\nan interest bearing account (which shall be a Permitted Investment) of the\ntype customarily maintained by Lender or its servicing agent for the\ninvestment of similar reserves, which account may not yield the highest\ninterest rate then available. All accounts must be and continue to be held\nwith a financial institution rated at least \"A\" by DCR and at least \"Aa2\" by\nMoody's, or if not rated by DCR and Moody's, correspondingly by at least two\n(2) Rating Agencies, or otherwise acceptable to DCR and Moody's. Interest\npayable on such amounts shall be computed based on the daily outstanding\nbalance in such account. Such interest shall be calculated on a simple, non-\ncompounded interest\n\n 51\n\n \nbasis based solely on contributions made to such account by Borrower. All\ninterest earned on amounts contributed to such account shall be retained by\nLender and added to the balance in the Impound Account, the Repair and\nRemediation Reserve, the Replacement Reserve, and the TI\/LC Reserve, as\napplicable, and shall be disbursed for payment of the items for which other\nfunds in such reserves are to be disbursed.\n\n 9.8 Pledge of Security Interest in Impound and Reserve Accounts.\n -----------------------------------------------------------\n\n (a) As additional security for the Secured Obligations,\nBorrower hereby unconditionally and irrevocably assigns, conveys, pledges,\nmortgages, transfers, delivers, deposits, sets over and confirms unto Lender,\nand hereby grants to Lender a security interest in, (i) the Impound Account, the\nRepair and Remediation Reserve, the Replacement Reserve, the TI\/LC Reserve, the\nEnvironmental Reserve, the Prepaid Rent Reserve, the Cash Management Accounts,\nand any other reserve or escrow account established, pursuant to the terms\nhereof or of any other Loan Documents (collectively, the \"Reserves\"), (ii) the\naccounts into which the Reserves have been deposited, (iii) all insurance of\nsaid accounts, (iv) all accounts, contract rights and general intangibles or\nother rights and interests pertaining thereto, (v) all sums now or hereafter\ntherein or represented thereby, (vi) all replacements, substitutions or proceeds\nthereof, (vii) all instruments and documents now or hereafter evidencing the\nReserves or such accounts, (viii) all powers, options, rights, privileges and\nimmunities pertaining to the Reserves (including the right to make withdrawals\ntherefrom), and (ix) all proceeds of the foregoing. Borrower hereby authorizes\nand consents to the account into which the Reserves have been or will be\ndeposited being held in Lender's name or the name of any entity servicing the\nNote for Lender and hereby acknowledges and agrees, that Lender, or at Lender's\nelection, such servicing agent, shall have exclusive control over said account.\nNotice of the assignment and security interest granted to Lender herein may be\ndelivered by Lender at any time to the financial institution wherein the\nReserves have been established, and Lender, or such servicing entity, shall have\npossession of all passbooks or other evidences of such accounts. Borrower hereby\nassumes all risk of loss with respect to amounts on deposit in the Reserves\nexcept to the extent such loss is caused by Lender's willful misconduct or gross\nnegligence. Borrower hereby knowingly, voluntarily and intentionally stipulates,\nacknowledges and agrees that the advancement of the funds from the Reserves as\nset forth herein is at Borrower's direction and is not the exercise by Lender of\nany right of set-off or other remedy upon an Event of Default. Borrower hereby\nwaives all right to withdraw funds from the Reserves except as provided in the\nCash Management Agreement. If an Event of Default shall occur hereunder or under\nany other of the Loan Documents, then Lender may, without notice or demand on\nBorrower or Guarantor, at its option: (A) withdraw any or all of the funds\n(including, without limitation, interest) then remaining in the Reserves and\napply the same, after deducting all costs and expenses of safekeeping,\ncollection and delivery (including, but not limited to, reasonable attorneys'\nfees, costs and expenses) to the obligations of Borrower under the Loan\nDocuments in such manner or as Lender shall deem appropriate in its sole\ndiscretion, and the excess, if any, shall be paid to Borrower, (B) exercise any\nand all rights and remedies of a secured party under any applicable Uniform\nCommercial Code, and\/or (C) exercise any other remedies available at law or in\nequity. No such use or application of the funds contained in the Reserves shall\nbe deemed to cure any Event of Default hereunder or under the other Loan\nDocuments.\n\n 52\n\n \n (b) The Reserves are solely for the protection of Lender and\nentail no responsibility on Lender's part beyond the payment of the respective\nitems for which they are held following receipt of bills, invoices or statements\ntherefor in accordance with the terms hereof and beyond the allowing of due\ncredit for the sums actually received. Upon assignment of the Note by Lender,\nany funds in the Reserves shall be turned over to the assignee and any\nresponsibility of Lender, as assignor, with respect thereto shall terminate. If\nthe funds in the applicable Reserve shall exceed the amount of payments actually\napplied by Lender for the purposes and items for which the applicable Reserve is\nheld, such excess may be credited by Lender on subsequent payments to be made\nhereunder or, at the option of Lender, refunded to Borrower. If, however, the\napplicable Reserve shall not contain sufficient funds to pay the sums required\nby the dates on which such sums are required to be on deposit in such account,\nBorrower shall, within ten (10) days after receipt of written notice thereof,\ndeposit with Lender the full amount of any such deficiency. If Borrower shall\nfail to deposit with Lender the full amount of such deficiency as provided\nabove, Lender shall have the option, but not the obligation, to make such\ndeposit, and all amounts so deposited by Lender, together with interest thereon\nat the Default Interest Rate from the date so deposited by Lender until actually\npaid by Borrower, shall be immediately paid by Borrower on demand and shall be\nsecured by the Mortgages and by all of the other Loan Documents securing all or\nany part of the Loan. Upon full payment of the Loan in accordance with its terms\nor at such earlier time as Lender may elect, the balance of any or all of the\nReserves then in Lender's possession shall be paid over to Borrower and no other\nparty shall have any right or claim thereto.\n\n\n (c) By exercising any of its rights or remedies under this\nSection 9.8 (including, without limitation, taking possession of the Reserves),\nLender shall not be deemed to have exercised any equitable right of setoff, or\nforeclosed any statutory banker's lien. Accordingly, the exercise of any or all\nof Lender's rights and remedies under this Section 9.8 shall not in any way\nprejudice or affect Lender's right to initiate and complete a judicial or\nnon-judicial foreclosure under the Mortgages. This Agreement evidences the\nconsensual granting of a personal property security interest in the Reserves as\npermitted by any applicable Uniform Commercial Code as adopted and enacted by\nthe State or States where any of the Reserves are held (the \"Uniform Commercial\nCode\").\n\n\n ARTICLE X\n\n DEFAULTS AND REMEDIES\n\n\n 10.1 Events of Default. The occurrence of any of the following events\n(each an \"Event of Default\") shall be an Event of Default hereunder and under\neach Loan Document:\n\n\n (a) Borrower fails to punctually perform any covenant,\nagreement or obligation under any Loan Document which requires payment of any\nmoney to Lender at the time or within any applicable period set forth in such\nLoan Document, or if no time or period is set forth in such Loan Document, then\nwithin ten (10) Business Days of the date such payment is due (except that no\ngrace period or notic\n\n 53\n\n \n (b) e period is provided for the payment of principal and\ninterest due on any Payment Date or on the Maturity Date), or following demand\nif there is no due date.\n\n\n (c) Borrower fails to perform any covenant, agreement,\nobligation, term or condition set forth in Section 2.11 hereof, Section 7.3\nhereof, or Article IV hereof.\n\n\n (d) Borrower fails to perform any other Secured Obligation or\ncondition set forth in any Loan Document other than those otherwise described in\nthis Section 10.1 and, to the extent such failure or default is susceptible of\nbeing cured, the continuance of such failure or default for thirty (30) days\nafter written notice thereof from Lender to Borrower; provided, however, that if\nsuch default is susceptible of cure but such cure cannot be accomplished with\nreasonable diligence within said period of time, and if Borrower commences to\ncure such default promptly after receipt of notice thereof from Lender and\nLender's security is not otherwise materially impaired, and thereafter\nprosecutes the curing of such default with reasonable diligence, such period of\ntime shall be extended for such period of time as may be necessary to cure such\ndefault with reasonable diligence, but not to exceed an additional ninety (90)\ndays.\n\n\n (e) Any representation or warranty made herein, in or in\nconnection with any application or in the Loan Commitment relating to the Loan\nevidenced by the Note, or in any of the other Loan Documents to Lender by\nBorrower, by any principal, general partner or managing member in Borrower or by\nany indemnitor or guarantor (including Guarantor) under any indemnity or\nguaranty executed in connection with the Loan is determined by Lender to have\nbeen false or misleading in any material respect with respect to any one or more\nProperties or otherwise with respect to the Loan at the time made.\n\n\n (f) An Event of Default occurs under any of the other Loan\nDocuments.\n\n\n (g) Borrower, any general partner or member in Borrower or any\nindemnitor or guarantor (including Guarantor) under any indemnity or guaranty\nexecuted in connection with the Loan becomes insolvent, or makes a transfer in\nfraud of creditors, or makes an assignment for the benefit of creditors, or\nfiles a petition in bankruptcy, or is voluntarily adjudicated insolvent or\nbankrupt or admits in writing the inability to pay debts as they mature, or\npetitions or applies to any tribunal for, or consents to or fails to contest the\nappointment of, a receiver, trustee, custodian or similar officer for Borrower,\nfor any such general partner or member of Borrower or for any such indemnitor or\nguarantor (including Guarantor) or for a substantial part of the assets of\nBorrower, of any such general partner or member of Borrower or of any such\nindemnitor or guarantor (including Guarantor), or commences any case, proceeding\nor other action under any bankruptcy, reorganization, arrangement, readjustment\nor debt, dissolution or liquidation law or statute of any jurisdiction, whether\nnow or hereafter in effect with respect to Borrower, any general partner or\nmember in Borrower or any indemnitor or guarantor (including, but not limited\nto, Guarantor).\n\n\n (h) A petition is filed or any case, proceeding or other\naction is commenced against Borrower, against any general partner or member of\nBorrower or against any indemnitor or guarantor (including Guarantor) under any\nindemnity or guaranty executed in connection with the Loan seeking to have an\norder for relief entered against it as debtor or seeking reorganization,\narrangement, adjustment, liquidation, dissolution or composition of it or its\ndebts or other relief under any law relating to bankruptcy, insolvency,\narrangement, reorganization, receivership or \n\n 54\n\n \nother debtor relief under any law or statute of any jurisdiction whether\nnow or hereafter in effect, or a court of competent jurisdiction enters an order\nfor relief against Borrower, against any general partner or member of Borrower\nor against any indemnitor or guarantor (including Guarantor) under any indemnity\nor guaranty executed in connection with the Loan, as debtor, or an order,\njudgment or decree is entered appointing, with or without the consent of\nBorrower, of any such general partner or member of Borrower or of any such\nindemnitor or guarantor (including Guarantor), a receiver, trustee, custodian or\nsimilar officer for Borrower, for any such general partner or member of Borrower\nor for any such indemnitor or guarantor (including Guarantor), or for any\nsubstantial part of any of the properties of Borrower, of any such general\npartner or member of Borrower or of any such indemnitor or guarantor (including\nGuarantor), and if any such event shall occur, such petition, case, proceeding,\naction, order, judgment or decree shall not be dismissed within sixty (60) days\nafter being commenced.\n\n (i) Any Property or any material part thereof is taken on\nexecution or other process of law (other than in the nature of eminent domain)\nin any action against Borrower.\n\n\n (j) Borrower fails to deliver the audited balance sheet as\nrequired in Section 8.1 above on or before October 28, 1998, which balance sheet\nmust be consistent with the Properties' financial information previously\ndelivered to Lender in connection with the closing of the Loan.\n\n\n 10.2 Acceleration Upon Event of Default; Remedies. Upon the occurrence\nand during the continuance of any Event of Default, Lender may, at its sole\noption, declare all sums owing to Lender under the Note, this Agreement and the\nother Loan Documents immediately due and payable without any presentment,\ndemand, protest, notice, or action of any kind whatever (each of which is hereby\nexpressly waived by Borrower), whereupon the same shall become immediately due\nand payable. Upon any such acceleration, payment of such accelerated amount\nshall constitute a prepayment of the principal balance of the Note and any\napplicable prepayment premium provided for in the Note shall then be immediately\ndue and payable.\n\n\n 10.3 Further Remedies. During the continuance of any Event of Default,\nLender shall have all rights, powers and remedies available under each of the\nLoan Documents, or accorded by law, including, without limitation, the right to\nresort to any or all security for any credit extended by Lender to Borrower\nunder any of the Loan Documents and to exercise any or all of the rights of a\nLender or secured party pursuant to the applicable law.\n\n\n 10.4 Repayment of Funds Advanced. Any amounts expended by Lender in\nthe exercise of its rights or remedies under this Agreement and the other Loan\nDocuments shall (except to the degree governed by a specific provision to the\ncontrary in this Agreement or the other Loan Documents) be due and payable\nfrom Borrower to Lender ten (10) Business Days after Lender's demand therefor,\ntogether with interest at the Applicable Interest Rate (as defined in the\nNote) from the date incurred by Lender and at the Default Interest Rate (x)\ncommencing ten (10) Business Days after Lender's demand or (y) if applicable,\nfollowing the maturity or acceleration of the Loan, until paid. Lender shall\nprovide to Borrower copies of invoices, statements or other records\ndocumenting such amounts to the extent available to Lender.\n\n\n 10.5 Rights Cumulative, No Waiver. All rights, powers and remedies of\nLender provided in this Agreement and in the other Loan Documents may be\nexercised at any time by \n\n 55\n\n \nLender and from time to time after the occurrence and during the\ncontinuance of any such breach or default, are cumulative and not exclusive, may\nbe pursued singularly, successively, or together at the sole discretion of\nLender, and shall be in addition to any other rights, powers or remedies\nprovided by law or equity. The failure to exercise any such right or remedy\nshall in no event be construed as a waiver or a release thereof. Lender's\nexercise of any right or remedy shall not constitute a cure of any Event of\nDefault unless all amounts then due and payable to Lender under the Loan\nDocuments are repaid and Borrower has cured all other Events of Default. No\nwaiver shall be implied from any failure of Lender to take, or any delay by\nLender in taking, action concerning any Event of Default or failure of condition\nunder the Loan Documents, or from any previous waiver of any similar or\nunrelated Event of Default or failure of condition. Any waiver or approval under\nany of the Loan Documents must be in writing and shall be limited to its\nspecific terms.\n\n ARTICLE XI\n\n MISCELLANEOUS PROVISIONS\n\n\n 11.1 No Third Parties Benefited. No person other than Lender and\nBorrower and their permitted successors and assigns shall have any right of\naction under any of the Loan Documents.\n\n\n 11.2 Notices. All notices, demands and other communications under this\nAgreement and the other Loan Documents shall be in writing and telecopied (with\na confirmation copy sent by overnight courier), mailed, messengered or sent by\novernight delivery service to the appropriate party at its telecopy number or\naddress set forth below (subject to change from time to time by written notice\nto all other parties to this Agreement). All such notices and communications\nshall be effective (a) upon receipt, when delivered by hand or overnight\ndelivery service, or if mailed, upon the first to occur of receipt or the\nexpiration of three (3) days after the deposit in the United States Postal\nService mail, postage prepaid and addressed to the address of Borrower or Lender\nat the address specified; provided, however, that non-receipt of any\ncommunication as the result of any change of address of which the sending party\nwas not notified or as the result of a refusal to accept delivery shall be\ndeemed receipt of such communication, and (b) upon transmission, when delivered\nby telecopy to the specified telecopy number (if a confirmation copy is also\nsent by overnight courier).\n\n\n Lender: Prudential Mortgage Capital Company, Inc.\n 100 Mulberry Street\n\n\n Gateway Center Four, 9th Floor\n Newark, New Jersey 07102-4069\n Attn: Shane Tucker, SVP\n Telecopy No.: (973) 802-4838\n\n\n With a copy to: Prudential Mortgage Capital Company, Inc.\n 21261 Burbank Boulevard\n Woodland Hills, California 91367-6699\n Attn: Steve Mekeown\n Telecopy No.: (818) 992-3790\n\n\n 56\n\n \n Borrower: Catellus Finance 1, L.L.C.\n 201 Mission Street, Suite 340\n San Francisco, CA 94105\n Attn: Stephen R. Koch\n Telecopy No.: (415) 974-4502\n\n\n 11.3 Payment of Costs; Reimbursement to Lender. Borrower shall pay all\ncosts and expenses of every character reasonably incurred in connection with the\nclosing or administration of the Loan or otherwise attributable or chargeable to\nBorrower as the owner of the Properties, including, without limitation,\nappraisal fees, recording fees, documentary, stamp, mortgage or intangible\ntaxes, brokerage fees and commissions, title policy premiums and title search\nfees, uniform commercial code\/tax lien\/litigation search fees, escrow fees and\nreasonable attorneys' fees. Lender shall provide to Borrower copies of invoices,\nstatements or other records documenting such amounts to the extent available to\nLender. If Borrower defaults in any such payment, which default is not cured\nwithin any applicable grace or cure period, Lender may pay the same and Borrower\nshall reimburse Lender on demand for all such costs and expenses incurred or\npaid by Lender, together with such interest thereon at the Default Interest Rate\nfrom and after the date of Lender's making such payment until reimbursement\nthereof by Borrower. Any such sums disbursed by Lender, together with such\ninterest thereon, shall be additional indebtedness of Borrower secured by the\nMortgages and by all of the other Loan Documents securing all or any part of the\nLoan by the Note. Without limiting or waiving any other rights and remedies of\nLender hereunder, if Borrower fails to perform any of its covenants or\nagreements contained in this Agreement or in any of the other Loan Documents and\nsuch failure is not cured within any applicable grace or cure period, or if any\naction or proceeding of any kind (including, but not limited to, any bankruptcy,\ninsolvency, arrangement, reorganization or other debtor relief proceeding) is\ncommenced which might affect Lender's interest in the Properties or Lender's\nright to enforce its security, then Lender may, at its option, with or without\nnotice to Borrower, make any appearances, disburse any sums and take any actions\nas may be necessary or desirable to protect or enforce the security of the\nMortgages or to remedy the failure of Borrower to perform its covenants and\nagreements (without, however, waiving any default of Borrower). Borrower agrees\nto pay on demand all expenses of Lender incurred with respect to the foregoing\n(including, but not limited to, reasonable fees and disbursements of counsel),\ntogether with interest thereon at the Default Interest Rate from and after the\ndate on which Lender incurs such expenses until reimbursement thereof by\nBorrower. Any such expenses so incurred by Lender, together with interest\nthereon as provided above, shall be additional indebtedness of Borrower secured\nby the Mortgages and by all of the other Loan Documents securing all or any part\nof the Loan. The necessity for any such actions and of the amounts to be paid\nshall be determined by Lender in its reasonable discretion. This Section shall\nnot be construed to require Lender to incur any expenses, make any appearances\nor take any actions.\n\n\n 11.4 Relationship of Parties. The relationship of Borrower and Lender\nunder this Agreement, and the other Loan Documents is, and shall at all times\nremain, solely that of borrower and lender; and Lender neither undertakes nor\nassumes any responsibility or duty to Borrower or to any third party with\nrespect to any of the Properties. Notwithstanding any other provisions of this\nAgreement or the other Loan Documents: (a) Lender is not, and shall not be\nconstrued as, a partner, joint venturer, alter-ego, manager, controlling person\nor other business associate or participant of any kind of Borrower, and Lender\ndoes not intend to ever assume such status; (b) Lender does not intend to ever\nassume any responsibility to any person for the quality, \n\n 57\n\n \nsuitability, safety or condition of any of the Properties; and (c) Lender\nshall not be deemed responsible for or a participant in any acts, omissions or\ndecisions of Borrower. Lender shall not be directly or indirectly liable or\nresponsible for any loss, claim, cause of action, liability, indebtedness,\ndamage or injury of any kind or character to any person or property arising from\nany construction on, or occupancy or use of, the Properties, whether caused by\nor arising from: (i) any defect in any building, structure, grading, fill,\nlandscaping or other improvements thereon or in any on-site or off-site\nimprovement or other facility therein or thereon; (ii) any act or omission of\nBorrower or any of Borrower's agents, employees, independent contractors,\nlicensees or invitees; (iii) any accident in or on the Properties or any fire,\nflood or other casualty or hazard thereon; (iv) the failure of Borrower, any of\nBorrower's licensees, employees, invitees, agents, independent contractors or\nother representatives to maintain any of the Properties in a safe condition; and\n(v) any nuisance made or suffered on any part of any of the Properties.\n\n 11.5 Delay Outside Lender's Control. Lender shall not be liable in any\nway to Borrower or any third party for Lender's failure to perform or delay in\nperforming under the Loan Documents (and Lender may suspend or terminate all or\nany portion of Lender's obligations under the Loan Documents) if such failure to\nperform or delay in performing results directly or indirectly from, or is based\nupon, the action, inaction, or purported action, of any governmental or local\nauthority, or because of war, rebellion, insurrection, strike, lock-out, boycott\nor blockade (whether presently in effect, announced or in the sole judgment of\nLender deemed probable), or from any act of God or other cause or event beyond\nLender's control.\n\n\n 11.6 Attorneys' Fees. In the event legal action, suit or any proceeding\nis commenced between Borrower and Lender regarding their respective rights and\nobligations under this Agreement or any of the other Loan Documents, the\nprevailing party shall be entitled to recover, in addition to damages or other\nrelief, costs and expenses, attorneys' fees and court costs. As used herein the\nterm \"prevailing party\" shall mean the party which obtains the principal relief\nit has sought, whether by compromise settlement or judgment. If the party which\nshall have commenced or instituted the action, suit or proceeding shall dismiss\nor discontinue it without the concurrence of the other party, such other party\nshall be deemed the prevailing party.\n\n\n 11.7 Loan Sales and Securitization; Disclosure of Information. Borrower\nacknowledges that Lender may include all or portions of the Loan in one or more\nfuture securitizations (collectively, the \"Securitization\"). Borrower shall\ncooperate in good faith with Lender in effecting any such Securitization and in\nimplementing all requirements imposed by any Rating Agency involved in any\nSecuritization including, without limitation, all changes to the Loan,\nincluding, but not limited to, any modifications to any documents evidencing or\nsecuring the Loan secured hereby; provided, however, no such modification shall\namend the Initial Interest Rate or Extended Term Interest Rate payable under the\nNote, the Anticipated Repayment Date or the Maturity Date, the amortization\nschedule of the Note or any economic or other material term of the Loan.\nBorrower will also agree to cooperate with Lender in connection with any\nSecuritization as required by any of the Rating Agencies or as reasonably\nrequested by Lender, in connection with Loan Document preparation, due\ndiligence, Lender's obtaining ratings and preliminary evaluations from all such\nRating Agencies or Lender's preparation of offering materials. Borrower\nacknowledges that such cooperation may include, if necessary, Borrower\nproviding, at Borrower's expense, audited financials as well as updated\nfinancial and other information on Borrower and the Properties. Reference in\nthis Agreement to the downgrade, disqualification or withdrawal of ratings by\nthe Rating Agencies shall be deemed \n\n 58\n\n \nto refer to the Rating Agencies which have rated or, as indicated by\nLender, shall rate the Securitization securities. Lender shall be permitted to\nshare all information provided to Lender in connection with the Loan with the\ninvestment banking firms, accounting firms, law firms, Rating Agencies and other\nthird-party advisors involved with any such Securitization. Lender and all such\nthird-party advisors shall be entitled to rely on any information supplied by,\nor on behalf of, Borrower or Guarantor. Borrower and Guarantor shall indemnify\nLender and such third-parties, and any of their respective \"controlling\" persons\n(as defined under the securities laws) from any loss, claim, cost, damage or\nexpense incurred by such parties and any of their respective \"controlling\"\npersons that arise out of or are based upon any untrue statement or alleged\nuntrue statement of any material fact contained in such information or arise out\nof or are based upon the omission or alleged omission to state therein a\nmaterial fact required or necessary in order to make the statements in such\ninformation, or in light of the circumstances under which they were made, not\nmisleading. Borrower further acknowledges that any item submitted to Lender in\nconnection with the Loan may be delivered to a purchaser of securities or other\ninterest in the Loan in connection with the Securitization. All obligations of\nBorrower and\/or Guarantor under the Loan Documents to indemnify Lender shall\nalso run to the benefit of any purchaser of the Loan or interests therein in the\nsecondary market who has been identified by Lender (whether or not the identity\nof such purchaser is known to Borrower prior to the Closing Date).\n\n 11.8 Certain Rights of Lender. Without affecting Borrower's liability\nfor the payment of any of the Loan, Lender may from time to time and without\nnotice to Borrower: (a) release any person liable for the payment of the Loan;\n(b) accept additional real or personal property of any kind as security or\nalter, substitute or release any property securing the Loan; (c) reconvey all or\nany part of the Properties; (d) consent in writing to the making of any\nsubdivision map or plat thereof; (e) join in granting any easement therein; or\n(f) enter into any agreement to subordinate the lien of any Loan Document.\n\n\n 11.9 Waiver; Discontinuance of Proceedings. Lender may waive any single\nEvent of Default by Borrower hereunder without waiving any other prior or\nsubsequent Default or Event of Default. Lender may remedy any Event of Default\nby Borrower hereunder without waiving the default remedied. Neither the failure\nby Lender to exercise, nor the delay by Lender in exercising, any right, power\nor remedy upon any Event of Default by Borrower hereunder shall be construed as\na waiver of such default or as a waiver of the right to exercise any such right,\npower or remedy at a later date. No single or partial exercise by Lender of any\nright, power or remedy hereunder shall exhaust the same or shall preclude any\nother or further exercise thereof, and every such right, power or remedy\nhereunder may be exercised at any time and from time to time. No modification or\nwaiver of any provision hereof nor consent to any departure by Borrower\ntherefrom shall in any event be effective unless the same shall be in writing\nand signed by Lender, and then such waiver or consent shall be effective only in\nthe specific instance and for the specific purpose given. No notice to nor\ndemand on Borrower in any case shall of itself entitle Borrower to any other or\nfurther notice or demand in similar or other circumstances. Acceptance by Lender\nof any payment in an amount less than the amount then due on any of the Loan\nshall be deemed an acceptance on account only and shall not in any way affect\nthe existence of an Event of Default hereunder. In case Lender shall have\nproceeded to invoke any right, remedy or recourse permitted hereunder or under\nthe other Loan Documents and shall thereafter elect to discontinue or abandon\nthe same for any reason, Lender shall have the unqualified right to do so and,\nin such an event, Borrower and Lender shall be restored to their \n\n 59\n\n \nformer positions with respect to the Loan, the Loan Documents, the\nProperties and otherwise, and the rights, remedies, recourses and powers of\nLender shall continue as if the same had never been invoked.\n\n 11.10 Application of the Proceeds of the Note. To the extent that\nproceeds of the Note are used to pay indebtedness secured by any outstanding\nlien, security interest, charge or prior encumbrance against any of the\nProperties, such proceeds have been advanced by Lender at Borrower's request and\nLender shall be subrogated to any and all rights, security interests and liens\nowned by any owner or holder of such outstanding liens, security interests,\ncharges or encumbrances, irrespective of whether said liens, security interests,\ncharges or encumbrances are released.\n\n\n 11.11 Tax Service. Lender is authorized to secure in Lender's\nreasonable discretion, at Borrower's expense, a tax service contract with a\nthird party vendor which shall provide property tax payment information on the\nProperties satisfactory to Lender.\n\n\n 11.12 Severability. If any provision or obligation under this Agreement\nand the other Loan Documents shall be determined by a court of competent\njurisdiction to be invalid, illegal or unenforceable, that provision shall be\ndeemed severed from the Loan Documents and the validity, legality and\nenforceability of the remaining provisions or obligations shall remain in full\nforce as though the invalid, illegal or unenforceable provision had never been a\npart of the Loan Documents.\n\n\n 11.13 Heirs, Successors and Assigns. The terms of this Agreement and of\nthe other Loan Documents shall bind and inure to the benefit of the heirs,\nsuccessors and assigns of the parties (including, but not limited to, any\npurchaser of the Loan or any interests therein in connection with any\nSecuritization or otherwise). The foregoing sentence shall not be construed to\npermit Borrower to assign the Loan except as otherwise permitted under this\nAgreement or in the other Loan Documents.\n\n\n 11.14 Time. Time is of the essence of each and every term of this\nAgreement.\n\n\n 11.15 Headings. All Article, Section or other headings appearing in\nthis Agreement and any of the other Loan Documents are for convenience of\nreference only and shall be disregarded in construing this Agreement and any of\nthe other Loan Documents.\n\n 11.16 Governing Law. The Note, this Agreement, and each of the other\nLoan Documents (unless otherwise provided in such other Loan Documents) shall be\ngoverned by and construed in accordance with the laws of the State of New York\nwithout reference to conflicts of law rules. It is the intent of the parties\nhereto that the provisions of Section 5-1401 of the General Obligations Law of\nthe State of New York apply to this Agreement. Accordingly, in all respects,\nincluding, without limitation, matters of construction, validity, enforceability\nand performance, this Agreement, the Note and the other Loan Documents and the\nobligations arising hereunder and thereunder shall be governed by, and construed\nin accordance with, the laws of the state of New York applicable to contracts\nmade and performed in such state, and any applicable law of the United States of\nAmerica, except that at all times the provisions for enforcement of the power of\nsale granted under the Mortgages and the creation, perfection and enforcement of\nthe security interests created pursuant thereto and hereunder and pursuant to\nthe other Loan Documents shall be governed by and construed according to the\nlaws of the state where the \n\n 60\n\n \nProperty is located. Except as provided in the immediately preceding\nsentence, Borrower hereby unconditionally and irrevocably waives, to the fullest\nextent permitted by law, any claim to assert that the law of any jurisdiction\nother than New York governs this Agreement, the Note and the other Loan\nDocuments.\n\n\n 11.17 Consent to Jurisdiction. Borrower irrevocably submits to the\njurisdiction of: (a) any state or federal court sitting in the state of New\nYork, over any suit, action or proceeding, arising out of or relating to this\nAgreement, the Note or the Loan; and (b) any state court sitting in the county\nof the state where the applicable Property is located over any suit, action or\nproceeding, brought by the trustee or Lender related to the exercise of the\npower of sale under the applicable Mortgage or any action brought by Lender to\nenforce its rights with respect to the Property. Borrower irrevocably waives, to\nthe fullest extent permitted by law, any objection that Borrower may now or\nhereafter have to the laying of venue of any such suit, action, or proceeding\nbrought in any such court and any claim that any such suit, action, or\nproceeding brought in any such court has been brought in an inconvenient forum.\n\n 11.18 Integration: Interpretation. The Loan Documents contain or\nexpressly incorporate by reference the entire agreement of the parties with\nrespect to the matters contemplated therein and supersede all current or prior\nnegotiations or agreements, written or oral. The Loan Documents shall not be\nmodified except by written instrument executed by all parties. Any reference in\nany of the Loan Documents to a Property or Properties shall include all or any\npart of such Property or Properties. Any reference to the Loan Documents\nincludes any amendments, renewals or extensions now or hereafter approved by\nLender in writing.\n\n 11.19 Joint and Several Liability. The liability of all persons and\nentities obligated in any manner under this Agreement and any of the Loan\nDocuments shall be joint and several.\n\n 11.20 Counterparts. This Agreement and any of the other Loan Documents\n(except for the Note) may be executed in any number of counterparts, each of\nwhich when executed and delivered shall be deemed to be an original, and all\nsuch counterparts together shall constitute one and the same instrument.\n\n 11.21 Advertising. Lender is authorized to state in advertising or\nother press releases the fact that the type and amount of financing under the\nLoan has been provided by Lender for Borrower on the Properties.\n\n 11.22 Maximum Interest. The provisions of this Agreement and of all\nother Loan Documents between Borrower and Lender, whether now existing or\nhereafter arising and whether written or oral, are hereby expressly limited so\nthat in no contingency or event whatsoever, whether by reason of demand or\nacceleration of the maturity of the Note or otherwise, shall the amount paid, or\nagreed to be paid (\"Interest\"), to Lender for the use, forbearance or retention\nof the money loaned under the Note exceed the maximum amount permissible under\napplicable law. If, from any circumstance whatsoever, performance or fulfillment\nof any provision hereof or of any agreement between Borrower and Lender shall,\nat the time performance or fulfillment of such provision shall be due, exceed\nthe limit for Interest prescribed by law or otherwise transcend the limit of\nvalidity prescribed by applicable law, then, ipso facto, the obligation to be\nperformed or fulfilled shall be reduced to such limit, and if, from any\ncircumstance whatsoever, Lender shall ever receive anything of value deemed\nInterest by applicable law in excess of the maximum lawful amount, an amount\nequal to any excessive\n\n 61\n\n \nInterest shall be applied to the reduction of the principal balance owing under\nthe Note in the inverse order of its maturity (whether or not then due) or, at\nthe option of Lender, be paid over to Borrower, and not to the payment of\nInterest. All Interest (including any amounts or payments deemed to be Interest)\npaid or agreed to be paid to Lender shall, to the extent permitted by applicable\nlaw, be amortized, prorated, allocated and spread throughout the full period\nuntil payment in full of the principal balance of the Note so that the Interest\nthereon for such full period will not exceed the maximum amount permitted by\napplicable law. This Section will control all agreements between Borrower and\nLender.\n\n\n 11.23 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT\nHEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT TO TRIAL BY\nJURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN\nDOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION\nTHEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE\nDEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS\n(AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT\nEXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OR CONDUCT, COURSE\nOF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), IN EACH CASE WHETHER SUCH\nCLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING,\nAND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY\nAGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL\nBE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT\nMAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS\nWRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT\nTHEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.\n\n----------- -------------\nInitials Initials\n\n\n [SIGNATURE PAGE FOLLOWS]\n\n\n 62\n\n \n IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as\nof the date appearing on the first page of this Agreement.\n\n\"Lender\" \"Borrower\"\n\n\nPRUDENTIAL MORTGAGE CAPITAL CATELLUS FINANCE 1, L.L.C.,\nCOMPANY, INC. a Delaware limited liability company\n\n\nBy:_________________________ By: _____________________________\n\n Name:_________________ Name:_____________________\n\n Title:________________ Title: ___________________\n\n\nAcknowledged and agreed as to \nthe provisions of Section 11.7 \nhereof.\n By: ______________________________\n\n\"Guarantor\" Name: ______________________\n\n Title: _____________________\n \n\n\nCATELLUS DEVELOPMENT CORPORATION, \na Delaware corporation\n\n\n\n 63\n\n \n EXHIBIT A - LIST OF PROPERTIES\n\n\n\n\n\n THE PROPERTIES\n\n<\/pre>\n