<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
Commission file number 1-12193
ARDEN REALTY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 95-04578533
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
11601 WILSHIRE BOULEVARD,
4TH FLOOR
LOS ANGELES, CALIFORNIA 90025-1740
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (310) 966-2600
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
As of July 30, 1998, there were 62,319,631 shares of the registrant's Common
Stock, $.01 par value, issued and outstanding.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARDEN REALTY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Commercial properties:
Land $ 475,692 $ 241,440
Buildings and improvements 1,693,254 975,791
Tenant improvements 37,652 21,801
---------- ----------
2,206,598 1,239,032
Less: accumulated depreciation (59,017) (35,860)
---------- ----------
2,147,581 1,203,172
Cash and cash equivalents 6,162 5,300
Restricted cash 11,804 4,040
Rent and other receivables 11,541 10,203
Mortgage notes receivable, net 14,447 14,430
Deferred rent 11,802 8,811
Prepaid financing and leasing costs, net of accumulated
amortization of $4,562 and $2,649, respectively 24,803 12,680
Prepaid expenses and other assets 5,301 25,368
---------- ----------
Total assets $2,233,441 $1,284,004
========== ==========
LIABILITIES
Mortgage loans payable $ 511,192 $ 237,166
Unsecured lines of credit 234,600 240,400
Accounts payable and accrued expenses 22,837 16,458
Security deposits 12,671 6,847
Dividends payable 26,174 14,177
---------- ----------
Total liabilities 807,474 515,048
---------- ----------
Minority interests 54,163 95,973
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 20,000,000 shares
authorized, none issued -- --
Common Stock, $.01 par value, 100,000,000 shares
authorized, 62,319,631 and 35,796,704 issued and
outstanding, respectively 623 358
Additional paid-in capital 1,371,181 672,625
---------- ----------
Total stockholders' equity 1,371,804 672,983
---------- ----------
Total liabilities and stockholders' equity $2,233,441 $1,284,004
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
ARDEN REALTY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -------------------
1998 1997 1998 1997
------- ------- -------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue $70,503 $29,704 $125,262 $54,620
Property operating expenses 21,543 9,544 38,281 17,438
------- ------- -------- -------
48,960 20,160 86,981 37,182
General and administrative 1,388 931 3,023 1,849
Interest 10,539 5,883 19,151 8,907
Depreciation and amortization 12,930 4,458 24,226 8,020
Interest and other income (695) (59) (2,153) (113)
------- ------- -------- -------
Income before minority interests 24,798 8,947 42,734 18,519
Minority interests (1,183) (1,090) (2,935) (2,224)
------- ------- -------- -------
Net income $23,615 $ 7,857 $ 39,799 $16,295
======= ======= ======== =======
Net income per common share:
Basic $ 0.38 $ 0.36 $ 0.73 $ 0.75
======= ======= ======== =======
Diluted $ 0.38 $ 0.36 $ 0.72 $ 0.74
======= ======= ======== =======
Weighted average common shares:
Basic 62,051 21,693 54,874 21,688
======= ======= ======== =======
Diluted 62,248 21,885 55,081 21,902
======= ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
ARDEN REALTY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1998 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
Operating Activities:
Net income $ 39,799 $ 16,295
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interests 2,935 2,224
Depreciation and amortization 24,226 8,020
Amortization of loan costs and fees 844 189
Changes in operating assets and liabilities:
Rents and other receivables (1,355) (851)
Deferred rent (2,991) (1,219)
Prepaid financing and leasing costs (14,036) (6,521)
Prepaid expenses and other assets 20,067 (4,013)
Accounts payable and accrued expenses 6,379 7,305
Security deposits 5,824 1,392
--------- ---------
Net cash provided by operating activities 81,692 22,821
--------- ---------
Investing Activities:
Acquisitions and improvements to commercial properties (988,966) (247,769)
--------- ---------
Financing Activities:
Proceeds from mortgage loans 639,920 246,000
Repayments of mortgage loans (365,894) (175,000)
Proceeds from secured lines of credit -- 26,700
Proceeds from unsecured lines of credit 314,150 142,900
Repayments of unsecured lines of credit (319,950) --
Proceeds from issuance of common stock, net of offering
costs 707,005 247
Redemption of Operating Partnership Units (16,305) --
Increase in restricted cash (7,764) (4,000)
Distributions to minority interests (3,141) --
Dividends paid (39,885) (18,669)
--------- ---------
Net cash provided by financing activities 908,136 218,178
--------- ---------
Net increase (decrease) in cash and cash equivalents $ 862 $ (6,770)
Cash and cash equivalents at beginning of period 5,300 7,632
--------- ---------
Cash and cash equivalents, at end of period $ 6,162 $ 862
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest, net of amount
capitalized $ 11,513 $ 6,675
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
ARDEN REALTY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Arden Realty, Inc. (the "Company"), through its controlling interest in
Arden Realty Limited Partnership (the "Operating Partnership") and its other
subsidiaries, is engaged in owning, acquiring, managing, leasing, and renovating
commercial properties located in Southern California. As of June 30, 1998 the
Company's portfolio of properties included 134 commercial properties with
approximately 17.5 million rentable square feet (the "Properties").
The accompanying consolidated financial statements include the accounts of
the Company, the Operating Partnership and its other subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
Minority interests for the six month periods ended June 30, 1998 and 1997
include limited partnership interests in the Operating Partnership of
approximately 5.7% and 12.0%, respectively.
2. INTERIM FINANCIAL DATA
The accompanying consolidated financial statements should be read in
conjunction with the Company's 1997 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission. The accompanying financial information
reflects all adjustments which are, in the opinion of management, of a normal
recurring nature and necessary for a fair presentation of the Company's
financial position, results of operations and cash flows for the interim
periods. Interim results of operations are not necessarily indicative of the
results to be expected for the full year.
3. NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Segment Reporting" ("Statement 131").
Statement 131 is effective for fiscal years beginning after December 15, 1997
and requires disclosure of selected information about reportable segments.
Implementation of Statement 131 will have no impact on the Company's reporting
of its results of operations.
In March 1998, the Financial Accounting Standards Board Emerging Issues
Task Force ("EITF") reached a consensus on Issue 97-11, concluding that internal
preacquisition costs related to the purchase of an operating property should be
expensed as incurred. The Company has adopted the provisions of EITF Abstract
97-11, and management does not believe that the Company's results of operations
will be materially impacted.
5
<PAGE> 6
4. ACQUISITIONS
The following table sets forth certain information regarding the Company's
acquisitions for the six months ended June 30, 1998.
<TABLE>
<CAPTION>
TOTAL
APPROXIMATE MONTH ACQUISITION
NET RENTABLE OF COST
PROPERTY NAME LOCATION SQUARE FEET ACQUISITION (IN MILLIONS)
- ----------------------------------- ---------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
OFFICE
LOS ANGELES COUNTY
Los Angeles West
9100 Wilshire Beverly Hills 326,227 January 1998 $ 65.1
1100 Glendon (A) Los Angeles 282,013 January 1998 28.7
World Savings Center Los Angeles (B) March 1998 27.5
600 Corporate Pointe Culver City 273,339 March 1998 (C)
1919 Santa Monica Santa Monica 44,096 March 1998 (C)
11075 Santa Monica Los Angeles 35,696 April 1998 5.0
Los Angeles North
Sunset Pointe Plaza Newhall 58,105 January 1998 8.5
Westlake Gardens Westlake 49,639 January 1998 7.3
5161 Lankershim North Hollywood 178,317 March 1998 (C)
150 East Colorado Pasadena 61,168 March 1998 (C)
Calabasas Tech Center Calabasas 273,526 May 1998 46.1
Lyons Plaza Santa Clarita 61,203 June 1998 8.4
Los Angeles South
1501 Hughes Way Long Beach 77,060 March 1998 (C)
3901 Via Oro Long Beach 53,195 March 1998 (C)
Continental Grand El Segundo 235,926 April 1998 47.6
Oceangate Tower Long Beach 210,907 May 1998 23.5
ORANGE COUNTY
Savi Tech Center Yorba Linda 341,446 March 1998 (C)
Yorba Linda Business Park Yorba Linda 167,142 March 1998 (C)
Huntington Commerce Center Huntington Beach 67,551 March 1998 (C)
Huntington Beach Plaza I & II Huntington Beach 52,186 March 1998 (C)
5602 Bolsa Huntington Beach 27,731 March 1998 (C)
5632 Bolsa Huntington Beach 21,568 March 1998 (C)
5672 Bolsa Huntington Beach 11,968 March 1998 (C)
Von Karman Corporate Center Irvine 451,477 March 1998 (C)
Orange Financial Center Orange 305,439 March 1998 (C)
625 The City Orange 139,806 March 1998 (C)
Fountain Valley Plaza Fountain Valley 107,252 March 1998 (C)
3300 Irvine Avenue Newport Beach 74,224 March 1998 (C)
1503 South Coast Costa Mesa 60,605 March 1998 (C)
One Venture Irvine 43,324 March 1998 (C)
Lambert Office Plaza Brea 32,807 March 1998 (C)
SAN DIEGO COUNTY
Activity Business Center San Diego 167,045 January 1998 14.9
Skypark Office Plaza San Diego 202,164 March 1998 (C)
Sorrento Valley Science Park San Diego 181,207 March 1998 (C)
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
TOTAL
APPROXIMATE MONTH ACQUISITION
NET RENTABLE OF COST
PROPERTY NAME LOCATION SQUARE FEET ACQUISITION (IN MILLIONS)
- ----------------------------------- ---------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Panorama Corporate Center San Diego 133,245 March 1998 (C)
Governor Park Plaza San Diego 104,065 March 1998 (C)
Torreyanna Science Park San Diego 81,204 March 1998 (C)
Balboa Corporate Center San Diego 69,890 March 1998 (C)
10251 Vista Sorrento San Diego 69,386 March 1998 (C)
Westridge San Diego 48,850 March 1998 (C)
Ruffin Corporate Center San Diego 45,059 March 1998 (C)
10180 Scripps Ranch San Diego 43,560 March 1998 (C)
5120 Shoreham San Diego 37,759 March 1998 (C)
Uniden Building San Diego 28,119 March 1998 (C)
Cymer Technology Center Rancho Bernardo 155,612 March 1998 (C)
Carlsbad Corporate Center Carlsbad 125,000 March 1998 (C)
Poway Industrial Poway 112,000 March 1998 (C)
10965-93 Via Frontera Rancho Bernardo 77,920 March 1998 (C)
Genesee Executive Plaza San Diego 155,820 June 1998 27.0
VENTURA COUNTY
Camarillo Business Center Camarillo 154,216 March 1998 (C)
RIVERSIDE & SAN BERNARDINO
COUNTIES
Hunter Business Park Riverside 106,782 March 1998 (C)
Chicago Avenue Business Park Riverside 47,482 March 1998 (C)
Tower Plaza I Temecula 72,350 March 1998 (C)
Tower Plaza II Temecula 19,301 March 1998 (C)
Tower Plaza III Temecula 12,483 March 1998 (C)
Centrelake Plaza Ontario 110,763 March 1998 (C)
HDS Plaza San Bernardino 104,178 March 1998 (C)
Havengate Center Rancho Cucamonga 80,557 March 1998 (C)
INDUSTRIAL
RIVERSIDE & SAN BERNARDINO
COUNTIES
Ontario Airport Commerce
Center Ontario 213,127 March 1998
Highlands I Temecula 26,856 March 1998 (C)
Highlands II Temecula 41,210 March 1998 (C)
RETAIL
Inland Empire
Tower Plaza Retail Temecula 144,225 March 1998 (C)
The Spectrum Club Los Angeles 36,959 March 1998 (D)
--------- ------
Sub-total 7,133,337 309.6
LBA Portfolio -- 619.9(C)
Howard Hughes Center -- 38.6(D)
--------- ------
Total 7,133,337 $968.1
========= ======
</TABLE>
(A) The Company owns a 97.5% interest in this property.
(B) At December 31, 1997 the Company owned a 75% interest in the 469,115 square
foot World Savings Center and exercised an option to purchase the remaining
25% interest for $27.5 million on March 25, 1998, resulting in a total
acquisition cost of approximately $110.7 million.
(C) On March 1, 1998, the Company acquired a portfolio of 50 primarily office
and R&D/industrial properties (the "LBA Portfolio"), aggregating
approximately 5.2 million rentable square feet for a
7
<PAGE> 8
purchase price of approximately $619.9 million, including $1.8 million of
closing costs and the estimated $3.6 million value of warrants to purchase
2.5 million shares of the Company's Common Stock.
(D) On March 31, 1998, the Company acquired the undeveloped commercial property
portions of the 70-acre Howard Hughes Center (the "Center") for
approximately $38.6 million. The Center, located in El Segundo, California,
is a mixed-use development currently containing three office buildings, an
executive health and athletic club and entitlements for an additional 1.3
million square feet of office space.
5. MORTGAGE LOANS PAYABLE
In January 1998, the Company assumed a mortgage note payable of
approximately $8.2 million in connection with the acquisition of Activity
Business Center. The note bears interest at 2.2% per annum plus the yield to
maturity at the bid price of obligations of the United States Treasury maturing
on April 30, 2006 (effective rate of 8.85% at June 30, 1998). The note requires
monthly payments of principal, interest, and impound payments for taxes and
insurance, and matures on May 1, 2006. This mortgage note prohibits prepayment
prior to May 1, 2002.
In January 1998, the Company also assumed a mortgage note payable of
approximately $15.4 million in connection with the acquisition of 1100 Glendon.
The note bears interest at 8.09% per annum, requires monthly payments of
principal and interest and matures on April 30, 2003.
Also in January 1998, the Company borrowed $60.0 million from Lehman
Brothers Realty Corporation (the "Lehman Bridge Loan I") in connection with the
acquisition of 9100 Wilshire. In June 1998, the Company repaid $5.6 million on
the Lehman Bridge Loan I with proceeds from the Mortgage Financing III and IV
mortgage loans, as defined below. The Lehman Bridge Loan I is secured by three
of the Company's properties, bears interest at LIBOR plus .75% per annum,
requires monthly payments of interest only, and matures on August 20, 1998. The
Company is currently planning to extend the maturity date on the Lehman Bridge
Loan I. The LIBOR rate was approximately 5.7% at June 30, 1998.
In March 1998, in connection with its acquisition of the LBA Portfolio, the
Company borrowed $200 million from Lehman Brothers Realty Corporation (the
"Lehman Bridge Loan II"). This $200 million mortgage loan was secured by 40
properties, required monthly payments of interest only, with $100 million
bearing interest at LIBOR plus 1.0% per annum and $100 million at a fixed rate
of 6.78% per annum. In June 1998, the Company repaid the Lehman Bridge Loan II
with proceeds from the Mortgage Financing III and IV mortgage loans, as defined
below.
In March 1998, the Company assumed an additional $15.0 million of debt
under an existing mortgage note (the "World Savings Note"). On May 1, 1998, the
$60.0 million World Savings Note was repaid in full with proceeds from a draw on
the Company's Amended Credit Facility.
On June 8, 1998, the Company repaid, through two special purpose
subsidiaries, its $200 million Lehman Bridge Loan II with two new mortgage loans
totaling $236.7 million. The additional proceeds were used to repay $22.0
million on the Company's lines of credit and to repay $5.6 million on the Lehman
Bridge Loan I. The $136.1 million ("Mortgage Financing III") and $100.6 million
("Mortgage Financing IV") mortgage loans payable to an affiliate of Lehman
Brothers are non-recourse and secured by fully cross-collaterized and
cross-defaulted first mortgage liens on 22 and 12 of the Company's Properties
("Mortgage Financing III, and IV, Properties"), respectively. The Mortgage
Financing III and IV mortgage loans each have a thirty year term, bear interest
at a fixed rate of 6.74% (6.93% including the amortization of costs associated
with the Swap Agreement, as defined below) per annum, require interest only
payments through April 2003, and thereafter require monthly payments of
principal and interest amortized over a 25 year period through maturity and are
anticipated to be repaid within ten years of issuance. If the Mortgage Financing
III and IV mortgage loans are not repaid within ten years of issuance, the
interest rate will increase by at least 5% per annum and all excess cash flow
(as defined) from the Mortgage Financing III and IV Properties must be used to
pay down outstanding principal. The Mortgage Financing III and IV mortgage loans
require the Company to maintain a cash reserve for tenant improvements of
approximately $2.7 million and $3.3 million,
8
<PAGE> 9
respectively, and to comply with certain customary financial covenants, ongoing
operational restrictions, and certain cash management procedures. Pursuant to
the execution of certain leasing transactions by September 8, 1998, the Company
may borrow up to an additional $10.6 million under the Mortgage Financing IV
loan.
In connection with the Mortgage Financing III and IV mortgage loans, the
Company entered into a treasury rate lock agreement (the "Swap Agreement") with
a notional amount of $100,000,000 and locked in the United States 10 year
treasury rate at 6.174%. The Company is amortizing the approximate $4.5 million
cost of the Swap Agreement over the term of the Mortgage Financing III and IV
mortgage loans.
6. STOCKHOLDERS' EQUITY
An Operating Partnership Unit ("OP Unit") and a share of Common Stock have
essentially the same economic characteristics as they share equally in the total
net income or loss and distributions of the Operating Partnership. OP Units may
be redeemed for cash or, at the election of the Company, for shares of Common
Stock on a one-for-one basis.
In January 1998, 226,880 OP Units were exchanged for Common Stock.
On February 23, 1998, the Company completed three February 1998 equity
offerings (the "February 1998 Offerings") resulting in the issuance of an
aggregate of 25,185,915 shares of Common Stock with gross proceeds totaling
approximately $713.2 million. Aggregate proceeds to the Company from the
February 1998 Offerings, net of underwriters' discount and offering costs
aggregating approximately $35.9 million, were approximately $677.3 million. Of
these February 1998 Offerings, 2,185,915 shares of Common Stock were issued to
the trustees of two unrelated registered unit investment trusts and the
remaining 23,000,000 shares were issued in a secondary public offering. The
Company used the net proceeds from the February 1998 Offerings to fund the
acquisition of the LBA Portfolio described above, to repay the outstanding
balances on its lines of credit and for working capital.
On March 1, 1998, the Operating Partnership issued 203,420 OP Units valued
at approximately $5.8 million in connection with acquisition of the LBA
Portfolio and issued warrants to purchase 2.5 million shares of Common Stock at
a price of $29.59 per share, subject to adjustment.
In December 1997, the Company issued 822,400 OP Units in connection with
its acquisition of the World Savings Center. On April 16, 1998, the Company
redeemed 542,382 of these OP Units at a cost of approximately $16.3 million
based on the original issuance price of the OP Units.
In April 1998, the Company issued 10,412 OP Units valued at approximately
$300,000 in connection with the acquisition of Continental Grand.
On April 23, 1998, the Company completed an offering (the "April 1998
Offering") of 1,110,132 shares of Common Stock. The shares from the April 1998
Offering were issued to the trustee of a registered unit investment trust at an
offering price of $28.375 per share. Gross proceeds from this offering were
approximately $31.5 million. The aggregate proceeds to the Company, net of
underwriters' discount and offering costs aggregating approximately $1.8
million, were approximately $29.7 million. The Company used the net proceeds
from the April 1998 Offering to repay a portion of its outstanding balance on
its lines of credit and for working capital.
On June 17, 1998, the Company declared a second quarter dividend of $.42
per share to shareholders of record on June 30, 1998.
9
<PAGE> 10
7. REVENUE FROM RENTAL OPERATIONS AND PROPERTY OPERATING EXPENSES
Revenue from rental operations and property operating expenses are
summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ---------------------
1998 1997 1998 1997
-------- -------- --------- --------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue From Rental Operations:
Rental $ 63,522 $ 26,611 $ 112,211 $ 48,503
Tenant reimbursements 2,174 931 4,057 1,889
Parking, net of expense 2,882 1,732 5,532 3,222
Other rental operations 1,925 430 3,462 1,006
-------- -------- --------- --------
Total rental revenue 70,503 29,704 125,262 54,620
-------- -------- --------- --------
Property Operating Expenses:
Repairs and maintenance 6,798 3,534 12,150 6,375
Utilities 5,982 2,946 10,598 5,369
Real estate taxes 5,372 1,635 9,472 3,013
Insurance 1,076 480 1,882 864
Ground rent 178 52 356 103
Marketing and other 2,137 897 3,823 1,714
-------- -------- --------- --------
21,543 9,544 38,281 17,438
-------- -------- --------- --------
$ 48,960 $ 20,160 $ 86,981 $ 37,182
======== ======== ========= ========
</TABLE>
8. SUBSEQUENT EVENTS
In July 1998, the Company acquired a 125,132 square foot office property
located in Oxnard, California for approximately $17.1 million, funded with
proceeds from existing working capital and draws on the Company's lines of
credit.
In August 1998, the Company acquired two commercial properties in Southern
California, including a 94,516 square foot office property located in Artesia
for approximately $11.8 million, and a 72,524 square foot office property
located in Burbank for approximately $9.8 million. These acquisitions were
funded with existing working capital and draws on the Company's lines of credit.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion relates to the consolidated financial statements
of the Company and should be read in conjunction with the financial statements
and related notes thereto included in the Company's 1997 Annual Report on Form
10-K.
Since its initial public offering in October 1996, the Company has pursued
a strategy of acquiring underperforming commercial properties, properties in
need of renovation, properties which provide attractive yields with stable cash
flow, and more recently, fully entitled commercial undeveloped real estate, all
in Southern California submarkets where the Company can utilize its local market
expertise. The Company has also used its active in-house management, leasing and
finance expertise to maximize growth in cash flow. In particular, during the six
months ended June 30, 1998 the Company has:
- - Acquired a total of 62 commercial properties, all located in Southern
California, with approximately 7.1 million rentable square feet.
- - Acquired the undeveloped commercial property portions of the 70-acre Howard
Hughes Center (the "Center") for approximately $38.6 million. The Center,
located in El Segundo, California, is a mixed-use development currently
containing three office buildings, an executive health and athletic club and
entitlements for an additional 1.3 million square feet of office space.
- - Raised approximately $744.7 million of equity in a series of four public
offerings. Proceeds to the Company from these offerings, net of underwriters'
discount, advisory fee and offering costs aggregating approximately $37.7
million, were approximately $707.0 million.
- - Refinanced $200 million of variable rate mortgage debt that matured on July 1,
1998, with two fixed rate mortgage loans totaling $236.7 million. The
additional proceeds from this refinancing were used to repay outstanding
indebtedness.
The Company intends to continue focusing on maximizing growth in cash flow
and enhancing the value of its portfolio of commercial properties. These
objectives will be pursued by active management of the Company's existing
portfolio, through development of new office or R&D/industrial properties and
through strategic acquisitions.
11
<PAGE> 12
RESULTS OF OPERATIONS
Comparison of the six months ended June 30, 1998 to the six months ended June
30, 1997
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------- PERCENT
1998 1997 CHANGE CHANGE
-------- ------- ------- -------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Revenue from rental operations:
Rental $112,211 $48,503 $63,708 131%
Tenant reimbursements 4,057 1,889 2,168 115%
Parking, net of expense 5,532 3,222 2,310 72%
Other rental operations 3,462 1,006 2,456 244%
-------- ------- ------- ------
125,262 54,620 70,642 129%
Other income 2,153 113 2,040 1,805%
-------- ------- ------- ------
Total revenue $127,415 $54,733 $72,682 133%
======== ======= ======= ======
EXPENSES
Property operations:
Repairs and maintenance $ 12,150 $ 6,375 $ 5,775 91%
Utilities 10,598 5,369 5,229 97%
Real estate taxes 9,472 3,013 6,459 214%
Insurance 1,882 864 1,018 118%
Ground rent 356 103 253 246%
Marketing and other 3,823 1,714 2,109 123%
-------- ------- ------- ------
Total property expenses 38,281 17,438 20,843 120%
General and administrative 3,023 1,849 1,174 63%
Interest 19,151 8,907 10,244 115%
Depreciation and amortization 24,226 8,020 16,206 202%
-------- ------- ------- ------
Total expenses $ 84,681 $36,214 $48,467 134%
======== ======= ======= ======
OTHER DATA:
NUMBER OF PROPERTIES:
Acquired during period 62 11 51 N/A
Owned at end of period 134 45 89 N/A
SQUARE FEET (IN THOUSANDS):
Acquired during period 7,133 1,947 5,187 N/A
Owned at end of period 17,460 7,390 10,070 N/A
</TABLE>
Rental revenue increased approximately $63.7 million for the six months
ended June 30, 1998 compared to the same period in 1997. Rental revenue from
properties owned for the entire six month periods ended June 30, 1998 and 1997
increased approximately $94,000 in 1998 compared to the prior year, primarily
from an overall increase in rental rates at these properties, partially offset
by the reversing effect of straightline rent adjustments for certain leases in
1998. Rental revenue from properties acquired after January 1, 1997 was
approximately $63.6 million higher for the six months ended June 30, 1998
compared to the same period in 1997, primarily due to the timing of these
acquisitions.
Tenant reimbursements increased approximately $2.2 million for the six
months ended June 30, 1998 compared to the same period in 1997. Tenant
reimbursements from properties owned for the entire six month periods ended June
30, 1998 and 1997 decreased approximately $99,000 in 1998 compared to 1997,
primarily as a result of resetting base years for leases that were retenanted in
1998. Tenant reimbursements from properties acquired after January 1, 1997 were
approximately $2.3 million higher for the six months ended June 30, 1998
compared to the same period in 1997, primarily due to the timing of these
acquisitions.
12
<PAGE> 13
Parking revenue, net of expense, increased approximately $2.3 million for
the six months ended June 30, 1998 compared to the same period in 1997,
primarily from properties acquired after January 1, 1997.
Revenue from other rental operations, consisting primarily of miscellaneous
tenant charges such as after hours utility, heating and air conditioning
charges, increased approximately $2.5 million for the six months ended June 30,
1998 compared to the same period in 1997. Excluding lease buyouts and other
non-recurring items of approximately $982,000 in 1998, revenues from properties
owned for the entire six month periods ended June 30, 1998 and 1997 increased
approximately $50,000 for the six months ended June 30, 1998 compared to the
same period in 1997, primarily due to higher after hours utility, heating and
air conditioning charges in 1998. Revenues from properties acquired after
January 1, 1997 were approximately $1.5 million higher for the six months ended
June 30, 1998 compared to the same period in 1997, primarily due to the timing
of these acquisitions.
Other income increased approximately $2.0 million for the six months ended
June 30, 1998 compared to the same period in 1997, primarily due to higher
interest income earned on mortgage notes receivable acquired in September 1997
and on cash deposits required by certain of the Company's mortgage loans.
For the six months ended June 30, 1998, total property expenses were $38.3
million, or 30.6% of total revenue from rental operations, compared with total
property expenses of $17.4 million or 31.9% of total revenue from rental
operations in 1997. Property expenses for properties owned for the entire six
month periods ended June 30, 1998 and 1997 decreased approximately $1.0 million
in 1998 compared to 1997, primarily due to expense reductions achieved from
economies of scale. Property expenses from properties acquired after January 1,
1997 were $21.8 million higher for the six months ended June 30, 1998, primarily
due to the timing of these acquisitions.
General and administrative expenses were approximately $3.0 million or 2.4%
of total revenue for the six months ended June 30, 1998 as compared to $1.8
million or 3.4% of total revenue for the same period in 1997. General and
administrative expenses as a percentage of total revenue decreased in the first
six months of 1998 compared to 1997 primarily due to benefits achieved from
economies of scale.
Interest expense increased approximately $10.2 million for the six months
ended June 30, 1998 compared to the same period in 1997, primarily as a result
of higher outstanding indebtedness to fund property acquisitions.
Depreciation and amortization expense increased $16.2 million for the six
months ended June 30, 1998 compared to the same period in 1997, primarily due to
1997 and 1998 property acquisitions and depreciation of capital improvements
made to the Company's existing portfolio.
13
<PAGE> 14
Following is a comparison of property operating data computed under
generally accepted accounting principles ("GAAP Basis") and excluding the
straightline rent adjustment ("Cash Basis") for the 34 properties which were
owned for the entire six month periods ended June 30, 1998 and 1997 (in
thousands, except percentage data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------ PERCENT
1998 1997 CHANGE CHANGE
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
GAAP BASIS:
Revenue from rental operations $49,617 $49,576 $ 41 0.08%
Property expenses 14,963 15,979 (1,016) (6.36%)
------- ------- ------- ------
Net $34,654 $33,597 $ 1,057 3.15%
======= ======= ======= ======
CASH BASIS(1):
Revenue from rental operations $49,182 $48,504 $ 678 1.40%
Property expenses 14,963 15,979 (1,016) (6.36%)
------- ------- ------- ------
Net $34,219 $32,525 $ 1,694 5.21%
======= ======= ======= ======
</TABLE>
(1) Excludes straightline rent adjustments.
Revenue from rental operations for the properties owned for the entire six
month periods ended June 30, 1998 and 1997, computed on a GAAP Basis, increased
by approximately $41,000 in 1998 compared to 1997, primarily due to increases in
rental rates and higher miscellaneous tenant charges partially offset by the
reversing effect of straightline rent adjustments for certain leases, lower
tenant reimbursements from resetting base years for leases that were retenanted
and lower parking income at certain properties in 1998.
Revenue from rental operations for these properties for the six months
ended June 30, 1998, computed on a Cash Basis, increased by approximately
$678,000, primarily due to increases in rental rates.
Property operating expenses for the properties owned for the entire six
month periods ended June 30, 1998 and 1997 decreased by approximately $1.0
million in 1998 compared to 1997, primarily due to expense reductions achieved
from economies of scale.
14
<PAGE> 15
Comparison of the three months ended June 30, 1998 to the three months ended
June 30, 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------ PERCENT
1998 1997 CHANGE CHANGE
------- ------- ------- -------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Revenue from rental operations:
Rental $63,522 $26,611 $36,911 139%
Tenant reimbursements 2,174 931 1,243 134%
Parking, net of expense 2,882 1,732 1,150 66%
Other rental operations 1,925 430 1,495 348%
------- ------- ------- -------
70,503 29,704 40,799 137%
Other income 695 59 636 1,078%
------- ------- ------- -------
Total revenue $71,198 $29,763 $41,435 139%
======= ======= ======= =======
EXPENSES
Property operations:
Repairs and maintenance $ 6,798 $ 3,534 $ 3,264 92%
Utilities 5,982 2,946 3,036 103%
Real estate taxes 5,372 1,635 3,737 229%
Insurance 1,076 480 596 124%
Ground rent 178 52 126 242%
Marketing and other 2,137 897 1,240 138%
------- ------- ------- -------
Total property expenses 21,543 9,544 11,999 126%
General and administrative 1,388 931 457 49%
Interest 10,539 5,883 4,656 79%
Depreciation and amortization 12,930 4,458 8,472 190%
------- ------- ------- -------
Total expenses $46,400 $20,816 $25,584 123%
======= ======= ======= =======
OTHER DATA:
NUMBER OF PROPERTIES:
Acquired during period 6 7 (1) N/A
Owned at end of period 134 45 89 N/A
SQUARE FEET (IN THOUSANDS):
Acquired during period 973 1,467 (494) N/A
Owned at end of period 17,460 7,390 10,070 N/A
</TABLE>
Rental revenue increased approximately $36.9 million for the three months
ended June 30, 1998 compared to the same period in 1997. Rental revenue from
properties owned for the entire three month periods ended June 30, 1998 and 1997
increased approximately $217,000 in 1998 compared to the prior year, primarily
from an overall increase in rental rates at these properties, partially offset
by the reversing effect of straightline rent adjustments for certain leases in
1998. Rental revenue from properties acquired after April 1, 1997 was
approximately $36.7 million higher for the three months ended June 30, 1998
compared to the same period in 1997, primarily due to the timing of these
acquisitions.
Tenant reimbursements increased approximately $1.2 million for the three
months ended June 30, 1998 compared to the same period in 1997. Tenant
reimbursements from properties owned for the entire three month periods ended
June 30, 1998 and 1997 decreased approximately $6,000 in 1998 compared to the
same period in 1997, primarily as a result of resetting base years for leases
that were retenanted in 1998. Tenant reimbursements from properties acquired
after April 1, 1997 were approximately $1.2 million higher for the three months
ended June 30, 1998 compared to the same period in 1997, primarily due to the
timing of these acquisitions.
15
<PAGE> 16
Parking revenue, net of expense, increased approximately $1.2 million for
the three months ended June 30, 1998 compared to the same period in 1997
primarily from the properties acquired after April 1, 1997.
Revenue from other rental operations, consisting primarily of miscellaneous
tenant charges such as after hours utility, heating and air conditioning
charges, increased approximately $1.5 million for the three months ended June
30, 1998 compared to the same period in 1997. Revenues from properties owned for
the entire three month periods ended June 30, 1998 and 1997 increased
approximately $219,000 for the three months ended June 30, 1998 compared to the
same period in 1997, primarily due to nonrecurring tenant charges in 1998.
Revenues from properties acquired after April 1, 1997 were approximately $1.3
million higher for the three months ended June 30, 1998 compared to the same
period in 1997, primarily due to the timing of these acquisitions.
Other income increased approximately $636,000 for the three months ended
June 30, 1998 compared to the same period in 1997, primarily due to higher
interest income earned on mortgage notes receivable acquired in September 1997
and on cash deposits required by certain of the Company's mortgage loans.
For the three months ended June 30, 1998, total property expenses were
$21.5 million, or 30.6% of total revenue from rental operations, compared with
total property expenses of $9.5 million or 32.1% of total revenue from rental
operations in 1997. Property expenses for properties owned for the entire three
month periods ended June 30, 1998 and 1997 decreased approximately $501,000 in
1998 compared to 1997, primarily due to expense reductions achieved from
economies of scale. Property expenses from properties acquired after April 1,
1997 were $12.5 million higher for the three months ended June 30, 1998,
primarily due to the timing of these acquisitions.
General and administrative expenses were approximately $1.4 million or 1.9%
of total revenue for the three months ended June 30, 1998 as compared to
$931,000 or 3.1% of total revenue for the same period in 1997. General and
administrative expenses as a percentage of total revenue decreased in the second
quarter of 1998 compared to 1997 primarily due to benefits achieved from
economies of scale.
Interest expense increased approximately $4.7 million for the three months
ended June 30, 1998 compared to the same period in 1997, primarily as a result
of higher outstanding indebtedness to fund property acquisitions.
Depreciation and amortization expense increased $8.5 million for the three
months ended June 30, 1998 compared to 1997 primarily due to 1997 and 1998
property acquisitions and depreciation of capital improvements made to the
Company's existing portfolio.
Following is a comparison of property operating data computed on a GAAP and
Cash Basis for the 38 properties which were owned for the entire three month
periods ended June 30, 1998 and 1997 (in thousands except percentage data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------ PERCENT
1998 1997 CHANGE CHANGE
------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C>
GAAP BASIS:
Revenues from rental operations $26,811 $26,417 $ 394 1.49%
Property expenses 8,071 8,572 (501) (5.84%)
------- ------- ------ ------
Net $18,740 $17,845 $ 895 5.02%
======= ======= ====== ======
CASH BASIS(1):
Revenues from rental operations $26,561 $25,860 $ 701 2.71%
Property expenses 8,071 8,572 (501) (5.84%)
------- ------- ------ ------
Net $18,490 $17,288 $1,202 6.95%
======= ======= ====== ======
</TABLE>
(1) Excludes straightline rent adjustments.
16
<PAGE> 17
Revenue from rental operations for the properties owned for the entire
three month periods ended June 30, 1998 and 1997 increased by approximately
$394,000 in 1998 compared to 1997, primarily due to increased rental rates and
higher miscellaneous tenant charges partially offset by the reversing effect of
straightline rent adjustments for certain leases and lower tenant reimbursements
and parking revenue, net of expense.
Revenue from rental operations for these properties for the three months
ended June 30, 1998, computed on a Cash Basis, increased by approximately
$701,000, primarily due to increases in rental rates.
Property operating expenses for the properties owned for the entire three
month periods ended June 30, 1998 and 1997 decreased by approximately $500,000
in 1998 compared to 1997, primarily due to expense reductions achieved from
economies of scale.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
Cash provided by operating activities increased by $58.9 million to $81.7
million for the six months ended June 30, 1998, as compared to $22.8 million for
the same period in 1997, primarily due to operating results from properties
acquired since January 1, 1997. Cash used in investing activities increased by
$741.2 million, to $989.0 million for the six months ended June 30, 1998
compared to approximately $247.8 million for the same period in 1997, primarily
due to the acquisition of 62 properties during the six months ended June 30,
1998 and an increase in capital expenditures on properties owned. Cash provided
by financing activities increased by approximately $690.0 million to $908.1
million, compared to $218.2 million for the same period in 1997. Cash provided
by financing activities for the six months ended June 30, 1998 consisted
primarily of net proceeds from mortgage loans and the issuance of 26,296,047
shares of Common Stock in a series of 1998 secondary offerings, partially offset
by distributions to shareholders and minority interest holders.
AVAILABLE BORROWINGS, CASH BALANCE AND CAPITAL RESOURCES
The Company has a $300 million unsecured line of credit (the "Amended
Credit Facility") from a group of banks led by Wells Fargo. The Amended Credit
Facility bears interest at a rate ranging between LIBOR plus 1.2% and LIBOR plus
1.45% depending on the leverage ratio of the Company. Once the Company achieves
an investment grade unsecured debt rating, the interest rate may be lowered to
between LIBOR plus 0.9% and LIBOR plus 1.15% depending on such debt rating.
Under certain circumstances, the Company has the option to convert the interest
rate from LIBOR to the prime rate plus 0.5%. In addition, the Amended Credit
Facility has a commitment fee ranging from .125% to .25% on the unused balance.
The Amended Credit Facility matures on September 1, 2000. Proceeds from the
Amended Credit Facility will be used, among other things, to provide funds for
tenant improvements and capital expenditures and provide for working capital and
other corporate purposes. As of June 30, 1998, the aggregate outstanding balance
on the Amended Credit Facility was $234.6 million, and $65.4 million was
available for additional borrowing. The LIBOR rate was approximately 5.7% at
June 30, 1998.
The Company also has an unsecured line of credit with a total commitment of
$10.0 million from City National Bank (the "City National Bank Credit
Facility"). The City National Bank Credit Facility accrues interest at the City
National Bank Prime Rate less 0.875% and is scheduled to mature on August 1,
1999. Proceeds from the City National Bank Credit Facility will be used, among
other things, to provide funds for tenant improvements and capital expenditures
and provide for working capital and other corporate purposes. As of June 30,
1998, there was no outstanding balance on the City National Bank Credit
Facility. The City National Bank Prime Rate was 8.5% at June 30, 1998.
On June 8, 1998 the Company repaid, through two special purpose
subsidiaries, its $200 million Lehman Bridge Loan II with two new mortgage loans
totaling $236.7 million. The additional proceeds were used to repay $22.0
million on the Company's lines of credit and to repay $5.6 million on the Lehman
Bridge Loan I. The $136.1 million ("Mortgage Financing III") and $100.6 million
("Mortgage Financing IV") mortgage loans payable to an affiliate of Lehman
Brothers are non-recourse and secured by fully cross-collaterized and
cross-defaulted first mortgage liens on 22 and 12 of the Company's Properties
("Mortgage Financing III, and
17
<PAGE> 18
IV, Properties"), respectively. The Mortgage Financing III and IV mortgage loans
each have a thirty year term, bear interest at a fixed rate of 6.74% (6.93%
including the amortization of costs associated with the Swap Agreement) per
annum, require interest only payments through April 2003, and thereafter require
monthly payments of principal and interest amortized over a 25 year period
through maturity and are anticipated to be repaid within ten years of issuance.
If the Mortgage Financing III and IV mortgage loans are not repaid within ten
years of issuance, the interest rate will increase by at least 5% per annum and
all excess cash flow (as defined) from the Mortgage Financing III and IV
Properties must be used to pay down outstanding principal. The Mortgage
Financing III and IV mortgage loans require the Company to maintain a cash
reserve for tenant improvements of approximately $2.7 million and $3.3 million,
respectively, and to comply with certain customary financial covenants, ongoing
operational restrictions, and certain cash management procedures. Pursuant to
the execution of certain leasing transactions by September 8, 1998, the Company
may borrow up to an additional $10.6 million under the Mortgage Financing IV
loan.
Following is a summary of scheduled principal payments for the Company's
mortgage loans as of June 30, 1998 (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1998 $ 59,249
1999 683
2000 743
2001 808
2002 5,879
Thereafter 443,830
--------
Total $511,192
========
</TABLE>
Following is a summary of the company's weighted average interest rate as
of June 30, 1998 (in thousands, except percentage data):
UNSECURED AND SECURED DEBT ANALYSIS
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
BALANCE INTEREST RATE
--------- ----------------
<S> <C> <C>
Unsecured Debt $ 234,600 7.33%
Secured Debt 511,192 7.38%
--------- -----------
Total Debt $ 745,792 7.36%
========= ===========
</TABLE>
FLOATING AND FIXED RATE DEBT ANALYSIS
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
BALANCE INTEREST RATE
--------- ----------------
<S> <C> <C>
Floating Rate Debt $ 288,978 7.23%
Fixed Rate Debt 456,814 7.45%
--------- -----------
Total Debt $ 745,792 7.36%
========= ===========
</TABLE>
As of June 30, 1998, the Company had $17.9 million in cash and cash
equivalents, including $11.8 million in restricted cash of which approximately
$10.0 million represents interest bearing cash deposits and tenant improvements
reserves required by certain of the Company's mortgage loans payable.
On January 12, 1998, the Company filed a Form S-3 Registration Statement
(the "Registration Statement") with the Securities and Exchange Commission to
offer in one or more series, shares of its $.01 par value Common Stock with an
aggregate public offering price of up to $1.0 billion. The Registration
Statement was declared effective on January 21, 1998.
On April 23, 1998, the Company completed the most recent of four 1998
equity offerings (the "1998 Offerings") resulting in the issuance of an
aggregate of 26,296,047 shares of Common Stock with gross proceeds totaling
approximately $744.7 million. Aggregate proceeds to the Company from these
offerings, net
18
<PAGE> 19
of underwriters' discount and offering costs aggregating approximately $37.7
million, were approximately $707.0 million. Of these 1998 offerings, 3,296,047
shares of Common Stock were issued to the trustees of three unrelated registered
unit investment trusts and the remaining 23,000,000 shares were issued in a
secondary public offering. Net proceeds from the 1998 Offerings were used to
repay the outstanding balances on the Amended Credit Facility and City National
Bank Credit Facility and to fund a portion of the LBA Portfolio acquisition. The
remaining proceeds were invested in short-term commercial paper and used for
working capital.
As of April 23, 1998, the Company had the capacity to issue up to $255.3
million of its Common Stock pursuant to the Registration Statement.
The Company expects to continue meeting its short-term liquidity and
capital requirements generally through its working capital and net cash provided
by operating activities. The Company believes that the net cash provided by
operating activities will continue to be sufficient to pay any distributions
necessary to enable the Company to continue qualifying as a real estate
investment trust. The Company also believes that the foregoing sources of
liquidity will be sufficient to fund its short-term liquidity needs for the
foreseeable future, including recurring non-revenue enhancing capital
expenditures, tenant improvements and leasing commissions.
The Company expects to meet certain long-term liquidity and capital
requirements such as property acquisitions, scheduled debt payments, renovation
costs, expansions and other non-recurring capital expenditures through long-term
secured and unsecured indebtedness and the issuance of additional equity
securities. The Company also expects to use the remaining funds available under
the Amended Credit Facility to fund acquisitions, development activities and
capital improvements on an interim basis.
FUNDS FROM OPERATIONS
The Company considers Funds from Operations, as defined by the National
Association of Real Estate Investment Trusts ("NAREIT"), to be a useful
financial measure of the operating performance for an equity real estate
investment trust ("REIT"). The Company believes that Funds from Operations
provides investors with an additional basis to evaluate the ability of a REIT to
incur and service debt and to fund acquisitions and other capital expenditures.
Funds from Operations should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Company's financial
performance or to cash flow from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it indicative of
funds available to fund the Company's cash needs, including its ability to make
distributions.
The following table reflects the calculation of the Company's Funds from
Operations for the three and six month periods ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Funds from Operations:
Net income $23,615 $ 7,857 $39,799 $16,295
Minority interests 1,183(a) 1,090 2,281(a) 2,224
Depreciation and amortization 12,930 4,458 24,226 8,020
------- ------- ------- -------
Funds from Operations $37,728 $13,405 $66,306 $26,539
======= ======= ======= =======
</TABLE>
(a) Excludes $575,000 in distributions made to the minority partner in the World
Savings Center office property.
The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in March 1995 (the "White Paper") defines Funds from Operations as net
income (loss) (computed in accordance with GAAP), excluding gains (or losses)
from debt restructuring and unusual items, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and joint
ventures.
19
<PAGE> 20
Management considers Funds from Operations an appropriate measure of performance
of an equity REIT because it is predicated on cash flow analyses. The Company
computes Funds from Operations in accordance with standards established by the
White Paper which may differ from the methodology for calculating Funds from
Operations utilized by other equity REITs and, accordingly, may not be
comparable to such other REITs.
YEAR 2000 READINESS
Any of the Company's computer programs that have time-sensitive software
may not be able to distinguish the year 2000 from the year 1900, if those
programs use two digits rather than four digits to define the year. This could
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send tenant invoices, or engage in similar normal business activities.
The accounting software the Company is using is not presently Year 2000
compliant, however, the manufacturer has indicated that a Year 2000 compliant
version of this software will be available in the fall of 1998. Depending on the
timing of the availability of this updated software, the Company plans to
install the Year 2000 compliant version of this software in the fourth quarter
of 1998 or the first quarter of 1999. The Company estimates the total costs
associated with converting to a Year 2000 compliant version of its accounting
software to be approximately $30,000. The hardware used to run the Company's
software is Year 2000 compliant.
The Company is currently completing an inventory of the Year 2000
compliance status of the computer hardware and software used to run the property
operating systems (i.e., security, energy, elevator and safety) at its
Properties. Once this inventory is complete, the Company will test the
time-sensitive systems that have been represented to be Year 2000 compliant and
reprogram or replace the systems found not to be Year 2000 compliant. The
Company cannot presently estimate the total cost of this phase of its Year 2000
program.
The Company is currently surveying material vendors and tenants regarding
the Year 2000 compliance status of their computer hardware and software. The
Company will review the results of this survey, assess the impact of the results
on its operations and take whatever action is deemed necessary. The Company
cannot presently estimate the total cost of this phase of its Year 2000 program.
Upon completion of the Company's Year 2000 Readiness program, management
will consider the necessity of implementing a contingency plan to mitigate any
adverse effects associated with the Year 2000 issue. The Company's ability to
complete the Year 2000 modifications outlined above prior to any anticipated
impact on its operating systems is based on numerous assumptions of future
events and is dependent upon numerous factors, including the ability of third
party software and hardware manufacturers to make necessary modifications to
current versions of their products, the availability of resources to install and
test the modified systems and other factors. Accordingly, there can be no
guarantee that these modifications will be successful.
20
<PAGE> 21
BUILDING AND LEASE INFORMATION
The following tables set forth certain information regarding the Company's
Properties as of June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF PROPERTIES APPROXIMATE NET RENTABLE SQUARE FEET
----------------------------- --------------------------------------
INDUSTRIAL INDUSTRIAL
LOCATION OFFICE AND RETAIL TOTAL OFFICE AND RETAIL TOTAL
-------- ------ ---------- ----- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles County:
West 25 1 26 3,979,686 36,959 4,016,645
North 27 -- 27 2,510,530 -- 2,510,530
South 15 -- 15 2,111,598 -- 2,111,598
Central 3 -- 3 608,789 -- 608,789
Orange County 20 -- 20 3,202,241 -- 3,202,241
San Diego County 21 -- 21 2,486,768 -- 2,486,768
Ventura County 3 -- 3 436,706 -- 436,706
Riverside/San Bernardino
County 8 4 12 553,896 425,418 979,314
Kern County 2 -- 2 216,522 -- 216,522
--- --- --- ---------- ------- ----------
Subtotal 124 5 129 16,106,736 462,377 16,569,113
Renovation Properties 5 -- 5 890,571 -- 890,571
--- --- --- ---------- ------- ----------
Total 129 5 134 16,997,307 462,377 17,459,684
=== === === ========== ======= ==========
</TABLE>
PORTFOLIO SUMMARY
<TABLE>
<CAPTION>
PERCENT OCCUPIED PERCENT LEASED
AT JUNE 30, 1998 AT JUNE 30, 1998
--------------------------- ---------------------------
INDUSTRIAL INDUSTRIAL
AND AND
LOCATION OFFICE RETAIL TOTAL OFFICE RETAIL TOTAL
-------- ------ ---------- ----- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Los Angeles County
West 85.9% 100% 86.1% 88.3% 100% 88.4%
North 90.8% -- 90.8% 91.3% -- 91.3%
South 87.5% -- 87.5% 88.1% -- 88.1%
Central 89.0% -- 89.0% 89.0% -- 89.0%
Orange County 94.0% -- 94.0% 94.7% -- 94.7%
San Diego County 92.9% -- 92.9% 93.4% -- 93.4%
Ventura County 88.7% -- 88.7% 91.3% -- 91.3%
Riverside/San Bernardino
County 79.5% 90.0% 84.9% 81.8% 93.1% 87.7%
Kern County 97.3% -- 97.3% 97.3% -- 97.3%
---- ---- ---- ---- ---- ----
Subtotal Weighted Average 89.7% 90.8% 89.7% 90.8% 93.7% 90.9%
Renovation Properties 27.2% -- 27.2% 27.2% -- 27.2%
---- ---- ---- ---- ---- ----
Total/Weighted Average 86.4% 90.8% 86.6% 87.5% 93.7% 87.6%
==== ==== ==== ==== ==== ====
<CAPTION>
ANNUALIZED BASE RENT
PER LEASED SQUARE FOOT
-------------------------------------------
INDUSTRIAL FULL SERVICE
AND GROSS
LOCATION OFFICE RETAIL TOTAL LEASES(1)
-------- ------ ---------- ------ ------------
<S> <C> <C> <C> <C>
Los Angeles County
West $22.16 $23.60 $22.17 $22.16
North 19.22 -- 19.22 20.47
South 16.85 -- 16.85 18.54
Central 19.71 -- 19.71 19.71
Orange County 14.70 -- 14.70 16.80
San Diego County 14.33 -- 14.33 16.66
Ventura County 16.01 -- 16.01 16.01
Riverside/San Bernardino
County 14.08 8.01 11.17 16.44
Kern County 22.36 -- 22.36 --
------ ------ ------ ------
Subtotal Weighted Average 17.73 9.18 17.45 19.44
Renovation Properties 16.12 -- 16.12 17.55
------ ------ ------ ------
Total/Weighted Average $17.70 $ 9.18 $17.46 $19.40
====== ====== ====== ======
</TABLE>
(1) Excludes 48 properties and 4,729,366 square feet under triple net and
modified gross leases.
LEASE EXPIRATIONS
SECOND QUARTER 1998
<TABLE>
<CAPTION>
ESTIMATED
SQUARE PERCENTAGE OF ANNUALIZED BASE MARKET RENT
NUMBER OF FOOTAGE OF AGGREGATE RENT OF OF EXPIRING
YEAR OF LEASE LEASES EXPIRING PORTFOLIO LEASED EXPIRING LEASES LEASES
EXPIRATION EXPIRING LEASES SQUARE FEET (PER SQUARE FOOT)(2) (PER SQUARE FOOT)(3)
------------- --------- ---------- ---------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
Month to Month 255 554,379 3.64% $16.15 $18.35
1998(1) 285 877,544 5.77% $17.81 $19.09
1999 511 2,194,038 14.42% $16.50 $19.76
2000 513 1,987,725 13.07% $18.83 $23.38
2001 407 2,087,843 13.72% $20.89 $24.94
</TABLE>
21
<PAGE> 22
(1) Represents leases expiring between July 1, 1998 and December 31, 1998.
(2) Base rent is as of the date of lease expiration, including all fixed
contractual base rent increases; increases tied to indices such as the
Consumer Price Index are not included.
(3) Calculated based on the Company's estimate of current market rental rates
and annual increases in such rates of 8.0%, 6.0% and 6.0%, in 1999, 2000 and
2001, respectively. The Company's estimates of these rental rates are based
on current trends which could change or reverse at any time as a result of
future events.
The Company's ability to rent expiring lease space at estimated levels is
highly dependent upon many factors over which the Company has no control.
These factors include, the national economic climate, perceptions of
prospective tenants of the attractiveness of the property, and the ability
of the Company to maintain and manage the properties. The Company also has
numerous competitors and some of the competing properties may be newer,
better located or owned by parties better capitalized than the Company. As
new commercial properties are developed and the number of competitive
commercial properties in a particular area increases, competitive pressures
will increase as well. Additionally, all of the Company's properties are
located in Southern California. The Company's ability to charge estimated
rents may be adversely affected by the local economic climate (which may be
adversely impacted by business layoffs or downsizing, industry slowdowns,
changing demographics and other factors) and local real estate conditions
(such as oversupply of or reduced demand for office and other competing
commercial properties). The preceding discussion is not intended as an
exhaustive list of the risks associated with rent rate projections and
should be read in conjunction with "Risk Factors -- Real Estate Ownership
Risks," "-- Risk that Company May be Unable to Retain Tenants or Rent Space
Upon Lease Expirations," "-- Impact of Competition on Occupancy Levels and
Rents Charged," and "-- Concentration of Properties in Southern California"
in the Company's most recent Annual Report on Form 10-K.
The Company undertakes no obligation to update or correct these estimates
if future events prove them to be inaccurate.
As a result of the foregoing, undue reliance should not be placed on these
estimated rental rates.
LEASING ACTIVITY
SECOND QUARTER 1998
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF LEASE TERM TI/COMM
LEASES SQUARE FEET (MO) PSF
------------- ----------------- ------------- ----------------
TYPE NEW RENEWAL NEW RENEWAL NEW RENEWAL NEW RENEWAL
---- --- ------- ------- ------- --- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office 158 87 512,840 250,797 56 42 $15.50 $5.55
Industrial/Retail 6 7 21,711 12,297 59 24 $ 4.86 $0.47
--- -- ------- -------
Total 164 94 534,551 263,094
=== == ======= =======
</TABLE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS -- NONE
ITEM 2. CHANGES IN SECURITIES --
In April 1998, the Operating Partnership issued 10,412 OP Units as partial
consideration in the acquisition of a 235,926 square foot office property. The
holder of the OP units may redeem part or all of its OP units issued in this
acquisition for cash or at the election of the Company, exchange such OP Units
for shares of Common Stock on a one-for-one basis.
The issuance of OP Units in the above described acquisition constitutes a
private placement of securities which is exempt from the registration
requirements of the Securities Act of 1993, as amended, pursuant to Section 4(2)
and Rule 506 of Regulation D promulgated thereunder.
22
<PAGE> 23
ITEM 3. DEFAULTS UPON SENIOR SECURITIES -- NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On May 7, 1998 the Company held its annual meeting of shareholders. Steven
C. Good was elected to serve as a member of the Board of Directors until the
annual meeting of shareholders in the year 2001, with 50,335,760 votes cast for
and 2,167,783 votes withheld/against his election. A total of 8,705,956 votes
were not cast. Directors whose term continued after the meeting are as follows:
Richard S. Ziman, Victor J. Coleman, Carl D. Covitz, Larry S. Flax, and Kenneth
B. Roath.
In addition, an amendment to the 1996 Stock Option and Incentive Plan of
Arden Realty, Inc. and Arden Realty Limited Partnership (the "1996 Incentive
Plan") was proposed at the 1998 annual meeting. The proposed amendment contained
an indefinite and continuing provision that reserved a percentage of Common
Shares available for the 1996 Incentive Plan based on the total number of Common
Shares outstanding. The proposed amendment was voted down with 22,456,940 votes
cast against and 20,490,124 votes cast for the proposal, 201,146 votes
abstained. There was a total of 9,355,333 Broker non-votes and 8,705,956 votes
not cast.
ITEM 5. OTHER INFORMATION -- NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation as filed as
an exhibit to Registration Statement on Form S-11 (No.
333-8163) and incorporated herein by reference.
3.2 By-Laws of Registrant as filed as an exhibit to Registration
Statement on Form S-11 (No. 333-8163) and incorporated
herein by reference.
3.3 Certificate of Amendment of the Bylaws of Arden Realty, Inc.
dated July 14, 1998.
10.3 Warrant Agreement dated as of March 2, 1998 by and among
Arden Realty, Inc., a Maryland corporation and AEW/LBA
Acquisition Co. II, LLC, a California limited liability
company as filed as an exhibit to Form 8-K filed on March
16, 1998 and incorporated herein by reference.
10.4 Loan Agreement by and between Arden Realty Finance III, LLC,
a Delaware limited liability company and Lehman Brothers
Realty Corporation, a Delaware corporation.
10.5 Mortgage Note, dated June 8, 1998 for $136,100,000 by and
between Arden Realty Finance III, L.L.C., a Delaware limited
liability company ("Maker"), and Lehman Brothers Realty
Corporation, a Delaware corporation. (Exhibit B. to Exhibit
10.4 above).
10.6 Tenant Estoppel Certificate (Exhibit C. to Exhibit 10.4
above).
10.7 Subordination, Non-Disturbance and Attornment Agreement
(Exhibit D. to Exhibit 10.4 above).
10.8 Deed of Trust, Assignment of Rents and Leases, Security
Agreement, and Fixture Filing dated as of June 8, 1998 made
by Arden Realty Finance III, L.L.C. as Grantor, to
Commonwealth Land Title Company as Trustee for the benefit
of Lehman Brothers Realty Corporation as Beneficiary.
10.9 Assignment of Leases and Rents dated June 8, 1998, by and
between Arden Realty Finance III, L.L.C., a Delaware limited
liability company ("Assignor"), and Lehman Brothers Realty
Corporation, a Delaware corporation, its successors and
assigns ("Assignee").
10.10 Collateral Assignment of Management Agreement and
Subordination Agreement (the "Agreement") dated as of June
8, 1998 among Arden Realty Finance III, L.L.C., a Delaware
limited liability company ("Borrower"), Lehman Brothers
Realty Corporation, a Delaware corporation, ("Lender"), and
Arden Realty Limited Partnership, a Maryland limited
partnership ("Manager").
10.11 Security Agreement ("Security Agreement") is entered into as
of June 8, 1998 by and between Arden Realty Finance III,
L.L.C., a Delaware limited liability company ("Debtor"), and
Lehman Brothers Realty Corporation, a Delaware corporation
("Secured Party").
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.12 Environmental Indemnity Agreement ("Agreement") dated June
8, 1998 by Arden Realty Finance III, L.L.C., a Delaware
limited liability company ("Indemnitor"), in favor of Lehman
Brothers Realty Corporation, a Delaware corporation
("Lender").
10.13 Letter agreement between Lehman Brothers Realty Corporation,
or an affiliate thereof ("Lender"), Arden Realty Finance
III, L.L.C. ("Borrower"), Arden Realty, Inc. (the "REIT")
and Arden Realty Limited Partnership (the "Operating
Partnership").
10.14 Loan Agreement by and between Arden Realty Finance IV, LLC,
a Delaware limited liability company and Lehman Brothers
Realty Corporation, a Delaware corporation.
10.15 Mortgage Note, dated June 8, 1998 for $100,600,000 by and
between Arden Realty Finance IV, L.L.C., a Delaware limited
liability company ("Maker"), and Lehman Brothers Realty
Corporation, a Delaware corporation (Exhibit B to Exhibit
10.14 above).
10.16 Tenant Estoppel Certificate (Exhibit C. to Exhibit 10.14
above).
10.17 Subordination, Non-Disturbance and Attornment Agreement
(Exhibit D. to Exhibit 10.4 above).
10.18 Deed of Trust, Assignment of Rents and Leases, Security
Agreement, and Fixture Filing dated as of June 8, 1998 made
by Arden Realty Finance IV, L.L.C. as Grantor, to
Commonwealth Land Title Company as Trustee for the benefit
of Lehman Brothers Realty Corporation as Beneficiary.
10.19 Assignment of Leases and Rents ("Assignment") dated June 8,
1998, by and between Arden Realty Finance IV, L.L.C., a
Delaware limited liability company ("Assignor"), and Lehman
Brothers Realty Corporation, a Delaware corporation, its
successors and assigns ("Assignee").
10.20 Collateral Assignment of Management Agreement and
Subordination Agreement (the "Agreement") dated as of June
8, 1998 among Arden Realty Finance IV, L.L.C., a Delaware
limited liability company ("Borrower"), Lehman Brothers
Realty Corporation, a Delaware corporation, ("Lender"), and
Arden Realty Limited Partnership, a Maryland limited
partnership ("Manager").
10.21 Security Agreement ("Security Agreement") is entered into as
of June 8, 1998 by and between Arden Realty Finance IV,
L.L.C., a Delaware limited liability company ("Debtor"), and
Lehman Brothers Realty Corporation, a Delaware corporation
("Secured Party").
10.22 Environmental Indemnity Agreement ("Agreement") dated June
8, 1998 by Arden Realty Finance IV, L.L.C., a Delaware
limited liability company ("Indemnitor"), in favor of Lehman
Brothers Realty Corporation, a Delaware corporation
("Lender").
10.23 Letter agreement between Lehman Brothers Realty Corporation,
or an affiliate thereof ("Lender"), Arden Realty Finance IV,
L.L.C. ("Borrower"), Arden Realty, Inc. (the "REIT") and
Arden Realty Limited Partnership (the "Operating
Partnership").
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
A report on Form 8-K/A dated January 23, 1998 was filed which included
information on Item 7. Item 7 contained exhibits related to financial statements
and pro forma financial information regarding the acquisitions of four office
properties.
A report on Form 8-K dated February 2, 1998 was filed which included
information on Items 2, 5, and 7. Item 2 contained a description on the
acquisition of six commercial properties. Item 5 contained a description of the
filing of a Form S-3 Registration Statement to offer one or more series of
Common Stock with an aggregate public offering price of up to $1.0 billion and a
description of a contract to purchase a portfolio of 50 primarily office and
R&D/industrial properties ("LBA Portfolio"). Item 7 contained financial
statements of the six acquired properties, financial statements of the LBA
Portfolio, and pro forma financial statements.
A report on Form 8-K/A dated February 13, 1998 was filed which included
information on Items 5 and 7. Item 5 contained a description of the filing of a
supplement to the Form S-3 Registration Statement
24
<PAGE> 25
(filed on January 12, 1998 and declared effective on January 21, 1998). This
supplement was initially filed on February 2, 1998, offering 17,000,000 shares
of Common Stock and was amended on February 13, 1998 to increase the number of
shares of Common Stock offered to 20,000,000. Item 5 also contained a
description of the filing of an additional supplement to the Form S-3
Registration Statement described above, offering 881,950 shares of Common Stock
to an institutional buyer, and a description of the Company entering into a
contract to purchase a portfolio of 50 primarily office and R&D/industrial
properties. Item 7 contained pro forma financial statements.
A report on Form 8-K dated February 19, 1998 was filed which included
information under Items 5 and 7. Item 5 contained a description of the issuance
of 881,950 shares of Common Stock on February 18, 1998 and 23,000,000 shares of
Common Stock on February 19, 1998. Item 7 contained exhibits related to these
issuances of Common Stock.
A report on Form 8-K dated February 23, 1998 was filed which included
information under Items 5 and 7. Item 5 contained a description of the issuance
of 1,303,965 shares of Common Stock on February 23, 1998. Item 7 contained
exhibits related to this issuance of Common Stock.
A report on Form 8-K dated March 16, 1998 was filed which included
information on Item 7. Item 7 contained financial statements, pro forma
information and exhibits. The Form 8-K was filed in connection with the
acquisition of a portfolio of 50 commercial properties.
A report on Form 8-K dated April 30, 1998 was filed which included
information on Items 5 and 7. Item 5 contained a description of the issuance of
1,110,132 shares of Common Stock on April 23, 1998. Item 7 contained exhibits
related to this issuance of Common Stock.
A report on Form 8-K dated May 29, 1998 was filed which included
information on Items 2 and 7. Item 2 contained a description of the acquisition
of five commercial properties and 34 acres of undeveloped commercial property,
and the Company's purchase of the remaining 25% interest in the World Savings
Center. Item 7 contained exhibits related to these acquisitions.
25
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARDEN REALTY, INC.
Date: August 14, 1998 By: /s/ DIANA M. LAING
------------------------------------
Diana M. Laing
Executive Vice President
Chief Financial Officer and
Secretary
Date: August 14, 1998 By: /s/ RICHARD S. DAVIS
------------------------------------
Richard S. Davis
Chief Accounting Officer
26
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF AMENDMENT OF
THE BYLAWS OF
ARDEN REALTY, INC.
The undersigned does hereby certify that:
1. She is the duly elected Secretary of Arden Realty,
Inc., a Maryland corporation (the "Corporation"); and
2. By resolutions duly adopted by written consent of the
Company's Board of Directors dated July 14, 1998, Section 9 and Section 12(c)(3)
of Article II as well as Section 10 of Article III of the Bylaws of the
Corporation's Bylaws were amended as follows:
ARTICLE II
Section 9. PROXIES. A stockholder may vote the stock owned of
record by him, either in person or by proxy executed in
writing by the stockholder or by his duly authorized agent.
Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 12. NOMINATIONS AND STOCKHOLDER BUSINESS.
(c) GENERAL.
(3) Notwithstanding the foregoing provisions
of this Section 12, a stockholder shall also comply with all
applicable requirements of state law and of the Exchange Act
and the rules and regulations thereunder with respect to the
matters set forth in this Section 12. Nothing in this Section
12 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in, nor the right of the
Corporation to omit a proposal from, the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE III
Section 10. VACANCIES. If for any reason any or all the
directors cease to be directors, such event shall not
terminate the Corporation or affect these Bylaws or the powers
of the remaining directors hereunder (even if fewer than five
directors remain). Any vacancy on the Board of Directors for
any cause other than an increase in the number of directors
may be filled at any regular meeting or at any special meeting
called for that purpose by a
<PAGE> 2
majority vote of the remaining directors, although such
majority may be less than a quorum. Any vacancy in the number
of directors created by an increase in the number of directors
may be filled by a majority vote of the entire Board of
Directors. Any individual so elected as director shall serve
until the next annual meeting of stockholders and until his
successor is elected and qualifies. Any individual elected as
a director by stockholders shall serve for the balance of the
term to which he is elected and qualifies.
IN WITNESS WHEREOF, I have hereunto subscribed my name as of
this 14th day of July, 1998.
By: /s/ DIANA M. LAING
------------------
Diana M. Laing, Secretary
2
<PAGE> 1
EXHIBIT 10.4
LOAN AGREEMENT
by and between
ARDEN REALTY FINANCE III, L.L.C.
AS BORROWER,
and
LEHMAN BROTHERS REALTY CORPORATION
AS LENDER
Dated as of June 8, 1998
$136,100,000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS AND REFERENCES.........................................................2
1.1. Defined Terms.............................................................2
1.2. Definitions Incorporated by Reference....................................21
1.3. Other Definitional Provisions............................................21
2. THE LOAN..........................................................................21
2.1. Making the Loan..........................................................21
2.2. Mortgage Note............................................................22
2.3. Use of Loan Proceeds.....................................................22
2.4. Payment of Principal and Interest........................................23
2.5. Defeasance...............................................................26
2.6. Release of Property......................................................28
2.7. Partial Release in Connection with a Casualty or Taking before
Defeasance Period........................................................28
2.8. Release of All the Properties during Defeasance Period...................29
2.9. Release of Individual Mortgaged Properties During the Defeasance
Period...................................................................30
2.10. Partial Release after Defeasance Period..................................30
2.11. Yield Maintenance........................................................32
2.12. Successor Borrower.......................................................33
3. REPRESENTATIONS AND WARRANTIES....................................................33
3.1. Organization and Power of Borrower and Managing Member...................33
3.2. Due Authorization and Execution..........................................34
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.3. No Consents Required; No Contravention..................................34
3.4. Title to Properties.....................................................35
3.5. Management Agreement....................................................35
3.6. Leases..................................................................35
3.7. Utilities...............................................................36
3.8. No Violations...........................................................36
3.9. Other Agreements........................................................36
3.10. Payment of Taxes........................................................37
3.11. Litigation..............................................................37
3.12. Regulation U............................................................37
3.13. Investment Company Act..................................................38
3.14. Transactions with Affiliates............................................38
3.15. Business Purpose; Non-Subordination.....................................38
3.16. Permits and Licenses....................................................38
3.17. Patents and Trademarks..................................................39
3.18. Insurance...............................................................39
3.19. ERISA...................................................................39
3.20. No Notice of Non-Compliance.............................................39
3.21. Compliance With Laws....................................................39
3.22. Compliance with Environmental Laws......................................39
3.23. Concerning Mortgaged Properties; Financial Statements...................40
3.24. Access..................................................................41
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
3.25. No Liens.................................................................41
3.26. Accuracy of Information..................................................41
3.27. Mortgage and Security Interests..........................................41
3.28. Assignment of Leases and Rents...........................................42
3.29. Foreign Person...........................................................42
3.30. No Defaults..............................................................42
3.31. No Fraudulent Conveyance.................................................42
4. CLOSING; CONDITIONS PRECEDENT.....................................................43
4.1. Representations, Warranties and Covenants................................43
4.2. Borrower's Actions.......................................................43
4.3. Delivery of Documents....................................................43
4.4. Evidence of Authorization; Related Documents.............................48
4.5. Closing Certificate......................................................49
4.6. Management Agreement.....................................................49
4.7. Existing Debt............................................................49
4.8. Payment of Lender Costs and Origination Fee..............................49
4.9. Independent Directors....................................................49
4.10. TI Reserve Requirement...................................................49
5. AFFIRMATIVE COVENANTS.............................................................50
5.1. Timely Payment of Amounts Due............................................50
5.2. Proceeds of the Loan.....................................................50
5.3. Management Agreement.....................................................50
5.4. Financial and Other Information..........................................52
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
5.5. Maintenance of Existence, Etc............................................55
5.6. Compliance with Applicable Laws..........................................55
5.7. Maintenance of Books; Inspection of Properties and Books.................55
5.8. Notice of Litigation; Disputes...........................................56
5.9. Mortgaged Property Operations; Maintenance...............................56
5.10. Separate Existence.......................................................57
5.11. Cash Management..........................................................57
5.12. Independent Director.....................................................57
5.13. Reserve Requirement......................................................58
5.14. Repair Expenditures......................................................58
6. NEGATIVE COVENANTS................................................................58
6.1. Limitation on Indebtedness...............................................59
6.2. Limitation on Liens......................................................59
6.3. Merger or Consolidation; Permitted Reorganization........................59
6.4. Single Purpose...........................................................59
6.5. Amendments to Agreements.................................................60
6.6. Distributions............................................................60
6.7. Permitted Transfers......................................................60
7. EVENTS OF DEFAULT.................................................................61
7.1. Default; an Event of Default.............................................61
7.2. Remedies.................................................................64
7.3. Remedies Cumulative......................................................65
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
7.4. Default Interest.........................................................65
7.5. Default Indemnity........................................................66
8. INSURANCE........................................................................66
8.1. Maintenance of Insurance.................................................66
8.2. Payment and Application of Insurance Proceeds............................66
8.3. Earthquake Insurance.....................................................67
9. SECURITIZATION...................................................................67
9.1. Securitization...........................................................67
9.2. No Assignment by Borrower................................................68
9.3. Method of Payment........................................................68
10. ASSIGNMENT AND PARTICIPATION.....................................................69
11. SUBSTITUTION OF PROPERTIES.......................................................69
12. MISCELLANEOUS....................................................................77
12.1. Limitation on Liability..................................................77
12.2. Entire Agreement, Amendments.............................................78
12.3. Notices..................................................................78
12.4. No Waiver; Cumulative Remedies...........................................79
12.5. Waiver of Jury Trial.....................................................79
12.6. Governing Law; Consent to Jurisdiction...................................79
12.7. Payment of Expenses......................................................80
12.8. Severability.............................................................80
12.9. Gender, Etc..............................................................81
12.10. Headings.................................................................81
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
12.11. Counterparts; Facsimiles...............................................81
12.12. No Third Party Beneficiary.............................................81
12.13. No Liability of Lender.................................................81
12.14. Confidentiality........................................................82
</TABLE>
<PAGE> 8
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT") is entered into as of June
8, 1998, by and between ARDEN REALTY FINANCE III, L.L.C., a Delaware limited
liability company having its principal office at 11601 Wilshire Boulevard, Suite
401, Los Angeles, California 90025 ("BORROWER"), and LEHMAN BROTHERS REALTY
CORPORATION, a Delaware corporation, having an office at Three World Financial
Center, 200 Vesey Street, 20th Floor, New York, New York 10285 ("LENDER").
WHEREAS, Borrower has requested Lender to make a loan (the
"LOAN") to Borrower, and Lender has agreed to make the Loan to Borrower, for the
purposes and on the terms and conditions described herein;
WHEREAS, the Loan is evidenced by that certain Mortgage Note
dated as of the date hereof by Borrower to the order of Lender and its
successors and assigns in the principal amount of One Hundred Thirty-Six Million
One Hundred Thousand and No/100 Dollars ($136,100,000), which is to be secured
by, among other things, first-priority liens on Borrower's assets, consisting
primarily of 22 office and industrial properties and related assets;
WHEREAS, the parties hereto desire to set forth their agreement
regarding the making of the Loan and the terms and conditions upon which the
Loan shall be made and repaid;
WHEREAS, without limiting any other rights that Lender has to
assign the Mortgage Note and the other Loan Documents (as hereinafter defined),
Lender may assign the Mortgage Note and the other Loan Documents, together with
mortgage loans made to other borrowers, to, among others, a Trustee (as
hereinafter defined) for the benefit of the Holders (as hereinafter defined),
who may appoint a Servicer (as hereinafter defined) and, following such
assignment, all rights of Lender hereunder will inure to the benefit of the
Trustee, for the benefit of the Holders, and to the Servicer, on behalf of the
Trustee, and the term "Lender" as used herein, shall, following such assignment,
include the Trustee and the Servicer, on behalf of the Trustee; and
WHEREAS, unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in SECTION 1.1 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS AND REFERENCES
1.1. DEFINED TERMS
Unless the context otherwise requires, capitalized terms used
herein shall have the respective meanings specified in this SECTION 1.1 (such
definitions to be equally applicable to both the singular and plural forms of
the terms defined).
<PAGE> 9
"ACCOUNT" means the Lockbox Account, the Cash Collateral Account,
the TI Reserve Account, the Tax and Insurance Escrow Account or any subaccount
of any of them or any other account or subaccount thereof created pursuant to
the Cash Management Procedures or otherwise in accordance with the terms hereof.
"ACCOUNTING PERIOD" shall mean each calendar month.
"ACCOUNTING QUARTER" shall mean each of the fiscal quarters in a
calendar or a conventional three hundred sixty-five (365)-day fiscal year (i.e.,
there shall be four consecutive Accounting Quarters of three (3) months each).
"ACCRUED INTEREST" has the meaning ascribed to it in SECTION
2.4.4(C) hereof.
"ADJUSTED INTEREST RATE" means the rate per annum determined on
the Anticipated Repayment Date as the greater of (i) eleven and 74/100 percent
(11.74%) and (ii) the sum of (A) five percentage points (5%) and (B) the
average, calculated by linear interpolation (rounded to three decimal places),
of the yields of the United States Treasury Constant Maturities with the terms
(one longer and one shorter) most nearly approximating those of U.S. Obligations
having maturities as close as possible to the twentieth (20th) anniversary of
the Anticipated Repayment Date, as determined by Lender on the basis of Federal
Reserve Statistical Release H.15-Selected Interest rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or such other recognized
source of financial market information as may reasonably be selected by Lender,
in each case on the last Business Day of the week immediately prior to the
Anticipated Repayment Date.
"AFFILIATE" means, as to any Person, (a) any Person directly or
indirectly owning, controlling, or holding power to vote ten percent (10%) or
more of the outstanding equity securities as to the Person in question; (b) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
Person in question; (c) any Person directly or indirectly controlling,
controlled by, or under common control with the Person in question; (d) if the
Person in question is a corporation or limited liability company, any executive
officer, director, member or manager of the Person in question or of any
corporation or limited liability company directly or indirectly controlling,
controlled by, or under common control with the Person in question; and (e) if
the Person in question is a partnership, any general partner of such
partnership. As used in this definition of "AFFILIATE," the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"AGREEMENT" means this Loan Agreement, as it may be amended,
supplemented or modified from time to time.
"ALLOCATED LOAN AMOUNT" means, for any Mortgaged Property, the
portion of the Loan that is allocated to a particular Mortgaged Property, as set
forth on SCHEDULE 1.1 hereof, or if a Mortgaged Property is a Substitute
Property, the amount allocated thereto pursuant to SECTION 11 hereof.
"ANNUAL APPROVED BUDGET" shall have the meaning ascribed to such
term in SECTION 5.4.3 hereof.
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"ANNUAL BUDGET" shall mean the operating budget, including all
planned capital expenditures, for the Mortgaged Properties prepared by Borrower
for the applicable Fiscal Year or portion thereof.
"ANTICIPATED REPAYMENT DATE" means April 16, 2008.
"ARDEN OP" means Arden Realty Limited Partnership, a Maryland
limited partnership.
"ARDEN REIT" means Arden Realty, Inc., a Maryland corporation
that is the general partner of Arden OP.
"ASSIGNMENT OF LEASES AND RENTS" means that certain Assignment of
Leases and Rents dated as of the date hereof made by Borrower to the Lender with
respect to the Mortgaged Properties.
"AUTHORIZED ACCOUNTING OFFICER" means the officer of Borrower who
has primary responsibility for accounting matters, or one of his or her duly
authorized representatives who, as set forth in a written notice of such officer
to the Lender, is duly authorized to act on behalf of such officer in connection
with this Agreement and the other Loan Documents.
"AWARD" has the meaning ascribed to it in the Mortgage.
"BANKRUPTCY LAW" means title 11, United States Code, or any
similar federal, state or foreign law for the relief of creditors.
"BASE RATE" means six and 74/100 percent (6.74%) per annum.
"BORROWER" has the meaning ascribed to it in the preamble hereto.
"BORROWER DOCUMENTS" has the meaning ascribed to it in SECTION
3.26 hereof.
"BUILDING EQUIPMENT" means all machinery, equipment, fixtures
(including, but not limited to, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every kind
and nature whatsoever owned by Borrower, or in which Borrower has or shall have
an interest, now or hereafter located upon the Land and the Improvements, or
appurtenant thereto, and usable in connection with the present or future
operation and occupancy of the Land and the Improvements.
"BUSINESS DAY" means a day other than (i) a Saturday or a Sunday
or (ii) a day on which federally insured depository institutions in the states
of New York and Illinois and the Commonwealth of Pennsylvania are required or
authorized by law, governmental decree or executive order to be closed.
"CASH COLLATERAL ACCOUNT" has the meaning specified in SCHEDULE
5.11 hereto.
"CASH EXPENSES" shall mean, for any period after the Anticipated
Repayment Date, the Operating Expenses for the operation of the Mortgaged
Properties as set forth in an
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Approved Annual Budget to the extent that such expenses are actually incurred by
Borrower minus payments into the Tax and Insurance Escrow Account and the TI
Reserve Account.
"CASH MANAGEMENT PROCEDURES" shall mean the provisions of
SCHEDULE 5.11 hereto.
"CASUALTY" has the meaning ascribed to it in the Mortgage.
"CERTIFICATES" has the meaning ascribed to it in SECTION 9.1
hereof.
"CLOSING" has the meaning ascribed to it in the first paragraph
of SECTION 4 hereof.
"CLOSING DATE" has the meaning ascribed to is in the first
paragraph of SECTION 4 hereof.
"CODE" means the Internal Revenue Code of 1986, as the same may
be amended from time to time, and any successor statute of similar import, and
the regulations thereunder, in each case as in effect from time to time.
References to sections of the Code shall be construed also to refer to any
successor sections and all related regulations.
"COLLATERAL" means the "PROPERTY" (as defined in the Mortgage,
whether individually or taken as a group, as the context may require), together
with such other collateral or property as may be pledged, liened or encumbered
from time to time as security for the Loan under any other Security Documents.
"COLLATERAL ASSIGNMENT OF MANAGEMENT AGREEMENT" means that
certain Collateral Assignment of Management Agreement and Subordination
Agreement, dated as of the Closing Date, by and among Borrower, Manager, and
Lender in favor of Lender.
"CONTRIBUTION AGREEMENT" means that certain Property Contribution
Agreement dated as of the Closing Date by and among Arden OP and Borrower,
pursuant to which Arden OP agrees to contribute to Borrower, and Borrower agrees
to accept from Arden OP, the Mortgaged Properties and all operating assets
related thereto, and assume the liabilities associated with such Mortgaged
Properties.
"COOPERATION AGREEMENT" means that certain Cooperation Letter
Agreement dated as of the Closing Date, by and among Borrower, Arden OP, Arden
REIT and Lender.
"DEBT" means the obligations of Borrower under the Loan
Documents, together with all interest thereon, and all other sums, including,
without limitation, fees, expenses, commissions, premiums and indemnities, which
may or shall become due under any of the Loan Documents, including the costs and
expenses of enforcing any provision of the Loan Documents that may be
reimbursable hereunder.
"DEBT SERVICE" shall mean, with respect to any particular period
of time, scheduled interest payments under the Mortgage Note.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the
applicable period in
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which:
(a) the numerator is the Net Operating Income
(excluding interest on credit accounts) for such
period; and
(b) the denominator is the aggregate amount of Monthly
Debt Service Payments due and payable on the
Mortgage Note or, in the event a Defeasance Event
has occurred, the Undefeased Note, for such period.
"DEBT SERVICE PERIOD" means the period commencing on (and
including) the first day of each calendar month (or with respect to the first
Debt Service Period, the period commencing on (and including) the Closing Date)
and ending on (and including) the last day of such calendar month.
"DEFAULT" has the meaning ascribed to it in SECTION 7.1 hereof.
"DEFAULT INTEREST" means (i) interest accruing on any overdue
principal amount of the Mortgage Note at a rate per annum equal to the
difference between the Default Interest Rate minus the Interest Rate, and (ii)
interest accruing on any overdue interest and any other overdue payments under
any Loan Documents at the Default Interest Rate.
"DEFAULT INTEREST RATE" has the meaning ascribed to it in SECTION
7.4 hereof.
"DEFEASANCE DATE" has the meaning ascribed to it in SECTION
2.5(a)(i).
"DEFEASANCE DEPOSIT" means an amount equal to the amount
necessary to purchase U.S. Obligations necessary to meet the Scheduled
Defeasance Payments, any costs and expenses incurred or to be incurred in the
purchase of such U.S. Obligations and any revenue, documentary stamp or
intangible taxes or any other tax or charge due in connection with the transfer
of the Mortgage Note or the Defeased Note, as applicable, the creation of the
Defeased Note, if applicable, or otherwise required to accomplish the agreements
of SECTION 2.5, SECTION 2.8, and SECTION 2.9.
"DEFEASANCE EVENT" has the meaning ascribed to it in SECTION
2.5(a).
"DEFEASANCE PERIOD" has the meaning ascribed to it in SECTION
2.5(a) hereof.
"DEFEASANCE SECURITY AGREEMENT" has the meaning ascribed to it in
SECTION 2.5(a)(vi) hereof.
"DEFEASED NOTE" has the meaning ascribed to it in SECTION
2.5(a)(v) hereof.
"DUE DATE" means the first (1st) day of each calendar month, or,
if in any calendar month the first (1st) day is not a Business Day, the Business
Day immediately succeeding the first (1st) day.
"ERISA" means the Employee Retirement Income Security Act of 1974
(together with all rules and regulations promulgated thereunder), as amended,
supplemented, or modified
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from time to time.
"ERISA AFFILIATE" means any trade or business under common
control (as it is defined in Section 414(b) or 414(c) of the Code or Section
4001(b)(1) of ERISA) with Borrower.
"ELIGIBLE ACCOUNT" means either (i) an account maintained with a
federal or state chartered depository institution or trust company, the
long-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the long-term unsecured debt obligations of the holding company of
which) are rated by each Rating Agency in one of its two highest rating
categories (or such other ratings as will not result in the rating of any of the
Certificates being reduced below their respective ratings on the Closing Date
and as to which the Rating Agencies may otherwise agree) or the short-term
unsecured debt obligations of such depository institution or trust company or
holding company, as the case may be, are rated not lower than A-1+ by the
applicable Rating Agencies, or (ii) a segregated trust account maintained with
the trust department of a federal or state chartered depository institution or
trust company acting in its fiduciary capacity provided that such account is
subject to fiduciary funds on deposit regulations (or internal guidelines)
substantially similar to 12 C.F.R. Section 9.10(b), or (iii) an account in any
other insured depository institution reasonably acceptable to Lender, so long as
prior to the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating Comfort
Letter with respect thereto.
"ENGINEERING SURVEYS" means those reports of recent date prior to
the Closing Date prepared by those companies listed on SCHEDULE 3.23a concerning
the physical condition of the Mortgaged Properties.
"ENVIRONMENTAL INDEMNITY AGREEMENT" means the Environmental
Indemnity Agreement, dated as of the date hereof between Borrower and Lender.
"ENVIRONMENTAL LAWS " has the meaning ascribed to it in the
definition of "Hazardous Materials" herein.
"EQUITY MEMBER" means Arden OP in its capacity as equity member
of Borrower.
"EVENT OF DEFAULT" has the meaning ascribed to it in SECTION 7.1
hereof.
"EXCESS CASH FLOW" means, for any Accounting Period, the
difference between (i) Net Operating Income and (ii) the sum of (A) the Monthly
Debt Service Payments, (B) other Debt then due and payable to the Lender
pursuant to this Agreement or any of the other Loan Documents (other than
Default Interest, Accrued Interest, Late Payment Fees and payments required
under SECTION 2.4.4(c) hereof), and (C) in the event a Lockbox Event has
occurred, to the extent not duplicative of the foregoing, withdrawals from the
Cash Collateral Account applied pursuant to clauses (e) through (j) of SECTION
4.4 of the Cash Management Procedures.
"EXISTING DEBT" means indebtedness owed to Lender and secured by
one or more of the Mortgaged Properties, the obligation to repay such
indebtedness having been assumed by Borrower pursuant to the Contribution
Agreement.
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"EXTRAORDINARY EXPENSE" shall have the meaning ascribed to such
term in SECTION 5.4.3(b) hereof.
"FINAL MATURITY DATE" means April 16, 2028.
"FINANCIAL STATEMENTS" means the financial statements of Borrower
furnished to Lender from time to time pursuant to SECTIONS 5.4.1 AND 5.4.2
hereof.
"FISCAL YEAR" means the period beginning January 1 of each year
through and including December 31 of such year.
"FORCE MAJEURE" means acts of God, acts of war, civil
disturbance, or governmental action, excluding any casualty customarily covered
by insurance.
"GAAP" means generally accepted accounting principles in the
United States of America (as such principles may change from time to time)
applied on a consistent basis (except for changes in application as to which
Borrower's independent certified public accountants concur), both as to
classification of items and amounts, within any applicable period and as to
prior periods.
"GOVERNMENTAL AUTHORITY" means any nation, government, state, or
political subdivision of any thereof, including any court or any other entity
exercising executive, legislative, regulatory, judicial, or administrative
functions of, or pertaining to, government.
"GROSS INCOME FROM OPERATIONS" shall mean all income of Borrower,
computed in accordance with GAAP, derived from the ownership and operation of
the Mortgaged Properties from whatever source, including, but not limited to,
Rents, utility charges, escalations, forfeited security deposits, interest on
credit accounts, service fees or charges, license fees, parking fees, rent
concessions or credits, and other required pass-throughs but excluding sales,
use and occupancy or other taxes on receipts required to be accounted for by
Borrower to any government or governmental agency, refunds and uncollectible
accounts, sales of furniture, fixtures and equipment, proceeds of casualty
insurance and condemnation awards (other than business interruption or other
loss of income insurance), and any disbursements to the Borrower from the Tax
and Insurance Escrow Account, the TI Reserve Account or any other escrow fund
established by the Loan Documents.
"HAZARDOUS MATERIALS" means any substances, materials, or wastes,
whether solids, liquids or gases, that are defined as "hazardous wastes,"
"hazardous substances," "toxic substances," "radioactive materials," or other
substantially similar designations in, or otherwise subject to regulation under,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"), 42 U.S.C. Section 9601 et seq.; the Toxic Substance Control
Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1802 et seq.; the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. Section 9601 et seq.; the Clean Water Act
("CWA"), 33 U.S.C. Section 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq.;
or other applicable Laws pertaining to the regulation of hazardous, toxic or
dangerous materials or wastes or the protection of the environment, including
any plans, rules, regulations, orders or ordinances adopted, or other criteria
and guidelines promulgated, pursuant to such laws,
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whether now or hereafter in effect (collectively referred to herein as
"ENVIRONMENTAL LAWS"). Hazardous Materials includes, but is not limited to,
polychlorinated biphenyls (PCBs), petroleum and petroleum products and
byproducts, and asbestos.
"HOLDERS" means the holders of record from time to time of the
Certificates.
"IMPROVEMENTS" means all buildings, structures, paving,
sidewalks, parking garages and other parking areas, curbing, landscaping,
signage, lighting, utilities and other improvements from time to time located on
all or any part of the Land (including, without limitation, the office and/or
industrial buildings that are located on the Land and any parking structures and
other parking facilities located on any of the Land), and any modifications,
additions, restorations or replacements of the whole or any part thereof.
"IMPOSITIONS" has the meaning ascribed to it in the Mortgage.
"INDEBTEDNESS" of any Person means (a) any liabilities and
obligations of such Person, contingent or otherwise, (i) in respect of borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (ii) evidenced by bonds, notes,
debentures, or similar instruments, (iii) representing the balance deferred and
unpaid of the purchase price of any property or services, except those incurred
in the ordinary course of such Person's business that would constitute
ordinarily a trade payable to trade creditors, (iv) evidenced by bankers'
acceptances, (v) for the payment of money relating to a capitalized lease
obligation or sale/leaseback obligation, or (vi) evidenced by a letter of credit
or a reimbursement obligation of such person with respect to any letter of
credit or (b) any liabilities and obligations of others of the kind described in
the preceding clause (a) that such Person has guaranteed or that are otherwise
its legal liability or which are secured by any assets or property of such
Person, including, without limitation, any obligations to purchase, redeem, or
acquire any capital stock or similar interests.
"INDEPENDENT MANAGER" means a person who is not, and has not
within the past five (5) years been, (i) an officer, director, employee,
partner, member, stockholder or beneficial-interest holder of Borrower, Arden OP
or Arden REIT; (ii) an officer, director, employee, partner, member,
beneficial-interest holder or stockholder of any "Affiliate" (as defined below)
of Borrower, Arden OP or Arden REIT; (iii) a customer or supplier of Borrower or
any Affiliate thereof; or (iv) a spouse, parent, sibling, or child of any person
described in (i), (ii), or (iii); provided, however, that a person shall not be
deemed to be a director of an Affiliate solely by reason of such person being a
director of a single-purpose entity that would otherwise be deemed to be an
Affiliate because they are under common control. For the purpose of this
definition alone, "Affiliate" means any person or entity (i) which owns
beneficially, directly or indirectly, more than ten percent (10%) of the
outstanding shares of common stock of the general partner of the Equity Member
or which is otherwise in control of Equity Member, (ii) of which more than ten
percent (10%) of the outstanding voting securities are owned beneficially,
directly or indirectly, by any person or entity described in clause (i) above,
or (iii) which is controlled by, or under common control with, any person or
entity described in clause (i) above; the terms "control" and "controlled by"
shall have the meanings assigned to them in Rule 405 under the Securities Act of
1933.
"INFORMATION" has the meaning ascribed to it in SECTION 5.4
hereof.
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"INSURANCE PROCEEDS" has the meaning ascribed to it in the
Mortgage.
"INTEREST RATE" means (i) prior to the Anticipated Repayment
Date, the Base Rate and (ii) from and after the Anticipated Repayment Date, the
Adjusted Interest Rate.
"LAND" means the parcels of land on which the Mortgaged
Properties are located, as more fully described on EXHIBIT A attached hereto.
"LAWS" means any statute or law, or any rules, regulations,
orders or determinations made by any applicable Governmental Authority,
including as to real property, but without limitation, any applicable
Environmental Laws and any zoning, building, subdivision or land use laws,
rules, or ordinances.
"LEASE" means any lease or other agreement (other than a Ground
Lease) affecting the use, enjoyment or occupancy of the Land or the
Improvements.
"LENDER" initially means Lehman Brothers Realty Corporation,
together with its successors and assigns, including, without limitation,
following the assignment and transfer contemplated by SECTION 9.1 hereof, (a)
the Trustee, on behalf of the Trust, or any of its successors and assigns, and
(b) the Servicer, on behalf of the Trustee.
"LENDER COSTS" means all of the costs and expenses of the Lender
of the kind described in SECTION 12.7.1 hereof.
"LIEN" means any mortgage, deed of trust, deed to secure debt,
lien, claim, option, security interest, pledge, preference, priority,
hypothecation, installment sale agreement, repurchase agreement or other
encumbrance or security arrangement of any kind or nature whatsoever, including,
without limitation, any conditional sale or title retention arrangement, and any
assignment, deposit arrangement, lease or other arrangement intended as, or
having the effect, of security.
"LLC AGREEMENT" means the Limited Liability Company Agreement of
Borrower dated June 4, 1998 by and between Borrower and Arden REIT.
"LOAN" means the loan made by Lender to Borrower pursuant to
SECTION 2.1 hereof.
"LOAN AMOUNT" means One Hundred Thirty-Six Million One Hundred
Thousand and No/100 Dollars ($136,100,000).
"LOAN DOCUMENTS" means this Agreement, the Mortgage Note, the
Environmental Indemnity Agreement, the Collateral Assignment of Management
Agreement, the Security Agreement, the Mortgage, the Assignment of Leases and
Rents, and all of the other Security Documents, and any and all other documents,
agreements, certificates, notes or other instruments delivered pursuant to, or
in connection with, the Loan.
"LOCKBOX ACCOUNT" has the meaning specified in SECTION 1.1 of
SCHEDULE 5.11 of this Loan Agreement.
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"LOCKBOX EVENT" has the meaning ascribed to such term in SCHEDULE
5.11 of this Loan Agreement.
"MANAGEMENT AGREEMENT" means that certain Management Agreement
dated as of the Closing Date by and between Borrower and Arden OP, as "Manager"
or any management agreement entered into between Borrower and a substitute
manager in accordance with SECTION 5.3 hereof.
"MANAGER" has the meaning ascribed to it in the definition of
"Management Agreement" herein, or any successor thereto, or any other Person who
becomes the manager of one or more of the Mortgaged Properties in compliance
with this Agreement.
"MEMBERS" shall mean Equity Member and Special Member in their
capacity as members of Borrower.
"MONTHLY DEBT SERVICE PAYMENT" means (i) prior to the fifth
anniversary of the date hereof, the Monthly Interest Payment, and (ii)
thereafter, the Scheduled Principal and Interest Payment.
"MONTHLY INTEREST PAYMENT" has the meaning ascribed to it in
SECTION 2.4.4.(b) hereof.
"MORTGAGE" means the Deed of Trust, Assignment of Rents and
Leases, Security Agreement and Fixture Filing executed by Borrower and delivered
to Lender or certain trustees for the benefit of Lender with respect to the
Mortgaged Properties, which is to be recorded in the land records of each
jurisdiction in which one or more of the Mortgaged Properties are located, as
security for the Loan.
"MORTGAGE NOTE" means the promissory note described in SECTION
2.2 hereof; provided, however, that if the principal amount of such promissory
note shall be divided at any time into one or more Defeased Notes and one or
more Undefeased Notes pursuant to SECTION 2.5(a)(v) hereof, "MORTGAGE NOTE"
shall mean, collectively, all such Undefeased Note(s) and Defeased Note(s).
"MORTGAGED PROPERTIES" means the twenty-two (22) office and
industrial properties transferred by Arden OP to Borrower, as of the Closing
Date, pursuant to the Contribution Agreement, including, without limitation,
Borrower's fee interest in the land associated with said office properties and
Borrower's ownership interest in all Improvements, which Mortgaged Properties
are identified on SCHEDULE 4.3.2 attached hereto.
"NET OPERATING INCOME" means, for any period the amount obtained
by subtracting Operating Expenses from Gross Income from Operations.
"NET SALES PROCEEDS" means the aggregate amount of cash received
by Borrower in respect of the sale of any Mortgaged Property and related assets
less (i) the sum of all reasonable and customary out-of-pocket payments, fees,
commissions and expenses, plus interest thereon, if applicable (including,
without limitation, fees, commissions and expenses of legal counsel and
investment bankers) paid or payable to third parties and incurred in connection
with such sale, including, without limitation, the Lender, the Trustee (if any),
and the
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Servicer (if any), and (ii) the amount (estimated reasonably and in good faith
by Borrower) of income, franchise, sales and other applicable taxes required to
be paid by Borrower in connection with such sale.
"NEW NOTE" has the meaning ascribed to it in SECTION 2.2 hereof.
"OFFICER'S CERTIFICATE" means a certificate delivered to Lender
by Borrower which is signed by an authorized representative of Borrower.
"OPERATING EXPENSES" means the total of expenses, computed in
accordance with GAAP, of whatever kind relating to the operation, maintenance
and management of the Mortgaged Properties that are incurred on a regular
monthly or other periodic basis, including without limitation, utilities,
ordinary repairs and maintenance, insurance, license fees, property taxes and
assessments, advertising expenses, management fees, payroll and related taxes,
computer processing charges, operational equipment or other lease payments as
approved by Lender, and other similar costs, but excluding depreciation, Debt
Service, capital expenditures and contributions to the TI Reserve Account, the
Tax and Insurance Escrow Account and any other reserves required under the Loan
Documents.
"ORIGINATION FEE" means a fee equal to Eight Hundred Forty-Five
Thousand Nine Hundred Forty-Five and No/100 Dollars ($845,945.00) to be paid by
Borrower to Lender on the Closing Date.
"PAYMENT DIFFERENTIAL" has the meaning ascribed to it in SECTION
2.11.1 hereof.
"PERMITTED DEBT" means, as to Borrower:
(i) unsecured trade indebtedness incurred by Borrower for
or in respect of the operation of the Mortgaged Properties in the
ordinary course of business, but only to the extent used to pay
Operating Expenses, which Indebtedness shall be paid not more
than sixty (60) days after the date incurred and which
Indebtedness may not be evidenced by any form of promissory note;
(ii) if no Default or Event of Default has occurred and is
continuing, purchase money Indebtedness and capitalized lease
obligations up to an aggregate amount not in excess of $3,000,000
outstanding at any one time, in each case, for the purchase or
lease of Building Equipment in the ordinary course of business
(and not inconsistent with customary industry practices), which
Indebtedness may be secured by a first priority lien on the goods
and equipment that have been so purchased or leased, provided, no
such Indebtedness shall be evidenced by a promissory note; and
(iii) if no Event of Default has occurred and is
continuing, (a) unsecured Indebtedness payable or reimbursable to
a tenant under a Lease, payable or reimbursable to such tenant on
account of work performed or costs incurred (including tenant
improvements) by such tenant in connection with its occupancy of
space at a Mortgaged
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<PAGE> 19
Property, provided such Lease is consistent with, or has been
approved by Lender if required by, Section 1.20.11.3 of the
Mortgage, which Indebtedness may not be evidenced by any form of
promissory note and the aggregate outstanding amount of which
Indebtedness at any one time may not exceed $5,000,000;
(iv) Indebtedness solely in respect of surety and appeal
bonds, performance bonds and other obligations of a like nature
(to the extent that such incurrence does not result in the
incurrence of any obligation to repay any obligation relating to
borrowed money of others), all in the ordinary course of business
in accordance with customary industry practices and, if not in
the ordinary course, in an individual amount not to exceed
$1,000,000;
"PERMITTED DEBT" means, as to a Member, any liability of a Member in its
capacity as a Member of Borrower for Permitted Debt of Borrower.
"PERMITTED INVESTMENTS" means any one or more of the following
obligations or securities which are payable on demand or available for
withdrawal, in each case without penalty, or which have a scheduled maturity on
or prior to the Business Day preceding the following Due Date, and having at all
times the required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to the Lender that a lower rating
would not result in the withdrawal, downgrading or qualification of the ratings
then assigned to the Certificates (and investments will not be disqualified as
"Permitted Investments" solely because they are issued by Lender or an Affiliate
of Lender):
(i) direct obligations of, or obligations guaranteed as to
full and timely payment of principal and interest by, the United
States or any agency or instrumentality thereof, provided that
such obligations are backed by the full faith and credit of the
United States of America, provided, however, that the investments
described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change,
(B) if rated by S&P, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must
not be subject to liquidation prior to their maturity;
(ii) direct obligations of, or obligations guaranteed as
to timely payment of principal and interest by, FHLMC, FNMA or
the Federal Farm Credit System, provided that any such obligation
is qualified by each Rating Agency as an investment of funds
backing securities having a long-term unsecured debt rating of
"AAA", provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (B) if rated by S&P,
must not have an "r" highlighter affixed to their rating, (C) if
such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed
spread (if any) and must move proportionately with that index,
and (D) such investments must not be subject to liquidation prior
to their maturity;
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(iii) demand and time deposits in, or demand notes of, or
certificates of deposit of, or bankers' acceptances having
maturities of not more than three hundred sixty-five (365) days
issued by, any bank or trust company, savings and loan
association or savings bank, provided that the commercial paper
or long-term unsecured debt obligations of such depository
institution or trust company (or in the case of the principal
depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such
holding company) are then rated not lower than the highest rating
category of each Rating Agency, in the case of commercial paper,
or in the highest category in the case of long-term debt
obligations, or such lower categories as will not result (as
evidenced in writing by each Rating Agency) in the withdrawal,
downgrading or qualification of the rating then assigned (or,
prior to the Securitization, proposed to be assigned) to the
Certificates by each Rating Agency, or, in the case of short-term
debt obligations which have maturities of thirty (30) days or
less, a rating of "A-1," provided, however, that the investments
described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change,
(B) if rated by S&P, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must
not be subject to liquidation prior to their maturity;
(iv) general obligations of, or obligations guaranteed by,
any state of the United States or the District of Columbia
receiving long-term debt ratings by each Rating Agency equal to
the highest rating then assigned (or, prior to the
Securitization, proposed to be assigned) to any Class of
Certificates by such Rating Agency or such lower category as will
not result in the withdrawal, downgrading, or qualification of
the rating then assigned (or, prior to the Securitization,
proposed to be assigned) to the Certificates by each Rating
Agency (as evidenced in writing by each Rating Agency) which
obligations shall have maturities of not more than three hundred
sixty-five (365) days, provided, however, that the investments
described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change,
(B) if rated by S&P, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must
not be subject to liquidation prior to their maturity;
(v) commercial or finance company paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more
than one (1) year after the date of issuance thereof) that is
rated by each Rating Agency in its highest short-term unsecured
rating category, and is issued by a corporation the outstanding
senior debt obligations of which are then rated by each Rating
Agency in its highest short-term unsecured rating category or its
highest long-term unsecured rating category, as applicable,
provided, however, that the investments described in this clause
must (A) have a predetermined fixed dollar of principal due at
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maturity that cannot vary or change, (B) if rated by S&P, must
not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate
must be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and (D)
such investments must not be subject to liquidation prior to
their maturity;
(vi) repurchase obligations maturing in three hundred
sixty-five (365) days or less from the date of investment with
respect to any security described in clause (i) or (ii) above
entered into with a depository institution or trust company
(acting as principal) meeting the rating standards described in
(iii) above, provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with
that index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(vii) debt securities (other than stripped bonds or
stripped coupons) maturing in thirty (30) days or less from the
date of investment bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the
United States of America or any state thereof and rated by each
Rating Agency in its highest long-term unsecured rating category;
provided, however, that securities issued by any such corporation
will not be Permitted Investments to the extent that investment
therein would cause the outstanding principal amount of
securities issued by such corporation that are then held as part
of any Account, to exceed twenty percent (20%) of the aggregate
principle amount of all Permitted Investments then held in the
Accounts, provided, further, that the investments described in
this clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with
that index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(viii) any money market funds rated "AAAm" or "AAAm-G" (or
equivalent), provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with
that index, and (D) such investments must not be subject to
liquidation prior to their maturity; and
(ix) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as evidenced by the delivery
by each Rating Agency of a Rating Comfort Letter;
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provided, however, that each such instrument continues to qualify as a "cash
flow investment" pursuant to Code Section 860G(a)(6) earning a passive return in
the nature of interest and that no instrument or security shall be a Permitted
Investment if (i) such instrument or security evidences a right to receive only
interest payments or (ii) the right to receive principal and interest payments
derived from the underlying investment provides a yield to maturity in excess of
one hundred twenty percent (120%) of the yield to maturity at par of such
underlying investment; and provided, further, that (a) variable interest on any
such investment shall be based on a single index and vary proportionally with
such index, and no such instrument or investment shall have a rating by the
Rating Agencies with the "r" symbol (or equivalent symbol) attached.
"PERMITTED LIENS" means any of the following:
(i) the Liens of the Mortgage and other Security
Documents;
(ii) Liens for taxes, assessments and other governmental
charges not yet due and payable or due and payable, but not yet
delinquent, or that are being contested in good faith by
appropriate proceedings and as to which adequate deposits have
been made with Lender as required by SECTION 6.2;
(iii) deposits or pledges to secure the payment of
workmen's compensation, unemployment insurance or other social
security benefits or obligations, or to secure the performance of
trade contracts, leases, public or statutory obligations, surety
or appeal bonds or other obligations of a like general nature
incurred in the ordinary course of business;
(iv) landlords', mechanics', materialmen's,
warehousemen's, carriers', or other like Liens arising in the
ordinary course of business securing obligations which are not
overdue for a period longer than thirty (30) days, or which are
being contested in good faith by appropriate proceedings which
are being diligently pursued (with deposits having been made with
Lender as required by SECTION 6.2) or as to which the Liens are
bonded to the satisfaction of Lender;
(v) easements, rights of way, zoning, similar
restrictions, and other similar encumbrances or title defects
that, singly or in the aggregate, do not in any case materially
detract from the value of the property subject thereto (as such
property is used by Borrower);
(vi) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount, and for a period
not resulting in an Event of Default with respect thereto;
(vii) Liens securing capitalized lease obligations insofar
as such Liens cover assets acquired pursuant to such capitalized
lease obligations and such capitalized lease obligations
constitute Permitted Debt; and
(viii) Liens securing assets acquired pursuant to purchase
money Indebtedness, which Indebtedness constitutes Permitted
Debt.
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"PERSON" means an individual, a partnership, a corporation, a
trust, an unincorporated organization, a joint venture or other business entity,
a limited liability company, or a government or any department, agency or
political subdivision thereof.
"PLAN" means any plan, program or arrangement, whether or not
written, that is or was an "employee benefit plan" as it is defined in ERISA and
(a) that was or is established or maintained by Borrower or any ERISA Affiliate;
(b) under which Borrower or any ERISA Affiliate has contributed or has been
obligated to contribute or to fund or provide benefits, or under which Borrower
or any ERISA Affiliate has any liability; or (c) that provides or promises
benefits to any person who performs or has performed services for Borrower or
any ERISA Affiliate who, because of such services, is or was a participant
therein or entitled to benefits thereunder.
"POOLING AND SERVICING AGREEMENT" has the meaning ascribed to it
in SECTION 9.1 hereof.
"PREPAYMENT DATE" means the date on which any voluntary or
involuntary prepayment of principal is made or required to be made.
"PRIME RATE" means the rate that is published from time to time
as the "prime rate" in The Wall Street Journal listing of "Money Rates" and
shall be the average of all such rates in effect at any one time if more than
one rate is quoted. If this index ceases to be published in The Wall Street
Journal, an alternate index of similar nature will be selected by Lender in its
reasonable discretion.
"QUALIFIED INSURANCE COMPANIES" has the meaning ascribed to it in
the Mortgage.
"QUALIFIED MANAGER" has the meaning ascribed to such term in
SECTION 5.3.2 hereof.
"REMIC" has the meaning ascribed to it in SECTION 2.5 hereof.
"RATING AGENCIES" shall mean (i) prior to the Securitization,
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc., and Moody's Investors Services, Inc. (except that, where a particular
provision in any Loan Document specifies one or more Rating Agencies by name,
"RATING AGENCIES" shall mean the rating agency or rating agencies so specified)
and (ii) after the Securitization, such of the following as actually rate the
securities issued in connection with the Securitization: Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co., Fitch Investors
Service, L.P., or any other nationally recognized statistical rating agency
selected by Lender.
"RATING COMFORT LETTER" with respect to any event or proposed
course of action or inaction, means a written confirmation from the Rating
Agencies that no rating assigned by such Rating Agencies to any of the
Certificates will be downgraded, qualified or withdrawn, or placed on a credit
watch with negative implications, as a result of such event or proposed action
or inaction; provided that if the Securitization has not taken (or as certified
by Lender, will not take) the form of a transaction rated by the Rating
Agencies, then "RATING COMFORT LETTER" shall instead mean that the matter in
question shall be subject to the prior approval of Lender,
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<PAGE> 24
which shall not be unreasonably withheld unless expressly stated to be in
Lender's sole and absolute discretion.
"REFERENCE PERIOD" means the twelve (12) full consecutive
calendar months ended immediately preceding the date as of which any
determination with respect to a Reference Period is made hereunder and for which
internal financial statements of Borrower are available. As used herein, the
Reference Period "applicable" to any sale of a Mortgaged Property, Release, or
other event shall mean the Reference Period immediately preceding such event for
which internal financial statements of the Borrower are available.
"REINVESTMENT YIELD" has the meaning ascribed to it in SECTION
2.11.2 hereof.
"RELEASE" means the release of one or more Mortgaged Properties
from the Lien of the Mortgage and the other Security Documents pursuant to the
provisions of SECTION 2.7, SECTION 2.8, SECTION 2.9 or SECTION 2.10 hereof.
"RELEASED" shall have a correlative meaning.
"RELEASE PRICE" means, with respect to a specified Mortgaged
Property, one hundred twenty-five percent (125%) of the Allocated Loan Amount
for such Mortgaged Property, provided, however, that in no event shall the
Release Price for a Mortgaged Property be greater than the then outstanding
aggregate principal amount of the Loan.
"REMAINING MORTGAGED PROPERTIES" means the Mortgaged Properties
that will remain subject to the Lien of any Mortgage following a Release or
several Releases to be made on the same day.
"RENTS" means all rents, rent equivalents, moneys payable as
damages or in lieu of rent or rent equivalents, royalties (including, without
limitation, all oil and gas or other mineral royalties and bonuses, if any),
income, receivables, receipts, revenues, deposits (including, without
limitation, security, utility and other deposits), accounts, cash, issues,
profits, charges for services rendered, and other consideration of whatever form
or nature received by or paid to or for the account of or benefit of Borrower or
its agents or employees from any and all sources arising from or attributable to
the Mortgaged Properties, or any portion thereof, and proceeds, if any, from
business interruption or other loss of income insurance.
"RESTORATION" has the meaning ascribed to it in the Mortgage.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc.
"SCHEDULED DEFEASANCE PAYMENTS" has the meaning ascribed to it in
SECTION 2.5(b) hereof.
"SCHEDULED PRINCIPAL AND INTEREST PAYMENT" shall have the meaning
set forth in SECTION 2.4.4(b) hereof.
"SEC" means the Securities and Exchange Commission of the United
States of America.
"SECURITIZATION" has the meaning ascribed to it in SECTION 9.1
hereof.
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<PAGE> 25
"SECURITY AGREEMENT" means that certain Security Agreement dated
as of even date herewith between Borrower and the Lender.
"SECURITY DOCUMENTS" means, collectively or individually, as the
context may require, the Mortgage, the Collateral Assignment of Management
Agreement, the Assignment of Leases and Rents, the Security Agreement, and such
other documents as are executed and delivered by any Person to grant additional
security for the repayment of the Loan.
"SERVICER" has the meaning ascribed to it in SECTION 9.1 hereof.
"SINGLE PURPOSE" means, with respect to a Person, that such
Person, (A) at all times since its formation, except as otherwise permitted in
or contemplated by the Loan Documents (i) has been a duly formed and existing
limited partnership, limited liability company, or corporation, as the case may
be; (ii) has observed all customary formalities regarding its partnership,
limited liability company or corporate existence; (iii) has maintained financial
statements, accounting records, and other partnership, limited liability
company, or corporate documents separate from those of any other Person
(provided that nothing shall prohibit such Person from being included in the
consolidated financial statements or tax group of another Person); (iv) has not
commingled its assets with those of any other Person; (v) has paid its own
liabilities out of its own funds, including funds contributed to its capital by
its respective equity holders, and all such capital contributions have been
reflected properly in its books and records; (vi) has allocated fairly and
reasonably any overhead for shared office expenses; (vii) has identified itself
in all dealings with the public, under its own name and as a separate and
distinct entity (provided that nothing shall prohibit such Person from engaging
a manager to represent such Person with respect to tenants, vendors, and other
parties, in accordance with standard industry practice); (viii) has not
identified itself as being a division or part of any other Person; (ix) has not
identified any other Person as being a division or part of such Person; (x) has
corrected any known misunderstanding regarding their separate identities; (xi)
has been adequately capitalized in light of the nature of its business; (xii)
has not assumed or guaranteed the obligations of any other Person (other than by
virtue of being a general partner of such other Person but only if such other
Person is Borrower and provided, that this clause shall not be deemed to be
violated by reason of joint and several liabilities arising as a matter of law);
and (xiii) has not engaged in any other business other than as permitted by the
Loan Documents, (B) such person has agreed to or is subject to covenants
substantially to the effect of SECTIONS 5.10, 5.12, 6.1, 6.3, 6.4 AND 6.5 hereof
and (C) if such Person is an entity, such person's organizational documents
contain restrictions similar to those contained in Article X of the LLC
Agreement as in effect on the date hereof.
"SPECIAL MEMBER" means the person acting as the special member of
Borrower under the LLC Agreement or a successor special member admitted in
accordance with the terms of the LLC Agreement and this Agreement.
"SUBSTANTIVE NON-CONSOLIDATION OPINION" means an opinion of
counsel substantially similar to the provisions of the opinion of Borrower's
counsel delivered on the Closing Date to the effect that the assets and
liabilities of Borrower will not be substantively consolidated with those of
Arden OP or Arden REIT in the event that Arden OP or Arden REIT were to become
the subject of bankruptcy or insolvency proceedings (with such changes as are
necessary to reflect the identity and operations of the parties addressed in
such Substantive Non-Consolidation Opinion).
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"SUBSTITUTE PROPERTY" has the meaning ascribed to it in SECTION
11 hereof.
"SUBSTITUTED PROPERTY" has the meaning ascribed to it in SECTION
11 hereof.
"SUBSTITUTION CONDITIONS" has the meaning ascribed to it in
SECTION 11 hereof.
"SUCCESSOR BORROWER" has the meaning ascribed to it in SECTION
2.12 hereof.
"TAKING" has the meaning ascribed to it in any applicable
Mortgage.
"TAX AND INSURANCE ESCROW ACCOUNT" shall have the meaning
ascribed to such term in SECTION 5.11 hereof.
"TI RESERVE ACCOUNT" has the meaning ascribed to such term in
SCHEDULE 5.11 of this Loan Agreement.
"TI RESERVE REQUIREMENT" means Two Million Seven Hundred Thirty
Thousand and No/100 Dollars ($2,730,000).
"TITLE COMPANY" has the meaning ascribed to it in SECTION 4.3.2
hereof.
"TITLE INSURANCE POLICY" and "TITLE INSURANCE POLICIES" have the
meanings ascribed to them in SECTION 4.3.2 hereof.
"TRANSACTION DOCUMENTS" means the Loan Documents, the
Contribution Agreement, and all documents to be delivered pursuant to the terms
hereof and thereof or that are executed and delivered by Borrower in connection
with the transactions contemplated hereby or thereby.
"TREASURY RATE" has the meaning ascribed to it in SECTION 2.11.2
hereof.
"TRUST FUND" has the meaning ascribed to it in SECTION 12.7.2
hereof.
"TRUSTEE" has the meaning ascribed to it in SECTION 9.1 hereof.
"U.C.C." or "UNIFORM COMMERCIAL CODE" means the Uniform
Commercial Code as in effect in the State of New York or, in the case of any
particular item of real or tangible personal property, in the State in which
such property is located.
"U.S. OBLIGATIONS" means direct, non-callable obligations of the
United States of America.
"UNDEFEASED NOTE" has the meaning ascribed to it in SECTION
2.5(a)(v) hereof.
"YIELD MAINTENANCE PAYMENT" has the meaning ascribed to it in
SECTION 2.11.1 hereof.
1.2. DEFINITIONS INCORPORATED BY REFERENCE
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Any term defined in SECTION 1.1 by reference to another
agreement, instrument or other document shall mean such agreement, instrument or
document as it may be amended, supplemented or modified from time to time, but
only to the extent such amendment, supplement or modification is permitted by
the terms hereof. If any such agreement, instrument or other document shall be
replaced or superseded in accordance with the terms hereof (for example, if the
Management Agreement is replaced by an agreement with another Qualified Manager,
the definition incorporated by reference in SECTION 1.1 to such agreement,
instrument or other document shall thereafter have the meaning established under
the replaced or superseded document, with any such changes as (a) shall be
necessary to conform to the replacement or superseding agreement, instrument or
document or (b) are otherwise agreed to by the Lender in writing.
1.3. OTHER DEFINITIONAL PROVISIONS
The terms defined in SECTION 1.1 hereof may not comprise all of
the defined terms contained in this Agreement. Capitalized terms not defined in
SECTION 1.1 hereof shall have the meanings ascribed to them elsewhere herein.
Accounting terms used in this Agreement but not defined herein shall have the
respective meanings given to them under GAAP. The words "hereof," "herein" and
"hereunder" and words of similar character when used in this Agreement shall
refer to this Agreement as a whole and shall not be limited to any particular
provision of this Agreement.
2. THE LOAN
2.1. MAKING THE LOAN
In reliance upon the representations, warranties, covenants and
agreements of Borrower contained herein and in the other Loan Documents, and
upon full satisfaction by Borrower of the terms and conditions precedent set
forth in ARTICLE 4 of this Agreement, Lender agrees to make a loan (the "LOAN")
to Borrower, which Loan shall be advanced to Borrower in a single advance of
immediately available funds equal to the Loan Amount. The Loan Amount shall be
used solely for the purposes described in SECTION 2.3 hereof. The Loan will be
secured by, among other things, a Mortgage encumbering the Mortgaged Properties
and other Improvements and granting a lien on and security interest in certain
other Property described in the Mortgage and by other Security Documents
effecting and granting a lien on and security interest in such other Collateral,
and shall bear interest at the rates per annum specified in SECTION 2.4 hereof.
2.2. MORTGAGE NOTE
The obligation of Borrower to repay the full Loan Amount,
together with interest thereon, and Yield Maintenance Payments, Defeasance
Deposits and other charges, if any, related thereto, shall be evidenced by that
certain Mortgage Note made by Borrower as of the Closing Date to the order of
Lender (the "MORTGAGE NOTE"), substantially in the form of EXHIBIT B attached
hereto and incorporated herein, in the original principal amount of One Hundred
Thirty-Six Million One Hundred Thousand and No/100 Dollars ($136,100,000).
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The Borrower hereby irrevocably appoints the Lender and its
successors and assigns, with full power of substitution, as its
attorney-in-fact, solely for the purpose, from time to time in connection with a
foreclosure on any Mortgaged Property following an Event of Default and/or
acceleration of the maturity of the Loan, of executing two or more promissory
notes (each, a "NEW NOTE") substantially in the form of EXHIBIT B, with an
aggregate face principal balance equal to the principal amount then outstanding
under the Mortgage Note (with a notation on each such New Note as to the
outstanding principal amount of the Loan allocated to each such New Note) and
marking each promissory note that is to be replaced with such New Notes (whether
the original Mortgage Note or any Defeased Note or Undefeased Note)
"SUBSTITUTED." Such power of attorney is a limited power of attorney coupled
with an interest.
2.3. USE OF LOAN PROCEEDS
Borrower agrees that the proceeds of the Loan shall be used
solely for the purpose of repaying or causing repayment of a portion of the
Existing Debt (the obligation to repay such indebtedness having been assumed by
Borrower pursuant to the Contribution Agreement), including the payment of fees
and expenses associated therewith, for the purposes of paying certain fees and
expenses associated with the Loan, for the purpose of the funding of the TI
Reserve Account and for general limited liability company purposes not
inconsistent with the terms of this Agreement.
2.4. PAYMENT OF PRINCIPAL AND INTEREST
2.4.1. PAYMENTS ON THE MORTGAGE NOTE
All payments made on the Mortgage Note shall be made in the
manner, and subject to the conditions, provided in this Agreement and the
Mortgage Note. The Mortgage Note shall not be prepayable except as expressly
provided for in this SECTION 2.4.1, and in SECTION 2.5, SECTION 2.7, SECTION
2.8, SECTION 2.9 and SECTION 2.10 hereof. On any Due Date occurring on or after
the Anticipated Repayment Date, the Mortgage Note may be prepaid, at the option
of the Borrower, in full or in part, without penalty or premium. To the extent
not previously paid, the entire Debt shall be due and payable on the Final
Maturity Date.
2.4.2. INTEREST
(a) Except as set forth in SECTIONS 2.4.4(b) with respect to
interest accruing at the Default Interest Rate, the Debt shall bear interest for
each Debt Service Period at the applicable Interest Rate then in effect and
shall be payable as provided herein.
(b) Calculations of interest shall be made on the basis of a
three hundred sixty (360) day year and the actual number of days elapsed during
each Debt Service Period.
2.4.3. PAYMENTS WITHOUT DEDUCTION, ETC.
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All payments of the Debt to Lender shall be absolute and
unconditional, shall be paid strictly in accordance with the terms of the Loan
Documents without being subject to any claim, set-off, defense or other right
which Borrower may have against Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
other circumstance or happening whatsoever. Borrower shall pay such payments to
the Lender free and clear of, and without deduction for, any and all present or
future taxes, levies, imposts, deductions, charges, penalties or withholdings,
and any liabilities with respect thereto, by whomever imposed, other than
present or future taxes on the income of Lender or franchise taxes imposed on
Lender as a result of its conducting business in specific jurisdictions.
Borrower shall pay and indemnify and hold Lender harmless from and against, any
present or future claim or liability for United States, state or local taxes or
assessments on the ownership by Lender of the debt obligations of Borrower
evidenced by the Mortgage Note, or on the principal, interest, fees or other
amounts payable under any Loan Documents or otherwise in respect of the Debt
(other than income or franchise taxes imposed on the Lender or its Affiliates by
any jurisdiction). The obligations of the Borrower hereunder shall survive
repayment of the Debt and termination of the Loan Documents.
2.4.4. PERIODIC PAYMENTS
(a) On July 1, 1998, Borrower shall pay to Lender interest on the
Mortgage Note at the Base Rate for the period commencing on the Closing Date and
ending on June 30, 1998.
(b) On August 1, 1998 and on each Due Date thereafter that occurs
on or prior to April 16, 2003 (the "INTEREST ONLY EXPIRATION DATE"), Borrower
shall pay interest on the outstanding principal of the Mortgage Note at the Base
Rate for the prior Debt Service Period (the "MONTHLY INTEREST PAYMENT"). On each
Due Date that occurs on or after the Interest Only Expiration Date, Borrower
shall pay to Lender a monthly payment of principal and interest (the "SCHEDULED
PRINCIPAL AND INTEREST PAYMENT") in an amount equal to the amount of the monthly
payment that would be necessary to fully amortize the outstanding principal
balance of the Loan as of the Interest Only Expiration Date over a twenty-five
(25) year period assuming a rate of interest per annum equal to the Base Rate
(with interest calculated on the basis of actual number of days elapsed and a
three hundred sixty (360) day year).
At any time while an Event of Default has occurred and is
continuing, the Borrower shall, in addition to the Monthly Debt Service Payment
and other amounts due hereunder, be liable for the payment of interest at the
Default Interest Rate (rather than the Interest Rate) (which interest is payable
both before and after Lender has obtained a judgment with respect to the Loan);
provided, however, that for the purposes of this sentence, an Event of Default
shall be considered to have occurred and be continuing only until such Event of
Default has been cured, including, without limitation, pursuant to the
provisions of SECTION 7.1.3 hereof, if applicable. Following the occurrence of a
Lockbox Event, the priority of payment of Default Interest shall be as set forth
in the Cash Management Procedures attached as Schedule 5.11 hereto). Payment or
acceptance of the increased rates provided for in this SECTION 2.4.4(b) is not a
permitted alternative to timely payment or full performance by Borrower and
shall not constitute a waiver of any Default or Event of Default or an amendment
to this Agreement or any other Loan Document and shall not otherwise prejudice
or limit any rights or remedies of Lender.
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(c) From and after the Anticipated Repayment Date, interest shall
accrue on the outstanding principal balance of the Mortgage Note at the Adjusted
Interest Rate. Payment of all interest accruing in respect of the Mortgage Note
after the Anticipated Repayment Date in the amount equal to the difference
between the amount that accrues at the Adjusted Interest Rate and the amount
that is paid (whether as part of each Scheduled Principal and Interest Payment,
if applicable, or otherwise) at the Base Rate ("ACCRUED INTEREST") shall be (a)
deferred, and (b) to the extent permitted by applicable law, accrue interest at
the Adjusted Interest Rate. If not sooner paid, all Accrued Interest together
with interest thereon (to the extent permitted by applicable law) shall be due
and payable in full on the Final Maturity Date. From and after the Anticipated
Repayment Date, Borrower shall pay to Lender on each Due Date (without
duplication), until the entire Debt is repaid in full, Excess Cash Flow for the
Debt Service Period relating to such Due Date; each monthly payment of Excess
Cash Flow made by Borrower under the Mortgage Note after the Anticipated
Repayment Date shall be applied first to the reduction of the outstanding
principal balance of the Mortgage Note and after the principal balance of the
Mortgage Note has been paid in full to the reduction of the outstanding amount
of Accrued Interest (together with any interest thereon).
(d) In addition to Default Interest, in the event Borrower fails
to make any Monthly Debt Service Payment, Yield Maintenance Payment or other
payment hereunder when due, Borrower shall be liable for the payment of a late
charge equal to five percent (5%) of the amount of the payment (the "LATE
PAYMENT FEE"); provided, however, prior to a Securitization, Borrower shall not
be liable to pay a Late Payment Fee the first time Borrower fails to make a
Monthly Debt Service Payment when due. Following the occurrence of a Lockbox
Event, the priority of payment of a Late Payment Fee shall be as set forth in
the Cash Management Procedures. Payment or acceptance of a Late Payment Fee
under this SECTION 2.4.4(d) is not a permitted alternative to timely payment or
full performance by Borrower and shall not constitute a waiver of any Default or
Event of Default or an amendment to this Agreement or any other Loan Document
and shall not otherwise prejudice or limit any rights or remedies of Lender.
Borrower acknowledges that its obligation to pay a Late Payment Fee may be
separated from the other obligations of Borrower hereunder, and may be held or
transferred separately from the other obligations of Borrower hereunder.
(e) Notwithstanding the foregoing SECTION 2.4.4(c), at the option
of Lender, which option shall be exercised prior to the Securitization, Lender
may require that the applicable provisions of Section 2.4.4(c) (and the
equivalent provisions of the Note) be modified to provide that all Monthly Debt
Service Payments from and after the Anticipated Repayment Date shall be interest
only. Borrower agrees to enter into such modifications to the Loan Documents as
may be requested by Lender in order to effectuate the foregoing.
2.4.5. INSUFFICIENT PAYMENTS
In the event that Borrower fails to pay all amounts due and
payable on the Mortgage Note on any Due Date, unless otherwise determined by
Lender, all cash paid by the Borrower on such date and all proceeds realized on
the sale of Collateral pursuant to any of the Loan Documents shall be applied in
the following order of priority to the extent of the cash so paid or proceeds
realized:
FIRST: to pay (a) all amounts that are due and unpaid under
SECTION 12.7.1 hereof and under SECTION 7.5 hereof, if applicable, (b)
all costs, if any, incurred
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by Lender in acting on behalf of Borrower as provided in the Loan
Documents and (c), if applicable, all costs and expenses incurred by the
Lender in enforcing this Loan Agreement and any of the other Loan
Documents, including all costs and expenses of the foreclosure and/or
sale of the Collateral or any part thereof or any interest therein, and
all costs and expenses of entering upon, taking possession of, removing,
holding, constructing improvements on, and operating and managing the
Collateral or any part thereof, and all costs and expenses of repairs,
renewals, replacements, additions, betterments, and improvements to the
Collateral, in each case in accordance with the Loan Documents, and all
reasonable attorneys' and accountants' fees and disbursements, including
any appraisals that may reasonably be required by Lender, incurred in
connection with any of the foregoing, together with any compensation
payable under SECTION 4.3 of the Mortgage;
SECOND: to pay interest at the Base Rate then due and payable on
the Mortgage Note;
THIRD: to pay all amounts of principal due and payable on the
Mortgage Note (whether at maturity, on a date fixed for any payment or
prepayment thereof, upon acceleration, or otherwise), until the
principal balance has been reduced to zero;
FOURTH: to pay any Yield Maintenance Payments then due and
payable;
FIFTH: to pay any Default Interest and Late Payment Fees then due
and payable; and
SIXTH: to pay Accrued Interest, if any (plus interest thereon at
the Adjusted Rate).
All proceeds realized upon the sale of Collateral pursuant to any of the Loan
Documents shall be applied in accordance with the foregoing as of the Due Date
next occurring following any such sale.
2.5. DEFEASANCE
(a) At any time during the period commencing on (i) the first
Business Day after the date that is the earlier of (A) two (2) years after the
"startup day," within the meaning of Section 860G(a)(9) of the Code, of a "real
estate mortgage investment conduit," within the meaning of Section 860D of the
Code (a "REMIC"), that holds the Mortgage Note and (B) three (3) years after the
Closing Date, and ending on (ii) the Anticipated Repayment Date (such period
being sometimes referred to herein as the "DEFEASANCE PERIOD"), and provided no
Event of Default has occurred and is continuing (other than an Event of Default
that will be cured by the release of a Mortgaged Property or Mortgaged
Properties from the Lien of the Security Documents pursuant to the provisions of
SECTION 7.1.3 hereof), Borrower may voluntarily defease all or any portion of
the Loan by providing Lender with the Defeasance Deposit (hereinafter, a
"DEFEASANCE EVENT"). Each Defeasance Event by the Borrower shall be subject to
the satisfaction of the following conditions precedent:
(i) Borrower shall provide not less than twenty (20) days prior
written notice
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to Lender specifying a regularly scheduled payment date (the "DEFEASANCE
DATE") on which the Defeasance Event is to occur. Such notice shall
indicate the principal amount of the Mortgage Note to be defeased;
(ii) Borrower shall pay to Lender all accrued and unpaid interest
on the principal balance of the Mortgage Note to but not including the
Defeasance Date. If for any reason the Defeasance Date is not a regularly
scheduled payment date, the Borrower shall also pay interest that would
have accrued on the Mortgage Note through the next regularly scheduled
payment date;
(iii) Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, due under the Mortgage Note,
this Agreement, the Mortgage, and the other Loan Documents;
(iv) Borrower shall pay to Lender the required Defeasance Deposit
for the Defeasance Event;
(v) In the event only a portion of the Loan is the subject of
the Defeasance Event, Borrower shall prepare all necessary documents to
amend and restate the Note and issue two substitute notes, one note having
a principal balance equal to the defeased portion of the original Note
(the "DEFEASED NOTE") and the other note having a principal balance equal
to the undefeased portion of the Note (the "UNDEFEASED NOTE"). The
Defeased Note and Undefeased Note shall have identical terms as the Note
except for the principal balance. A Defeased Note cannot be the subject of
any further Defeasance Event;
(vi) Borrower shall execute and deliver a security agreement, in
form and substance satisfactory to Lender, creating a first priority lien
on the Defeasance Deposit and the U.S. Obligations purchased with the
Defeasance Deposit in accordance with this provision of this SECTION 2.5
(the "DEFEASANCE SECURITY AGREEMENT");
(vii) Borrower shall deliver an opinion of counsel for Borrower
in form satisfactory to Lender in its sole discretion stating, among other
things, that Borrower has legally and validly transferred and assigned the
U.S. Obligations and all obligations, rights and duties under and to the
Mortgage Note or Defeased Note (as applicable) to the Successor Borrower,
that Lender has a perfected first priority security interest in the
Defeasance Deposit and the U.S. Obligations delivered by Borrower, that
such Defeasance will not adversely affect the status of the entity holding
the interest in the Mortgage Note as a REMIC (assuming for such purpose
that such entity otherwise qualifies as a REMIC) and that such Defeasance
will not result in a deemed exchange of the Certificates pursuant to
Section 1001 of the Code;
(viii) Borrower shall deliver a Rating Comfort Letter from the
Rating Agencies in connection with the Defeasance Event. If required by
the applicable Rating Agencies, Borrower shall also deliver or cause to be
delivered a Substantive Non-Consolidation Opinion with respect to the
Successor Borrower in form and substance satisfactory to Lender and the
applicable Rating Agencies;
(ix) Borrower shall deliver an Officer's Certificate certifying
that the
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requirements set forth in this SECTION 2.5(a) have been satisfied;
(x) Borrower shall deliver to Lender a certificate of Borrower's
independent certified public accountant certifying that the U.S.
Obligations purchased with the Defeasance Deposit will generate monthly
amounts equal to or greater than the required Scheduled Defeasance
Payments;
(xi) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request; and
(xii) Borrower shall pay all costs and expenses of Lender
incurred in connection with the Defeasance Event, including any costs and
expenses associated with a release of the Lien of the Mortgage as provided
in SECTION 2.8 hereof or SECTION 2.9 hereof, as applicable, as well as
reasonable attorneys' fees and expenses.
(b) In connection with each Defeasance Event, Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Obligations which provide payments
on or prior to, but as close as possible to, all successive Due Dates after the
Defeasance Date upon which interest payments are required under the Mortgage
Note, in the case of a Defeasance Event for the entire outstanding principal
balance of the Loan, or the Defeased Note, in the case of a Defeasance Event for
only a portion of the outstanding principal balance of the Loan, as applicable,
and in amounts equal to the scheduled payments due on such Due Dates under the
Mortgage Note or the Defeased Note, as applicable, and assuming such Mortgage
Note or Defeased Note is paid in full on the Anticipated Repayment Date (the
"SCHEDULED DEFEASANCE PAYMENTS"). Borrower, pursuant to the Defeasance Security
Agreement or other appropriate document, shall authorize and direct that the
payments received from the U.S. Obligations may be made directly to the Cash
Collateral Account (unless otherwise directed by Lender) and applied to satisfy
the obligations of Borrower under the Mortgage Note or the Defeased Note, as
applicable.
2.6. RELEASE OF PROPERTY
Except as set forth in SECTION 2.7, SECTION 2.8, SECTION 2.9 or
SECTION 2.10, no repayment, prepayment or defeasance of all or any portion of
the Mortgage Note shall cause, give rise to a right to require, or otherwise
result in, the release of the Lien of the Mortgage on any of the Mortgaged
Properties.
2.7. PARTIAL RELEASE IN CONNECTION WITH A CASUALTY OR TAKING BEFORE
DEFEASANCE PERIOD
In the event that, prior to (a) the first day of the Defeasance
Period, a Mortgaged Property has suffered a total or substantial Taking or
Casualty (in each case, as to which Restoration is not required or permitted
under the Mortgage) or (b) a Securitization, a Default of the type described in
SECTION 7.1.3 occurs that can be cured by a Release of a Mortgaged Property from
the lien of the Security Documents, Borrower shall cause the Release of such
Mortgaged Property from the Lien of the Security Documents upon the satisfaction
of the following conditions:
(a) Borrower shall provide not less than thirty (30) days notice
to Lender specifying a Due Date on which the amount set forth in clause (c)
below is to be provided to Lender, which notice shall be accompanied by a
certificate of Borrower, signed by a duly
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authorized officer of Borrower, to the effect that no Default or Event of
Default has occurred and is continuing (or, in the case of a Default or Event of
Default that shall be cured or avoided by the Release of the affected Mortgaged
Property, describing the nature of such Default or Event of Default, and
certifying that such Default or Event of Default shall be cured by such Release)
and that such Release will comply with all applicable requirements of this
SECTION 2.7;
(b) Borrower shall pay to Lender all interest that is accrued and
unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date, including,
without limitation, all reasonable costs and expenses of Lender incurred in
connection with the Release, including any costs and expenses associated with a
release of the Lien of the Security Documents and reasonable attorneys' fees and
expenses;
(c) Borrower shall pay to Lender, to be applied to prepayment of
the outstanding principal balance of the Loan, an amount equal to (1) in the
case of a prepayment pursuant to clause (b) of the first paragraph of this
SECTION 2.7, the Release Price and the Yield Maintenance Payment for such
Mortgaged Property or (2) in the case of a Release pursuant to clause (a) of the
first paragraph of this SECTION 2.7, an amount equal to the greater of (a) and
(b), in which (a) is the Allocated Loan Amount for such Mortgaged Property and
(b) is the lesser of (x) the Release Price for such Mortgaged Property and (y)
the sum of the Net Sales Proceeds received by Borrower from the sale of the
Mortgaged Property or the part thereof that remains following the Taking or
Casualty, plus the remaining Award or Insurance Proceeds not previously applied
to repayment of the Loan or Restoration;
(d) Borrower shall deliver to Lender, for execution, forms of
release of such Mortgaged Property from the Lien of the Security Documents
appropriate for the jurisdiction in which such Mortgaged Property is located;
(e) if the Release is being requested in order to avoid an Event
of Default pursuant to SECTION 7.1.3 hereof, Borrower shall deliver to Lender
evidence reasonably satisfactory to Lender, that after giving effect to such
Release, the Debt Service Coverage Ratio for the Remaining Mortgaged Properties
shall be equal to the greater of (i) 2.22:1 (on or before April 16, 2003) or
1.81:1 (on or after April 17, 2003) and (ii) the Debt Service Coverage Ratio for
the Remaining Mortgaged Properties and the Mortgaged Properties to be released
for the twelve (12) full calendar months immediately preceding the release of
the Mortgaged Properties to be released;
(f) Borrower shall provide to Lender an opinion of counsel in
form and substance, and from a firm, acceptable to Lender in the exercise of its
sole discretion, that such Release would not adversely affect the status of the
entity holding the interest in the Mortgage Note as a REMIC (assuming for such
purpose that such entity otherwise qualifies as a REMIC) and that such Release
will not result in a deemed exchange of the Certificates pursuant to Section
1001 of the Code.
2.8. RELEASE OF ALL THE PROPERTIES DURING DEFEASANCE PERIOD
(a) At any time during the Defeasance Period, if Borrower has
elected to defease the entire outstanding principal balance of the Mortgage Note
and the requirements of
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SECTION 2.5 have been satisfied, all of the Mortgaged Properties shall be
released from the Lien of the Mortgage and the U.S. Obligations, pledged
pursuant to the Defeasance Security Agreement, shall be the sole source of
collateral securing the Note.
(b) In connection with the release of the Lien, Borrower shall
submit to Lender, not less than thirty (30) days prior to the Release Date, a
release of Lien (and related Loan Documents) for each Mortgaged Property for
execution by Lender. Such release shall be in a form appropriate in each
jurisdiction in which a Mortgaged Property is located and satisfactory to Lender
in its sole discretion. In addition, Borrower shall provide all other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such release, together with an Officer's Certificate certifying
that such documentation (i) is in compliance with all Laws, and (ii) will effect
such Releases in accordance with the terms of this Agreement.
2.9. RELEASE OF INDIVIDUAL MORTGAGED PROPERTIES DURING THE
DEFEASANCE PERIOD
At any time during the Defeasance Period, in connection with any
Defeasance of less than the entire principal balance of the Mortgage Note,
Borrower may obtain (i) the Release of one or more Mortgaged Properties from the
Lien of the Mortgage thereon (and related Loan Documents) and (ii) the release
of Borrower's obligations under the Loan Documents with respect to such
Mortgaged Properties (other than those expressly stated to survive), upon
satisfaction of each of the following conditions:
(a) the principal balance of the Defeased Note issued in
connection with such Defeasance shall equal or exceed the aggregate Release
Prices for the Mortgaged Properties then being Released;
(b) the requirements of SECTION 2.5 have been satisfied;
(c) Borrower shall submit to Lender, not less than thirty (30)
days prior to the date of such Release, a release of Lien (and related Loan
Documents) for each such Mortgaged Property for execution by Lender. Such
release shall be in a form appropriate in the jurisdiction in which such
Mortgaged Property is located and satisfactory to Lender in its sole discretion.
In addition, Borrower shall provide all other documentation Lender reasonably
requires to be delivered by Borrower in connection with such release, together
with an Officer's Certificate certifying that such documentation (i) is in
compliance with all Laws, (ii) will effect such release in accordance with the
terms of this Agreement, and (iii) will not impair or otherwise adversely affect
the Liens, security interests and other rights of Lender under the Loan
Documents not being released (or as to the parties to the Loan Documents and
Mortgaged Properties subject to the Loan Documents not being released); and
(d) After giving effect to such release, the Debt Service
Coverage Ratio for the Remaining Mortgaged Properties shall be equal to the
greater of (i) 2.22:1 (on or before April 16, 2003) or 1.81:1 (on or after April
17, 2003), and (ii) the Debt Service Coverage Ratio for the Remaining Mortgaged
Properties and the Mortgaged Properties to be released for the twelve (12) full
calendar months immediately preceding the release of the Mortgaged Properties to
be released.
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2.10. PARTIAL RELEASE AFTER DEFEASANCE PERIOD
On any Due Date occurring on or after the last day of the
Defeasance Period, upon the sale of any Mortgaged Property to any Person,
Borrower may cause the Release of such Mortgaged Property from the Lien of the
Security Documents upon the satisfaction of the following conditions:
(a) Borrower shall provide not less than thirty (30) days notice
to Lender specifying a Due Date on which the amount set forth in clause (c)
below is to be provided to Lender, which notice shall be accompanied by a
certificate of Borrower, signed by a duly authorized officer of Borrower, to the
effect that no Default or Event of Default has occurred and is continuing (or,
in the case of a Default or Event of Default that shall be cured or avoided by
the Release of the affected Mortgaged Property, describing the nature of such
Default or Event of Default, and certifying that such Default or Event of
Default shall be cured by such Release) and that such Release will comply with
all applicable requirements of this SECTION 2.10;
(b) Borrower shall pay to Lender all interest that is accrued and
unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date;
(c) Borrower shall pay to Lender, to be applied to the
outstanding principal balance of the Loan, an amount equal to the Release Price
of such Mortgaged Property; provided, however, that (A) if a Mortgaged Property
is released pursuant to this SECTION 2.10 as a result of a Casualty or a Taking
as to which Restoration is not required or permitted under the Mortgage, such
payment shall be an amount equal to the greater of (a) and (b), in which (a) is
the Allocated Loan Amount for such Mortgaged Property and (b) is the lesser of
(x) the Release Price for such Mortgaged Property and (y) the sum of the Net
Sales Proceeds received by Borrower from the sale of the Mortgaged Property or
the part thereof that remains following the Taking or Casualty plus the
remaining Award or Insurance Proceeds not previously applied to repayment of the
Loan or Restoration;
(d) Borrower shall deliver to Lender, for execution, forms of
release of such Mortgaged Property from the Lien of the Security Documents
appropriate for the jurisdiction in which such Mortgaged Property is located;
(e) unless the Release is being made in connection with a
Casualty or Taking (as to which Restoration is not required or permitted under
the Mortgage), after giving effect to such Release, the Debt Service Coverage
Ratio for the Remaining Mortgaged Properties shall be at least equal to the
greater of (i) 2.22:1 (on or before April 6, 2003) or 1.81:1 (on or after April
17, 2003), and (ii) the Debt Service Coverage Ratio for the Remaining Mortgaged
Properties and the Mortgaged Property to be released for the twelve (12) full
calendar months immediately preceding the release of the Mortgaged Property to
be released; and
(f) Borrower shall provide to Lender an opinion of counsel in
form and substance, and from a firm, acceptable to Lender in the exercise of its
sole discretion, that such Release would not adversely affect the status of the
entity holding the interest in the Mortgage Note as a REMIC (assuming for such
purpose that such entity otherwise qualifies as a REMIC) and that such
Defeasance will not result in a deemed exchange of the Certificates pursuant to
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Section 1001 of the Code.
Sales of personal property at a Mortgaged Property in the
ordinary course of business may be made pursuant to SECTION 1.23 of the Mortgage
without regard to SECTION 2.7, SECTION 2.8, SECTION 2.9 OR SECTION 2.10 hereof.
2.11. YIELD MAINTENANCE
2.11.1.
If all or any part of the principal amount of the Loan is prepaid
after the Closing Date but prior to the last day of the Defeasance Period as a
result of the acceleration of the maturity of the Mortgage Note after an Event
of Default (or if a Mortgaged Property is released for the purpose set forth in
SECTION 7.1.3 after the Closing Date but prior to the Securitization), Borrower
shall be required to pay a prepayment premium (the "YIELD MAINTENANCE PAYMENT")
on the Mortgage Note equal to the greater of (A) one percent (1%) of the amount
of the principal prepayment that is to be applied to the Mortgage Note and (B)
the present value as of the end of the applicable Debt Service Period,
discounted at the Reinvestment Yield, of a series of payments each equal to the
Payment Differential on each of the remaining Due Dates prior to and including
the Anticipated Repayment Date, after giving effect to the regularly scheduled
payment of principal that is to be made on the Prepayment Date. No Yield
Maintenance Payment shall be required in connection with prepayments made on or
after the last day of the Defeasance Period.
2.11.2.
Promptly following the acceleration of the Mortgage Note or
following the occurrence of any other event, the occurrence of which obligates
Borrower to make a Yield Maintenance Payment, Lender shall notify Borrower of
the amount and basis of determination of the applicable Yield Maintenance
Payment promptly upon determining the Treasury Rate, as contemplated below.
Absent manifest error, Borrower shall not dispute Lender's calculations
hereunder.
For purposes of this SECTION 2.11, the following terms shall have
the meanings ascribed to them below:
"PAYMENT DIFFERENTIAL" means, an amount equal to (x) the Base
Rate, minus the Reinvestment Yield, divided by (y) 12, and multiplied by
(z) the amount of the principal prepayment.
"REINVESTMENT YIELD" is the Treasury Rate converted to a monthly
compounded nominal annual yield.
"TREASURY RATE" is equal to the lesser of (A) the annual yield on
the United States Treasury issue (primary issue) with a maturity date
closest to the Final Maturity Date and (B) the yield on the United
States Treasury issue (primary issue) with a maturity equal to the
remaining average life of the Mortgage Note, with each such yield being
based on the bid price for such issue as published in The Wall Street
Journal on the date that is fourteen (14) days prior to (x) the
applicable Prepayment Date set forth
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in the notice of prepayment provided by the Borrower or (y) the date of
acceleration by the Lender (or if such bid price is not published on
that date, the next preceding date on which such bid price is so
published).
2.12. SUCCESSOR BORROWER
In connection with any release of a Lien under SECTION 2.8 or
SECTION 2.9, Lender shall establish or designate a successor entity (the
"SUCCESSOR BORROWER") which shall be a single purpose bankruptcy remote entity
approved by Lender, and Borrower shall transfer and assign all obligations,
rights and duties under and to the Mortgage Note (in the event of a Release
pursuant to SECTION 2.8) or the Defeased Note (in the event of a Release
pursuant to SECTION 2.9), as applicable, together with the pledged U.S.
Obligations to such Successor Borrower. Such Successor Borrower shall assume the
obligations under the Mortgage Note or the Defeased Note, as applicable, and the
Defeasance Security Agreement and Borrower shall be relieved of its obligations
under such documents. The Borrower shall pay $1,000 to any such Successor
Borrower as consideration for assuming the obligations under the Mortgage Note
or the Defeased Note, as applicable, and the Defeasance Security Agreement.
Notwithstanding anything in this Agreement to the contrary, no other assumption
fee shall be payable upon a transfer of the Mortgage Note in accordance with
this SECTION 2.12, but Borrower shall pay all costs and expenses incurred by
Lender, including Lender's attorneys' fees and expenses, incurred in connection
therewith.
3. REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement and the other Loan
Documents and to make the Loan to Borrower, Borrower makes the following
representations and warranties. For purposes of this Article 3, references to
the knowledge of Borrower or to information known by Borrower, shall be deemed
to include the knowledge of, or information known by, Arden OP and Arden REIT.
3.1. ORGANIZATION AND POWER OF BORROWER AND EQUITY MEMBER
Borrower (i) is duly organized and validly existing as a limited
liability company in good standing under the laws of the State of Delaware, (ii)
has full power and authority to enter into, execute, deliver and perform this
Agreement, the Mortgage Note, and the other Loan Documents and Transaction
Documents and to consummate the transactions contemplated hereby and thereby,
(iii) has full power and authority to mortgage or assign all of its right, title
and interest in and to the Mortgaged Properties and the other Collateral, (iv)
has full power and authority to transact the business in which it is now
engaged, or proposes to engage, (v) has power and authority and is duly
qualified to transact such business as a foreign limited liability company under
the laws of all jurisdictions in which the Mortgaged Properties are located, and
in all jurisdictions where the nature of Borrower's business or the character of
properties owned, leased, operated or otherwise held by Borrower makes such
qualification necessary and (vi) is a special purpose entity established for the
sole purpose of owning and operating the Mortgaged Properties or causing the
Mortgaged Properties to be operated and entering into the transactions
contemplated by the Transaction Documents and performing activities incidental
and related to the operation of the Mortgaged Properties. All of the membership
interests in
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Borrower have been duly and validly authorized and issued and are owned by the
Equity Member and Special Member free and clear of any liens, encumbrances,
equities or claims. The Equity Member (i) is duly organized and validly existing
as a limited partnership in good standing under the laws of the State of
Maryland, (ii) has full power and authority to execute, deliver, and perform
this Agreement and the other Loan Documents and Transaction Documents to which
it is a party, whether for itself or on behalf of Borrower, and (iii) is duly
qualified to transact business as a foreign limited partnership in good standing
under the laws of each jurisdiction which requires such qualification, except
when the failure to be so qualified, considering all such failures in the
aggregate, would not be reasonably likely to have a material adverse effect on
the financial condition, business or results of operations of Equity Member or
Borrower or on the ownership, use or value of any of the Mortgaged Properties.
Borrower has its principal place of business, principal office and office where
it keeps its records and other documents and instruments relating to the
Mortgaged Properties (except for certain records, documents and instruments kept
at the Mortgaged Properties) at its address set forth in SECTION 12.3.
3.2. DUE AUTHORIZATION AND EXECUTION
The execution, delivery and performance by Borrower of this
Agreement and each of the other Loan Documents and Transaction Documents have
been duly authorized by all requisite actions by and on behalf of Borrower and
are within the limited liability company power of Borrower, and this Agreement
and all other Loan Documents and Transaction Documents executed and delivered by
Borrower have been duly executed by Borrower and constitute the valid and
binding obligations of Borrower, enforceable against Borrower, in accordance
with their respective terms, subject to the effects of applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws
relating to or affecting creditors' rights generally and general principles of
equity (whether considered in a proceeding in equity or at law).
3.3. NO CONSENTS REQUIRED; NO CONTRAVENTION
Except for consents and approvals that have already been obtained
and are in full force and effect, no consent, license, approval or authorization
of, or registration or declaration with, any Governmental Authority, commission,
bureau, agency or other Person is required in connection with the execution,
delivery and performance of this Agreement, the Mortgage Note, or any of the
other Loan Documents or Transaction Documents or the consummation of the
transactions contemplated hereby and thereby. Neither the execution and delivery
by Borrower of this Agreement nor of the other Loan Documents or other
Transaction Documents, the consummation of the transactions contemplated hereby
or thereby, nor the fulfillment by Borrower of, or compliance by Borrower with,
the terms and conditions of this Agreement or the Loan Documents or other
Transaction Documents:
(a) will result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any Laws or any judgment, decree
or order binding on Borrower or its properties or assets;
(b) will conflict with or result in any breach or violation of
any of the terms, conditions or provisions of the organizational documents of
Borrower; or
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(c) will result in a breach or violation of or constitute a
default under any existing material agreement or instrument to which Borrower or
its assets are a party or by which Borrower is bound.
3.4. TITLE TO PROPERTIES
Borrower has good and marketable title to the Mortgaged
Properties, including good and marketable fee simple in and to the Land, and
good and marketable title in and to the Improvements located thereon, in each
case free and clear of all Liens except for Permitted Liens, and Borrower has
good title in all other assets that serve as Collateral for the Loan (which, in
the case of assets leased by Borrower, shall mean a good and valid leasehold
interest in such assets), free and clear of all Liens except Permitted Liens.
The Permitted Liens do not and will not materially and adversely affect (i) the
ability of Borrower to pay in full the principal and interest when due on the
Mortgage Note or (ii) the use of the Mortgaged Properties for the use currently
being made thereof or the operation of the Mortgaged Properties as they
currently are being operated. Borrower has no interest in real property other
than the Mortgaged Properties, including the Land and Improvements related
thereto. Each Mortgaged Property constitutes one or more separate tax lots that
do not share tax liability with other real property except property that is (a)
owned in full by Borrower and (b) encumbered by a Lien in favor of the Lender
securing the Loan.
3.5. MANAGEMENT AGREEMENT
The execution, delivery and performance by Borrower of the
Management Agreement has been duly authorized by all requisite actions by and on
behalf of Borrower and are within the limited liability company power of
Borrower and the Management Agreement has been duly executed by Borrower and the
Manager and constitute the valid and binding obligations of Borrower and the
Manager, enforceable against Borrower and the Manager in accordance with their
terms, subject to the effects of applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights generally and general principles of equity (whether
considered in a proceeding in equity or at law).
3.6. LEASES
(a) Borrower is the sole owner of the entire lessor's interest in
the Leases; (b) the Leases are valid and enforceable subject to the effects of
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
generally and general principles of equity (whether considered in a proceeding
in equity or at law); (c) the material economic terms of all alterations,
modifications and amendments to the Leases are reflected in the certified
occupancy statement delivered to and approved by Lender; (d) none of the rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated
(other than to Lender); (e) except as may otherwise be permitted herein, none of
the Rents have been collected for more than one (1) month in advance; (f) the
premises demised under the Leases have been completed and the tenants under the
Leases have been accepted the same and have taken possession of the same on a
rent-paying basis except as otherwise shown on SCHEDULE 3.6 attached hereto and
except for
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tenant improvement work that is in process that has been previously disclosed to
Lender; (g) there currently exist no offsets or defenses to the payment of any
portion of the Rents, except as otherwise shown on SCHEDULE 3.6 attached hereto;
(h) no Lease contains an option to purchase, right of first refusal to purchase,
or any other similar provision; and (i) no person or entity has any possessory
interest in, or right to occupy, the Property except under and pursuant to a
Lease.
3.7. UTILITIES
(i) All utility services and facilities (including water,
sanitary sewer, storm sewer, gas and electrical services and facilities)
necessary for the present and proposed use of the Mortgaged Properties are
available to the Mortgaged Properties and, except as shown on the surveys or
title reports for the Mortgaged Properties, enter the Mortgaged Properties
either through adjoining public streets or through private lands pursuant to
valid, unsubordinated, perpetual, enforceable and recorded public or private
easements; (ii) all utility connections for the Mortgaged Properties have been
completed, installed and paid for; (iii) except as shown on the surveys or title
reports for the Mortgaged Properties and except for encroachments that would not
reasonably be expected to materially and adversely affect the operation of the
applicable Mortgaged Property, no Improvements on the Land are located upon any
public utility lines or upon any private utility lines serving property other
than the Mortgaged Properties, or encroach upon any property adjoining the
Mortgaged Properties or encroach upon any utility easements or rights-of-way;
and (iv) neither Borrower nor Equity Member has received any notice from any
utility that any utility services utilized by the Mortgaged Properties will be
revoked or otherwise terminated.
3.8. NO VIOLATIONS
No notices of any material violation of law or municipal
ordinances or of federal, state, county or municipal or other governmental
agency regulations, orders or requirements relating to the Collateral have been
entered against or received by Borrower or Equity Member and neither Borrower
nor Equity Member has reason to believe that any such notice may or will be
entered or received.
3.9. OTHER AGREEMENTS
Neither Borrower nor Equity Member is a party to any agreement,
instrument, indenture, or other contract or subject to any charter or other
restriction that could materially adversely affect, or threaten to materially
adversely affect, its business, operations, prospects, properties, assets or
condition (financial or otherwise). No material default by Borrower or Arden
REIT has occurred or is continuing (nor has there occurred any continuing event
which, with giving of notice or the passage of time or both, would constitute
such a default) under any material contracts, material agreements or material
orders to which Borrower or Equity Member, as the case may be, is a party or by
which it is bound and, to the knowledge of Borrower, no material default by a
third party has occurred or is continuing (nor has there occurred any continuing
event which, with the giving of notice or the passage of time, or both, would
constitute such a default) under any such contracts, agreements or orders. No
holder of any indebtedness of Borrower or Equity Member has given notice of any
default thereunder,
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and no liquidation or dissolution of Borrower or Equity Member, and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to Borrower or Equity Member or any of their properties, is
pending or, to the knowledge of Borrower or Equity Member, threatened against
them or their properties.
3.10. PAYMENT OF TAXES
(i) Borrower and Equity Member have filed or have caused to be
filed all federal, state, local, and foreign income, excise, property and other
tax returns with respect to their operations, that are required to be filed,
(ii) all such returns are true and correct in all material respects, and (iii)
Borrower and Equity Member have paid or caused to be paid in full all taxes as
shown on such returns or on any assessment received by them, to the extent that
such taxes have become due. Except as so disclosed, the amounts reserved as a
liability for income and other taxes that may become payable are sufficient for
the payment of all such unpaid taxes of Borrower or Equity Member, whether or
not disputed, for which Borrower or Equity Member may be liable in its own right
or as a transferee of the assets of, or as successor to, any other person or
entity.
3.11. LITIGATION
There is no legal or governmental action, suit or proceeding
(including any condemnation proceeding) pending to which Borrower or Equity
Member is a party or of which any property of Borrower or Equity Member is
subject which, if determined adversely to Borrower or Equity Member, as the case
may be, would individually or in the aggregate have a material adverse effect on
the Mortgaged Properties, or on the financial position, business or results of
operations of Borrower or Equity Member or that might affect in any material
respect the transactions contemplated by this Agreement and, to the knowledge of
Borrower and Equity Member, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others.
3.12. REGULATION U
Neither Borrower nor Equity Member is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as now and
from time to time hereafter in effect, and no proceeds of the Loan will be used
for any purpose (and Borrower has not taken or will take any action) which might
cause this Agreement or any Loan Document to violate said Regulation U or any
other regulation of the Board of Governors of the Federal Reserve System (in
each case as in effect on the date hereof or as the same may hereinafter be in
effect).
3.13. INVESTMENT COMPANY ACT
Neither Borrower nor the Equity Member is an "investment company"
or a company "controlled" by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended and none is an open-ended
investment company, unit trust or face-amount certificate company that is or is
required to be registered under Section 8 of the
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Investment Company Act.
3.14. TRANSACTIONS WITH AFFILIATES
Excluding all transactions contemplated by the Loan Documents, no
officer of Borrower, and no other Affiliate of Borrower or of any such officer,
is currently a party to any transaction with Borrower, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
advisory or other services by, purchase or lease of real or personal property
from, or otherwise requiring payments to, any such officer or Affiliate, except
on terms that are fair and reasonable and no less favorable to Borrower than
would be expected in arms-length transactions with third parties where neither
party is under duress or under any extraordinary compulsion to enter into such
contract, agreement or arrangement.
3.15. BUSINESS PURPOSE; NON-SUBORDINATION
The Loan is solely for the business purpose of Borrower, and is
not for personal, family, household or agricultural purposes. The obligations of
Borrower under this Agreement, the Mortgage Note, and each of the other Loan
Documents, and the indebtedness evidenced by the Mortgage Note, are not
subordinated in right of payment or otherwise to any other obligation of
Borrower or to any rights of others.
3.16. PERMITS AND LICENSES
Borrower has all material permits, licenses and authorizations
necessary to conduct its business in the same manner as the business conducted
by Arden OP and Arden REIT immediately prior to the transfer of the Mortgaged
Properties to Borrower. No proceedings are pending or, to the best of Borrower's
and Equity Member's knowledge, threatened seeking the revocation or suspension
of any permits, licenses or approvals issued with respect to the Mortgaged
Properties the revocation of which might reasonably be expected to result in any
material adverse change in the business, operations, prospects, properties,
assets or condition (financial or otherwise) of Borrower or any of the Mortgaged
Properties. No such permits, licenses or approvals shall be altered or amended
in any materially adverse respect, nor shall Borrower or Equity Member make any
attempt to alter or amend the same, in any materially adverse respect, without
the prior written consent of Lender, which shall not be unreasonably withheld.
3.17. PATENTS AND TRADEMARKS
Borrower owns or possesses the right to use all patents,
trademarks, service marks, trade names, copyrights, licenses, franchises,
permits and rights with respect to the foregoing, necessary to own and operate
its properties and to carry on its business as presently conducted and presently
planned to be conducted without conflict with any rights of others.
3.18. INSURANCE
Borrower has obtained or caused to be obtained all insurance
policies required by SECTION 8.1 hereof and by each of the Mortgages, in each
case with Qualified Insurance
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Companies and all such policies are in full force and effect.
3.19. ERISA
Borrower has no employees, and Borrower does not maintain or
sponsor any Plan. Borrower is not obligated to make contributions on behalf of
the employees of any Person to any Plan.
3.20. NO NOTICE OF NON-COMPLIANCE
Neither Borrower nor Equity Member nor Arden REIT has received
any notice from any insurance company which has issued a policy with respect to
the Mortgaged Properties or from any State Board of Fire Underwriters (or any
other body exercising similar functions) requiring the performance of any
repairs, alterations or other work, which repairs, alterations or other work
have not been completed at the Mortgaged Properties. Neither Borrower nor Equity
Member nor Arden REIT has received any notice of default or breach which has not
been cured under any covenant, condition, restriction, right-of-way, reciprocal
easement agreement or other easement or agreement affecting the Mortgaged
Properties which is to be performed or complied with by it.
3.21. COMPLIANCE WITH LAWS
Borrower and each Mortgaged Property is in compliance with all
Laws, except for such non-compliance as would not reasonably be expected, singly
or in the aggregate, to materially and adversely affect any Mortgaged Property
or the business, operations, prospects, assets, properties or condition
(financial or otherwise) of Borrower.
3.22. COMPLIANCE WITH ENVIRONMENTAL LAWS
To the best of Borrower's knowledge, each of the Mortgaged
Properties is in compliance in all material respects with, all applicable
Environmental Laws, except for such matters as may be described in the reports
listed on SCHEDULE 3.22 and in reports previously delivered to Lender. There are
not pending (and, to the best of Borrower's knowledge, there are not
threatened), any actions, suits, claims, legal proceedings or any other
proceedings claiming or involving the presence on, at or under the Mortgaged
Properties, or any part thereof, of any Hazardous Materials (other than
Hazardous Materials in quantities customary in operations similar to the
operation of the Mortgaged Properties that are contained, stored and used in
compliance in all material respects with applicable Environmental Laws or
claiming violation of Environmental Laws relating to the Mortgaged Properties or
any part thereof, and neither Borrower nor Arden REIT has received, directly or
indirectly, formal or informal notice of any complaint, order directive,
citation, notice of responsibility, notice of potential responsibility, or
information request from any Governmental Authority or any other person or
entity relating to the foregoing.
3.23. CONCERNING MORTGAGED PROPERTIES; FINANCIAL STATEMENTS
(a) All certifications, permits, licenses and approvals required
for the legal use,
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occupancy and operation of each Mortgaged Property as used immediately prior to
the transfer of such Mortgaged Property to Borrower including any applicable
certificate of completion and occupancy permit, have been obtained and are in
full force and effect; (b) Engineering Surveys have been performed by a surveyor
or registered professional engineer duly licensed in the jurisdictions in which
the Mortgaged Properties are situated for each of the Mortgaged Properties and,
except as set forth in the Engineering Surveys or in reports previously
delivered by Borrower to Lender, the Mortgaged Properties and other Improvements
are in sound condition and repair and neither Borrower nor Equity Member has
knowledge that any such Engineering Survey contains any material inaccuracy or
omission; (c) there are no proceedings pending or, to the best of Borrower's or
Equity Member's knowledge, threatened for the total or partial condemnation of
or affecting, any Mortgaged Property; (d) the Mortgaged Properties are not
subject to any leases, licenses or other use or occupancy agreements other than
the Leases, and leases of Building Equipment described on SCHEDULE 3.23B; (e)
other than the tenants pursuant to the Leases, no Person has any possessory
interest in any Mortgaged Property or right to occupy any portion thereof except
under and pursuant to the provisions of the Leases; (f) Borrower does not have
on the date hereof any contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments which in each case are known to Borrower and which, in
Borrower's opinion, are reasonably likely to result in a material adverse effect
on the Mortgaged Properties or the operation thereof, except as referred to or
reflected or provided for in the financial statements heretofore furnished to
Lender or as otherwise disclosed to Lender herein; (g) since the last date of
such financial statements, (i) Borrower has not entered into any material
transaction or incurred any material liability or obligation, contingent or
otherwise, other than in the ordinary course of business, except as disclosed to
Lender and (ii) there has not been any material adverse change in the condition
(financial or otherwise), business, net worth or results of operations of
Borrower or the condition (financial or otherwise) of the Mortgaged Properties;
and (h) no Mortgaged Property is located in a flood hazard area as defined by
the Federal Insurance Administration.
3.24. ACCESS
Each Mortgaged Property has access and is contiguous to publicly
dedicated streets, roads or highways, or if not so contiguous, access to and
from each Mortgaged Property and publicly dedicated streets, roads or highways
is available through private lands pursuant to valid, perpetual, enforceable and
recorded public or private easements or rights-of-way; and pedestrian and
vehicular access to and from each Mortgaged Property via the easements or
rights-of-way is not limited or restricted in any unreasonable manner.
3.25. NO LIENS
There are no Liens of any type with respect to any of the
Mortgaged Properties, except the Liens created by the Loan Documents and the
Permitted Liens. There has been no construction or other activities at any of
the Mortgaged Properties within such periods of time as would permit the
imposition of any mechanics' or materialmen's Liens on any of the Mortgaged
Properties except as set forth on SCHEDULE 3.25.
3.26. ACCURACY OF INFORMATION
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To the best knowledge of Borrower and Equity Member, neither the
Loan Documents nor any document, agreements, instrument, schedule, certificates,
statements, or cash flow schedules (collectively, the "BORROWER DOCUMENTS")
furnished by Borrower, Arden OP or Arden REIT to Lender contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading. Since the furnishing of the Borrower
Documents, there has been no change nor any development or event involving a
prospective change known to Borrower or Equity Member which would render any of
the Borrower Documents untrue or misleading in any material respect.
3.27. MORTGAGE AND SECURITY INTERESTS
When executed and delivered, and, if necessary under applicable
laws, recorded, the Mortgage will create valid mortgage, deed of trust, or
similar Liens upon the Mortgaged Properties, the Land underlying them and the
Improvements and valid security interests in the fixtures located thereon, and
the Mortgage and accompanying financing statements (if any) will be recorded and
filed in such places as may be required and, where appropriate, applicable
mortgage, transfer, recording and UCC taxes and fees will be paid, such that the
Mortgage will constitute valid first priority mortgage, deed of trust, or
similar Liens on the Land and Mortgaged Properties and will create valid
perfected first priority security interests of record with respect to the
respective Mortgaged Property and related Collateral (except Collateral as to
which a security interest cannot be created and perfected by a Mortgage or the
filing of a financing statement under the U.C.C.), subject only to the Permitted
Liens.
When executed and delivered, and, if necessary under applicable
laws, when appropriate filings of financing statements are made, the Security
Agreement by and between Borrower and Lender will create valid first priority
security interests with respect to the Collateral named therein, which security
interests shall be perfected to the extent that security interests in such
Collateral can be perfected by the filing of a financing statement under the
U.C.C.
3.28. ASSIGNMENT OF LEASES AND RENTS
When executed and delivered by Borrower and the other parties
thereto, the Assignment of Leases and Rents will create a valid assignment of
the Collateral described therein. The Assignment of Leases and Rents, and
accompanying financing statements (if any) will be recorded by the Title Company
and filed in such places as may be required so that all such documents will
create valid assignments of record with respect to the Collateral described
therein, subject only to the Permitted Liens.
3.29. FOREIGN PERSON
Borrower is not a "foreign person" as defined in Section 1445 of
the Internal Revenue Code of 1986 and any regulations promulgated thereunder
(including temporary or proposed regulations).
3.30. NO DEFAULTS
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No Default or Event of Default exists hereunder or under the
other Loan Documents.
3.31. NO FRAUDULENT CONVEYANCE
Borrower (i) is entering into this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby in good faith and
with no actual intent to disturb, hinder, delay, or defraud any present or
future creditor of Borrower, Equity Member or any other Person, and (ii) has
received reasonably equivalent value in exchange for its obligations under the
Loan Documents. After giving effect to the transactions contemplated by the Loan
Documents, the fair salable value of Borrower's assets exceeds and will,
immediately following the execution and delivery of the Loan Documents, exceed
Borrower's total liabilities, including subordinated, unliquidated, disputed or
contingent liabilities known to Borrower. The fair salable value of Borrower's
assets is and will, immediately following the execution and delivery of the Loan
Documents, be greater than Borrower's probable liabilities, including the
maximum amount of its contingent liabilities known to the Borrower or its debts
as such debts become absolute and matured. Borrower's assets do not and,
immediately following the execution and delivery of the Loan Documents will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to, and does not believe
it will, incur debts and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).
4. CLOSING; CONDITIONS PRECEDENT
The Loan shall be made at a closing (the "CLOSING") on a date
(the "CLOSING DATE") that coincides with the closing of the transactions
contemplated by the Contribution Agreement. Without limiting the foregoing, the
obligation of Lender to make the Loan to Borrower and to proceed with the
Closing is subject to the satisfaction on or before the Closing Date of each and
all of the following conditions (and the occurrence of the Closing shall be
conclusive evidence that all such conditions have been satisfied in full or
knowingly waived):
4.1. REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties of Borrower and Equity Member
made in this Agreement or in any other Loan Document shall have been true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date, with the same effect as if such
representations and warranties were made on the Closing Date. As of the Closing
Date, Borrower shall each have performed and complied in all material respects
with all covenants and agreements required by this Agreement or by any other
Loan Document to be performed or complied with by Borrower as of such date.
4.2. BORROWER'S ACTIONS
Borrower shall have taken all actions under the laws of any state
having jurisdiction over Borrower necessary to effectuate the transactions
contemplated by this Agreement and by the other Loan Documents.
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4.3. DELIVERY OF DOCUMENTS
The Borrower shall have delivered to the Lender the following
documents, instruments and agreements, each of which shall be in form and
substance reasonably satisfactory to the Lender:
4.3.1.
All Loan Documents, fully executed by the Borrower and, as
applicable, Equity Member, including the following;
(i) This Agreement;
(ii) The Mortgage Note;
(iii) The Mortgage;
(iv) The Environmental Indemnity Agreement;
(v) The Collateral Assignment of Management Agreement
(and the Manager's consent to same);
(vi) The Security Agreement;
(vii) The Assignment of Leases and Rents; and
(viii) The Cooperation Agreement;
4.3.2.
Mortgagee's forms of title insurance policies (each a "TITLE
INSURANCE POLICY" and, collectively, the "TITLE INSURANCE POLICIES"), or
marked-up commitments evidencing such policies, each in form and content
reasonably acceptable to the Lender, and each in an amount not less than the
Allocated Loan Amount applicable to the particular Mortgaged Property (as
specified in SCHEDULE 1.1 attached hereto), with premiums fully paid, insuring
that (i) each Mortgage constitutes a valid first priority mortgage or similar
lien on, and security interest in, the Land and the Improvements and all rights
appurtenant thereto described therein, in each case free and clear of all
defects and encumbrances other than as set forth in SCHEDULE B to the applicable
Title Insurance Policy, and containing, to the extent such coverage is available
in the state in which the particular Mortgaged Property is located, (A) full
coverage (by affirmative insurance) against liens of mechanics, materialmen,
laborers, and any other Persons who might claim statutory or other common law
liens relating to services performed prior to Closing; (B) no survey exceptions
other than those set forth in SCHEDULE B to each Title Insurance Policy; (C)
such other endorsements as the Lender may deem reasonably necessary to insure
that any off-site easements benefiting any of the Mortgaged Properties are valid
and enforceable in accordance with their terms; (D) a "tie-in" endorsement
aggregating the insurance amount indicated for the applicable Mortgaged Property
with the amounts indicated for other Mortgaged Properties; and (E) such other
endorsements as are required by Lender. Such Title Insurance Policies shall be
issued by Commonwealth Land Title Insurance Company or any other
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nationally recognized title insurance company (the "TITLE COMPANY") reasonably
satisfactory to Lender.
4.3.3.
Evidence reasonably satisfactory to the Lender that the
requirements set forth in SECTION 8.1 and SECTION 8.3 hereof have been complied
with and that all policies of insurance required by SECTION 8.1 and SECTION 8.3
are in full force and effect;
4.3.4.
Evidence reasonably satisfactory to Lender that funds necessary
to pay all taxes related to the Mortgage and all other recording and filing fees
and other expenses necessary in connection with the recordation of the Mortgage
and the perfection of the security interests under all of the other Security
Documents have been paid to the Title Company, or to other Persons reasonably
satisfactory to the Lender, for payment to the applicable taxing authorities or
recording officials;
4.3.5.
A certificate of Borrower, dated as of the Closing Date (together
with copies of the documents referred to therein) certifying that: (i) attached
thereto is a true and complete copy of the LLC Agreement, together with all
amendments thereto, (ii) the LLC Agreement has not been amended since the date
of the last amendment attached to the certificate, and (iii) the LLC Agreement
is in full force and effect;
4.3.6. [INTENTIONALLY DELETED]
4.3.7.
A certified copy of the certificate of formation of Borrower,
certified as of a date no more than two weeks prior to the Closing Date by the
Delaware Secretary of State as being a true and complete copy of such
certificate as on file in such state, and a certificate of a duly authorized
officer of Borrower, dated as of the Closing Date (together with copies of the
documents referred to therein) certifying that: (i) attached thereto are true
and complete copies of the Borrower's certificate of formation, together with
all amendments thereto, (ii) the certificate of formation has not been amended
since the date of the last amendment attached to the certificate, and (iii) the
certificate of formation is in full force and effect;
4.3.8.
A certified copy of the articles of incorporation of Arden REIT,
certified as of a date no more than two weeks before the Closing Date by the
Maryland State Department of Assessments and Taxation as being a true and
complete copy of such articles as on file in such State, and a certificate of a
duly authorized officer of Arden REIT, dated as of the Closing Date (together
with copies of the documents referred to therein) certifying that: (i) attached
thereto is a true and complete copy of such company's articles of incorporation,
together with all amendments thereto, (ii) attached thereto is a true and
complete copy of such company's bylaws, together with all amendments thereto,
(iii) such organizational documents and bylaws
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have not been amended since the date of the last amendment attached to the
certificate, (iv) such organizational documents and bylaws are in full force and
effect, and (v) attached thereto are currently effective resolutions of the
board of directors of such company authorizing the consummation of the
transactions contemplated hereby by Arden REIT on its own behalf and as the sole
general partner of Arden OP;
4.3.9.
A certified copy of the certificate of limited partnership of
Arden OP, certified as of a date no more than two weeks prior to the Closing
Date by the Maryland State Department of Assessments and Taxation as being a
true and complete copy of such certificate as on file in such state, and a
certificate of a duly authorized office or Arden REIT, as sole general partner
of Arden OP, dated as of the Closing Date (together with copies of the documents
referred to therein) certifying that: (i) attached thereto are true and complete
copies of Arden OP's limited partnership agreement and certificate of limited
partnership, together with all amendments thereto, (ii) the limited partnership
agreement has not been amended since the date of the last amendment attached to
the certificate, and (iii) the limited partnership agreement is in full force
and effect.
4.3.10.
Original fictitious name certificates, certificates of existence
and, if available, certificates of good standing for Borrower and Equity Member
from the Secretary of State's office (or equivalent) of their respective
jurisdictions of organization, as well as certificates of qualification to
transact business in California, for Borrower and Equity Member from the
Secretary of State for the State of California, each dated as of a date recent
to the Closing Date.
4.3.11.
Certificates of each of Borrower and Manager, each dated as of
the Closing Date (together with copies of the documents referred to therein)
certifying that: (i) attached thereto is a true and complete copy of the
Management Agreement, together with all amendments thereto, (ii) the Management
Agreement has not been amended since the date of the last amendment attached to
the certificate, (iii) the Management Agreement is in full force and effect,
(iv) no notice of default under the Management Agreement has been given or
received by such party, and neither such party nor, to the best knowledge of
such party, the other party is in default with respect to any obligation under
the Management Agreement, and (v) such party does not claim to have any defense,
counterclaim or right of offset with respect to any of its obligations under the
Management Agreement.
4.3.12.
As-built surveys for each Mortgaged Property that conform to the
1992 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys and
that meet the accuracy standards of an Urban Land Survey, each such survey to be
prepared by a surveyor registered in California, and to contain a certificate
from such surveyor to Lender and the Title Company,
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dated within ninety (90) days immediately preceding the Closing Date, in form
and content reasonably acceptable to Lender and the Title Company. Each survey
shall show (i) the boundaries of the applicable Land, (ii) the location and
dimension of all Improvements located on the Land, (iii) the location and
identity of all visible or recorded easements and rights-of-way across or
serving the Land, (iv) that the Improvements comply with all setback
requirements and zoning restrictions, except for violations that do not
materially adversely affect the Mortgaged Properties or as to which Lender is
affirmatively insured under the applicable Title Insurance Policy, (v) that the
Improvements do not encroach on adjoining property or on any easement or right
of way, except for encroachments that do not materially adversely affect the
Mortgaged Properties or as to which Lender is affirmatively insured under the
applicable Title Insurance Policy, (vi) that there are no encroachments on the
Land, except for encroachments that do not materially adversely affect the
Mortgaged Properties or as to which Lender is affirmatively insured under the
applicable Title Insurance Policy, (vii) that the Land is not located within any
flood plain area (unless flood insurance reasonably satisfactory to Lender is
provided), and (viii) any other matters that Lender may reasonably require;
4.3.13.
A report of the Title Company or a professional records-search
firm stating that a search of the public records in each state and county in
which a Mortgaged Property is located, disclosed no conditional sales contracts,
chattel mortgages, leases of personalty, financing statements or title retention
agreements, that affect any Mortgaged Property or Land or any other Collateral
assigned or pledged to Lender, except such matters as may be listed in such
report, and such matters must be reasonably acceptable to Lender;
4.3.14.
A copy of the certificate of occupancy for each Mortgaged
Property and the Improvements located on each parcel of Land, or evidence
satisfactory to Lender that no certificate of occupancy is required by
applicable Laws, and a copy of all licenses and permits required for the legal
operation of each Mortgaged Property and all other Improvements located on each
parcel of Land, or evidence satisfactory to Lender that no other licenses or
permits are required by applicable Laws or that the absence of particular
licenses or permits will not have a materially adverse effect on the business,
properties, prospects, assets or condition (financial or otherwise) of the
Mortgaged Property;
4.3.15.
The Engineering Surveys for all of the Mortgaged Properties,
which shall show that no material defects or conditions affect any of the
Mortgaged Properties.
4.3.16.
Seismic studies showing probable maximum loss with respect to
each Mortgaged Property;
4.3.17.
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Current reports prepared by an environmental surveying firm
reasonably satisfactory to Lender and in form and scope reasonably satisfactory
to Lender;
4.3.19.
Estoppel certificates, in form and content substantially in
accordance with the form attached hereto as EXHIBIT C, from (i) each tenant of
each Mortgaged Property that accounted for more than five percent (5%) of the
gross rents from such Mortgaged Property during the most recently completed four
full Accounting Quarters and (ii) tenants of each Mortgaged Property that
accounted, in the aggregate, for at least seventy-five percent (75%) of the
gross rents from such Mortgaged Property for the most recently completed four
full Accounting Quarters;
4.3.20.
Letters from the holders of the Existing Debt showing the amounts
necessary to pay such indebtedness in full as of the Closing Date, together with
evidence that the Title Company has received into escrow from such holders all
instruments of release, in recordable form, necessary to release any Liens
securing such debt immediately following the Closing;
4.3.21.
The Management Agreement duly executed by Borrower and Manager.
4.4. EVIDENCE OF AUTHORIZATION; RELATED DOCUMENTS
Lender shall also have received:
4.4.1.
A certificate of the corporate secretaries of Borrower, Arden
REIT and the Manager certifying as to the incumbency and genuine signature of
each officer of such corporation executing any of the Loan Documents or other
statements, reports, certificates and documents called for by the terms of the
Loan Documents and who will otherwise act under the Loan Documents for and on
behalf of Borrower or any such entity, including specimen signatures of each
individual that will be signing any of the Loan Documents on behalf of Borrower
or Manager, which specimen signatures shall be certified by an appropriate
officer to be a true specimen thereof (and the signature, authority and
incumbency of the certifying officer shall be similarly certified).
4.4.2.
One or more written opinions addressed to Lender, dated as of the
Closing Date, from Latham & Watkins, special counsel to Borrower, and from
Richards, Layton & Finger, special Delaware counsel to Borrower, in form and
substance reasonably acceptable to Lender;
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4.4.3.
One or more written opinions addressed to Lender, dated as of the
Closing Date, from Ballard, Spahr, Andrews & Ingersoll, special Maryland counsel
to Equity Member and Arden REIT, in form and substance acceptable to Lender.
4.5. CLOSING CERTIFICATE
The Lender shall have received a certificate of Borrower signed
by a duly authorized officer of Borrower, dated as of even date herewith,
stating that:
(i) The representations and warranties of Borrower and Equity
Member contained in each of the Loan Documents to which Borrower or Equity
Member is a party, and in all certificates, documents and instruments delivered
by Borrower or Equity Member pursuant to the Loan Documents are true and correct
in all material respects on and as of the Closing Date; and
(ii) All conditions precedent to be performed by the Borrower or
Equity Member have been satisfied as of the Closing Date.
4.6. MANAGEMENT AGREEMENT
The Management Agreement shall be in full force and effect.
4.7. EXISTING DEBT
All actions necessary to repay the Existing Debt, and to release
all mortgages or other Liens relating thereto, shall have been taken, and Lender
shall have received evidence reasonably satisfactory to the Lender to that
effect.
4.8. PAYMENT OF LENDER COSTS AND ORIGINATION FEE
Borrower shall pay at the Closing, (i) the Origination Fee and
(ii) all Lender Costs, the amounts of which are known to the Lender at such
time. In the event that the amounts paid or withheld by Lender at the Closing
are insufficient to pay all such Lender Costs, Borrower shall promptly, upon
demand, provide additional funds to Lender to pay such Lender Costs.
4.9. INDEPENDENT MANAGER
Borrower shall have at least one Independent Manager.
4.10. TI RESERVE REQUIREMENT
An amount at least equal to the TI Reserve Requirement shall have
been deposited in the TI Reserve Account.
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4.11. ENVIRONMENTAL RESERVE REQUIREMENT
An amount at least equal to the Environmental Reserve Requirement
shall have been deposited in the Environmental Reserve Account.
5. AFFIRMATIVE COVENANTS
Borrower agrees that, so long as any amount of principal,
interest, Yield Maintenance Payment, or any other charges relating to the Loan
shall be outstanding, or so long as there exist any other charges owing on or
under this Agreement, the Mortgage Note, or any other Loan Document, Borrower
shall comply with all of the following:
5.1. TIMELY PAYMENT OF AMOUNTS DUE
Borrower shall duly pay or cause to be paid, when due, the
principal of, interest on, Yield Maintenance Payments, if any, and other amounts
payable under or in connection with this Agreement, the Mortgage Note and each
other Loan Document in accordance with the terms hereof and thereof, at the
times and places and in the manner provided herein or therein.
5.2 PROCEEDS OF THE LOAN
Borrower shall apply the Loan Amount solely for the purposes set
forth in SECTION 2.3 hereof.
5.3. MANAGEMENT AGREEMENT
5.3.1.
Borrower shall duly and punctually pay all sums required to be
paid by Borrower under the Management Agreement and otherwise perform in all
material respects the obligations contemplated to be performed by it under the
Management Agreement, subject to the provisions of the Collateral Assignment of
Management Agreement, and will, with due diligence and in a reasonable and
prudent manner, enforce its rights under the Management Agreement to the extent
failure to perform or protect its rights thereunder might materially and
adversely affect the business, operations, prospects, assets, properties or
condition (financial or otherwise) of Borrower. Without limiting the foregoing,
Borrower agrees that:
(a) Borrower shall at all times promptly and faithfully keep,
perform and comply with, or cause to be kept, performed and complied
with, prior to the expiration of any applicable grace period, the
provisions of the Management Agreement to be complied with by it.
(b) Borrower shall give Lender prompt notice of any notice of
default given to or received from the Manager under the Management
Agreement, which notice shall include a copy of such notice whether or
not Lender may be entitled to such notice directly from the Manager.
Borrower shall promptly furnish to Lender upon Lender's reasonable
request any and all information concerning the performance by it of the
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provisions of the Management Agreement and shall permit Lender or its
representative at all reasonable times to make investigation or
examination concerning the performance by it of the provisions of the
Management Agreement. Within ten (10) days after receipt by Borrower,
Borrower shall deliver to Lender a copy of any notice, communication,
plan, specification or other instrument or document received or given by
it in any way relating to or affecting the Management Agreement which
may materially concern or affect the rights of Borrower under the
Management Agreement.
(c) If any legal action or proceeding shall be instituted to
terminate the Management Agreement, or for any other purpose materially
affecting the Management Agreement, Borrower will, promptly upon service
thereof on or to it, deliver to Lender a copy of each petition, summons,
complaint, notice of motion, order to show cause and of all other
provisions, pleadings and papers, however designated, served in any such
action or proceeding. Borrower will consult with Lender before
instituting suit against the Manager.
(d) Notwithstanding any other provision of this Agreement, of the
Management Agreement, if Borrower shall fail so to do, Lender may (but
shall not be obligated to) take any such action as Lender reasonably
deems required to prevent, mitigate or cure, in whole or in part, any
default by Borrower under the Management Agreement, and upon the receipt
by Lender from Borrower or the Manager, of any written notice of default
by Borrower under the Management Agreement, Lender may rely thereon, and
such notice shall constitute full authority and protection to Lender for
any action taken by the Lender or its agents in good faith reliance
thereon. All expenses, including reasonable attorneys' fees, incurred by
Lender to prevent, mitigate or cure any such default, or to sustain the
Lien of Lender on or security interest in the Management Agreement or
the applicable Mortgaged Property, or the priority thereof, together
with interest thereon at the Default Interest Rate, shall be deemed
secured by the Security Documents and shall be payable within fifteen
(15) days after demand. Nothing in this paragraph (d) shall limit
Borrower's right under the Management Agreement to contest issues
concerning requirements of law or other similar matters to the extent
permitted by the Management Agreement. Without limiting the foregoing,
Lender shall, upon ten (10) days prior written notice to Borrower
(except in the case of an emergency) have the absolute and immediate
right (but shall not be obligated) to enter in and upon the Mortgaged
Properties or any part thereof to such extent and as often as Lender, in
its reasonable judgment, deems necessary or desirable to prevent or cure
any such default or condition reasonably believed by Lender to
constitute a material default by Borrower.
(e) Borrower shall give Lender prompt notice of the commencement
of, and consult with Lender in connection with the conduct of, any
arbitration or appraisal proceeding under and pursuant to the provisions
of the Management Agreement.
(f) Borrower shall do, or cause to be done, all things necessary
to preserve and keep unimpaired its rights under the Management
Agreement and its rights and will enforce the obligations of the Manager
under the Management Agreement to the end that it may enjoy all of the
rights granted to it thereunder.
5.3.2. SUBSTITUTE MANAGER
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Notwithstanding the foregoing SECTION 5.3.1, Borrower may replace
the Manager and designate and retain a substitute manager for all (but not less
than all) of the Mortgaged Properties on the following terms and conditions:
(i) no Default or Event of Default shall have occurred and be
continuing;
(ii) the substitute manager shall either be (x) a manager that
is an Affiliate of Arden REIT and in which Arden REIT owns
directly or indirectly at least a seventy-five percent
(75%) economic or beneficial interest or (y) a third party
manager of recognized standing and experience in the
management of office and industrial properties comparable
to the Mortgaged Properties that is acceptable to Lender;
(iii) Lender shall have approved the management agreement to be
entered into between Borrower and the substitute manager;
(iv) the fee payable to the substitute manager shall not exceed
the five percent (5%) of the Gross Income from Operations
from the Mortgaged Properties; and
(v) if the Securitization has occurred, each of the Rating
Agencies delivers to Lender a Rating Comfort Letter with
respect thereto.
5.4. FINANCIAL AND OTHER INFORMATION
Borrower shall furnish to Lender the Financial Statements,
notices, and other items described below in this SECTION 5.4 (the "INFORMATION")
at the times indicated. Whenever any Financial Statements, notice or other item
shall be stated to be due on a day other than a Business Day, such Financial
Statement, notice or other item shall be due on the next succeeding Business
Day. All Financial Statements relating to earnings and expenses shall set forth
separately, or otherwise identify all extraordinary and non-recurring items to
the extent required by GAAP.
5.4.1. QUARTERLY FINANCIAL STATEMENTS
Borrower shall furnish to Lender, as soon as practicable, and in
any event within thirty (30) days after the end of each Accounting Quarter
(other than the last Accounting Quarter in any Fiscal Year), an unaudited
consolidated balance sheet of Borrower as at the end of such Accounting Quarter
and unaudited consolidated statement of income and expense of Borrower for each
such Accounting Quarter, and for that part of the Fiscal Year to date, and an
unaudited consolidated statement of cash flow of Borrower for that part of the
Fiscal Year to date, all in the form that would be required of Borrower if
Borrower were required to file quarterly reports with the SEC on Form 10-Q,
setting forth in each case, in comparative form, the corresponding figures for
the corresponding period(s) of the preceding Borrower Fiscal Year, which
statements shall, as a whole, fairly present the financial position of Borrower
as at the end of the periods indicated and the results of the operations of
Borrower for such periods and which shall be certified by an Authorized
Accounting Officer as having been prepared under his or her supervision in
accordance with GAAP, subject to year-end audit adjustments, and stating that
such Authorized Accounting Officer knows of no facts inconsistent with such
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Financial Statements and that such Financial Statements, as a whole, fairly
present the financial position of Borrower as of the end of the periods
indicated and the results of the operations of Borrower for such periods. Any
financial statements furnished pursuant to this Section shall be accompanied by
a certificate of an Authorized Accounting Officer stating that, to his or her
knowledge, no Default or Event of Default has occurred and is continuing or, if
a Default or Event of Default has occurred and is continuing, a statement as to
the nature thereof, the period of its existence, and the action that Borrower
has taken or proposes to take with respect thereto.
5.4.2. BORROWER'S ANNUAL FINANCIAL STATEMENTS
Borrower shall furnish to Lender, as soon as practicable, and in
any event within seventy-five (75) days after the end of each Fiscal Year of
Borrower, a consolidated balance sheet of Borrower as at the end of such Fiscal
Year and a consolidated statement of income, partners' capital or deficit and
consolidated cash flow of Borrower for such Fiscal Year, setting forth in each
case, in comparative form, the corresponding figures for the preceding Fiscal
Year, prepared in accordance with GAAP, and in the form that would be required
of Borrower if Borrower were required to file annual reports with the SEC on
Form 10-K. Such Financial Statements shall be accompanied by (A) (1) an audit
report and opinion in respect of such Financial Statements of Ernst & Young or
other "Big Six" independent certified public accounting firm selected by
Borrower and reasonably acceptable to Lender, which report and opinion shall be
unqualified as to the scope of the audit and reasonably satisfactory to Lender,
and (2) the written statement of the accountants described in clause (1) that,
in making the examination necessary for their report and opinion on such
Financial Statements, they have obtained no knowledge of any condition, event or
act that constitutes a Default or Event of Default, or, if such accountants
shall have obtained such knowledge, a statement as to the nature and status
thereof, and (B) a certificate of an Authorized Accounting Officer, stating that
(1) such Financial Statements have been prepared under his or her supervision in
accordance with GAAP and that he or she knows of no facts inconsistent with such
Financial Statements and (2) to his or her knowledge, no Default or Event of
Default has occurred is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof, the period of
its existence, and the action that Borrower has taken or proposes to take with
respect thereto.
5.4.3. BUDGETS
(a) For the partial year period commencing on the Anticipated
Repayment Date, and for each Fiscal Year thereafter, Borrower shall submit to
Lender for Lender's written approval the Annual Budget not later than thirty
(30) days prior to the commencement of such period or Fiscal Year. Such Annual
Budget shall be in form and substance reasonably satisfactory to Lender setting
forth in reasonable detail budgeted monthly operating income and monthly
operating capital and monthly operating and other expenses for the Mortgaged
Properties, including all planned capital expenditures in respect of the
Mortgaged Properties for such period or Fiscal Year. Each such Annual Budget
approved by Lender shall hereinafter be referred to as an "APPROVED ANNUAL
BUDGET". Until such time that Lender approves a proposed Annual Budget, the most
recently Approved Annual Budget shall apply; provided that, such Approved Annual
Budget shall be adjusted from time to time to reflect actual increases in
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real estate taxes, insurance premiums and utilities expenses.
(b) In the event that, after the Anticipated Repayment Date,
Borrower must incur an extraordinary operating expense or capital expense not
set forth in the Annual Budget (each an "EXTRAORDINARY EXPENSE"), then the
Borrower shall promptly deliver to Lender a reasonably detailed explanation of
such proposed Extraordinary Expense for the Lender's approval.
5.4.4. PROPERTY OPERATING STATISTICS
Borrower shall furnish to Lender operating statements setting
forth the Net Operating Income and occupancy statements for each Mortgaged
Property for each calendar month together with rent rolls (which rent rolls
shall contain the same information as the rent rolls provided by Borrower to
Lender in connection with the Closing) within fifteen (15) days following the
end of such calendar month in each case certified as true and correct by an
Authorized Accounting Officer and accompanied by a calculation of the Debt
Service Coverage Ratio as of the end of such calendar month.
5.4.5. CERTIFICATES REGARDING DEFAULTS
Within five (5) Business Days after any officer of Borrower
obtains knowledge of any Default or Event of Default, Borrower shall furnish to
Lender a statement of such officer specifying the nature of such Default or
Event of Default, the period of existence thereof, and the action that Borrower
has taken or proposes to take with respect thereto.
5.4.6. PROPOSED AMENDMENTS TO LLC AGREEMENT
Not less than ten (10) days prior to the execution thereof,
Borrower shall furnish to Lender a true and complete copy of any proposed
amendment to the LLC Agreement, which proposed amendments shall be subject to
the provisions of SECTION 6.5.1 hereof.
5.4.7. ENVIRONMENTAL CONDITIONS
Within five (5) Business Days after any officer of Borrower
obtains knowledge of or discovers any occurrence or condition on any real
property adjoining or in the vicinity of any Mortgaged Property that might
reasonably be expected to cause such Mortgaged Property or the Land on which it
is located to be subject to any investigation or cleanup pursuant to any
Environmental Law which could reasonably be expected to lead or result in a
material adverse effect upon the business, operations, prospects, assets,
properties or condition (financial or otherwise) of Borrower or any Mortgaged
Property, Borrower shall furnish to Lender written notice thereof describing the
nature thereof and the actions, if any, that Borrower proposes to take to
address it.
5.4.8. EVIDENCE OF TAX PAYMENTS
Concurrently with the delivery of Financial Statements required
by SECTIONS 5.4.1 and 5.4.2, Borrower shall provide to Lender evidence of the
payment of all real estate taxes that were due and payable on the Mortgaged
Properties during the preceding Accounting Quarter.
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5.5. MAINTENANCE OF EXISTENCE, ETC.
At all times (a) maintain its principal place of business,
principal office, and office where it keeps its records and other documents and
instruments, relating to the Mortgaged Properties (except for certain records,
documents and instruments kept at the Mortgaged Properties) at its address set
forth in SECTION 12.3 hereof or such other address of which Lender may be given
written notice not less than thirty (30) days prior to the date on which a
change of location is to occur; (b) obtain and maintain in full force and effect
all authorizations, consents, approvals, licenses, exemptions and other actions
by, and all registrations, qualifications, designations, declarations and other
filings, if any, with, any governmental or administrative board, body,
commission, authority, bureau, or agency necessary (i) in connection with the
execution and delivery of this Agreement, the Mortgage Note, and the other Loan
Documents, the consummation of the transactions contemplated herein or therein,
and the performance of or compliance with the terms and conditions thereof, or
(ii) to ensure the legality, validity and enforceability hereof or thereof; and
(c) maintain in effect its existence pursuant to the LLC Agreement and cause
Equity Member to (x) maintain its partnership existence in effect and in good
standing and (y) comply with all requirements of Law material to the conduct of
its business (including continuing to be qualified to engage in business in each
jurisdiction where such qualification is required) and the performance of the
obligations of Borrower or Equity Member under the Loan Documents to which
Borrower or Equity Member is a party.
5.6. COMPLIANCE WITH APPLICABLE LAWS
Comply in all material respects with all requirements of Law
applicable to the conduct of its business (including continuing to be registered
or qualified to do business in each jurisdiction where such registration or
qualification is required), the operation of the Mortgaged Properties, and the
performance of the obligations of Borrower under the Loan Documents to which
Borrower is a party, including Environmental Laws, rules, regulations and orders
of any governmental authority.
5.7. MAINTENANCE OF BOOKS; INSPECTION OF PROPERTIES AND BOOKS
Keep and maintain adequate and proper records and books of
account, in which complete entries are made in accordance with GAAP and in
accordance with all applicable laws and regulations, and permit authorized
representatives of Lender to discuss the business, operations, prospects,
assets, properties and condition (financial or otherwise) of Borrower with its
officers and employees and, at reasonable times and on reasonable notice (except
during the existence of an Event of Default, in which case no notice shall be
required) to examine its books of account and other records and make copies
thereof or extracts therefrom, all at such reasonable times as Lender may
request.
5.8. NOTICE OF LITIGATION; DISPUTES
Give written notice to Lender within five (5) Business Days after
learning of:
(i) Any action, suit or proceeding instituted against
Borrower or any action, suit or proceeding instituted by Borrower in any federal
or state court or before any
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commission or other regulatory body (federal, state or local, domestic or
foreign), or any such proceedings threatened against Borrower (including (i) any
proceeding initiated by any party with respect to the presence or release, or
alleged presence or release, of any Hazardous Materials at, on, under, from or
about any Mortgaged Property or the Land on which any Mortgaged Property is
located and (ii) any claim made or threatened by any third party against
Borrower or any such Mortgaged Property or Land relating to any loss or injury
resulting from any Hazardous Materials) an adverse determination of which could
reasonably be expected to lead to or result in a material adverse effect upon
the business, operations, prospects, assets, properties or condition (financial
or otherwise) of Borrower or any Mortgaged Property, in each case containing the
details thereof;
(ii) The filing, recording or assessment of any Federal,
state or local tax lien against it, or any of its assets, an adverse
determination of which could reasonably be expected to lead to or result in a
material adverse effect upon the business, operations, prospects, assets,
properties or condition (financial or otherwise) of Borrower or any Mortgaged
Property;
(iii) Any dispute between Borrower and any Governmental
Authority or other Person which, if adversely determined, could reasonably be
expected to materially interfere with the normal business operations of Borrower
or any Mortgaged Property.
Borrower shall permit Lender to join and participate as a party,
if Lender so elects, in any legal proceedings or actions initiated with respect
to any Mortgaged Property or the Land on which any Mortgaged Property is located
in connection with any Environmental Law or Hazardous Materials.
5.9. MORTGAGED PROPERTY OPERATIONS; MAINTENANCE
At all times, (a) conduct continuously and operate actively its
business at the Mortgaged Properties (subject to temporary cessation of, or
other limitations on, its activities due to strikes, lockouts, casualties,
events of Force Majeure, or other causes beyond the reasonable control of
Borrower, provided prompt written notice thereof is given to Lender); (b) keep
in full force and effect and existence all rights, licenses, permits and
franchises required for the use or operation of the Mortgaged Properties; (c)
maintain the Mortgaged Properties in good and clean order and condition such
that the utility and operation of the Mortgaged Properties will not be affected
in any material and adverse respect, subject to ordinary wear and tear and
damage caused by fire or other casualty; (d) make or cause to be made all
necessary or appropriate repairs, replacements and renewals to the Mortgaged
Properties in the manner and within the periods required by the Management
Agreement and the applicable Mortgage; and (iii) not commit or permit any waste
to the Mortgaged Properties or any part thereof.
5.10. SEPARATE EXISTENCE
Borrower is familiar with all of the criteria of the Rating
Agencies required to qualify as a special-purpose bankruptcy-remote entity and
Borrower shall preserve and keep in full force and effect its existence as a
Single Purpose Entity. Borrower shall (i) maintain its books and records and
bank accounts separate from any other person or entity (except that, for
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accounting and reporting purposes, Borrower may be included in the consolidated
financial statements of Arden REIT in accordance with generally accepted
accounting principles); (ii) maintain an arm's length relationship with its
members, Affiliates and any other party furnishing services to it; (iii)
maintain its books, records, resolutions and agreements as official records;
(iv) conduct its business in its own name and through its own authorized
officers and agents; (v) prepare and maintain its financial statements,
accounting records and other limited liability company or corporation documents
separate from those of any other Person (except for inclusion of Borrower in
consolidated financial statements of Arden REIT); (vi) pay its own liabilities
out of its own funds and other assets; (vii) observe all limited liability
company formalities necessary to maintain its identity as an entity separate and
distinct from Arden REIT, Arden OP and all other Affiliates; (viii) participate
in the fair and reasonable allocation of any and all overhead expenses and other
common expenses for facilities, goods or services provided to multiple entities;
(ix) use its own stationery, invoices and checks (except when acting in a
representative capacity); (x) hold and identify itself as a separate and
distinct entity under its own name and not as a division or part of any other
Person (except for inclusion of Borrower in consolidated financial statements of
Arden REIT); (xi) comply, with the provisions of its certificate of formation
and LLC Agreement, and the laws of its jurisdiction of organization relating to
limited liability companies; (xii) at all times continue to be, adequately
capitalized in light of the nature of its business; and (xiii) hold its assets
in its own name. Borrower shall comply with all of the assumptions set forth in
the Substantive Non-Consolidation Opinion delivered by Borrower's counsel at
Closing.
5.11. CASH MANAGEMENT
Borrower will comply with, and will direct the Manager to comply
with, the provisions of SCHEDULE 5.11 hereto, which shall govern the collection
and application of Operating Income, Awards, and Insurance Proceeds and the
administration of the TI Reserve Account, the Cash Collateral Account, and the
Lockbox Account. Lender agrees that it shall administer the Cash Collateral
Account, the TI Reserve Account, and the Lockbox Account in accordance with the
provisions of SCHEDULE 5.11 hereto.
5.12. INDEPENDENT MANAGER
Borrower shall have an Independent Manager acceptable to Lender
at all times, or if the Independent Manager has resigned or otherwise is no
longer the Special Member of Borrower, Borrower shall not take any action which
may not be taken pursuant to the organizational documents of Borrower without
the consent of the Independent Manager, until such new Independent Manager shall
have been appointed as Independent Manager of Borrower and admitted to Borrower
as the Special Member.
5.13. TI RESERVE REQUIREMENT
(a) If, at any time, the amount on deposit in the TI Reserve
Account is less than the TI Reserve Requirement, the Excess Cash Flow for each
Accounting Period shall be deposited into the TI Reserve Account until the
amount on deposit in the TI Reserve Account equals the TI Reserve Requirement
(provided, that following the occurrence of a Lockbox Event, any deficiency in
the TI Reserve Account shall be paid pursuant to Section 4.4 of the
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Cash Management Procedures).
(b) Borrower shall not make any distributions to its Members at
any time that the amount on deposit in the TI Reserve Account is less than the
TI Reserve Requirement.
5.14. REPAIR EXPENDITURES
Not later than June 8 1999, Borrower shall have expended for
repairs at each Mortgaged Property in at least the amount set forth next to the
name of each Mortgaged Property on SCHEDULE 5.14 hereto; provided, in the event
for any of the Mortgaged Properties Borrower shall have failed to expend at
least the amount for such Mortgaged Property set forth on SCHEDULE 5.14 on or
before June 8, 1999, Borrower, if then requested by Lender, shall deposit any
deficiency with Lender. Lender shall establish an account into which any such
deficiencies shall be deposited; such account shall be an Eligible Account and
shall otherwise be similar to Accounts established pursuant to the Cash
Management Procedures; such account shall be in the name of Lender, under the
sole dominion and control of Lender and shall be pledged to Lender as additional
security for the obligations of Borrower under the Loan Documents. The amount
deposited by Borrower in such account for a particular Mortgaged Property shall
be released to Borrower upon presentation by Borrower to Lender of evidence that
Borrower has expended at least the amount of the deficiency for repairs at such
Mortgaged Property (which amount shall be released only so long as no Event of
Default shall have occurred and be continuing).
6. NEGATIVE COVENANTS
Borrower agrees that, so long as this Agreement shall remain in
effect, or so long as there exists any principal, interest or Yield Maintenance
Payment due or outstanding under the Mortgage Note, or any other unpaid charges
or amounts under this Agreement or under any other Loan Document, then:
6.1. LIMITATION ON INDEBTEDNESS
Borrower shall not incur, create or assume any Indebtedness of
any kind, provided that Borrower may incur, create or assume any Permitted Debt.
6.2. LIMITATION ON LIENS
Borrower shall not create, assume or suffer to exist, any Lien of
any kind, upon any of its properties, assets or Collateral, whether now owned or
hereafter acquired, except Permitted Liens.
In the event Borrower contests the payment of a tax, assessment
or other governmental charge or contests a landlords', mechanics',
materialmen's, warehousemen's, carriers', or other like Lien, Borrower, prior to
the commencement of such contest and prior to the date such payment would
otherwise be due and payable, shall deposit with Lender (or, following the
assignment contemplated by SECTION 9.1 hereof, deposit with the Servicer) an
amount equal to one hundred twenty-five percent (125%) of the amount of the
contested
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payment, to be held in a segregated subaccount of the Cash Collateral Account;
provided, however, Borrower shall not be required to make such a deposit so long
as the aggregate of all such Liens that Borrower is contesting without deposit
is less than Fifty Thousand Dollars ($50,000). Upon the conclusion of such
contest and upon written request by Borrower accompanied by supporting
documentation, Lender (or the Servicer) shall disburse from the deposit made by
Borrower with Lender (or the Servicer) any amounts required to be paid by
Borrower and shall remit the excess to Borrower. Notwithstanding the foregoing,
Lender (or the Servicer) may pay over to the appropriate Person any or all of
the funds on deposit with Lender (or the Servicer) when, in Lender's (or the
Servicer's) reasonable judgment, the entitlement of such Person to such funds is
firmly established or if necessary to avoid the foreclosure of a Lien that
secures the contested payment.
6.3. MERGER OR CONSOLIDATION; PERMITTED REORGANIZATION
Borrower shall not be a party to any merger or consolidation.
6.4. SINGLE PURPOSE
Borrower shall not engage in any business or operate for any
purpose other than as set forth in the LLC Agreement as in effect on the date
hereof and shall not have or create any subsidiaries. Borrower will not: (i)
seek or consent to any dissolution, winding up, liquidation, consolidation,
merger or sale of all or substantially all of its assets; (ii) fail to correct
any known misunderstanding regarding its separate identity; (iii) commingle its
funds or other assets with those of any other Person; (iv) assume or guarantee
or become obligated for the debts of any other Person or hold out its credit as
being available to satisfy the obligations of any other Person (other than as
permitted by the Loan Documents); (v) acquire obligations or securities of its
members; (vi) pledge any of its assets for the benefit of any other Person other
than Lender (except as permitted by the Loan Documents); (vii) make any loans to
any other Person; (viii) identify its members or any of its Affiliates as a
division or part of it (except for inclusion of the Borrower in consolidated
financial statements of Arden REIT); (ix) engage (either as transferor or
transferee) in any material transaction with any Affiliate other than for fair
value and on terms similar to those obtainable in arms-length transactions with
unaffiliated parties, or engage in any transaction with any Affiliate involving
any intent to hinder, delay or defraud any entity; (x) engage in any business
activity or operate for any purpose other than as stated in Section X of its LLC
Agreement as in effect on the date hereof or (xi) without the consent of all its
members and managers including the consent of an Independent Manager, file a
bankruptcy or insolvency petition or otherwise institute bankruptcy proceedings.
Borrower will not acquire any assets not related to the business and operation
of the Mortgaged Properties.
6.5. AMENDMENTS TO AGREEMENTS
6.5.1.
Borrower shall not, without the consent of Lender, (i) amend,
modify or alter the terms of the LLC Agreement, (ii) admit any additional
members, (iii) cancel, release, terminate or surrender the Management Agreement,
or permit any cancellation, release, termination or surrender of the Management
Agreement or (iv) amend, modify or alter the terms of the
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Management Agreement in any material respect; provided that Borrower shall be
entitled to cancel, release, terminate, surrender, amend, modify or alter the
Management Agreement in connection with the replacement of the Manager if,
before the date on which the Manager ceases to be the Manager of any Mortgaged
Property, (a) Borrower causes such Mortgaged Property to come under management
by a third party property manager in accordance with the provisions of clauses
(i), (ii)(y), (iii), (iv) and (v) of SECTION 5.3.2 above, (b) each of the Rating
Agencies delivers to the Lender a Rating Comfort Letter with respect thereto.
6.5.2.
[INTENTIONALLY DELETED]
6.6. DISTRIBUTIONS
Borrower shall make no distributions of cash or other assets to
the Members if an Event of Default has occurred and is continuing.
6.7. PERMITTED TRANSFERS
Borrower shall not transfer, pledge, hypothecate or assign any of
the Mortgaged Properties except (a) to Lender or (b) in connection with the
simultaneous Release of such Mortgaged Property pursuant to SECTION 2.7, SECTION
2.8, SECTION 2.9, SECTION 2.10 or SECTION 11 hereof.
7. EVENTS OF DEFAULT
7.1. DEFAULT; AN EVENT OF DEFAULT
The occurrence of any of the following events beyond any
applicable notice and cure period set forth in this SECTION 7.1 shall be an
"EVENT OF DEFAULT" hereunder (and the occurrence of any of the following which,
with the giving of notice or the passage of time, or both, would become an Event
of Default shall, prior to the giving of such notice or the passage of such
time, be a "DEFAULT" hereunder).
7.1.1.
Borrower shall fail to pay, when due, any principal or interest
on the Mortgage Note or any Yield Maintenance Payment or Defeasance Deposit that
may be due.
7.1.2.
Borrower shall fail to pay, when due, any other amount due under
or pursuant to the Mortgage Note, this Agreement, or any of the other Loan
Documents (other than principal, interest, and any Yield Maintenance Payments or
Defeasance Deposits).
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7.1.3.
Borrower shall fail to perform or observe in any material and
adverse respect any of the covenants and agreements of Borrower set forth in
this Agreement, or any representation and warranty made by Borrower in this
Agreement or in any of the other Loan Documents shall fail to have been true in
any material and adverse respect when made and, in either case, such failure
shall continue uncured for a period of more than (i) ten (10) days with respect
to any failure or breach of covenant relating to the payment of taxes or the
maintenance of insurance, or (ii) with respect to all other such failures or
breaches, thirty (30) days following Borrower's receipt of written notice
thereof from Lender; provided that with respect to clause (ii) above, it shall
not be an Event of Default hereunder if (a) such failure is curable but is not
reasonably capable of being cured within such thirty (30)-day period and
Borrower shall have promptly commenced to cure such failure (including by
consummation of a sale of the affected Mortgaged Properties and the payment of
the applicable Release Price, Defeasance Deposit and Yield Maintenance Payment,
if any) and thereafter shall diligently pursue such cure to completion, but in
no event later than ninety (90) days after the date on which Borrower received
such written notice from Lender.
7.1.4.
The Manager shall cease to be Manager of all of the Mortgaged
Properties or the Management Agreement shall terminate with respect to one or
more Mortgaged Properties, unless, before the date on which the Manager ceases
to be the Manager of any such Mortgaged Property, or the Management Agreement
terminates with respect to any such Mortgaged Property, (a) Borrower causes such
Mortgaged Property to come under management by a third party property manager in
accordance with clauses (i), (ii)(y), (iii), (iv) and (v) of SECTION 5.3.2,
hereof, and (b) if the Securitization has occurred, each of the Rating Agencies
delivers to Lender a Rating Comfort Letter with respect thereto.
7.1.5.
Borrower shall default in its payment of any Indebtedness with an
aggregate principal amount in excess of $2,000,000.
7.1.6.
If at any one time there shall be any final nonappealable
judgment or judgments rendered by any court or Governmental Authority not
covered by insurance aggregating in excess of $5,000,000 against Borrower, which
shall not have been satisfied, fully stayed or bonded within sixty (60) days
after the entry thereof.
7.1.7.
Either of the following shall occur with respect to Borrower:
(a) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating Borrower as
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of Borrower under any Bankruptcy Law, and
such decree or order shall have continued
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undischarged and unstayed for a period of sixty (60) consecutive
days; or a decree, judgment or order of a court of competent
jurisdiction appointing a receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency for Borrower, or any
substantial part of the property of Borrower, or for the winding
up or liquidation of the affairs of Borrower, and such decree,
judgment, or order shall have remained in force undischarged and
unstayed for a period of sixty (60) days; or
(b) Borrower shall institute proceedings to be adjudicated
a voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under any Bankruptcy
Law, or shall consent to the filing of any such petition, or
shall consent to the appointment of a custodian, receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency of
it or any substantial part of its assets or property, or shall
make a general assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they
become due, or shall, within the meaning of any Bankruptcy Law,
become insolvent, fail generally to pay its debts as they become
due, or shall, within the meaning of any Bankruptcy Law, become
insolvent, fail generally to pay its debts as they become due, or
take any corporate action in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing.
7.1.8.
Unless Borrower causes all of the Mortgaged Properties to come
under management by a third party manager in accordance with clauses (i),
(ii)(y), (iii), (iv) and (v) of SECTION 5.3.2 hereof, either of the following
shall occur with respect to the Manager:
(a) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating the Manager as
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Manager under any Bankruptcy Law,
and such decree or order shall have continued undischarged and
unstayed for a period of sixty (60) consecutive days; or a
decree, judgment or order of a court of competent jurisdiction
appointing a receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency for the Manager, or any substantial part
of the property of the Manager, or for the winding up or
liquidation of the affairs of the Manager shall have been
entered, and such decree, judgment, or order shall have remained
in force undischarged and unstayed for a period of sixty (60)
days; or
(b) the Manager shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing
of a bankruptcy proceeding against it, or shall file a petition
or answer or consent seeking reorganization under any Bankruptcy
Law, or shall consent to the filing of any such petition, or
shall consent to the appointment of a custodian, receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency of
it or any substantial part of its assets or property, or shall
make a general assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they
become due, or
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shall, within the meaning of any Bankruptcy Law, become
insolvent, fail generally to pay its debts as they become due, or
take any corporate action in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing.
7.1.9.
An Event of Default shall occur under any other Loan Document.
7.1.10.
If a Securitization has not yet occurred, Borrower shall default
in a material respect under the Cooperation Agreement after the giving of any
required notice and/or the expiration of any required cure period.
7.1.11.
The Special Member shall cease to be a member of Borrower or
Borrower shall fail to have at least one member who is an Independent Manager,
other than as a result of the resignation or removal of an Independent Manager,
so long as Borrower is then diligently searching for a new Independent Manager.
7.1.12.
Borrower acquires any assets not related to the business and
operation of the Mortgaged Properties (other than a direct or indirect interest
in a residual class certificate issued pursuant to the Securitization).
7.1.13. [INTENTIONALLY DELETED]
7.1.14.
Following the occurrence of a Lockbox Event, the willful failure
of Borrower to instruct tenants of the Mortgaged Properties to make payments of
Rents into the Lockbox Account or the failure of Borrower or Manager to deposit
payments of Rents received by Borrower or Manager into the Lockbox Account
promptly upon receipt thereof.
7.1.15.
In the event Borrower shall fail to perform or observe any of the
covenants set forth in SECTION 5.10 or SECTION 6.4 hereof.
7.2. REMEDIES
If an Event of Default shall have occurred and be continuing,
Lender shall have the right, in its sole discretion, by written notice to
Borrower (except upon the occurrence of an Event of Default under SECTION 7.1.7
affecting Borrower, in which case all principal and accrued interest thereon
will be immediately due and payable on the Mortgage Note without any declaration
or other act on the part of Lender) to take one or more of the following
actions:
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7.2.1.
To declare the principal of and all amounts accrued but unpaid
under the Mortgage Note, this Agreement and the other Loan Documents, together
with a Yield Maintenance Payment calculated in accordance with SECTION 2.11
hereof, to be immediately due and payable, and such amounts shall thereupon
become immediately due and payable, without presentment, demand, protest or
notice of any kind, other than any notice specifically required by this SECTION
7.2, all of which are hereby expressly waived by Borrower.
7.2.2.
Pursue such rights and remedies against Borrower, or otherwise,
as are provided under and pursuant to this Agreement, the Mortgage or any of the
other Loan Documents and as may be available to the Lender at law or in equity.
7.2.3.
If the Event of Default involves Borrower's failure to pay any
tax, assessment, encumbrance or other imposition binding on Borrower or any of
the Collateral or to perform its obligation to furnish insurance hereunder, or
to perform or observe any other covenant, condition or term in any Loan Document
or in the Management Agreement, Lender may, at its option, without waiving or
affecting any of its other rights or remedies hereunder, pay, perform or observe
the same, and, in connection therewith, Lender shall be entitled to rely on any
representations and statements of the Manager under the Management Agreement in
regard to alleged breaches or violations thereof, and all payments made or costs
or expenses incurred by Lender in connection therewith shall be repaid by
Borrower to Lender within fifteen (15) days after demand therefor, together with
interest at the Default Interest Rate, and shall be added to and become a part
of the Indebtedness secured by the Mortgage and other Security Documents. Lender
is hereby empowered to enter and to authorize others to enter upon any Land and
all Improvements located on any Land for the purpose of performing or observing
any such defaulted covenant, condition or term, without thereby becoming liable
to Borrower or any Person in possession holding under Borrower.
7.2.4.
Appoint as a matter of right, without notice, to the fullest
extent permitted under applicable law, a receiver for Borrower or for all or any
part of the Collateral, whether such receivership be incidental to a proposed
sale of the Collateral or otherwise. All disbursements made by the receiver and
the expenses of receivership, shall be added to and be a part of the principal
amount of the obligations secured by the Security Documents, and, whether or not
said principal sum, including such disbursements and expenses, exceeds the
indebtedness originally intended to be secured thereby, the entire amount of
said sum, including such disbursements and expenses, shall bear interest at the
Default Interest Rate, be secured by the Security Documents and shall be due and
payable within fifteen (15) days after demand therefor.
7.3. REMEDIES CUMULATIVE
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Each of the rights, powers, and remedies provided herein are
intended and are hereby deemed to be cumulative, concurrent and in addition to,
and not in limitation of, those rights, powers, and remedies provided elsewhere
hereunder or in any other Loan Document or now or hereafter existing at law or
in equity or by statute or otherwise. No waiver of any Event of Default in one
instance shall constitute a waiver of any other or any succeeding Event of
Default, except to the extent provided in such waiver.
7.4. DEFAULT INTEREST
In addition to the provisions of SECTION 2 hereof, if Borrower
shall fail to make payment when and as due of any amounts due hereunder (whether
at the stated date for payment, or earlier upon an acceleration hereunder),
Borrower shall pay, to the fullest extent permitted by applicable law, interest
to Lender on such past due amounts beginning on the date such payment becomes
past due at a per annum rate of interest (the "DEFAULT INTEREST RATE") equal to
the greater of (a) the Interest Rate in effect from time to time plus three
percentage points (3%) and (b) the Prime Rate plus two percentage points (2%).
Borrower acknowledges that its obligation to pay Default Interest may be
separated from the other obligations of Borrower hereunder, and may be held or
transferred separately from the other obligations of the Borrower hereunder.
7.5. DEFAULT INDEMNITY
Borrower hereby agrees to, and shall, indemnify and hold harmless
Lender against the reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and expenses) which it may sustain or incur as a
consequence of any Default or Event of Default hereunder and in the enforcement
of Lender's rights and remedies in connection therewith. Lender shall provide to
Borrower a satisfactory statement, signed by an officer of Lender and supported,
where applicable, by documentary evidence, explaining the amount of all such
costs or expenses. Any amounts that Borrower must pay to Lender under this
SECTION 7.5 shall bear interest at the Default Interest Rate and shall be due
fifteen (15) days after demand therefor accompanied by documentation sufficient
to establish the amount of Borrower's liability, and shall be added to and
become a part of the Indebtedness secured by the Mortgage and other Security
Documents.
8. INSURANCE
8.1. MAINTENANCE OF INSURANCE
Borrower shall maintain at all times with Qualified Insurance
Companies all policies of insurance required under the Mortgage, which policies
shall name Lender, as an additional insured or loss payee, as applicable, as
their interests may appear. Each policy of insurance required hereunder shall
require the insurer to give not less than thirty (30) days prior written notice
to Lender in the event of cancellation of such policy for any reason whatsoever
(ten (10) days in the case of non-payment of premium) and, with respect to
property insurance, shall provide that the interest of the additional insureds
or loss payees thereunder shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of any of the insured property or by the
occupation of the premises wherein such property is located for purposes
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more hazardous than are permitted by such policy. If Borrower fails to provide
and pay for such insurance, Lender may, at Borrower's expense, procure the same,
but shall not be required to do so, and any amounts reasonably expended by
Lender to do so, together with interest at the Default Interest Rate shall
become part of the debt secured by the Security Documents.
8.2 PAYMENT AND APPLICATION OF INSURANCE PROCEEDS
Insurance proceeds payable with respect to damage to or
destruction of any Mortgaged Property or the Improvements related thereto,
including damage by earthquake, if in effect, shall be applied in accordance
with the terms of the applicable Mortgage. All other insurance proceeds shall be
payable in accordance with the provisions of the applicable policy.
8.3. EARTHQUAKE INSURANCE
Borrower shall maintain at all times or cause to be maintained
for its benefit with a Qualified Insurance Company, a blanket policy of
insurance insuring all of the Mortgaged Properties against damage by earthquake
in an aggregate insured amount not less than $22,300,000 and having a deductible
of not more than five percent (5%) per unit of earthquake insurance subject to a
$100,000 minimum (a unit being defined as each individual building on each
Mortgaged Property). Such earthquake insurance shall otherwise comply with the
requirements of SECTION 1.7.3 of the Mortgage.
9. SECURITIZATION
9.1. SECURITIZATION
Borrower shall use commercially reasonable best efforts to
cooperate with Lender in its activities in connection with the sale of the Loan
as a whole loan or any securitization of the Loan (the "SECURITIZATION"),
including obtaining ratings by the Rating Agencies in accordance with the terms
hereof and in accordance with the Cooperation Agreement. The Securitization will
involve the issuance of rated single- or multi-class securities secured by or
evidencing ownership interests in the Loan Documents (the "CERTIFICATES").
Borrower acknowledges and agrees that, in connection with the Securitization,
(a) this Agreement, the Mortgage Note, the Security Documents and the other Loan
Documents may be assigned, pursuant to the assignment, to a trustee (the
"TRUSTEE"), as trustee under a pooling and servicing agreement (the "POOLING AND
SERVICING AGREEMENT") in form substantially similar to those commonly used in
rated commercial mortgage-backed securities offerings and (b) pursuant to the
Pooling and Servicing Agreement, a professional loan servicer of recognized
standing (the "SERVICER") would be appointed to service the Loan, this Agreement
and the Loan Documents as provided therein. The addresses of the Trustee and the
Servicer will be provided to Borrower in writing before the Securitization is
consummated. Upon such assignment, the Trustee shall for all purposes be the
sole Lender hereunder and the sole mortgagee or beneficiary under the Mortgage
(and all references herein to the "Lender" shall be deemed to refer to the
Trustee) and shall, together with the Servicer, among other things, (i) have the
sole and exclusive benefit of and the right and power to exercise, or to direct
the exercise of, all the rights and remedies of Lender hereunder and under the
Security Documents, including the right to inspect the Collateral, to receive
notices and financial
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information, to grant or withhold consents or approvals, to benefit from
indemnities, to receive, hold and apply proceeds or any other amount or property
provided by Borrower hereunder, and, upon the occurrence and during the
continuation of an Event of Default, to take any action required or permitted of
Lender with respect thereto, all in the Trustee's own name, and to exercise all
other rights and remedies of Lender hereunder and under the Security Documents,
and (ii) be bound by all the terms hereof which apply to Lender. Borrower hereby
acknowledges the foregoing and agrees to be bound to the Trustee, upon such
assignment, recognizing the Trustee as Lender hereunder as if the Trustee were
named in this Agreement as Lender, recognizing that the Servicer shall be
entitled to act on behalf of the Trustee and the Holders under and as provided
in the Pooling and Servicing Agreement and shall be entitled to and shall
receive all notices, financial and other information, agreements and other
documents to be delivered to Lender or the Trustee hereunder or under any of the
other Loan Documents and accepting and agreeing to all of the terms reasonably
set forth in the Pooling and Servicing Agreement and the exhibits thereto, all
of which shall be secured under the Security Documents. Upon such assignment,
Borrower's obligations to Lender specified in this Agreement shall be satisfied
by Borrower's tendering full and timely payment or performance thereof to the
Trustee or, if directed by the Trustee, to the Servicer. With respect to the
delivery of documents and other written material, the Trustee and the Servicer
shall have only the obligations expressly required of Lender herein or in the
other Loan Documents or of the Trustee or the Servicer in the Pooling and
Servicing Agreement. All rights and remedies of the Trustee as Lender hereunder,
including all indemnities running to Lender, shall also operate for the benefit
of the Servicer and the Holders, as provided in the Pooling and Servicing
Agreement, and shall be exercised by the Trustee and the Servicer in accordance
with and subject to the terms and conditions set forth in the Pooling and
Servicing Agreement. Borrower acknowledges and agrees that, until Borrower has
received notice from the Trustee to the contrary, and subject to the terms and
conditions set forth in the Pooling and Servicing Agreement to the contrary, all
deliveries and notifications to be made by Borrower to the Trustee, as Lender,
pursuant to this Agreement or any other Loan Document shall be made to the
Servicer only and not to the Trustee.
Borrower will cooperate with Lender to retain the Rating Agencies
to provide rating surveillance services on any Certificates issued in a
Securitization. Such rating surveillance shall be at the expense of Borrower.
Prior to the Securitization (or in the event the Securitization does not occur),
Lender may appoint a professional loan servicer of recognized standing to
service the Loan, this Agreement and the Loan Documents on terms and conditions
acceptable to Lender. The costs, fees and expenses of any such servicer shall be
paid by Lender.
9.2. NO ASSIGNMENT BY BORROWER
The rights and obligations of Borrower under this Agreement are
personal to Borrower and, accordingly, Borrower shall not assign this Agreement
or any other Loan Document or any other right, interest, or obligation of
Borrower hereunder or thereunder, either in whole or in part, to any Person
whatsoever.
9.3. METHOD OF PAYMENT
Following the assignment contemplated by SECTION 9.1 hereof,
Borrower shall
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make or cause to be made all payments under the Mortgage Note, and any other
payments required to be made by Borrower to or on behalf of Lender hereunder or
pursuant to any other Loan Document, to the Servicer by application of the
provisions of SCHEDULE 5.11 hereto or by wire transfer through the Federal
Reserve Bank of New York of immediately available funds in lawful tender of the
United States of America, in accordance with instructions provided by the
Servicer, which payments shall be held and applied by the Servicer in accordance
with the Pooling and Servicing Agreement.
10. ASSIGNMENT AND PARTICIPATION
Notwithstanding anything to the contrary set forth herein or in
any other Loan Document, Lender and any assignee of Lender shall have the right
at any time and from time to time to (a) assign (and thereafter, at any time and
from time to time, repurchase) all or any portion of its rights and obligations
with respect the Loan, including, without limitation, all or any portion of the
outstanding principal balance of the Loan and thereafter be released from its
rights and obligations as Lender in respect of such portion of the Loan (except
to the extent such portion of the Loan is repurchased by Lender or such
assignee), and (b) sell participations in the Loan. If requested by Lender,
Borrower shall execute and deliver a written acknowledgment acknowledging the
assignment of all or a portion of the Loan to an assignee.
11. SUBSTITUTION OF PROPERTIES
Subject to the terms and conditions set forth in this Section, at
any time following the commencement of the Defeasance Period, Borrower may
obtain a release of the Lien of the Mortgage (and the related Loan Documents) to
the extent it encumbers one or more Mortgaged Properties (a "SUBSTITUTED
PROPERTY") by substituting therefor one or more office properties acquired by
Borrower (individually, a "SUBSTITUTE PROPERTY" and collectively, the
"SUBSTITUTE PROPERTIES"), provided that (a) the Substitution Conditions are
satisfied with respect to the Substitute Properties, (b) no such substitution
may occur after the Anticipated Repayment Date, (c) such substitution shall not
be allowed more than two (2) times during the term of the Loan and (d) not more
than five (5) Mortgaged Properties may be released from the Lien of the Mortgage
(and the related Loan Documents) during the term of the Loan pursuant to this
SECTION 11. Any such substitution shall be subject, in each case, to the
satisfaction of the following conditions precedent (collectively, the
"SUBSTITUTION CONDITIONS"):
(i) Lender shall have received a copy of a deed conveying
all of Borrower's right, title and interest in and to
the Substituted Property or Substituted Properties then
being Released to an entity other than Borrower and a
letter from Borrower countersigned by the Title Company
acknowledging receipt of such deed or assignment and
assumption, as applicable, and agreeing to record such
deed or assignment and assumption, as applicable, in the
real estate records for the county in which the
Substituted Property is located or in the counties in
which the Substituted Properties are located;
(ii) Lender shall have received an appraisal of the
Substitute Property or
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Substitute Properties, as applicable, dated no more than
sixty (60) days prior to the substitution by an
appraiser acceptable to the Rating Agencies, indicating
an appraised value of the Substitute Property or
Substitute Properties, as applicable, that is equal to
or greater than the Release Price of the Substituted
Property or Substituted Properties, then being Released,
determined by Lender as of the Closing Date;
(iii) after giving effect to the substitution, the Debt
Service Coverage Ratio for the Mortgaged Properties
(including the Substitute Properties but excluding the
Substituted Properties) shall be at least equal to the
greater of (i) 2.22:1 (on or before April 16, 2003) or
1.81:1 (on or after April 17, 2003), and (ii) the Debt
Service Coverage Ratio for the Loan for all of the
Mortgaged Properties immediately preceding the
substitution;
(iv) the Net Operating Income for any Substitute Property
does not show a downward trend over the three (3) years
immediately prior to the date of substitution or, with
respect to a Substitute Property for which information
regarding the Net Operating Income of such Substitute
Property for the three (3) years immediately prior to
the date of substitution cannot be obtained by Borrower
after Borrower's exercise of diligent efforts, the Net
Operating Income shall not show a downward trend for
such period of time immediately prior to the date of
substitution as may be determined from the information
regarding such Net Operating Income available (which
period of time, in any event, shall not be less than one
(1) year);
The Net Operating Income for a Substitute Property shall
be deemed to show a downward trend, if the Net Operating
Income for the Substitute Property for each
Determination Period (as defined below) was less than
the Net Operating Income for the immediately preceding
Determination Period, commencing with the Determination
Period that commenced on the date that is three (3)
years prior to the first day of the calendar month in
which the substitution is to occur. A "Determination
Period" is a twelve (12) month period that commences on
a prior anniversary of the first day of the calendar
month in which the substitution is to occur and ends on
the last day of the calendar month (or prior anniversary
thereof) immediately preceding the month in which the
substitution is to occur;
(v) the Net Operating Income and Debt Service Coverage Ratio
(for the twelve (12) month period immediately preceding
the substitution) for the Substitute Property or
Substituted Properties, as applicable, is greater than
one hundred twenty-five percent (125%) of the Net
Operating Income and Debt Service Coverage Ratio (for
the twelve (12) month period immediately preceding the
substitution) for the Substituted Property or
Substituted Properties then being substituted. For
purposes of this clause (v), the Debt Service Coverage
Ratio with respect to a Substitute Property (or
Substitute Properties, as applicable) or
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a Substituted Property (or Substituted Properties, as
applicable) shall be calculated using the Net Operating
Income with respect to such Substitute Property (or
Substitute Properties, as applicable) or Substituted
Property, (or Substituted Properties, as applicable) and
the principal, if any, and interest due and payable on
the Mortgage Note allocable to the Release Price for the
Substitute Property or Substituted Property, as
applicable (or the aggregate Release Prices for the
Substitute Properties or Substituted Properties, as
applicable);
(vi) Lender shall have received a Rating Comfort Letter from
each Rating Agency with respect to the substitution;
(vii) no Default or Event of Default shall have occurred and
be continuing and Borrower shall be in compliance with
all terms and conditions set forth in this Agreement and
in each Loan Document on Borrower's part to be observed
or performed. Lender shall have received a certificate
from Borrower confirming the foregoing, stating that the
representations and warranties of Borrower contained in
this Agreement and the other Loan Documents are true and
correct in all material respects on and as if made on
the date of the substitution with respect to Borrower,
the Mortgaged Properties and each Substitute Property
and containing any other representations and warranties
with respect to Borrower, the Mortgaged Properties, each
Substitute Property and the Loan as the Rating Agencies
may require, such certificate to be in form and
substance satisfactory to the Rating Agencies;
(viii) Borrower shall have executed, acknowledged and delivered
to Lender (A) a Mortgage, an Assignment of Leases and
Rents and one or more UCC Financing Statements with
respect to each Substitute Property, together with a
letter from Borrower countersigned by the Title Company
acknowledging receipt of such Mortgage, Assignment of
Leases and Rents and UCC-1 Financing Statements and
agreeing to record or file, as applicable, such
Mortgage, Assignment of Leases and Rents and, if
applicable, one of the UCC-1 Financing Statements in the
real estate records for the county in which such
Substitute Property is located and agreeing to file one
of the UCC-1 Financing Statements in the office of the
Secretary of State of the State in which such Substitute
Property is located, so as to effectively create upon
such recording and filing valid and enforceable Liens
upon such Substitute Property, of the requisite
priority, in favor of Lender (or such other trustee as
may be desired under local law), subject only to
Permitted Encumbrances and Permitted Liens and (B) a
Security Agreement and an Environmental Indemnity
Agreement with respect to such Substitute Property. The
Mortgage, Assignment of Leases and Rents, UCC-1
Financing Statements, Security Agreement and
Environmental Indemnity Agreement shall be the same in
form and substance as the counterparts of such documents
executed and delivered on the Closing Date subject to
modifications reflecting such Substitute Property as a
Mortgaged Property that is the subject of such documents
and such modifications reflecting the laws of the state
in which such Substitute Property is located as shall be
recommended by the counsel admitted to practice in such
state and delivering the opinion
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as to the enforceability of such documents required
pursuant to clause (xv) below. Borrower shall also have
executed, acknowledged and delivered any amendments to
the Loan Documents required in connection with a
substitution and, where applicable, a letter from
Borrower countersigned by the Title Company agreeing to
record such amendments in the real estate records for
each county where the Mortgage was recorded. The
Mortgage encumbering the Substitute Property shall
secure all amounts evidenced by the Mortgage Note. The
amount of the Loan allocated to the Substitute Property
or Substitute Properties (such amount being hereinafter
referred to as the "Substitute Release Amount") shall
equal the Allocated Loan Amount of the Substitute
Property or Substituted Properties then being Released
(and, if applicable, equitably allocated among the
Substitute Properties);
(ix) Lender shall have received (A) any "tie-in" or similar
endorsement to each Title Insurance Policy insuring the
Lien of the existing Mortgage as of the date of the
substitution available with respect to the Title
Insurance Policy insuring the Lien of the Mortgage with
respect to each Substitute Property and (B) a Title
Insurance Policy (or a marked, signed and redated
commitment to issue such Title Insurance Policy)
insuring the Lien of the Mortgage encumbering each
Substitute Property, issued by the Title Company
insuring the Lien of the existing Mortgage and dated as
of the date of the substitution, with reinsurance and
direct access agreements that replace such agreements
issued in connection with the Title Insurance Policy
insuring the Lien of the Mortgage encumbering the
Substituted Property. The Title Insurance Policy issued
with respect to each Substitute Property shall (1)
provide coverage in the amount of the Loan Amount of the
"tie-in" or similar endorsement described above, (2)
insure Lender that the relevant Mortgage creates a valid
first lien on the Substitute Property encumbered
thereby, free and clear of all exceptions from coverage
other than Permitted Encumbrances (as modified by the
terms of any endorsements), (3) contain such
endorsements and affirmative coverages as are contained
in the Title Insurance Policies insuring the Liens of
the existing Mortgage, and (4) name Lender as the
insured. Lender also shall have received copies of paid
receipts showing that all premiums in respect of such
endorsements and Title Insurance Policies have been
paid;
(x) Lender shall have received a current title survey for
each Substitute Property, certified to the Title Company
and Lender and their successors and assigns, in the same
form and having the same content as the certification of
the Survey of the Substituted Property prepared by a
professional land surveyor licensed in the state in
which the Substitute Property is located and acceptable
to the Rating Agencies in accordance with the 1992
Minimum Standard Detail Requirements for ALTA/ACSM Land
Title Surveys. Such survey shall reflect the same legal
description contained in the Title Insurance Policy
relating to such Substitute Property and shall include,
among other things, a metes and bounds
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description of the real property comprising part of such
Substitute Property. The surveyor's seal shall be
affixed to each survey and each survey shall certify
that the surveyed property is not located in a "one
hundred year flood hazard area;"
(xi) Lender shall have received valid certificates of
insurance indicating that the requirements for the
policies of insurance required for an Mortgaged Property
hereunder have been satisfied with respect to the
Substitute Property and evidence of the payment of all
premiums payable for the existing policy period;
(xii) Lender shall have received a Phase I environmental
report and, if recommended under the Phase I
environmental report, a Phase II environmental report
(in each case prepared by an environmental consultant
acceptable to Lender), which conclude that the
Substitute Property does not contain any Hazardous
Materials (as defined in the Mortgage) and is not
subject to any risk of contamination from any off-site
Hazardous Materials;
(xiii) Borrower shall deliver or cause to be delivered to
Lender (A) updates certified by Borrower of all
organizational documentation related to Borrower and/or
the formation, structure, existence, good standing
and/or qualification to do business delivered to Lender
in connection with the closing of the Loan; (B) good
standing certificates, certificates of qualification to
do business in the jurisdiction in which the Substitute
Property is located (if required in such jurisdiction)
and (C) resolutions of Borrower authorizing the
substitution and any actions taken in connection with
such substitution;
(xiv) Lender shall have received the following opinions of
Borrower's counsel: (A) an opinion or opinions of
counsel admitted to practice under the laws of the state
in which the Substitute Property is located stating that
the Loan Documents delivered with respect to the
Substitute Property pursuant to clause (viii) above are
valid and enforceable in accordance with their terms,
subject to the laws applicable to creditors' rights and
equitable principles, and that Borrower is qualified to
do business and in good standing under the laws of the
jurisdiction where the Substitute Property is located;
(B) an opinion of counsel acceptable to the Rating
Agencies stating that the Loan Documents delivered with
respect to the Substitute Property pursuant to clause
(viii) above were duly authorized, executed and
delivered by Borrower and that the execution and
delivery of such Loan Documents and the performance by
Borrower of its obligations thereunder will not cause a
breach of, or a default under, any agreement, document
or instrument to which Borrower is a party or to which
it or its properties are bound; (C) an opinion of
counsel acceptable to the Rating Agencies stating that
subjecting the Substitute Property to the Lien of the
related Mortgage and the execution and delivery of the
related Loan Documents does not and will not affect or
impair the ability of Lender to enforce its remedies
under all of the Loan Documents or to
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realize the benefits of the cross-collateralization
provided for thereunder; (D) an update of the
Substantive Non-Consolidation Opinion indicating that
the substitution does not affect the opinions set forth
therein; (E) an opinion of counsel acceptable to the
Rating Agencies stating that the substitution and the
related transactions do not constitute a fraudulent
conveyance under applicable bankruptcy and insolvency
laws or other evidence pertaining thereto acceptable to
the Rating Agencies and (F) an opinion of counsel
acceptable to the Rating Agencies stating that the
substitution would not adversely affect the status of
the entity holding the interest in the Mortgage Note as
a REMIC (assuming for such purpose that such entity
otherwise qualifies as a REMIC) and that such
substitution will not result in a deemed exchange of the
Certificates pursuant to Section 1001 of the Code;
(xv) all real estate taxes due and payable with respect to
the Substitute Property shall have been paid and
Borrower shall have delivered evidence thereof to
Lender;
(xvi) Borrower shall have paid or reimbursed Lender for all
costs and expenses incurred by Lender (including,
without limitation, reasonable attorneys fees and
disbursements) in connection with the substitution and
Borrower shall have paid all recording charges, filing
fees, taxes or other expenses (including, without
limitation, mortgage and intangible taxes and
documentary stamp taxes) payable in connection with the
substitution. Borrower shall have paid all costs and
expenses of the Rating Agencies incurred in connection
with the substitution;
(xvii) Lender shall have received annual operating statements
and occupancy statements for each Substitute Property
for the most recently completed Fiscal Year and an
operating statement for each Substituted Property for
all Accounting Periods and Accounting Quarters for which
such statements have been prepared, each certified to
Lender as being true and correct and certificate from
Borrower certifying that there has been no adverse
change in the financial condition of such Substitute
Property since the date of such operating statements;
(xviii) Borrower shall have delivered to Lender estoppel
certificates from (i) each tenant of each Substitute
Property that accounted more than five percent (5%) of
the gross rents from the Substitute Property during the
most recently completed four full Accounting Quarters
("Major Tenants"), and (ii) tenants of the Substitute
Property that accounted, in the aggregate, for at least
seventy-five percent (75%) of the gross rents from the
Substitute Property for the most recently completed for
full accounting quarters. All such estoppel certificates
shall be in the form attached hereto as EXHIBIT C and
shall indicate that (1) the subject lease is a valid and
binding obligation of the tenant thereunder, (2) there
are no defaults under such lease on the part of the
landlord or tenant thereunder, (3) the tenant thereunder
has no defense or offset to the payment of rent under
such leases, (4) no rent under such lease has been paid
more than one
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(1) month in advance, (5) the tenant thereunder has no
option or right of first refusal under such lease to
purchase all or any portion of the Substitute Property
and (6) all tenant improvement work required under such
lease has been completed and the tenant under such lease
is in actual occupancy of its leased premises. If an
estoppel certificate indicates that all tenant
improvement work required under the subject lease has
not yet been completed, Borrower shall, if required by
the Rating Agencies, deliver to Lender financial
statements indicating that Borrower has adequate funds
to pay all costs related to such tenant improvement work
as required under such lease;
(xix) Lender shall have receive copies of all tenant leases
and any ground leases affecting the Substitute Property
certified by Borrower as being true and correct. Lender
shall have received a current rent roll of the
Substitute Property certified by Borrower as being true
and correct;
(xx) Lender shall have received subordination, nondisturbance
and attornment agreements in the form attached hereto as
EXHIBIT D with respect to each of the Material Leases
affecting the Substitute Property other than such Leases
that are, by their terms, subordinate to the Mortgage
with respect to the Substitute Property;
(xxi) Lender shall have received (A) an endorsement to the
Title Insurance Policy insuring the Lien of the Mortgage
encumbering the Substitute Property insuring that the
Substitute Property constitutes a separate tax lot or,
if such an endorsement is not available in the state in
which the Substitute Property is located, a letter from
the Title Company issuing such Title Insurance Policy
stating that the Substitute Policy constitutes a
separate tax lot or (B) a letter from the appropriate
taxing authority stating that the Substitute Property
constitutes a separate tax lot;
(xxii) Lender shall have received a physical conditions report
(substantially similar in form and scope to the physical
conditions report delivered with respect to the
Substituted Property in connection with the Closing)
with respect to the Substitute Property stating that the
Substitute Property and its use comply in all material
respects with all applicable Laws (including, without
limitation, zoning, subdivision and building laws) and
that the Substitute Property is in good condition and
repair and free of material damage or waste. If
compliance with Laws is not addressed by the physical
conditions report, such compliance shall be confirmed by
delivery to Lender of a certificate of an architect
licensed in the state in which the Substitute Property
is located, a letter from the municipality in which such
Property is located, a certificate of a surveyor that is
licensed in the state in which the Substitute Property
is located (with respect to zoning and subdivision
laws), an ALTA 3.1 zoning endorsement to the Title
Insurance Policy delivered pursuant to clause (ix) above
(with respect to zoning laws) or a subdivision
endorsement to the Title Insurance Policy delivered
pursuant to clause (ix) above (with respect to
subdivision laws). If the physical conditions report
recommends that any
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repairs be made with respect to the Substitute Property,
such physical conditions report shall include an
estimate of the cost of such recommended repairs and
Borrower shall deposit with Lender an amount equal to
one hundred fifty percent (150%) of such estimated cost,
which deposit shall constitute additional security for
the Loan and shall be released to Borrower upon the
delivery to Lender of (A) an update to such physical
conditions report or a letter from the engineer that
prepared such physical conditions report indicating that
the recommended repairs were completed in good and
workmanlike manner and (B) paid receipts indicating that
the costs of all such repairs have been paid;
(xxiii) Lender shall have received a certified copy of an
amendment to the Management Agreement reflecting the
deletion of the Substituted Property and the addition of
the Substitute Property as a property managed pursuant
thereto and Manager shall have executed and delivered to
Lender an amendment to the Collateral Assignment of
Management Agreement reflecting such amendment to the
Management Agreement;
(xxiv) Lender shall have received such other and further
approvals, opinions, documents and information in
connection with the substitution as the Rating Agencies
have requested;
(xxv) Lender shall have received copies of all contracts and
agreements relating to the leasing and operation of the
Substitute Property (other than the Management
Agreement) together with a certification of Borrower
attached to each such contract or agreement certifying
that the attached copy is a true and correct copy of
such contract or agreement and all amendments thereto;
(xxvi) Borrower shall submit to Lender, not less than thirty
(30) days prior to the date of such substitution, a
release of Lien (and related Loan Documents) for the
Substituted Property for execution by Lender. Such
release shall be in a form appropriate for the
jurisdiction in which the Substituted Property is
located and satisfactory to Lender in its sole
discretion. Borrower shall deliver an Officer's
Certificate certifying that the requirements set forth
in this SECTION 11 have been satisfied.
Upon the satisfaction of the foregoing conditions precedent, Lender will release
its Lien from the Substituted Property or Substituted Properties, as applicable,
to be released and the Substitute Property or Substitute Properties, as
applicable, shall be deemed to be an Mortgaged Property for purposes of this
Agreement and the Allocated Loan Amount with respect to such Substituted
Property or Substituted Properties, as applicable, shall be deemed to be the
Allocated Loan Amount with respect to such Substitute Property(or the aggregate
Allocated Loan Amounts for such Substitute Properties, as applicable) for all
purposes hereunder (and, if there is more than one Substitute Properties, the
Allocated Loan Amounts for such Substitute Properties shall be equitably
determined).
12. MISCELLANEOUS
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12.1. LIMITATION ON LIABILITY
Notwithstanding any contrary provision in any of the Loan
Documents, it is hereby expressly agreed that, except as otherwise provided in
this SECTION 12.1 or in any Section of any Loan Document that is substantially
similar to this SECTION 12.1, there shall be no recourse to the assets of
Borrower or any of its Members (other than against the Collateral and any other
property given as security for the payment of the Mortgage Note) for (i) the
payment of principal, interest, Defeasance Deposits, Yield Maintenance Payments
or other charges under this Agreement or the Mortgage Note or for any other
amount that is or may become due and owing to Lender by Borrower under this
Agreement or any of the other Loan Documents or (ii) the performance or
discharge of any covenant or undertaking hereunder or under the other Loan
Documents, and in the event of any Event of Default hereunder or thereunder,
Lender agrees to proceed solely against the Collateral and any other property
given as security for payment of the Mortgage Note, and Lender shall not seek or
claim recourse against Borrower or either Member (other than against the
Collateral and any other property given as security for payment of the Mortgage
Note) for any deficiency or for any personal judgment after a foreclosure of the
lien of the Mortgage or other Security Documents or for the performance or
discharge of any covenants or undertakings of Borrower hereunder or under any of
the other Loan Documents (except that Borrower may be made a party to a
proceeding to the extent legally necessary for the conduct of a foreclosure or
the exercise of other similar remedies under the Mortgage or other Security
Documents). Notwithstanding the foregoing, nothing contained in this SECTION
12.1 shall relieve Borrower or either Member of any personal liability for any
loss, cost, expense, damage or liability arising or resulting from (A) any
breach of any representation or warranty made in this Agreement that was
materially incorrect when made and that was made with fraudulent intent, (B) any
amount paid or distributed to the Members, the Manager or any Affiliate of any
of them in violation of the provisions of the Loan Documents, (C) fraud or
breach of trust, including misapplication of Loan proceeds or any Insurance
Proceeds or Awards or other sums that are part of the Collateral that may come
into the possession or control of Borrower or either Member or any Affiliate of
any of them, (D) liability of such Person under the Environmental Indemnity
Agreement or (E) following the occurrence of a Lockbox Event, the willful
failure of Borrower to instruct tenants of the Mortgaged Properties to make
payments of Rents into the Lockbox Account or the failure of Borrower or Manager
to deposit payments of Rents received by Borrower or Manager into the Lockbox
Account promptly upon receipt thereof. It is hereby expressly agreed that no
director, officer, shareholder, partner, member or employee of Borrower or a
Member, nor the legal or personal representative, successor or assign of any of
the foregoing, nor any other principal of Borrower or either Member, whether
disclosed or undisclosed, shall have any personal liability under this Agreement
or any of the other Loan Documents, except as personal liability may be
specifically imposed upon a signatory to any Loan Document. It is the intention
of the parties hereto that this SECTION 12.1 shall govern every other provision
of the Loan Documents and that the absence of explicit reference to this SECTION
12.1 in any provision of the Loan Documents or the absence of any Section
similar to this SECTION 12.1 in any Loan Document shall not be construed to deny
the application of this SECTION 12.1 to such provision, notwithstanding the
presence of explicit reference to this SECTION 12.1 in other provisions of the
Loan Documents.
12.2. ENTIRE AGREEMENT, AMENDMENTS
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This Agreement, including the Schedules and Exhibits hereto and
the other instruments and documents referred to herein or delivered pursuant
hereto, contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written agreements,
commitments or understandings with respect to such matters. No amendment,
modification or discharge of this Agreement shall be valid or binding unless set
forth in writing and duly executed by both parties.
12.3. NOTICES
All notices, requests and demands to or upon the respective
parties hereto shall be in writing (except as is otherwise specifically provided
in this Agreement) and shall be deemed to have been duly given or made when
received (or when delivery thereof is refused by the intended recipient) if
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid, or sent by facsimile transmission, with confirmation of receipt
or delivery, or sent by nationally recognized overnight courier, delivery
charges prepaid or delivered by hand, in each case addressed or directed as
follows (or to such other address or facsimile transmission number as may be
hereafter designated in writing by the respective parties hereto):
IF TO BORROWER: Arden Realty Finance III, L.L.C.
11601 Wilshire Boulevard
Suite 401
Los Angeles, California 90025
Attention: Diana M. Laing
IF TO LENDER: Lehman Brothers Realty Corporation
Three World Financial Center
200 Vesey Street
New York, New York 10285
Attention: Commercial Mortgage Loan
Surveillance
Fax: (212) 528-6659
12.4. NO WAIVER; CUMULATIVE REMEDIES
No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Agreement or under any other instrument
or document given in connection with or pursuant to this Agreement shall impair
any such right, power or privilege or be construed as a waiver of any default or
any acquiescence therein. No single or partial exercise of any such right, power
or privilege shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or privilege. No waiver
shall be valid against any party hereto unless made in writing and signed by the
party against whom enforcement of such waiver is sought and then only to the
extent expressly specified therein. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
12.5. WAIVER OF JURY TRIAL
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Each of the parties hereto (i) covenants and agrees not to elect
trial by jury of any issue triable of right by a jury and (ii) waives any rights
to trial by jury to the full extent that any such right shall now or hereafter
exist. This waiver of right to trial by jury is separately given, knowingly and
voluntarily, by each party hereto, and this waiver is intended to encompass
individually each instance and each issue as to which the right to a jury trial
would otherwise accrue. The parties are hereby authorized to submit this
Agreement to any court having jurisdiction over the subject matter so as to
serve as conclusive evidence of the other party's herein contained waiver of the
right to jury trial. Further, each party hereto certifies that no representative
of the other party (including such other party's counsel) has represented,
expressly or otherwise, to that party, that the other party will not seek to
enforce this waiver by the such certifying party of the right to a jury trial.
12.6. GOVERNING LAW; CONSENT TO JURISDICTION
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (but not including the choice of law
rules thereof). In the event of any litigation arising out of this Loan
Agreement, Borrower agrees that the substantive law of the State of New York
shall apply. Borrower hereby consents to jurisdiction within the State of New
York for purposes of such litigation and agrees that service of process may be
made, and personal jurisdiction over Borrower obtained, by serving a copy of the
summons and complaint upon Borrower, at the notice address set forth herein, in
accordance with the applicable laws of the State of New York. Nothing herein
contained, however, shall prevent any owner or holder of the Mortgage Note from
bringing any action or exercising any right against any security or against
Borrower, personally, or against any property of Borrower, within any other
jurisdiction or state. Initiating such proceeding or taking such action in any
other jurisdiction or state shall not, however, constitute a waiver of the
agreement contained herein that the laws of the State of New York shall govern
the rights and obligations of the parties hereunder.
12.7. PAYMENT OF EXPENSES
12.7.1.
Borrower shall pay all expenses incurred by Lender in connection
with this Agreement and in the preparation for, and consummation of, the
transactions provided for herein and in connection with the enforcement hereof,
and Borrower shall pay all costs of conveyances, initial Servicer fee and
Trustee fee, initial rating fees and ongoing activity of any special Servicer
incurred as a result of an Event of Default, bank charges relating to the
operation of the Operating Account, the Lockbox Account, the Cash Collateral
Account and any other Account, after the Securitization has occurred, its
proportionate share of initial and annual surveillance fees, if any, of the
Rating Agencies, any processing fees, reasonable attorney's fees and
disbursements, auditor's fees, costs of appraisals, environmental reports, and
engineering reports, all title insurance premiums, all notary fees, all filing
and application fees to any federal, state or local agencies, all sales, stamp,
documentary, transfer, and other taxes and fees applicable to the transactions
contemplated by this Agreement and the instruments and documents called for
hereunder and all other costs and charges incurred by the parties in connection
with such transactions. In addition, the Borrower shall reimburse Lender for any
expenses incurred by the Lender to the extent provided in SECTION 4.8 hereof.
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12.7.2.
Except as provided in SECTION 12.7.1, if the Securitization
occurs, the Servicer Fee (as defined in the Pooling and Servicing Agreement) and
the Trustee Fee (as defined in the Pooling and Servicing Agreement) and any
other amounts required to be paid to the Servicer or the Trustee under the
Pooling and Servicing Agreement in reimbursement of expenses of the Servicer or
the Trustee shall be paid by Lender or the Trust Fund (the "TRUST FUND") created
under the Pooling and Servicing Agreement.
12.8. SEVERABILITY
In the event that any term or provision of this Agreement or of
any other Loan Document or the application thereof to any Person or circumstance
shall, to any extent, be held to be invalid or unenforceable, the remainder of
such term or provision or the application thereof to Persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and shall be enforced to the fullest extent permitted by law.
12.9. GENDER, ETC.
Whenever used herein and where the context so requires, the
singular shall include the plural, the plural shall include the singular, and
the use of the masculine, feminine or neuter gender shall include all genders;
and the word "including" shall mean "including, without limitation."
12.10. HEADINGS
The Article, Section and Subsection headings of this Agreement
are for convenience of reference only, and shall not limit or otherwise affect
any of the terms hereof.
12.11. COUNTERPARTS; FACSIMILES
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
to be an original, and all of which taken together shall constitute one and the
same instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto. In the
event the parties hereto exchange signature pages of this Agreement by
facsimile, they agree to send the original executed counterparts of this
Agreement to one another by overnight delivery service, but the facsimile
signatures shall in any event be binding.
12.12. NO THIRD PARTY BENEFICIARY
The parties do not intend the benefits of this Agreement to inure
to any third party other than the Trust (and the Servicer and Trustee on behalf
of the Trust), upon
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assignment hereof by Lender to the Trustee, on behalf of the Trust, as
contemplated by SECTION 9.1 hereof. Notwithstanding anything contained herein or
in the Mortgage Note or any other Loan Document to the contrary, or any conduct
or course of conduct by any or all of the parties hereto, before or after
signing this Agreement or any of the other Loan Documents, nothing herein shall
be construed as creating any right, claim or cause of action against Lender, or
any of Lender's officers, directors, agents or employees, in favor of any
materialman, supplier, contractor, subcontractor, purchaser or lessee of any
property owned by Borrower any other person or entity other than Borrower.
12.13. NO LIABILITY OF LENDER
The relationship between Borrower and Lender is, and shall at all
times remain, solely that of borrower and lender, and Lender will not undertake
or assume any responsibility or duty to Borrower to review, inspect, supervise,
pass judgment upon, or inform Borrower of any matter in connection with any
phase of Borrower's business, operations, or condition, financial or otherwise.
Borrower shall rely entirely upon its own judgment with respect to such matters,
and any review, inspection, supervision, exercise of judgment, or information
supplied to Borrower by Lender in connection with any such matter is for the
protection of Lender, and neither Borrower nor any third party is entitled to
rely thereon.
12.14. CONFIDENTIALITY
Lender agrees that it shall maintain confidentiality with regard
to nonpublic information concerning Borrower obtained from Borrower pursuant to
this Agreement that is identified by Borrower as nonpublic, provided that Lender
shall not be precluded from making disclosure regarding such information: (i) to
Lender's counsel, accountants and other professional advisors (who are, in each
case, subject to this confidentiality agreement), (ii) to officers, directors,
employees, agents and partners of Lender who typically would be provided with
such information (who are, in each case, subject to this confidentiality
agreement), (iii) in response to a subpoena or order of a court or governmental
agency, (iv) in connection with the Securitization, to the Rating Agencies, the
Trustee and the Servicer, provided, Lender shall require that any such entity be
subject to this SECTION 12.14, however, Lender shall have no duty to monitor any
such entity and shall have no liability in the event that any such entity
violates this SECTION 12.14, (v) as required by law, GAAP or applicable
regulation, or (vi) following the public disclosure of such information (other
than by Lender). In connection with enforcing its rights pursuant to this
SECTION 12.14, Borrower shall be entitled to the equitable remedies of specific
performance and injunctive relief against Lender or other entity subject to this
Section 12.14 which shall breach the confidentiality provisions of this Section
12.14.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Loan
Agreement or have caused this Loan Agreement to be executed on their behalf as
of the day and year first above written.
BORROWER:
ARDEN REALTY FINANCE III, L.L.C.
By:
Name:
Its:
LENDER:
LEHMAN BROTHERS REALTY CORPORATION
By:
Name:
Its:
<PAGE> 86
LIST OF SCHEDULES
-----------------
Schedule 1.1 Allocated Loan Amounts
Schedule 3.6 Lease Defaults
Schedule 3.22 Environmental Reports
Schedule 3.23A Engineering Surveys
Schedule 3.23B Equipment Leases
Schedule 4.3.2 Mortgaged Properties
Schedule 5.11 Cash Management Procedures
Schedule 5.14 Required Expenditures
<PAGE> 87
LIST OF EXHIBITS
----------------
Exhibit A Description of Land
Exhibit B Form of Mortgage Note
Exhibit C Tenant Estoppel Certificate
Exhibit D Subordination, Non-Disturbance and Attornment
Agreement
<PAGE> 1
EXHIBIT 10.5
MORTGAGE NOTE
$136,100,000 June 8, 1998
FOR VALUE RECEIVED, the undersigned, ARDEN REALTY FINANCE III,
L.L.C., a Delaware limited liability company ("MAKER"), promises to pay to the
order of LEHMAN BROTHERS REALTY CORPORATION, a Delaware corporation, its
successors and assigns ("HOLDER"), at such place as Holder may from time to time
designate in writing, the principal sum of ONE HUNDRED THIRTY-SIX MILLION ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($136,100,000.00) in lawful money of the
United States of America, together with interest thereon, to be computed and
paid as specified in SECTION 1 below.
Except as otherwise defined or limited herein, capitalized terms
used herein shall have the meanings ascribed to them in that certain Loan
Agreement (the "LOAN AGREEMENT") dated as of the date hereof by and between
Maker and Holder. This is the Mortgage Note referred to in the Loan Agreement.
1. PAYMENTS OF PRINCIPAL AND INTEREST.
1.1 INTEREST; MATURITY DATE
The outstanding principal balance hereof from time to time shall
bear interest (a) on or prior to April 16, 2008 (the "Anticipated Repayment
Date"), at a rate per annum equal to six and 74/100 percent (6.74%) (the "Base
Rate") and (b) from and after April 17, 2008, at a rate per annum (the "Adjusted
Interest Rate") equal to the greater of (i) eleven and 74/100 percent (11.74%)
and (ii) the sum of (A) five percentage points (5%) and (B) the average,
calculated by linear interpolation (rounded to three decimal places), of the
yields of the United States Treasury Constant Maturities with the terms (one
longer and one shorter) most nearly approximating those of U.S. Obligations
having maturities as close as possible to the 20th anniversary of the
Anticipated Repayment Date, as determined by the Holder on the basis of Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or such other recognized
source of financial market information as may reasonably be selected by the
Holder, in each case on the last Business Day of the week immediately prior to
the Anticipated Repayment Date. Interest accrued from the date hereof to (and
including) June 30, 1998 shall be due and payable on July 1, 1998. Thereafter,
payments of interest or principal and interest, as applicable, and other amounts
to be paid hereunder shall be made, in arrears, on the first (1st) day of each
calendar month, or, if in any calendar month the first (1st) day is not a
Business Day, then on the Business Day succeeding the first (1st) day,
commencing August 1, 1998 (each, a "Due Date") for the period (the "Debt Service
Period") beginning on (and including) the first (1st) day of the calendar month
immediately preceding the month in which such Due Date occurs, through (but
excluding) the Due Date. Interest shall be computed on the basis of a 360 day
year and the actual number of days elapsed in each Debt Service Period.
<PAGE> 2
For the period that commences on the date hereof and ends on
April 16, 2003 (the "Interest Only Period"), Holder shall pay interest only on
the outstanding principal balance hereof. On each Due Date after the expiration
of the Interest Only Period, Maker shall pay to Holder a monthly payment of
principal and interest (the "Scheduled Principal and Interest Payment") in an
amount equal to the amount of the monthly payment that would be necessary to
fully amortize the outstanding principal balance of the Loan as of the last day
of the Interest Only Period over a 25-year period assuming a rate of interest
per annum equal to the Base Rate (with interest calculated on the basis of
actual number of days elapsed and a 360 day year).
Following the Anticipated Repayment Date, interest on the
outstanding principal balance hereof shall continue to accrue at the Base Rate
and Maker shall continue to make the Scheduled Principal and Interest Payment on
each Due Date.
Payment of all interest accruing in respect of this Mortgage
Note after the Anticipated Repayment Date in the amount equal to the difference
between the amount that accrues at the Adjusted Interest Rate and the amount
that is paid (whether as part of the Scheduled Principal and Interest Payment,
if applicable, or otherwise) at the Base Rate ("Accrued Interest") shall be (a)
deferred, (b) added to the principal amount of this Mortgage Note, and (c) to
the extent permitted by applicable law, accrue interest at the Adjusted Interest
Rate. If not sooner paid, all Accrued Interest together with interest thereon
(to the extent permitted by applicable law) shall be due and payable in full on
the Final Maturity Date (as defined below).
Subsequent to the Anticipated Repayment Date and in accordance
with the Cash Management Procedures, Maker shall pay to Holder on each Due Date
(without duplication), until the entire Debt is repaid in full, Excess Cash Flow
for the Debt Service Period relating to such Due Date. Each monthly payment of
Excess Cash Flow made by Borrower under this Mortgage Note shall be applied
first to the reduction of the outstanding principal balance of this Mortgage
Note and after the principal balance of this Mortgage Note has been paid in full
to the reduction of the outstanding amount of Accrued Interest (and interest
thereon).
The outstanding principal balance of this Mortgage Note,
together with accrued and unpaid interest thereon through April 16, 2028
(including any unpaid Accrued Interest and interest thereon) shall be due and
payable on April 16, 2028 (the "Final Maturity Date").
1.2 PREPAYMENT RESTRICTIONS
On any Due Date occurring on or after the Anticipated Repayment
Date, all or any portion of the principal balance hereof may be prepaid, at
Maker's option, in full or in part, without penalty or premium; provided,
however, that the requirements of SECTION 2.10 of the Loan Agreement shall have
been satisfied. In addition, a portion of the principal amount hereof may be
prepaid prior to the first day of the Defeasance Period, upon satisfaction of
the conditions in SECTION 2.7 of the Loan Agreement but without payment of a
Yield Maintenance Payment, in connection with a Casualty or Taking (provided
that the Mortgage does not require a Restoration of the applicable Mortgaged
Property). Neither Holder nor, following the Securitization, the
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<PAGE> 3
Trustee or the Servicer shall be required to accept or apply any prepayment
requiring payment of a Yield Maintenance Payment, as provided in this paragraph
or in SECTION 1.3 hereof, unless such prepayment is accompanied by the payment
of such Yield Maintenance Payment, and if any legal and other expenses are due
and owing to Holder, Trustee or Servicer in connection with such prepayment
under the terms of the Pooling and Servicing Agreement or any Loan Document,
neither Holder nor the Servicer shall be required to accept or apply any
prepayment unless the prepayment also is accompanied by the amount that is due
and payable to Holder, Trustee or Servicer with respect to such expenses. Except
as provided above, this Mortgage Note may not be prepaid.
1.3 YIELD MAINTENANCE
If (i) all or any part of the principal amount of the Loan is
prepaid after the Closing Date but prior to the last day of the Defeasance
Period as a result of the acceleration of the maturity of the Mortgage Note
after an Event of Default, Maker shall be required to pay a Yield Maintenance
Payment equal to the greater of (A) 1% of the amount of the principal prepayment
that is to be applied to the outstanding principal balance hereof and (B) the
present value as of the end of the applicable Debt Service Period, discounted at
the Reinvestment Yield, of a series of payments each equal to the Payment
Differential on each of the remaining Due Dates prior to and including the
Anticipated Repayment Date, after giving effect to the regularly scheduled
payment of principal that is to be made on the Prepayment Date. No Yield
Maintenance Payment shall be required in connection with prepayments made on or
after the last day of the Defeasance Period.
Promptly following acceleration of this Mortgage Note or
following the occurrence of any other event, the occurrence of which obligates
Maker to make a Yield Maintenance Payment, Holder shall notify Maker of the
amount and basis of determination of the Yield Maintenance Payment promptly upon
determining the Treasury Rate, as contemplated below. Absent manifest error,
Maker shall not dispute Holder's calculations hereunder.
For purposes of this SECTION 1.3, the following terms shall have
the meanings ascribed to them below:
"PAYMENT DIFFERENTIAL" means, an amount equal to (x) the Base
Rate, minus the Reinvestment Yield, divided by (y) 12, and multiplied by
(z) the amount of the principal prepayment.
"REINVESTMENT YIELD" is the Treasury Rate converted to a monthly
compounded nominal annual yield.
"TREASURY RATE" is equal to the lesser of (A) the annual yield
on the United States Treasury issue (primary issue) with a maturity date
closest to the Final Maturity Date and (B) the annual yield on the
United States Treasury issue (primary issue) with a maturity equal to
the remaining average life of this Mortgage Note with each such yield
being based on the bid price for such issue as published in The Wall
Street Journal on the
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<PAGE> 4
date that is 14 days prior to (x) the applicable Prepayment Date set
forth in the notice of prepayment provided by the Maker or (y) the date
of acceleration by the Holder (or if such bid price is not published on
that date, the next preceding date on which such bid price is so
published).
1.4 METHOD OF PAYMENT; PAYMENTS ABSOLUTE
All payments due hereunder shall be made in legal currency of
the United States of America in immediately available federal funds by credit to
the Holder's account in the United States as announced by the Holder from time
to time in writing to Maker. If any payment is due on a day that is not a
Business Day, the date for payment thereof shall be extended to the next
Business Day, without additional interest, except that, if the Final Maturity
Date is not a Business Day, the date for payment of the amount, if any, that is
due on the Final Maturity Date shall be extended to the next succeeding Business
Day, and any interest payable thereon shall accrue and be payable for such
extension of time at the Adjusted Interest Rate.
The terms of this Mortgage Note are hereby supplemented in full
by the terms of the Loan Agreement and the other Loan Documents.
2. SECURITY FOR THE LOAN.
This Mortgage Note is secured by, among other things, twenty-two
(22) Mortgaged Properties owned by Maker, including all assets of Maker related
thereto, pursuant to a Mortgage encumbering the Land, the Buildings located
thereon and other Improvements relating to such Buildings and granting a lien on
and security interest in certain other Property described therein, and by other
Security Documents effecting and granting a lien on and security interest in
other Collateral, including but not limited to, the Security Agreement, the
Assignment of Rents and Leases, and the Collateral Assignment of Management
Agreement.
3. EVENTS OF DEFAULT.
The entire outstanding principal balance of this Mortgage Note,
together with all accrued and unpaid interest thereon and all other sums due
hereunder or under any of the Loan Documents (all such sums, collectively, the
"DEBT"), or any portion thereof, shall without notice, except such notice as is
required under the terms of any Loan Document, become immediately due and
payable at the option of Holder: (a) if payments of principal, interest and
premium, if any, due hereunder are not made when due or (b) an Event of Default
shall have occurred and be continuing under the Loan Agreement (each of the
foregoing, an "EVENT OF DEFAULT"). In the event that Holder retains counsel to
collect all or any part of the Debt, or to protect or foreclose the security
provided in connection herewith, Maker agrees to pay reasonable costs of
collection incurred by Holder, including reasonable attorneys' fees.
4. DEFAULT INTEREST; LATE PAYMENT FEE.
Maker does hereby agree that, if any amount due hereunder is not
paid when due,
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<PAGE> 5
including, without limitation, Maker's failure to pay the Debt in full on the
Maturity Date or on the date set for acceleration following an Event of Default,
Holder shall be entitled to receive, and Maker shall pay, to the extent
permitted by applicable law, interest to Holder on such past due amounts
beginning on the date such payment becomes past due at a rate of interest equal
to the lesser of (a) the greater of (i) the Base Rate plus three percentage
points (3%) (or, on and after the Anticipated Repayment Date, the Adjusted
Interest Rate plus three percentage points (3%)) and (ii) the Prime Rate plus
two percentage points (2%), and (b) the maximum rate of interest allowed to be
collected under applicable law.
In addition to Default Interest, in the event Borrower fails to
make any payment of interest, Yield Maintenance Payment or other payment
hereunder when due, Borrower shall be liable for the payment of a late charge
equal to five percent (5%) of the amount of the payment; provided, however,
prior to a Securitization, Borrower shall not be liable to pay such a late
payment fee the first time Borrower fails to make a Monthly Debt Service Payment
when due.
5. LIMITATIONS ON RECOURSE.
Notwithstanding any contrary provision in this Mortgage Note or
any of the Loan Documents, it is hereby expressly agreed that, except as
otherwise provided in this SECTION 5 or in any section of any Loan Document that
is substantially similar to this SECTION 5, there shall be no recourse to the
assets of Maker or any of its Members (other than against the Collateral and any
other property given as security for the payment of this Mortgage Note) for (i)
the payment of principal, interest, Defeasance Deposits, Yield Maintenance
Payments or other charges hereunder or for any other amount that is or may
become due and owing to Holder by Maker under this Mortgage Note or any of the
other Loan Documents or (ii) the performance or discharge of any covenant or
undertaking hereunder or under the other Loan Documents, and in the event of any
Event of Default hereunder or thereunder, Holder agrees to proceed solely
against the Collateral and any other property given as security for payment of
this Mortgage Note, and Holder shall not seek or claim recourse against Maker or
any Member (other than against the Collateral and any other property given as
security for payment of this Mortgage Note) for any deficiency or for any
personal judgment after a foreclosure of the lien of the Mortgage or other
Security Documents or for the performance or discharge of any covenants or
undertakings of Maker hereunder or under any other Loan Documents (except that
Maker may be made a party to a proceeding to the extent legally necessary for
the conduct of a foreclosure or the exercise of other similar remedies under the
Mortgage or other Security Documents). Notwithstanding the foregoing, nothing
contained in this SECTION 5 shall relieve Maker or any Member of any personal
liability for any loss, cost, expense, damage or liability arising or resulting
from (A) any breach of any representation or warranty made in the Loan Agreement
that was materially incorrect when made and that was made with fraudulent
intent, (B) any amount paid or distributed to the Members, the Manager or any
Affiliate of any of them in violation of the provisions of the Loan Documents,
(C) fraud or breach of trust, including misapplication of Loan proceeds or any
Insurance Proceeds or Awards or other sums that are part of the Collateral that
may come into the possession or control of Maker or a Member or any Affiliate of
any of them, (D) liability under the Environmental Indemnity Agreement or (E)
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<PAGE> 6
following the occurrence of a Lockbox Event, the willful failure of Maker to
instruct Tenants of the Mortgaged Properties to make payments of Rents into the
Lockbox Account or the failure of Maker or the Manager to deposit payments of
Rents received by Maker or Manager into the Lockbox Account promptly upon
receipt thereof. It is hereby expressly agreed that no director, officer,
shareholder, partner, member or employee of Maker or any Member, nor the legal
or personal representative, successor or assign of any of the foregoing, nor any
other principal of Maker or any Member, whether disclosed or undisclosed, shall
have any personal liability under the Loan Agreement or any of the other Loan
Documents, except as personal liability may be specifically imposed upon a
signatory to any of the Loan Documents. It is the intention of the parties
hereto that this SECTION 5 shall govern every other provision of the Loan
Documents and that the absence of explicit reference to this SECTION 5 in any
provision of the Loan Documents or the absence of any Section similar to this
SECTION 5 in any Loan Document shall not be construed to deny the application of
this SECTION 5 to such provision, notwithstanding the presence of explicit
reference to this SECTION 5 in other provisions of the Loan Documents.
6. NO USURY.
It is expressly stipulated and agreed to be the intent of Maker
and Holder at all times to comply with applicable state law and with applicable
United States federal law (to the extent that it permits Holder to contract for,
charge, take, reserve, or receive a greater amount of interest than under state
law) and that this Section shall control every other covenant and agreement in
this Mortgage Note and the other Loan Documents. If the applicable law (state or
federal) is ever judicially interpreted so as to render usurious any amount
called for under this Mortgage Note or under any of the other Loan Documents, or
contracted for, charged, taken, reserved, or received with respect to the Debt,
or if Holder's exercise of the option to accelerate the maturity of this
Mortgage Note, or if any prepayment by Maker results in Maker having paid any
interest in excess of that permitted by applicable law, then it is Maker's and
Holder's express intent that all excess amounts theretofore collected by Holder
shall be credited to the principal balance hereof and all other debt in the
order specified above (or, if this Mortgage Note and all other Debt have been or
would thereby be paid in full, shall be refunded to Maker), and the provisions
of this Mortgage Note and the other Loan Documents shall immediately and
automatically be deemed to be reformed, and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid or agreed to be paid to Holder for the use, forbearance, or detention
of the Debt shall, to the fullest extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Debt until payment in full so that the rate or amount of interest on account
of the Debt does not exceed the maximum lawful rate from time to time in effect
and applicable to the Debt for so long as the Debt is outstanding.
7. AUTHORITY.
Maker represents that Maker has full power, authority and legal
right to execute
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<PAGE> 7
and deliver this Mortgage Note and to perform its obligations hereunder, and
that this Mortgage Note constitutes the valid and binding obligation of Maker,
enforceable against Maker in accordance with its terms, except as enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity, regardless of whether
considered in proceedings at law or in equity.
8. NOTICES.
All notices or other communications required or permitted to be
given pursuant hereto shall be given in the manner specified in the Loan
Agreement directed to the parties at their respective addresses as provided
therein.
9. WAIVER OF JURY TRIAL.
MAKER, AND BY ACCEPTANCE HEREOF, HOLDER, EACH (1) COVENANTS AND
AGREES NOT TO ELECT TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND
(2) WAIVES ANY RIGHTS TO TRIAL BY JURY TO THE FULL EXTENT THAT ANY SUCH RIGHT
SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH PARTY HERETO, AND THIS
WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. THE PARTIES ARE HEREBY
AUTHORIZED TO SUBMIT THIS MORTGAGE NOTE TO ANY COURT HAVING JURISDICTION OVER
THE SUBJECT MATTER TO BE TRIED SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE
OTHER PARTY'S HEREIN CONTAINED WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, EACH
PARTY HERETO CERTIFIES THAT NO REPRESENTATIVE OF THE OTHER PARTY (INCLUDING SUCH
OTHER PARTY'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO THAT PARTY,
THAT THE OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER BY SUCH CERTIFYING
PARTY OF THE RIGHT TO A JURY TRIAL.
10. GOVERNING LAW.
This Mortgage Note shall be governed by and construed under and
in accordance with the laws of the State of New York, excluding the choice of
law rules thereof.
11. MISCELLANEOUS.
(a) No release of any security for the Debt or any person
liable for payment of the Debt, no extension of time for payment of this
Mortgage Note or any installment hereof, and no alteration, amendment or waiver
of any provision of the Loan Documents made by agreement between Holder and any
other person or party shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Maker or any other person or
party who
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<PAGE> 8
might be or become liable for the payment of all or any part of the Debt, under
the Loan Documents.
(b) Maker and all others who may become liable for the
payment of all or any part of the Debt do hereby severally waive presentment and
demand for payment, notice of dishonor, protest, notice of protest, notice of
non-payment, and notice of intent to accelerate the maturity hereof and of
acceleration.
(c) This Mortgage Note may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Maker or Holder, but only by an agreement in writing signed
by the party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
(d) Whenever used, the singular number shall include the
plural, the plural the singular, and the words "Holder" and "Maker" shall
include their respective successors, assigns, heirs, executors and
administrators.
[SIGNATURE PAGE TO FOLLOW]
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<PAGE> 9
IN WITNESS WHEREOF, Maker has duly executed or has caused its
duly authorized officer to execute this Mortgage Note on its behalf, as of the
day and year first above written.
MAKER:
ARDEN REALTY FINANCE III, L.L.C.,
a Delaware limited liability company
By:
Name:
Its:
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<PAGE> 1
EXHIBIT 10.6
TENANT ESTOPPEL CERTIFICATE
Lehman Brothers Realty Corporation
Three World Financial Center
20th Floor
New York, New York 10285
RE: TENANT LEASE FOR _______________, CALIFORNIA, SUITE _______
Ladies and Gentlemen:
We understand that Lehman Brothers Realty Corporation ("Lender") has
made or is proposing to make a loan (the "Loan") to __________________ ("Owner")
that will be secured by an Deed of Trust, Assignment of Rents and Leases,
Security Agreement and Fixture Filing (the "Mortgage") and an associated
Assignment of Leases and Rents (the "Assignment") relating in whole or in part
to an office complex commonly known as _________________________,
__________________, California (the "Property") in which the undersigned is a
tenant. In connection with the Loan, we hereby (i) agree with you as follows and
(ii) warrant and represent to you that with respect to our lease, as amended
(the "Lease") and more particularly described in Schedule "A" attached hereto
(the "Schedule") the following is true and correct:
1. The Lease constitutes the entire agreement between the undersigned
and the landlord thereunder with respect to the subject matter thereof and the
Lease has not been modified, amended or supplemented in any way except by the
amendments or other agreements described in the Schedule.
2. The summary of the basic terms of the Lease contained in the
Schedule is true and correct.
3. Except as provided in the Schedule, the undersigned has not
assigned, transferred or hypothecated the Lease or any interest therein or
entered into a sublease for any portion of the premises covered by the Lease and
no person or firm other than the undersigned or its employees is in possession
of such premises or any portion thereof.
4. The undersigned is not in default (or with the giving of notice or
the passage of time or both will not be in default) under the Lease and the
undersigned has no claim against, off-set, credit, defense, counterclaim or
deductions against the landlord thereunder or any rent or other sums due or
payable under the Lease and, the landlord thereunder is not in default (or with
the giving of notice or the passage of time or both will not be in default)
under the Lease.
<PAGE> 2
5. Except as set forth on the Schedule, the undersigned has no option,
right of first refusal or other right to purchase the Property or any portion
thereof or any interest therein or to lease additional space in the Property or
to extend the term of the Lease and the only interest of the undersigned in the
Property is that of a tenant pursuant to the terms of the Lease.
6. The undersigned has not and does not engage in the generation,
storage or disposal of "Hazardous Materials" on the Property and to the best of
the undersigned's knowledge, there are no Hazardous Materials located in, on,
under or in the vicinity of the Premises demised by the Lease except for normal
office supplies. The undersigned agrees not to use, store, or permit the use,
storage or release of any Hazardous Materials on, under or about the Premises or
the Property other than what is permitted by applicable law, codes, regulations
or restrictions and used by the undersigned in accordance with applicable laws
and in amounts as dictated by the normal conduct of the undersigned's business.
The term "Hazardous Material" means any toxic or hazardous substance, material
or wastes which if or becomes regulated by any local government, the State of
California, the United States government or any agency or division thereof.
7. The undersigned is not the subject of any bankruptcy, insolvency,
debtor's relief, reorganization, receivership or other similar proceedings.
8. The person executing this Certificate hereby warrants and represents
that he or she has the power and authority to execute and deliver this
Certificate on behalf of the tenant named herein.
9. The undersigned as tenant hereby ratifies and confirms the Lease and
the tenancy created thereby and upon consummation of the acquisition by Owner,
agrees to accept Owner as the landlord thereunder.
10. The undersigned agrees to notify you at the address set forth above
(or at such other address of which the undersigned may be advised by you) of any
default on the part of landlord under the Lease, and further agrees that
notwithstanding any provisions of the Lease, no notice, cancellation or
termination thereof shall be effective unless Lender shall have received such
notice and have failed to cure or commence to cure such default within a
reasonable time following receipt of such notice and the expiration of any cure
period applicable thereto.
11. All conditions under the Lease to be performed by landlord as of
the date hereof (including, without limitation, all work to be performed by
landlord in the leased premises) have been satisfied, and all contributions, if
any, required to be paid by landlord under the Lease to date for improvements to
the leased premises have been paid. The undersigned is in possession of the
Premises and is fully obligated to perform and is performing all of the other
obligations of the undersigned under the Lease.
12. So long as the Loan remains outstanding, the undersigned shall not
amend, modify or cancel the Lease, or consent to an amendment, modification or
cancellation of the Lease, or agree to subordinate the Lease to any other
mortgage, without Lender's prior written consent in each instance.
<PAGE> 3
We understand that you will rely on this Certificate. This Certificate
may be relied upon by your successors and assigns.
Very truly yours,
_________________________________________
Name of Tenant
_________________________________________
Signature
_________________________________________
Date
[Add Notary Paragraph]
<PAGE> 4
SCHEDULE "A"
Summary of Lease Terms
(1) Name of Tenant:
--------------------------------------------------------
(2) Lease Date:
-----------------------------------------------------------
(3) Amendment Dates, Separate Agreements, if any:
--------------------------
(4) Suite No.: ; Estimated Square Footage:
---------------- -----------------
(5) Lease Commencement Date: ; Expiration of Term:
------------------- ------
(6) Option(s) to Extend:
---------------------------------------------------
(7) Option(s) for Additional Space:
----------------------------------------
(8) Monthly Base Rent: $ ;
-----------------
Escalations/CAM Charges: $ ;
-----------------
Total Monthly Rent: $ .
-----------------
Date on which Rent last paid:
-------------------------
(9) Tenant's Percentage Share of Increased Operating Costs: %
--------------
(10) Security Deposit: $ ; Prepaid Rent:
------------------------ ------------
(11) Assignees/Subtenants:
--------------------------------------------------
(12) Parking Spaces:
--------------------------------------------------------
(13) Lease Guarantor(s):
----------------------------------------------------
(14) Uncured Defaults by Landlord: None
-----------------------------------------
(15) Exclusive Uses:
--------------------------------------------------------
(16) Free Rent Months remaining after 6/01/98:
-------------------------------
(17) Tenant Improvements or other allowances due Tenant: $
------------------
(18) Comments, if any:
------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------
Name of Tenant
By:
-------------------------------------------
Date:
------------------------------------------
<PAGE> 1
EXHIBIT 10.7
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the
"Agreement") is made as of the ___ day of _________, 1998, among LEHMAN BROTHERS
REALTY CORPORATION, a Delaware corporation having a place of business at Three
World Financial Center, 200 Vesey Street, 20th Floor, New York, New York 10285,
its successors and assigns ("Lender"), ARDEN REALTY FINANCE __________, L.L.C.,
a Delaware limited liability company, with its principal office at 11601
Wilshire Boulevard, Suite ____, Los Angeles, California 90025 ("Landlord" or
"Borrower"), and ______________________, a ______________ corporation having a
place of business at ________________________________ ("Tenant").
INTRODUCTORY PROVISIONS
WHEREAS, Lender has made or is making a loan in the amount of
________________________________ ($______________) (the "Loan") to Borrower
pursuant to a Loan Agreement entered into between Borrower and Lender on or
about June __, 1998 (the "Loan Agreement");
WHEREAS, Borrower's obligation to repay the Loan is or will be secured,
in part, by first priority mortgage liens on ___________ (____) office and
industrial properties owned or to be owned by Borrower, including, without
limitation, the office property commonly known as _________________, (the
"Property") pursuant to a certain Deed of Trust, Assignment of Rents and Leases,
Security Agreement and Fixture Filing by Borrower to the trustee named therein
for the benefit of Lender and recorded or to be recorded in the land records of
[__________ COUNTY, CALIFORNIA] (the "Deed of Trust");
WHEREAS, Borrower's obligation to repay the Loan will be further
secured by an Assignment of Leases and Rents by Borrower to Lender recorded or
to be recorded among said land records (the "Assignment");
WHEREAS, Tenant is the tenant under that certain lease ("Lease") dated
___________, 19_____ made with Landlord, covering certain premises ("Premises")
at the Property as more particularly described in the Lease;
WHEREAS, Lender requires, as a condition to the making of the Loan,
that the Deed of Trust be and remain superior to the Lease and that its rights
under the Assignment be recognized;
WHEREAS, Tenant requires as a condition to the Lease being subordinate
to the Deed of Trust that its rights under the Lease be recognized; and
WHEREAS, Lender, Landlord, and Tenant desire to confirm their
understanding with respect to the Deed of Trust and the Lease.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein, and other valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and with the understanding by
Tenant that Lender shall rely hereon in making and maintaining the Loan, Lender,
Landlord, and Tenant agree as follows:
1. Subordination. The Lease and the rights of Tenant thereunder are
subordinate and inferior to the Deed of Trust and any amendment, renewal,
substitution, extension or replacement thereof and each advance made thereunder
as though the Deed of Trust, and each such amendment, renewal, substitution,
extension or replacement were executed and recorded, and the advance made,
before the execution of the Lease.
2. Non-Disturbance. So long as Tenant is not in default (beyond any
period expressed in the Lease within which Tenant may cure such default) in the
payment of rent or in the performance or observance of any of the terms,
covenants or conditions of the Lease on Tenant's part to be performed or
observed, (i) Tenant's occupancy of the Premises shall not be disturbed by
Lender in the exercise of any of its rights under the Deed of Trust during the
term of the Lease, or any extension or renewal thereof made in accordance with
the terms of the Lease, and (ii) Lender will not join Tenant as a party
defendant in any action or proceeding for the purpose of terminating of Tenant's
interest and estate under the Lease because of any default under the Deed of
Trust.
3. Attornment and Certificates. In the event Lender succeeds to the
interest of Borrower as Landlord under the Lease, or if the Property or the
Premises are sold pursuant to the power of sale under the Deed of Trust or
otherwise pursuant to the exercise of remedies under the Deed of Trust, Tenant
shall attorn to Lender, or a purchaser upon any such foreclosure sale, and shall
recognize Lender, or such purchaser, thereafter as the Landlord under the Lease.
Such attornment shall be effective and self-operative without the execution of
any further instrument. Tenant agrees, however, to execute and deliver at any
time and from time to time, upon the request of any holder(s) of any of the
indebtedness or other obligations secured by the Deed of Trust, or upon request
of any such purchaser, (a) any instrument or certificate which, in the
reasonable judgment of such holder(s), or such purchaser, may be necessary or
appropriate in any such foreclosure proceeding or otherwise to evidence such
attornment, and (b) an instrument or certificate regarding the status of the
Lease, consisting of statements, if true (and if not true, specifying in what
respect), (i) that the Lease is in full force and effect, (ii) the date through
which rentals have been paid, (iii) the duration and date of the commencement of
the term of the Lease, (iv) the nature of any amendments or modifications to the
Lease, (v) that no default, or state of facts, which with the passage of time,
or notice, or both, would constitute a default, exists on the part of either
party to the Lease, (vi) the dates on which payments of additional rent, if any,
are due under the Lease and (vii) such other matters as such holder(s) or such
purchaser shall reasonably request.
4. Limitations. If Lender exercises any of its rights under the
Assignment or the Deed of Trust, or if Lender shall succeed to the interest of
Landlord under the Lease in any manner, or if any purchaser acquires the
Property, or the Premises, upon or after any foreclosure
-2-
<PAGE> 3
of the Deed of Trust, or any deed in lieu thereof, Lender or such purchaser, as
the case may be, shall have the same remedies by entry, action or otherwise in
the event of any default by Tenant (beyond any period expressed in the Lease
within which Tenant may cure such default) in the payment of rent or in the
performance or observance of any of the terms, covenants and conditions of the
Lease on Tenant's part to be paid, performed or observed that the Landlord had
or would have had if Lender or such purchaser had not succeeded to the interest
of the present Landlord. From and after any such attornment, Lender or such
purchaser shall be bound to Tenant under all the terms, covenants and conditions
of the Lease and Tenant shall, from and after such attornment to Lender, or to
such purchaser, have the same remedies against Lender, or such purchaser, for
the breach of an agreement contained in the Lease that Tenant might have had
under the Lease against Landlord, if Lender or such purchaser had not succeeded
to the interest of Landlord. Provided, however, that Lender or such purchaser
shall only be bound during the period of its ownership, and that in the case of
the exercise by Lender of its rights under the Deed of Trust, or the Assignment,
or any combination thereof, or a foreclosure, or deed in lieu of foreclosure,
all Tenant claims shall be satisfied only out of the interest, if any, of
Lender, or such purchaser in the Property, and Lender and such purchaser shall
not be (a) liable for any act or omission of any prior landlord (including the
Landlord); or (b) liable for or incur any obligation with respect to the
construction of the Property or any improvements of the Premises or the
Property; or (c) subject to any offsets or defenses which Tenant might have
against any prior landlord (including the Landlord); or (d) bound by any rent or
additional rent which Tenant might have paid for more than the then current
rental period to any prior landlord (including the Landlord); or (e) bound by
any amendment or modification of the Lease, or any consent to any assignment or
sublet, made without Lender's prior written consent; or (f) bound by or
responsible for any security deposit not actually received by Lender; or (g)
liable for or incur any obligation with respect to any breach of warranties or
representations of any nature under the Lease or otherwise including without
limitation any warranties or representations expecting use, compliance with
zoning, landlord's title, landlord's authority, habitability and/or fitness for
any purpose, or possession; or (h) liable for consequential damages.
5. Rights Reserved. Nothing herein contained is intended, nor shall it
be construed, to abridge or adversely affect any right or remedy of: (a) the
Landlord under the Lease, or any subsequent Landlord, against the Tenant in the
event of any default by Tenant (beyond any period expressed in the Lease within
which Tenant may cure such default) in the payment of rent or in the performance
or observance of any of the terms, covenants or conditions of the Lease on
Tenant's part to be performed or observed; or (b) the Tenant under the Lease
against the original or any prior Landlord in the event of any default by the
original Landlord to pursue claims against such original or prior Landlord
whether or not such claim is barred against Lender or a subsequent purchaser.
6. Notice and Right to Cure. Tenant agrees to provide Lender with a
copy of each notice of default given to Landlord under the Lease, at the same
time as such notice of default is given to the Landlord, and that in the event
of any default by the Landlord under the Lease, Tenant will take no action to
terminate the Lease (a) if the default is not curable by Lender (so long as the
default does not interfere with Tenant's use and occupation of the premises), or
(b) if the default is curable by Lender, unless the default remains uncured for
a period of thirty (30)
-3-
<PAGE> 4
days after written notice thereof shall have been given, postage prepaid, to
Landlord at Landlord's address, and to Lender, at the address provided in
Section 7 below; provided, however, that if any such default is such that it
reasonably cannot be cured within such thirty (30) day period, such period shall
be extended for such additional period of time as shall be reasonably necessary
(including, without limitation, a reasonable period of time to obtain possession
of the Property and to foreclose the Deed of Trust), if Lender gives Tenant
written notice within such thirty (30) day period of Lender's election to
undertake the cure of the default and if curative action (including, without
limitation, action to obtain possession and foreclose) is instituted within a
reasonable period of time and is thereafter diligently pursued. Lender shall
have no obligation to cure any default under the Lease.
7. Notices. Any notice or communication required or permitted hereunder
shall be in writing, and shall be given or delivered: (i) by United States mail,
registered or certified, postage fully prepaid, return receipt requested, or
(ii) by recognized courier service or recognized overnight delivery service; and
in any event addressed to the party for which it is intended at its address set
forth below:
To Lender: Lehman Brothers Realty Corporation
Three World Financial Center
200 Vesey Street
New York, New York 10285
To Tenant: _______________________________________
_______________________________________
_______________________________________
_______________________________________
or such other address as such party may have previously specified by notice
given or delivered in accordance with the foregoing. Any such notice shall be
deemed to have been given and received on the date delivered or tendered for
delivery during normal business hours as herein provided.
8. No Oral Change. This Agreement may not be modified orally or in any
manner than by an agreement in writing signed by the parties hereto or their
respective successors in interest.
9. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective heirs, personal
representatives, successors and assigns, and any purchaser or purchasers at
foreclosure of the Property or any portion thereof, and their respective heirs,
personal representatives, successors and assigns.
10. Payment of Rent to Lender. Tenant acknowledges that it has notice
that the Lease and the rent and all sums due thereunder have been assigned to
Lender as part of the security for the obligations secured by the Deed of Trust.
In the event Lender notifies Tenant and demands that Tenant pay its rent and all
other sums due under the Lease to Lender, Tenant agrees that it
-4-
<PAGE> 5
will honor such demand and pay its rent and all other sums due under the Lease
to Lender, or Lender's designated agent, until otherwise notified in writing by
Lender. Borrower unconditionally authorizes and directs Tenant to make rental
payments directly to Lender following receipt of such notice and further agrees
that Tenant may rely upon such notice without any obligation to further inquire
as to whether or not any default exists under the Deed of Trust or the
Assignment, and that Borrower shall have no right or claim against Tenant for or
by reason of any payments of rent or other charges made by Tenant to Lender
following receipt of such notice.
11. No Amendment or Cancellation of Lease. So long as the Deed of Trust
remains undischarged of record, Tenant shall not amend, modify, cancel or
terminate the Lease, or agree to subordinate the Lease to any other mortgage,
without Lender's prior written consent in each instance.
12. Options. With respect to any options for additional space provided
to Tenant under the Lease, Lender agrees to recognize the same if Tenant is
entitled thereto under the Lease after the date on which Lender succeeds as
Landlord under the Lease by virtue of foreclosure or deed in lieu of foreclosure
or Lender takes possession of the Premises; provided, however, Lender shall not
be responsible for any acts of any prior landlord under the lease, or the act of
any tenant, subtenant or other party which prevents Lender from complying with
the provisions hereof and Tenant shall have no right to cancel the Lease or to
make any claims against Lender on account thereof.
13. Cautions. Captions and headings of sections are not parts of this
Agreement and shall not be deemed to affect the meaning or construction of any
of the provisions of this Agreement.
14. Counterparts. This Agreement may be executed in several
counterparts each of which when executed and delivered is an original, but all
of which together shall constitute one instrument.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of ___________________.
16. Parties Bound. The provisions of this Agreement shall be binding
upon and inure to the benefit of Tenant, Lender and Borrower and their
respective successors and assigns; provided, however, reference to successors
and assigns of Tenant shall not constitute a consent by Landlord or Borrower to
an assignment or sublet by Tenant, but has reference only to those instances in
which such consent is not required pursuant to the Lease or for which such
consent has been given.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
LENDER:
LEHMAN BROTHERS REALTY CORPORATION
By:___________________________________
Name:______________________________
Title:_____________________________
Date executed by Lender:______________
TENANT:
______________________________________
By:___________________________________
Name:______________________________
Title:_____________________________
Date executed by Tenant:______________
STATE OF ________________
COUNTY OF ______________
On the ___ day of ___________, 1998, before me, a notary public
personally appeared _______________________, a ______________, of Lehman
Brothers Realty Corporation personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument he person(s), or the entity upon which the person(s) acted,
executed this instrument.
WITNESS my hand and official seal.
_________________________________________
Notary Public
My commission expires:
-6-
<PAGE> 7
STATE OF ________________
COUNTY OF ______________
On the ___ day of ___________, 1998, before me, a notary public
personally appeared _______________________, a ______________, of , personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument he
person(s), or the entity upon which the person(s) acted, executed this
instrument.
WITNESS my hand and official seal.
_________________________________________
Notary Public
My commission expires:
-7-
<PAGE> 8
AGREEMENT OF BORROWER
Arden Realty Finance _____________, L.L.C., as Landlord under the
Lease, and Borrower under the Loan Agreement, the Deed of Trust and the other
Loan Documents, agrees for itself and its successors and assigns that:
1. The above agreement does not (a) constitute a waiver by Lender of
any of its rights under the Deed of Trust or any of the other Loan Documents; or
(b) in any way release Borrower from its obligations to comply with the terms,
provisions, conditions, covenants and agreements and clauses of the Deed of
Trust and other Loan Documents;
2. The provisions of the Deed of Trust remain in full force and effect
and must be complied with by Borrower;
3. Tenant shall have the right to rely on any notice or request from
Lender which directs Tenant to pay rent to Lender without any obligation to
inquire as to whether or not a default exists and notwithstanding any notice
from or claim of Borrower to the contrary. Borrower shall have no right or claim
against Tenant for rent paid to Lender after Lender so notifies Tenant to make
payment of rent to Lender; and
4. The Borrower shall be bound by all of the terms, conditions and
provisions of the foregoing Agreement in all respects.
Executed and delivered as a sealed instrument as of the __ day of
_____________, 1998.
BORROWER:
ARDEN REALTY FINANCE ___________,
L.L.C.
By:_____________________________________
Name:________________________________
Title:_______________________________
Date executed by Borrower:___________
-8-
<PAGE> 9
STATE OF ________________
COUNTY OF ______________
On the ___ day of ___________, 1998, before me, a notary public
personally appeared _______________________, a ______________, of Arden Realty
________, III, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument he person(s), or the entity upon which the person(s) acted,
executed this instrument.
WITNESS my hand and official seal.
_________________________________________
Notary Public
My commission expires:
-9-
<PAGE> 1
EXHIBIT 10.8
DEED OF TRUST,
ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT, AND
FIXTURE FILING
Dated as of June 8, 1998
Made by
ARDEN REALTY FINANCE III, L.L.C.
as Grantor,
to
COMMONWEALTH LAND TITLE COMPANY
as Trustee
for the benefit of
LEHMAN BROTHERS REALTY CORPORATION
as Beneficiary
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RECITALS ...............................................................1
GRANTING CLAUSES........................................................2
1. COVENANTS, REPRESENTATIONS AND WARRANTIES........................................5
1.1. Payment of Mortgage Note; Performance of Other Obligations................5
1.2. General Representations, Warranties and Covenants.........................5
1.2.1. Authority, Enforceability, Etc..................................5
1.2.2. No Defaults.....................................................5
1.2.3. No Litigation...................................................5
1.2.4. Compliance with Law, Etc........................................5
1.2.5. Good Title......................................................6
1.2.6. Covenant of Title...............................................6
1.2.7. Negative Pledge.................................................7
1.2.8. Necessary Permits...............................................7
1.2.9. Flood Zone......................................................7
1.2.10. Separate Tax Lot; Assessments...................................7
1.3. Title Insurance...........................................................7
1.4. Recordation; Preservation of Lien.........................................8
1.5. Taxes, Liens, and Permitted Encumbrances..................................8
1.5.1. Taxes...........................................................8
1.5.2. Liens; Permitted Encumbrances...................................8
1.5.3. Permitted Contests..............................................8
1.5.4. No Credit for Payment of Taxes or Impositions...................9
1.6. Care of the Property......................................................9
1.6.1. Condition of the Property.......................................9
1.6.2. Alterations; Building Only......................................9
1.6.3. Right to Inspect...............................................10
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1.6.4. Compliance with Laws and Covenants..............................10
1.7. Insurance.................................................................10
1.7.1. Risks to Be Insured.............................................10
1.7.2. Qualified Insurers..............................................11
1.7.3. Policy Provisions...............................................11
1.7.4. Delivery of Certificates........................................12
1.7.5. No Separate Insurance...........................................12
1.8. Damage to or Destruction of Property......................................13
1.8.1. Notice..........................................................13
1.8.2. Restoration.....................................................13
1.8.3. Application of Insurance Proceeds or Awards.....................13
1.9. Condemnation..............................................................14
1.9.1. Grantor to Give Notice, Etc.....................................14
1.9.2. Total and Substantial Taking....................................15
1.9.3. Partial and Temporary Taking....................................15
1.10. Notices Concerning the Property..........................................15
1.11. Alterations..............................................................16
1.11.1. Alteration Conditions...........................................16
1.11.2. Right to Inspect................................................16
1.11.3. Cooperation.....................................................16
1.12. Indemnification by the Grantor...........................................17
1.13. Expenses.................................................................17
1.14. Monthly Escrow Deposits..................................................18
1.15. Further Assurances.......................................................18
1.16. Additions to Security....................................................18
1.17. U.C.C. Security Agreement and Fixture Filing.............................18
1.17.1. Grant of Security...............................................18
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1.17.2. Financing Statements...........................................19
1.17.3. Multiple Remedies..............................................19
1.17.4. Waiver of Rights...............................................19
1.17.5. Expenses of Disposition of the Properties......................19
1.17.6. Fixture Filing.................................................19
1.18. INTENTIONALLY DELETED....................................................20
1.19. Compliance with Access Laws..............................................20
1.20. Assignment of Rents and Grantor's Interest in Leases; Lease Covenants....20
1.20.1. Assignment and License.........................................20
1.20.2. Rights and Powers Assigned.....................................20
1.20.3. No Set-Off.....................................................21
1.20.4. Termination of License.........................................21
1.20.5. Right to Collect Upon Event of Default.........................21
1.20.6. Leases Unaffected..............................................22
1.20.7. Inconsistent Actions Void......................................22
1.20.8. Satisfaction and Release.......................................22
1.20.9. No Obligations.................................................22
1.20.10. Rights in Litigation and Bankruptcy............................22
1.20.11. Additional Lease Provisions....................................23
1.20.12. Assignment to Beneficiary Controlling..........................25
1.21. Environmental Covenants and Representations..............................25
1.22. Release..................................................................26
1.22.1. Satisfaction of Obligations....................................26
1.22.2. Release of Building; Partial Releases..........................26
1.23. Transfers, Indebtedness and Subordinate Liens............................27
1.23.1. Transfers......................................................27
1.23.2. Indebtedness...................................................27
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1.23.3. Additional Permitted Transfers................................27
1.23.4. Delivery of Documents to the Beneficiary......................28
1.24. Utility Services.........................................................28
2. EVENTS OF DEFAULT................................................................28
2.1. Payment Default..........................................................28
2.2. Material Breach of Representation and Warranty...........................28
2.3. Material Breach of Covenant..............................................28
2.4. Event of Default Under Loan Agreement....................................29
3. REMEDIES.........................................................................29
3.1. Legal Proceedings; Cost of Enforcement...................................29
3.1.1. Legal Proceedings...............................................29
3.1.2. Cost of Enforcement.............................................29
3.2. Acceleration.............................................................29
3.3. Right to Perform Grantor's Covenants, Etc................................29
3.4. Possession Upon Default..................................................30
3.4.1. Surrender or Taking of Possession...............................30
3.4.2. Entering into Possession........................................30
3.4.3. Satisfaction of Default.........................................31
3.5. Sale of Property.........................................................31
3.6. Appointment of Receiver..................................................32
3.7. Trustees Authorized to Execute Deeds, Etc................................32
3.8. Purchase of the Property by the Beneficiary..............................33
3.9. Foreclosure of Personalty................................................33
3.10. Receipt a Sufficient Discharge to Purchaser..............................33
3.11. Sale Shall be a Bar Against Grantor......................................33
3.12. Application of Proceeds of Sale and Other Monies.........................33
3.13. Remedies Cumulative......................................................34
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
3.14. No Waiver, Etc...........................................................34
3.15. Cross-Collateralization; Waiver of Marshalling, Appraisal, Valuation.....34
4. CONCERNING TRUSTEES..............................................................35
4.1. Acts of One Trustee Valid................................................35
4.2. Removal and Substitution of Trustees.....................................35
4.3. Trustee's Compensation, Expenses, Etc....................................36
5. MISCELLANEOUS....................................................................36
5.1. Notices..................................................................36
5.2. Invalidity of Any Provision; Entire Agreement............................37
5.3. Amendment................................................................37
5.4. Parties Bound and Benefited..............................................37
5.5. Effect of Renewal, Amendment, Waiver, Etc................................37
5.6. Estoppel Certificates....................................................37
5.7. Headings.................................................................38
5.8. Pronouns.................................................................38
5.9. Governing Law; Service of Process........................................38
5.10. Waiver of Jury Trial.....................................................38
5.11. Limitation of Liability..................................................39
5.12. Assignment to Finance Trustee............................................39
5.12.1. Anticipated Assignment..........................................39
5.12.2. Recognition of Finance Trustee as Beneficiary...................40
5.12.3. Delivery of Amounts to Servicer.................................40
6. DEFINITIONS......................................................................40
6.1. Certain Defined Terms....................................................40
</TABLE>
<PAGE> 7
EXHIBITS
EXHIBIT A Description of Land
<PAGE> 8
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY
AGREEMENT, AND FIXTURE FILING (this "Deed of Trust") is made and entered into as
of this 8th day of June, 1998, by and between ARDEN REALTY FINANCE III, L.L.C.,
a Delaware limited liability company having its principal offices at 11601
Wilshire Boulevard, Los Angeles, California 90025 ("Grantor") to COMMONWEALTH
LAND TITLE COMPANY (the "Trustee"), for the benefit of LEHMAN BROTHERS REALTY
CORPORATION having an address at Three World Financial Center, 200 Vesey Street,
New York, New York 10285 ("Beneficiary").
RECITALS
A. Beneficiary has, on or about the date hereof, made a loan (the
"Loan") to Grantor in the aggregate principal amount of One Hundred Thirty-Six
Million One Hundred Thousand Dollars ($136,100,000.00) pursuant to that certain
Loan Agreement by and between Beneficiary and Grantor, dated as of June 8, 1998
(the "Loan Agreement"), which Loan is evidenced by the Mortgage Note (the
"Mortgage Note") of even date herewith by Grantor to the order of Beneficiary
(together with its successors and assigns thereto, the "Noteholder") in the
aggregate principal amount of the Loan, which Mortgage Note has a final maturity
date of April 16, 2028.
B. The Grantor is the owner of, among other things, a fee interest in
the twenty-two (22) parcels of land described on Exhibit A-1 through Exhibit
A-22 attached hereto and incorporated herein (collectively, the "Land").
C. On each parcel of Land is located one or more office buildings (the
building or buildings located on an individual parcel of Land, whether one or
more, shall be known as a "Building" and the buildings located on all twenty-two
(22) parcels of Land collectively shall be known as the "Buildings").
D. In connection with the execution and delivery of the Mortgage Note
and as additional security for the Mortgage Note, Grantor is executing and
delivering this Deed of Trust for the purpose of granting, conveying,
transferring and assigning to the Trustee for the benefit of the Beneficiary a
first priority lien on and security interest in all of Grantor's right, title
and interest in and to the Land, together with the Buildings and all other
buildings, structures, parking structures, fixtures and improvements now or
hereafter located or placed thereon (which Buildings and other buildings,
structures, fixtures and improvements, together with any additions thereto or
alterations or replacements thereof, are sometimes herein referred to as the
"Improvements") and in certain other Property more fully described herein, as
security for the Loan and the payment and satisfaction when due of the
Obligations (as defined herein).
E. Without limiting Beneficiary's rights otherwise to assign this Deed
of Trust, the Loan Agreement, the Mortgage Note and all other Loan Documents (as
defined in the Loan Agreement), all of Beneficiary's rights under this Deed of
Trust, the Loan Agreement, the Mortgage Note and all other Loan Documents (as
defined in the Loan Agreement) may be assigned by Beneficiary, along with
mortgage loans made to other borrowers, to, among others, an institutional
trustee (the "Finance Trustee") under the Pooling and Servicing Agreement (as
defined in the Loan Agreement) for the benefit of the holders from time to time
of certain mortgage-backed certificates (the "Certificates"), and may be
serviced by a professional loan servicing company selected by Beneficiary (the
"Servicer") on behalf of the Finance Trustee.
F. A glossary of capitalized terms used herein may be found at Article
VI hereof.
NOW, THEREFORE, in order to secure: (i) payment by Grantor, as and when
due, of the principal of and interest on the Mortgage Note, (ii) any Defeasance
Deposits and Yield Maintenance Payments (as defined in the Loan Agreement) that
may become due thereunder or under any other Loan Document, (iii) any and all
other amounts that may become due and payable under the Mortgage Note, (iv) the
payment of all amounts payable under this Deed of Trust, the Loan Agreement and
the other Loan Documents, (v) the performance by Grantor of its covenants and
agreements contained in this Deed of Trust, the Loan Agreement and the other
Loan Documents, (vi) if the Securitization has occurred, the reimbursement by
Grantor to Beneficiary of all sums required to be paid
<PAGE> 9
by Beneficiary under the Pooling and Servicing Agreement as the same may be
amended, modified or supplemented (the items in clauses (i) through (vi) of this
paragraph being sometimes collectively referred to herein as the "Obligations");
and for other good and valuable consideration, the receipt and sufficiency of
which the parties hereto acknowledge, Grantor, Beneficiary and the Trustee by
these presents do hereby agree as follows:
GRANTING CLAUSES
Grantor by these presents hereby grants, bargains, sells, assigns,
mortgages, pledges, conveys, confirms, transfers and warrants to the Trustee,
and its successors and assigns, IN TRUST for Beneficiary, with power of sale and
right of entry and possession, all estate, right, title and interest of Grantor,
whether now owned or hereafter acquired, and grants to the Trustee for the
benefit of Beneficiary a security interest in and to, all right, title and
interest of Grantor in and to the following (such right, title and interest of
the Grantor being hereinafter referred to as the "Property"):
(i) the Land described in Exhibit A-1 through Exhibit A-22
attached hereto, together with the Buildings and all other Improvements located
on the Land;
(ii) all rights and interests appurtenant to or benefiting the
Land and/or the Improvements, including, without limitation, (a) all easements,
rights of way, streets, ways, alleys or passages, all sewer rights, water, water
courses, water rights and powers, riparian rights, and public places adjoining,
benefiting or appurtenant to said Land, and any other interests in property
constituting appurtenances to the Land or the Improvements, or which hereafter
shall in any way belong, relate or be appurtenant thereto and all land lying in
the bed of any street, road or avenue opened or proposed, in front of or
adjoining the Land and (b) all hereditaments, tenements, gas, oil, minerals and
mineral rights and other rights of every kind and nature whatsoever, relating to
or located in, on or under the Land or the Improvements and all other rights and
privileges thereunto belonging or appertaining, and all extensions, additions,
improvements, betterments, renewals, substitutions and replacements to or of any
of the rights and interests described in subparagraphs (a) and (b) above
(hereinafter, together with the items described in Granting Clause (i) and the
real property, if any, described in Granting Clause (iii) being hereinafter
sometimes referred to as the "Real Property Rights");
(iii) all real and personal property of whatever kind or nature
whatsoever used or useful in the operation of the Buildings, or any of them or
the other Improvements, or in any way related to the Land, the Buildings of any
of them or the other Improvements, whether located on, affixed to, or attached
to the Land, the Buildings or the other Improvements or otherwise related
thereto or arising therefrom, and whether tangible or intangible, direct or
indirect, fully matured or contingent, and all extensions, additions,
improvements, betterments, renewals, substitutions, and replacements to or of
any of the foregoing, including, without limitation all machinery; all
equipment; all screens, window shades, blinds, storm doors and windows; all
lighting, laundry, incinerating and power equipment; all engines, boilers,
machines, motors, furnaces, compressors and transformers, all generating
equipment; all pumps, tanks, ducts, conduits, wires, switches, fans,
switchboards, and other electrical equipment and fixtures; all telephones,
televisions, radios, remote control units, cable boxes, and other electronic
equipment and all vending machines; all piping, tubing, plumbing equipment and
fixtures; all heating, refrigeration, air conditioning, cooling, ventilating,
sprinkling, water, power and communications equipment, systems and apparatus;
all fire prevention, alarm and extinguishing systems and apparatus; all lift,
elevator and escalator equipment and apparatus; all partitions, exterior and
interior signs, gas fixtures, stoves, ovens, refrigerators, garbage disposals
and compactors, dishwashers, cabinets, mirrors, mantles, floor coverings,
carpets, rugs, draperies and other furnishings and furniture installed or to be
installed or used or usable in any way in the operation of any Improvements or
appurtenant facilities erected or to be erected in or upon any of the Land; and
all sculpture, art and other artifacts; it being mutually intended, agreed and
declared by the parties hereto that all items of the foregoing property that now
are or hereafter become attached or affixed to any of the Land or the
Improvements in such a way as to constitute them "fixtures" under applicable law
(the "Fixtures"), shall, to the fullest extent permitted by law, be deemed to be
and form a part of the Land and Improvements and, for purposes of this Deed of
Trust, shall be deemed to be real estate subject to the lien created by this
Deed of Trust;
(iv) any and all additions and accessions to the foregoing, and
all proceeds thereof, including,
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<PAGE> 10
without limitation, proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
all Awards (as defined in Section 1.9 hereof) and other payments as a result of
any Taking (as defined in Section 1.9 hereof), all Insurance Proceeds (as
defined in Section 1.8 hereof), and all proceeds of the title insurance referred
to in Section 1.3 hereof, together with all amounts received by the Beneficiary
or the Trustee or due and payable to the Trustee or the Beneficiary pursuant to
this Deed of Trust, including, without limitation, any unearned premiums or
refunds of premiums on any insurance policies covering all or any part of the
Land or Improvements and the right to receive and apply the proceeds of any
insurance, or of any judgments or settlements made in lieu thereof for damage to
or diminution of the Land or Improvements, in accordance with the terms of this
Deed of Trust;
(v) all real estate tax refunds and credits and all awards or
payments, including interest on any of them, and the right to receive the same,
which Grantor may have, which may be made with respect to any of the Land or any
Improvements whether from a Taking thereof or for any other injury to, decrease
in the value of, or other occurrence affecting any of the Land or any
Improvements, subject, in each case, to the rights of tenants under any leases
or subleases of the Property to the extent such leases are not subordinate to
the terms of this Deed of Trust;
(vi) all leases and other agreements affecting the use, enjoyment
or occupancy of the Land, the Buildings and the Improvements or any portion
thereof heretofore or hereafter entered into, whether before or after the filing
by or against Grantor of any petition for relief under 11 U.S.C. Section 101 et
seq., as the same may be amended from time to time (the "Bankruptcy Code") (the
"Leases"), and all right, title and interest of Grantor, its successors and
assigns therein and thereunder including, without limitation, cash or securities
deposited thereunder to secure the performance by the lessees of their
obligations thereunder and all Rents (as defined in the Loan Agreements),
additional rents, revenues, issues and profits (including all oil and gas and
other mineral royalties and bonuses, if any) from the Land, the Buildings and
the Improvements whether paid or payable under Leases or otherwise and whether
paid or accruing before of after the filing by or against Grantor of any
petition for relief under the Bankruptcy Code (the "Rents") and all proceeds
from the sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Obligations;
(vii) all present and future licenses, contracts or other
agreements relating to the ownership of the Land and/or the Improvements
(including all of Grantor's rights under any contracts for the sale of any
portion of the Land or the Improvements, and all revenues and royalties under
any oil, gas and mineral leases relating to the Land) (collectively, the
"Contracts") and revenues derived by the Grantor therefrom and otherwise from
the Land and Improvements;
(viii) all "general intangibles" (as defined the Uniform
Commercial Code in effect in the State of California and, to the extent a
broader definition is contained therein, in the State of New York) (the
"U.C.C.") relating to any of the Land or any of the Improvements, including,
without limitation, to the extent assignable, all rights relating to design,
development, operation, and use of the Land or Improvements, all certificates of
occupancy, zoning variances, building, use or other permits, approvals,
authorizations, licenses and consents obtained from any governmental agency in
connection with the development, use, operation or management of any of the Land
or any of the Improvements, all construction, service, engineering, consulting,
architectural and other similar contracts concerning the design, construction,
operation, occupancy and/or use of any of the Land or any of the Improvements,
all architectural drawings, plans, specifications, soil tests, appraisals,
engineering reports and similar materials relating to all or any portion of the
Land or Improvements, and all payment and performance bonds or warranties or
guarantees relating to any of the Land or any of the Improvements; all rights in
the Lockbox Account, the Cash Collateral Account, the TI Reserve Account, the
Tax and Insurance Escrow Account and any investments of Rents, rights of Grantor
in the Management Agreement (as defined in the Loan Agreement), the Contribution
Agreement (as defined in the Loan Agreement), Grantor's limited liability
company agreement, and all rights under the Leases, all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source and business identifiers, trademark
registrations and applications for registration used exclusively at or relating
exclusively to any part of the Property; all renewals, extensions and
continuations-in-part of the items referred to above; any written agreements
granting to Grantor any right to use any trademark or trademark registration at
or in connection with any part of the Property; and the right
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<PAGE> 11
of Grantor to sue for past, present and future infringements of the foregoing;
and the right in the name and on behalf of Grantor to appear in and defend any
action or proceeding brought with respect to any part of the Property and to
commence any action or proceeding to protect the interest of the Beneficiary in
such Property;
(ix) all "accounts," "goods," "documents," "instruments," and
"chattel paper" (as those terms are defined in the U.C.C.), including, without
limitation, equipment, inventory, motor vehicles, all items of personal property
of the kind described in clause (iii) above, all stocks, bonds, interests in
mutual funds and other investments, all rights under equipment leases, all bills
of lading and warehouse receipts, and other assets of any kind;
(x) all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Property, hereafter acquired by or released to Grantor or constructed,
assembled, or placed by Grantor thereon, immediately upon such acquisition,
release, construction, assembling or placement, as the case may be, and in each
such case, without any further mortgage, conveyance, assignment or other act by
Grantor, any of such extensions, improvements, betterments, renewals,
substitutes and replacements shall become subject to the lien of this Deed of
Trust, and the security and other interests created hereby, as fully and
completely, and with the same effect, as though now owned by Grantor and
specifically described herein; and
(xi) all other proceeds (including, without limitation, as
defined in the U.C.C.), both cash and noncash, of the foregoing which may be
sold or otherwise disposed of.
TO HAVE AND TO HOLD the said Property unto the Trustee, in trust for the
benefit of Beneficiary, and its or their successors and assigns forever to
secure payment to Beneficiary of the full principal and interest on the Mortgage
Note and the performance by Grantor of the other Obligations thereunder, under
this Deed of Trust and under the other Loan Documents; provided, however, that,
except as otherwise provided in Schedule 5.11 to the Loan Agreement, unless and
until an Event of Default (as defined in Article II hereof) shall have occurred
and be continuing, Grantor shall have the right to possess and enjoy the
Property, and to receive the rents, issues, and profits therefrom, subject to
the terms of the Loan Agreement, the Mortgage Note, this Deed of Trust, and the
other Loan Documents; and provided, further, that if the Grantor shall pay and
satisfy in full the principal of and interest on the Mortgage Note and all other
monetary Obligations which this Deed of Trust by its terms secures, then the
lien of this Deed of Trust shall be released by the Trustee to Grantor upon the
written request and at the expense of Grantor; and provided, further, that
nothing herein contained shall be construed as constituting Beneficiary or the
Trustee as a mortgagee-in-possession unless and to the extent Beneficiary or the
Trustee shall have taken actual possession of the Land and Improvements;
provided, further, that nothing contained in this Deed of Trust shall be
construed as imposing on Beneficiary or the Trustee any of the obligations of
the lessor under any lease of the Land or the Improvements, or of any contract
party to any of the Leases or the Contracts, unless the Beneficiary or the
Trustee shall have foreclosed the lien of this Deed of Trust or expressly
assumed such obligations in writing; and provided, further, that all items of
the foregoing Property that may constitute collateral of the kind in which a
security interest may be created and perfected under the Uniform Commercial Code
as in effect in the State in which the Land is located shall be subject to the
grant of security interest made in Section 1.17 hereof, which Section 1.17 shall
be supplemental to, and shall not be deemed to limit, supersede or impair, these
Granting Clauses.
AND IT IS HEREBY COVENANTED AND AGREED by Grantor, for itself and its
heirs, legal representatives, successors, and assigns, that the Property is to
be held and applied subject to the terms herein set forth, and Grantor, for
itself and its heirs, legal representatives, successors, and assigns, hereby
covenants and agrees with Beneficiary (and the Trustee for the benefit of
Beneficiary, as applicable), as follows:
ARTICLE I
1. COVENANTS, REPRESENTATIONS AND WARRANTIES
1.1. Payment of Mortgage Note; Performance of Other Obligations
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<PAGE> 12
Grantor represents and warrants that it has duly authorized, executed,
issued and delivered the Mortgage Note, this Deed of Trust and the other Loan
Documents and covenants that it shall duly and punctually pay and perform all of
its Obligations as the same shall become due and payable, and shall otherwise
duly, fully and timely comply with all of the terms, covenants, conditions, and
agreements contained in (or incorporated into) this Deed of Trust, the Mortgage
Note and the other Loan Documents.
1.2. General Representations, Warranties and Covenants
Grantor hereby covenants, represents and warrants that:
1.2.1. Authority, Enforceability, Etc.
This Deed of Trust, the Mortgage Note and all of the other Loan
Documents executed by Grantor have been duly executed and delivered by Grantor
pursuant to authority legally adequate therefor, and Grantor has been and is
authorized and empowered by all necessary persons having the power of direction
over it to execute and deliver this Deed of Trust, the Mortgage Note and each
such other Loan Document and to carry out the transactions contemplated herein
and therein. Each of this Deed of Trust, the Mortgage Note and each such other
Loan Document is a legal, valid and binding obligation of Grantor, enforceable
against Grantor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law); and
1.2.2. No Defaults
Grantor is not now in default in any material respect under any
instruments or obligations relating to all or any part of the Property, and no
party has asserted in writing any material claim of default against Grantor
relating to all or any part of the Property. The execution and delivery by
Grantor of this Deed of Trust, the Mortgage Note, the Loan Agreement or any
other Loan Document, and the consummation of the transactions contemplated
hereby or thereby, will not result in any breach of, or constitute a default
under, any mortgage, lease, loan agreement, credit agreement, trust indenture,
deed of trust, or other instrument, contract or agreement to which Grantor is a
party or by which it or the Property (or any part thereof) is bound or affected,
nor do any such instruments, contracts or agreements impose any obligations upon
Grantor that are inconsistent with the obligations imposed on Grantor hereunder
or under the Mortgage Note, the Loan Agreement or any other Loan Document; and
1.2.3. No Litigation
There are no actions, investigations, suits or proceedings (including,
without limitation, any condemnation or bankruptcy proceedings) pending or, to
Grantor's knowledge, threatened against or affecting any of the Property, which
may materially and adversely affect any of the Property or the validity or
enforceability of this Deed of Trust, the Mortgage Note, the Loan Agreement, or
any other Loan Document, at law or in equity, or before or by any governmental
authority, and Grantor is not in default with respect to any writ, injunction,
decree or demand of any court or any governmental authority affecting any of the
Property; and
1.2.4. Compliance with Law, Etc.
All of the Property and the use, operation and maintenance thereof
comply in all material respects with (and Grantor is in compliance in all
material respects with) all restrictive covenants, zoning and subdivision
regulations, and ordinances and building codes applicable to the Property, and
each Building and other Improvement complies in all material respects with the
requirements of the Americans with Disabilities Act of 1990, and all rules,
regulations and orders issued pursuant thereto, to the extent applicable
thereto; and
1.2.5. Good Title
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<PAGE> 13
Grantor is well seized and possessed of, and is transferring to the
Trustee, good, valid and marketable fee simple title in and to the Land and
Improvements, and good and valid title to all of the other Property, in each
case, free and clear of any mortgage, deed of trust, lien, claim, option,
encumbrance, encroachment, reservation, right of way, easement, covenant, lease,
condition or restriction, pledge, security interest, hypothecation, assignment,
assigned deposit arrangement, charge or defect of any kind, or any preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including, without limitation, any conditional sale or other
title retention agreement (all of the foregoing being hereinafter referred to
each individually as a "Lien" and collectively as "Liens"), subject only to the
following (the "Permitted Liens and Encumbrances") (none of which Permitted
Liens and Encumbrances do or will materially or adversely interfere with (x) the
ability of Grantor to pay the Obligations in full or (y) the use, operation or
value of any of the Property as of the date hereof):
(i) Liens created by the Loan Documents in favor of the
Beneficiary (or the Trustee, as applicable);
(ii) Liens, if any, for taxes, assessments and other
charges that are not yet due or payable (or are due and payable but not yet
delinquent);
(iii) Applicable building and zoning laws and regulations
and other applicable laws and regulations affecting the use and occupancy of any
of the Property;
(iv) Liens of mechanics and materialmen currently
affecting the Property against which the Beneficiary has been adequately insured
by the applicable Title Insurance Policy described in Section 1.3 hereof and
future liens of mechanics or materialmen for work or services for which payment
is not yet due or the payment of which is being contested by appropriate
proceedings in accordance with Section 1.5.3 hereof and as to which Grantor has
deposited with the Beneficiary the amounts required by Section 6.2 of the Loan
Agreement;
(v) Matters set forth on Schedule B to the Title Insurance
Policies;
(vi) INTENTIONALLY DELETED
(vii) Easements, restrictions, covenants, reservations and
rights of way granted in the ordinary course of business for traffic
circulation, ingress, egress, parking, access, water and sewer lines, telephone
and telegraph lines, electric lines or other utilities or for other similar
purposes that are not encroached upon by the Improvements;
(viii) the Leases;
(ix) Liens securing purchase money financing or finance
leasing of the kind permitted by Section 1.5.2 hereof; and
(x) Matters described as "Permitted Liens" in the Loan
Agreement; and
1.2.6. Covenant of Title
Grantor, at its own expense, does hereby and shall forever warrant and
defend to the Trustee for the benefit of Beneficiary, and its or their
successors and assigns forever, title to the Property as described in Section
1.2.5 and the lien and interest of the Trustee created by this Deed of Trust on
and in the Property, and the first priority thereof, against all claims and
demands of any and all persons whomsoever, and shall maintain and preserve such
title and lien so long as the Mortgage Note, the Loan Agreement, this Deed of
Trust, or any other Loan Document is outstanding and until such time as all sums
secured hereby and thereby have been paid in full and all other Obligations have
been duly performed; and
1.2.7. Negative Pledge
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<PAGE> 14
Except as set forth in Sections 1.5.2 and 1.23 hereof, during the term
of this Deed of Trust, Grantor shall not, directly or indirectly, assign,
transfer, pledge, convey, mortgage or encumber, or permit the assignment,
transfer, pledge, conveyance, mortgaging or encumbrance of, any or all of
Grantor's legal or equitable interest in the Property, other than Permitted
Liens and Encumbrances, without the prior written consent of the Beneficiary;
and
1.2.8. Necessary Permits
Grantor owns, or otherwise has the right to use or is in possession of,
all licenses, permits and government approvals or authorizations that are
required by applicable law to occupy and conduct its operations on or in the
Land and Improvements as currently conducted, except to the extent the lack of
any such license, permit, approval or authorization would not reasonably be
expected to materially adversely affect the occupancy of the Land or
Improvements or any portion thereof, the operation or value of the Improvements
or any portion thereof or the ability of Beneficiary or the Trustee as
applicable to exercise their rights or remedies hereunder; and
1.2.9. Flood Zone
No portion of the Improvements is located in an area identified by the
Secretary of Housing and Urban Development as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the Flood
Disaster Act of 1973, as amended, or any successor law, or, if located within
any such area, Grantor has obtained and will maintain the insurance prescribed
in Section 1.7.1(iv); and
1.2.10. Separate Tax Lot; Assessments
(a) Each Individual Property is assessed for real estate tax purposes as
one or more wholly independent tax lot or lots, separate from any adjoining land
or improvements not constituting a part of such lot or lots, and no other land
or improvements is assessed and taxed together with the Property or any portion
thereof; and
(b) To Grantor's knowledge, there are no pending or, proposed, special
or other assessments for public improvements or otherwise affecting any of the
Property, nor, to Grantor's knowledge, are there any contemplated improvements
to any of the Property that may cause or result in any special or other
assessments.
1.3. Title Insurance
The Grantor has delivered or caused to be delivered to the Beneficiary
one or more prepaid Mortgagee's policies of title insurance (each a "Title
Insurance Policy" and collectively, the "Title Insurance Policies") issued by
Commonwealth Land Title Insurance Company or another title insurance company
reasonably satisfactory to Beneficiary (singly or collectively, the "Title
Company"), insuring the interest of Beneficiary as holder of a valid
first-priority mortgage, deed of trust, or similar lien upon good and marketable
fee simple title to the Land and Improvements in a total amount equal in the
aggregate to the original principal amount of the Mortgage Note, subject only to
Permitted Liens and Encumbrances. All proceeds received by Beneficiary or the
Trustee for any loss under such title insurance policy, or under any title
insurance policies delivered to Beneficiary in substitution therefor or in
replacement thereof, shall be received by Beneficiary and distributed in the
manner set forth in Section 2.4.5 of the Loan Agreement.
1.4. Recordation; Preservation of Lien
Grantor, at its expense, shall at all times cause this Deed of Trust and
all amendments and supplements hereto, and such financing statements,
continuation statements, and other instruments as may be reasonably required by
Beneficiary or the Trustee, or applicable law to be recorded, registered, and
filed in such manner and in such places as may be required or advisable under
applicable law in the good faith judgment of Beneficiary or the Trustee to
establish, preserve, maintain, and protect the lien of this Deed of Trust on all
or substantially all of the Property (including, without limitation, any of the
Property acquired after the execution hereof), and to perfect and maintain the
security interest granted by this Deed of Trust or any other Loan Document with
respect to the
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<PAGE> 15
Property referred to herein, and shall pay all recording, registration, filing,
and other taxes, fees, and charges relating thereto, and shall comply in all
material respects with all laws, rules, and regulations in connection therewith.
1.5. Taxes, Liens, and Permitted Encumbrances
1.5.1. Taxes
Subject to the right of contest described in Section 1.5.3 hereof,
Grantor shall pay all taxes, assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof), ground rents, water, sewer and other rents,
rates and charges, excises, levies, license fees, permit fees, inspection fees,
common area maintenance fees, dues and fees owing to property owners'
associations having jurisdiction over any of the Property and other
authorization fees and other charges (collectively, "Impositions"), in each case
whether general or special, ordinary or extraordinary, foreseen or unforeseen,
public or private, of every character (including all interest and penalties
thereon), which at any time from and after the date hereof may be assessed,
levied, confirmed or imposed on or in respect of, or be a lien upon (i) the
Property, or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (ii) any occupancy, use or possession of or activity
conducted on the Property or any part thereof. Such payments shall be made
before any fine, penalty, interest or cost may be added for nonpayment. At
Beneficiary's request, Grantor shall furnish to Beneficiary official receipts or
other satisfactory proof evidencing such payments. Upon default by Grantor in
the payment of any such tax, assessment or other charge, unless the same is
being properly contested in accordance with Section 1.5.3 hereof, Beneficiary
may (but shall have no obligation to) pay or cause to be paid the amount
thereof, together with any amount of interest or penalties that may be due with
respect thereto, and such amounts (together with any expenses incurred by
Beneficiary in connection therewith, including, without limitation, reasonable
attorneys' fees and charges) shall be secured by this Deed of Trust and shall be
repaid upon demand, together with interest thereon at the Default Interest Rate
specified in the Loan Agreement.
1.5.2. Liens; Permitted Encumbrances
The Grantor shall not effect any financing using the Property or any
part thereof as security, except for (i) the Loan and (ii) purchase money
financings or finance leasing of particular items of furniture, fixtures and
equipment to the extent permitted under the Loan Agreement, and shall not
directly or indirectly create or permit or suffer to be created or to remain,
and will discharge, or promptly cause to be discharged, any Lien on or with
respect to the Property or any part thereof, or Beneficiary's or the Trustee's,
as applicable, interest therein, other than (1) this Deed of Trust, and (2) the
Permitted Liens and Encumbrances.
1.5.3. Permitted Contests
Anything to the contrary contained herein notwithstanding, Grantor, at
its expense, may contest, by appropriate legal, administrative or other
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Impositions, including any
taxes, assessments, charges or other amounts required to be paid pursuant to the
provisions of this Section 1.5, or the application of any instrument of record
affecting the Property or any part thereof (other than the Loan Documents), or
any claims or judgments of mechanics, materialmen, suppliers, vendors or other
Persons or any Lien therefor, or any other charge or cost imposed on the Grantor
or all or any part of the Property and may withhold payment of the same pending
such proceedings if permitted by law; provided that (i) in the case of any
Impositions or liens therefor or any claims or judgments of mechanics,
materialmen, suppliers, vendors or other Persons or any liens therefor, such
proceedings shall suspend the collection thereof, (ii) neither the Property nor
any part thereof or interest therein would be in danger of being sold, forfeited
or lost during the pendency of such contest, and the Grantor will pay or satisfy
the underlying claim if the Grantor does not prevail in the contest or if
payment or satisfaction is required to avoid the sale, forfeiture or loss of the
Property (and, where required by Section 6.2 of the Loan Agreement and as
further security hereunder, deposit with the Beneficiary, or, following the
assignment contemplated by Section 5.12 hereof, the Servicer, such amounts in
connection with such contest as are required by Section 6.2 of the Loan
Agreement),
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(iii) in the case of an obligation with respect to the insurance requirements
set forth in Section 1.7 hereof, the failure of Grantor to comply therewith
shall not impair the validity of any insurance required to be maintained by
Grantor under Section 1.7 or the right to full payment of any claims thereunder,
(iv) in the case of taxes, if an amount can be contested without being paid, the
Grantor shall deposit (where required by Section 6.2 of the Loan Agreement) with
the Beneficiary, or, following the assignment contemplated by Section 5.12
hereof, the Servicer (to the extent not deposited with Beneficiary or the
Servicer, as applicable, pursuant to the foregoing subsection (ii)) in
accordance with Section 6.2 of the Loan Agreement one hundred twenty-five
percent (125%) of the amount being contested together with interest and
penalties reasonably expected to accrue thereon for so long as such amount is
due and payable and unpaid, (v) in the case of any utility service, any contest
or failure to pay will not result in a discontinuance of any such service, and
(vi) in the case of any instrument of record affecting the Property or any part
thereof, the contest or failure to perform under any such instrument shall not
result in the placing of any Lien on the Property or any part thereof unless
such Lien is bonded or otherwise discharged or enforcement thereof is stayed.
1.5.4. No Credit for Payment of Taxes or Impositions
Grantor shall not be entitled to any credit against the principal of or
interest, if any, payable on the Mortgage Note, and the Grantor shall not be
entitled to any credit against any other amounts which may become payable under
the terms thereof or hereof, by reason of the payment of any tax on the Property
or any part thereof or by reason of the payment of any other Imposition or other
amount required to be paid hereunder. No deduction shall be made or claimed from
the taxable value of the Property or any part thereof by reason of this Deed of
Trust.
1.6. Care of the Property
1.6.1. Condition of the Property
Grantor shall keep the Property in good and clean order and condition
and repair in accordance with the requirements of the Loan Agreement, shall not
commit or suffer waste thereto, and shall not do or suffer to be done anything
that will increase the risk of fire or other hazard to the Property or any
material part thereof and shall in accordance with the requirements of the Loan
Agreement keep all Property used or useful in its business in good repair,
working order and condition, and from time to time make all necessary or
appropriate repairs thereto and renewals and replacements thereof.
1.6.2. Alterations; Building Only
The Grantor shall not remove or demolish or materially alter the overall
design or structural character of the Improvements or impair the structural
integrity thereof or of any other part of the Property except in accordance with
Section 1.8 or Section 1.11 hereof, as applicable, and shall at all times use
the Property or cause the Property to be used only for the purpose of operating
the Land and Improvements in substantially the same manner as currently
operated; provided, however, that Grantor shall be permitted to make alterations
and repairs to the Property without restriction as reasonably necessary to
maintain the Property in as good condition as existed on the date hereof,
reasonable wear and tear excepted.
1.6.3. Right to Inspect
Beneficiary and the Trustee or their representatives or both are hereby
authorized to enter upon and inspect the Property at their own cost (or, upon
the occurrence and during the continuation of an Event of Default, at the
Grantor's cost) at any time upon reasonable notice and during normal business
hours; provided, however, that Beneficiary and the Trustee must at all times use
reasonable efforts to minimize any disruption to the operations on the Land.
1.6.4. Compliance with Laws and Covenants
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Grantor shall promptly comply with (a) all present and future Laws
affecting the Property or any part thereof, (b) all conditions, covenants,
restrictions, common area maintenance, reciprocal easement and similar
agreements affecting the Property or any part thereof and (c) all Laws necessary
for the operation and maintenance of the Improvements in the manner they are
currently operated and maintained. Grantor shall not initiate, join in,
acquiesce in, or consent to any change in any private restrictive covenant,
zoning law or other public or private restriction, limiting or defining the uses
which may be made of the Property or any part thereof; if under applicable
zoning provisions the use of all or any portion of the Property is or shall
become a nonconforming use, Grantor will not cause or permit the nonconforming
use to be discontinued or abandoned without the express written consent of
Beneficiary.
1.7. Insurance
1.7.1. Risks to Be Insured
Grantor (or its designee), at the Grantor's expense, will obtain and
maintain in full force and effect at all times until all Obligations have been
fully paid and performed, with Qualified Insurance Companies (as that term is
defined in Section 1.7.2), insurance against the following risks:
(i) Loss and damage by fire and all other casualties on or
to the Property as are included in the form of casualty insurance commonly
referred to as "extended coverage" (including, without limitation, windstorm,
explosion and such other risks as are typically insured against by owners of
like properties in the area in which the Buildings are located) in such amounts
as are reasonably satisfactory to Beneficiary, but in no event less than one
hundred percent (100%) of the full replacement cost of the Property (exclusive
of excavation and foundations and without deduction for physical depreciation)
and in no event less than the amount required to prevent Grantor from becoming a
co-insurer within the terms of the applicable policies and in no event less than
the outstanding amount of the Obligations; such insurance shall contain an
"Ordinance or Law Coverage" or "Enforcement" endorsement if any of the
Improvements or the use of the Property constitute legal, non-conforming
structures or uses;
(ii) Comprehensive public liability insurance on an
"occurrence basis" against claims for personal injury, including without
limitation, bodily injury, death or property damage occurring on, in or about
the Property with a combined single limit of not less than Three Million Dollars
($3,000,000) with respect to personal injury or death to one or more persons and
with "umbrella" liability coverage of not less than Twenty-Five Million Dollars
($25,000,000), or such greater amounts as may from time to time be required by
institutional lenders for similar loans;
(iii) Business interruption insurance for an amount not
less than the greater of (x) twenty-four (24) months gross income from the
Property and (y) estimated operating expenses (including debt service) for the
Property for a twenty-four (24) month period that commences on the effective
date of said insurance policy or each renewal thereof, as applicable (in either
case on an "actual loss sustained" basis) covering the same risks as are covered
by the policies described in Section 1.7.1(i);
(iv) If the Land is located in an area designated by the
U.S. Department of Housing and Urban Development as a flood hazard area,
insurance for the peril of flood as is available through the National Flood
Insurance Program;
(v) Broad form boiler and machinery insurance on a
"comprehensive" form in an amount adequate to provide protection against the
maximum amount of damage possible to building, improvements and contents
resulting from explosion or other occurrences relating to boilers, pressure
vessels, machinery and equipment on or about the Property;
(vi) Workers' compensation insurance in such forms and in
such amounts as may be required by the laws of each state in which any Building
is located;
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(vii) A blanket policy of insurance insuring the Property
against damage by earthquake in an aggregate insured amount not less than
Twenty-Two Million Three Hundred Thousand Dollars ($22,300,000) and having a
deductible of not more than five percent (5%) per unit subject to a One Hundred
Thousand ($100,000) minimum or such other earthquake insurance as may be
required by Section 8.3 of the Loan Agreement (a unit being defined as each
Building on an Individual Property); and
(viii) Such other insurance as is generally available on
commercially reasonable terms and is generally required by institutional lenders
on loans secured by properties similar to any Individual Property.
1.7.2. Qualified Insurers
An insurer satisfying the applicable requirements of this Section 1.7.2
shall be deemed to be a "Qualified Insurance Company."
All primary insurers must be authorized to issue insurance in the State
of California. All primary insurance coverage required by Section 1.7.1 (other
than flood insurance and workers' compensation insurance) shall be provided by
one or more insurers having a rating for claims paying ability of at least "AA"
from S&P and an equal or equivalent rating from at least one other Rating
Agency. If permitted by the laws of the State of California, the insurance
required by clause (vi) of Section 1.7.1 may be provided by a state approved and
regulated employer's self-insurance fund.
1.7.3. Policy Provisions
All insurance policies required by Section 1.7.1 shall be on forms, with
endorsements and with deductible amounts reasonably satisfactory to Beneficiary
(but in no event shall a deductible amount exceed ten percent (10%) of the
policy limits above). All policies of insurance required by Sections 1.7.1(i),
(iii), (iv), (v) and (vii) shall contain suitable loss-payable and standard
noncontribution mortgagee clauses acceptable to and in favor of Beneficiary or
the Trustee and their assigns. If an Event of Default shall have occurred at the
time of receipt of any insurance proceeds, Beneficiary or the Trustee may, at
Beneficiary's option, apply the same to the repayment of the Obligations in
accordance with the Mortgage Note or other Loan Documents. In all other cases,
proceeds of such insurance shall be applied in the manner contemplated by
Section 1.8 hereof.
All policies of insurance maintained by Grantor pursuant to this
Section 1.7.2 shall:
(i) Name Beneficiary and the Trustee as additional
insureds or loss payees, as applicable, as their respective interests may
appear;
(ii) provide that Beneficiary shall be advised in writing
of any casualty insurance claims exceeding One Hundred Thousand Dollars
($100,000) before payment thereon is made and, except in the case of worker's
compensation and public liability insurance, that all proceeds for losses of One
Hundred Thousand Dollars ($100,000) or less, shall be paid to and adjusted by
Grantor, and all proceeds for losses of more than One Hundred Thousand Dollars
($100,000) shall be paid to Beneficiary or Grantor in accordance with Section
1.8.3 and adjusted by Grantor with approval of Beneficiary, pursuant to a
mortgagee endorsement acceptable to Beneficiary;
(iii) provide that the casualty insurance (or insurance
otherwise known as property insurance) shall not be impaired or invalidated by
virtue of (A) any act, failure to act, or neglect of Grantor, (B) the occupation
or use of the insured properties for purposes more hazardous than permitted by
the terms of the policy, (C) any foreclosure or other proceeding or notice of
sale relating to the insured properties, or (D) any change in the possession of
the insured properties without a change in the identity of the holder of actual
title to the Property (provided that with respect to items (C) and (D), any
notice requirements of the applicable policies are satisfied);
(iv) provide that no material changes or mid-term
cancellation shall be effective until at least thirty (30) days after receipt of
written notice thereof by Grantor and Beneficiary (and no termination for
non-payment of premium shall be effective until at least ten (10) days after
receipt of written notice thereof by
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Grantor and Beneficiary), with Beneficiary having the opportunity, but being
under no obligation, to pay all moneys or to do any act necessary to prevent
such alteration, cancellation, termination or expiration or to cause such
renewal, the cost thereof, together with interest thereon at the Default
Interest Rate provided for in the Loan Agreement, to be added to the
indebtedness of Grantor under the Mortgage Note and to be secured hereby;
(v) include effective waivers by the insurer of all claims
for insurance premiums against all loss payees and additional insureds (other
than Grantor) and, where applicable, all rights of subrogation against any loss
payee, additional insured or named insured;
(vi) permit Beneficiary to pay the premiums and continue
any insurance upon failure of Grantor to pay premiums when due, upon the
insolvency of Grantor, or through foreclosure or other transfer of title to the
Property or any portion thereof (it being understood that Grantor's rights to
coverage under such policies may not be assignable without the consent of the
provider); and
(vii) be reasonably satisfactory to Beneficiary in all
other respects.
The insurance required to be maintained by clauses (i), (ii), (iii),
(iv) and (v) of Section 1.7.1 may be provided by a blanket policy so long as the
blanket policy complies with the terms of this Section 1.7 and Beneficiary is
provided with reasonably satisfactory evidence that the policy limits required
hereunder are satisfied by such policy and that such coverage and limits will be
no less than those that would be provided under separate policies even if there
is a total loss of all properties covered by the blanket policy.
1.7.4. Delivery of Certificates
Prior to the execution of this Deed of Trust, and thereafter not less
than fifteen (15) days prior to the expiration date of any policy required
pursuant to this Section 1.7, Grantor will deliver to the Beneficiary original
certificates of the insurers for all policies of insurance required by this Deed
of Trust, which shall bear notations evidencing the payment of premiums then due
and payable and the date through which said coverage is made effective by the
evidenced payment. Grantor also shall deliver to Beneficiary from time to time,
at Beneficiary's request, (i) schedules setting forth all such insurance then in
effect and (ii) certified copies of all such policies.
1.7.5. No Separate Insurance
Grantor will not take out separate insurance of the kind described in
clauses (i), (iii), (iv), (v) or (vii) of Section 1.7.1 or other forms of
casualty insurance concurrent in form or contributing in the event of loss with
that required to be maintained pursuant to this Section 1.7 unless such
insurance complies with Sections 1.7.2 and 1.7.3.
1.8. Damage to or Destruction of Property
1.8.1. Notice
In case of any material damage to or destruction of the Property or any
part thereof (each, a "Casualty"), Grantor will, promptly upon becoming aware
thereof, give written notice thereof to Beneficiary describing the nature and
extent of such damage or destruction.
1.8.2. Restoration
In case of a Casualty to one or more of the Individual Properties (each,
a "Casualty Property"), Grantor, whether or not the insurance proceeds
(hereafter "Insurance Proceeds") on account of such Casualty shall be sufficient
for such purpose, at its expense, will promptly commence and complete the
restoration, replacement or rebuilding of the Casualty Property as nearly as
possible to its value, condition and character immediately prior to such
Casualty (such restoration, replacement, and rebuilding, together with any
temporary repairs and property protection pending completion of the work, being
herein referred to as the "Restoration"), provided, however, in the
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event that (i) the Restoration adversely affects the cash flow from the Casualty
Property in any material respect and cannot reasonably be expected to be
completed within a period of twelve (12) months after the date of the Casualty
(or, if shorter, by the date on which the proceeds of business interruption
insurance will no longer be available) or (ii) the extent of the damage makes it
impracticable in Grantor's good faith business judgment, to restore the Casualty
Property to substantially the same condition as existed prior to the Casualty or
the Casualty results in the permanent loss of access to the Casualty Property or
the Improvements thereon or (iii) the Casualty Property and the use thereof
after the Restoration would not be in material compliance with and permitted
under all applicable laws, or (iv) the Insurance Proceeds payable on account of
such Casualty equal or exceed the Allocated Loan Amount applicable to the
Casualty Property, then Restoration shall not be required or permitted and
instead the Insurance Proceeds shall be collected and paid over to Beneficiary
up to the amount of the Allocated Loan Amount for such Casualty Property (with
any excess to be paid to Grantor) and the amount thereof shall be held and
applied by Beneficiary (or the Servicer on its behalf in accordance with Section
5.12.3 hereof) (net of any amounts necessary to avoid or eliminate any hazardous
condition on the Casualty Property or to prevent imminent and substantial
physical deterioration of the Casualty Property), (a) (i) if applied prior to
the first day of the Defeasance Period, to prepayment of the outstanding
principal balance of the Mortgage Note, without the requirement of a Yield
Maintenance Payment, in accordance with Section 2.7 of the Loan Agreement, or
(ii) if applied during the Defeasance Period and after the Securitization has
occurred, to the purchase of U.S. Obligations in accordance with Section 2.5 and
Section 2.9 of the Loan Agreement, or (iii) if applied after the Defeasance
Period, to prepayment of the outstanding principal balance of the Mortgage Note,
in accordance with Section 2.10 of the Loan Agreement, without the requirement
of a Yield Maintenance Payment and (b) to the payment of all other indebtedness
which this Deed of Trust secures in such order as is contemplated under the Loan
Documents; provided, however, that such prepayment must be in an amount at least
equal the greater of (A) the Allocated Loan Amount for such Casualty Property
and (B) the Net Sales Proceeds received by Grantor from the sale of the Casualty
Property or the part thereof that remains following the Casualty (plus any
remaining Insurance Proceeds not previously applied to repayment of the Loan or
Restoration), but in no event more than the Release Price of such Casualty
Property, regardless of the amount of Insurance Proceeds, and shall be payable
by Grantor (and the amounts described in the immediately preceding parenthetical
phrase shall not be deducted from the Insurance Proceeds to the extent that the
same shall not be sufficient to pay the Allocated Loan Amount plus such
interest).
1.8.3. Application of Insurance Proceeds or Awards
All Insurance Proceeds received by any one or more of Grantor,
Beneficiary or Trustee, on account of any Casualty affecting the Property or any
part thereof (less the costs, fees and expenses reasonably incurred by
Beneficiary or Trustee, as applicable, in the collection thereof, including,
without limitation, all adjusters' fees and expenses and reasonable attorneys'
fees and charges, which shall be deemed to be incurred for the account of
Grantor) shall be delivered to and held by Grantor, if such Insurance Proceeds
total two and one-half percent (2.5%) of the Allocated Loan Amount applicable to
the Casualty Property, or less, in the aggregate for a single Casualty or, if
the amount of such Insurance Proceeds is more than two and one-half percent
(2.5%) of the Allocated Loan Amount applicable to the Casualty Property, to
Beneficiary to be held by Beneficiary (or the Servicer on its behalf in
accordance with Section 5.12.3 hereof) and applied in accordance with the terms
hereof. Except as provided in Section 1.8.2, all Insurance Proceeds shall be
used and applied in either case, so long as no Default or Event of Default shall
have occurred and be continuing, to reimburse Grantor for the cost of
Restoration from time to time as Restoration progresses, and advances of funds
held by Beneficiary shall be made within thirty (30) days after Grantor's
written request for reimbursement; provided, however, that if the cost of
Restoration as to which Insurance Proceeds have been paid or are payable in
connection with any single Casualty exceeds or is expected to exceed two and
one-half percent (2.5%) of the Allocated Loan Amount applicable to the Casualty
Property, Beneficiary shall have the right to approve the plans and
specifications for such Restoration before the Restoration work begins, to
appoint a Qualified Supervising Professional to oversee the Restoration, and to
require as a condition to the release of funds to pay the costs of such
Restoration (A) a certificate of the Qualified Supervising Professional
certifying (x) that the amount that Beneficiary is requested to advance is
necessary to pay invoices for work completed that have been submitted to Grantor
(and which have not previously been paid), (y) that the amount of Insurance
Proceeds and other funds of Grantor, if required by this Section, that
Beneficiary will hold following payment of the requested advance is expected to
be sufficient to complete the Restoration, and (z) that the Restoration work for
which such proceeds are requested has been completed in accordance with the
approved plans
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and specifications and with applicable law, (B) lien waivers from all
materialmen, laborers and contractors who are to be paid with such advances, (C)
an endorsement to the title policy described in Section 1.3 hereof relating to
the Casualty Property insuring against mechanic's liens that may arise out of
the Restoration, and (D) such other documents as Beneficiary or the Trustee may
request; and provided, further, that if the cost of Restoration as to which
Insurance Proceeds have been paid or are payable in respect of the applicable
Casualty is (or is expected to be) five percent (5%) of the Allocated Loan
Amount applicable to the Casualty Property or less, in lieu of the documentation
referred to in clauses (A) and (B) of the preceding proviso, Beneficiary will
accept a certificate of an officer of the Grantor certifying to the matters
described in subparts (x), (y) and (z) of said clause (A). The balance of the
Insurance Proceeds held by Beneficiary or the Trustee, or both, shall at no time
be reduced below the amount necessary to complete the Restoration (and any
Restoration costs that cannot be paid out of the remaining balance thereof as a
result of this proviso shall be deposited by Grantor with the Beneficiary, or
its agent, promptly after demand therefor, out of Grantor's own funds). Upon
receipt by Beneficiary or the Trustee of the documents required and the
subsequent payment in full of the costs of Restoration, the balance, if any, of
any Insurance Proceeds shall be applied first, to the Reserve Account to the
extent the amount or deposit in the Reserve Account is less than the Reserve
Requirement, then if the Securitization has been effected, to the Finance
Trustee and the Servicer under the Pooling and Servicing Agreement, if
applicable, and thereafter shall be paid to Grantor or any other Person entitled
thereto; provided, however, that all such proceeds which pursuant to this
Section 1.8.3 are payable to Grantor shall, if an Event of Default has occurred
and is continuing, be paid to Beneficiary to be held and distributed in
accordance with the provisions of Section 5.12.3 hereof.
1.9. Condemnation
1.9.1. Grantor to Give Notice, Etc.
In case of any taking during the term hereof of all or any part of the
Property, or the taking or transfer of any interest therein or right accruing
thereto, as the result of or in lieu or in anticipation of the exercise of the
right of condemnation or eminent domain by any governmental authority (each
hereinafter a "Taking"), Grantor will promptly give written notice thereof to
Beneficiary and Trustee describing the nature and extent of the Taking or any
potential Taking, or the nature of the proceedings and negotiations for such
Taking or potential Taking and the nature and extent of the Taking or potential
Taking which might result therefrom, as the case may be. Trustee or Beneficiary,
or both, may appear in any proceedings for a Taking or potential Taking or any
negotiations relating to a Taking or potential Taking. Grantor will promptly
give the Trustee and Beneficiary copies of all notices, pleadings,
determinations, and other papers related to any such Taking or potential Taking
proceeding. The Grantor will, in good faith and with due diligence, file and
prosecute its claims for any award or payment on account of any Taking
(hereinafter an "Award"), and will pay all costs and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and charges and
the reasonable expenses of the Trustee and of Beneficiary) in connection with
any such Taking, including expenses incurred in seeking and obtaining any Award.
Such costs and expenses, to the extent advanced or paid by Beneficiary or the
Trustee, shall be deemed paid on behalf of Grantor, shall constitute
indebtedness secured by this Deed of Trust, shall be repayable by Grantor upon
demand and shall bear interest at the Prime Rate (as defined in the Loan
Agreement) plus one percentage point (1%) from the date of demand until paid,
provided that Trustee and Beneficiary shall have no obligation to make such
advances or payments.
1.9.2. Total and Substantial Taking
In the case of (i) a Taking of the fee or leasehold of an entire
Individual Property, or (ii) a Taking resulting in the imposition of a perpetual
easement on an entire Individual Property that materially impairs the operation
of such Individual Property, or (iii) a Taking that adversely affects the cash
flow from an Individual Property in any material respect and as to which any
necessary Restoration cannot reasonably be expected to be completed within
twelve (12) months from the date of the Taking and Restoration as defined in
Section 1.8.2 is permitted under Section 1.8.2 then, in any such event, any
Award shall be collected and paid over to the Beneficiary to be held by
Beneficiary in accordance with the provisions of Section 1.8.3 and Section
5.12.3 hereof and the amount thereof (net of any amounts necessary to avoid or
eliminate any hazardous condition on the Individual Property and/or to
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prevent imminent and substantial physical deterioration of the Individual
Property), shall be applied by Beneficiary (a) (i) if applied prior to the first
day of the Defeasance Period, to prepayment of the outstanding principal balance
of the Mortgage Note without the requirement of a Yield Maintenance Payment, or
(ii) if applied during the Defeasance Period and after the Securitization has
occurred, to the purchase of U.S. Obligations in accordance with Section 2.5 of
the Loan Agreement, or (iii) if applied after the Defeasance Period, to
prepayment of the outstanding principal balance of the Mortgage Note in
accordance with Sections 2.6 and 2.7 of the Loan Agreement, without the
requirement of a Yield Maintenance Payment and (b) to the payment of all other
indebtedness which this Deed of Trust secures in such order as is contemplated
under the Loan Documents; provided, however, that such prepayment must be in an
amount at least equal to the greater of (A) the Allocated Loan Amount and (B)
the sum of the Net Sales Proceeds received by Grantor from the sale of the
affected Individual Property or the part thereof that remains following the
Taking (plus any remaining Award not previously applied to repayment of the Loan
or Restoration), but in no event more than the Release Price, regardless of the
amount of the Award and shall be payable by Grantor (and the amounts described
in the immediately preceding parenthetical phrase shall not be deducted from the
applicable Award to the extent that the same shall not be sufficient to pay the
Allocated Loan Amount plus such interest).
1.9.3. Partial and Temporary Taking
In the case of any Taking other than a Taking referred to in Section
1.9.2 hereof, and in case such Taking requires repairs to or Restoration of the
affected Individual Property in order to maintain the quality of the operations
of the Individual Property, any Award shall be paid over to Grantor or
Beneficiary, as applicable, to be used or to be held and distributed in
accordance with the provisions of Sections 1.8.3 and 5.12.3 hereof in the same
manner as if such Taking were a Casualty affecting such Individual Property and
as if such Award constituted Insurance Proceeds relating thereto, except that
any amount of the Award not used to pay for any necessary Restoration shall be
applied by Beneficiary to the prepayment of the Mortgage Note, and to the
payment of all other indebtedness which this Deed of Trust secures, all in the
manner contemplated by Section 2.4.3 of the Loan Agreement.
1.10. Notices Concerning the Property
Grantor shall deliver to Beneficiary promptly upon receipt of same,
copies of all notices, certificates, documents, and instruments received by it
which materially affect the Property as a whole, any Individual Property or
Beneficiary's rights hereunder.
1.11. Alterations
1.11.1. Alteration Conditions
Provided that no Event of Default shall have occurred and be continuing,
Grantor may, subject to the terms of this Section 1.11.1 undertake any
alteration, expansion, improvement, demolition or removal (each, an
"Alteration") of any Individual Property or any portion thereof so long as such
Alteration (i) is undertaken with Beneficiary's prior written consent where the
estimated cost of the Alteration exceeds five percent (5%) of the Allocated Loan
Amount applicable to such Individual Property, (ii) is undertaken in accordance
with the applicable provisions of this Deed of Trust and the other Loan
Documents, (iii) is paid for from reserves established by the Grantor or from
capital contributions by the members of Grantor that are deposited with
Beneficiary or the Servicer, as applicable, prior to the commencement of such
work, which amounts (including, in either case, additional deposits made from
time to time to prevent a deficiency between the amount then on deposit with
Beneficiary and the amount reasonably estimated at such time to complete the
Alteration) shall be held by Beneficiary (or Servicer on its behalf in
accordance with Section 5.12.3 hereof), and (iv) could not reasonably be
expected (A) to decrease the value of the Individual Property, (B) to impair the
utility and operation of the Individual Property in a manner consistent with its
current use and operation and as required by the Loan Documents, (C) upon
completion, to reduce the Net Operating Income from the Individual Property
below the level available immediately prior to commencement of such Alteration
(except in the case of tenant improvement work), (D) to result in any Lien being
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placed on the Individual Property (other than mechanics' liens filings for
amounts not yet due and payable that are not yet forecloseable under the
applicable Laws of the State of California) or (E) to adversely affect the
ability of the Grantor to pay and perform the Obligations or make principal and
interest payments with respect to the Mortgage Note as and when due. Any
Alteration which involves an estimated cost of more than five percent (5%) of
the Allocated Loan Amount applicable to the Individual Property shall be
conducted under the supervision of a Qualified Supervising Professional selected
by Beneficiary, to oversee such Alteration, and no such Alteration as to which
plans and specifications are required by any Laws and which involves an
estimated cost of more than five percent (5%) of the Allocated Loan Amount
applicable to the Individual Property shall be undertaken until detailed plans
and specifications and cost estimates therefor have been approved in writing by
Beneficiary and such Qualified Supervising Professional. Such plans and
specifications may be revised at any time and from time to time provided that
material revisions of such plans and specifications are approved by Beneficiary,
such approval not to be unreasonably withheld, together with the written
approval thereof by such Qualified Supervising Professional. All work done in
connection with any Alteration shall be performed with due diligence in a good
and workmanlike manner, all materials used in connection with any Alteration
shall not be less than the standard of quality of the material currently used at
the Individual Property, and all work performed and all materials used shall be
in accordance with all applicable Laws and insurance requirements. Grantor shall
be entitled to a disbursement from the Reserve Account (as defined in the Loan
Agreement) to pay for the cost of an Alteration only in the event such
Alteration constitutes an Approved Capital Expenditure (as defined in Section
5.2 of the Cash Management Procedures) and the other conditions to a
disbursement from the Reserve Account set forth in Section 5.2 of the Cash
Management Procedures have been satisfied.
1.11.2. Right to Inspect
Beneficiary and any Persons authorized by it at all reasonable times and
upon reasonable notice may enter and examine the Individual Property and may
inspect all work done, labor performed and materials furnished in respect of any
Alteration. Beneficiary shall not have any duty to make any such inspection and
shall not have any liability or obligation for making or not making any such
inspection.
1.11.3. Cooperation
Beneficiary will cooperate with Grantor and execute and deliver to
Grantor such instruments and agreements as are reasonably requested of it by
Grantor, at Grantor's expense, in order to consummate or facilitate any
Alteration permitted hereby (provided the same shall not subject Beneficiary to
any risk of liability or cost not paid for by Grantor).
1.12. Indemnification by the Grantor
Grantor shall protect, defend, and indemnify Beneficiary and the
Trustee, and each of Beneficiary's and the Trustee's officers, directors and
employees (collectively the "Indemnitees") from and against any and all losses,
liabilities, obligations, claims, damages, penalties, causes of action, fines,
judgments, penalties, charges, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and charges, whether
based on private agreements or in tort, contract, implied or express warranties,
statute, regulation, common law, or otherwise, imposed upon or incurred by or
asserted against such Indemnitee (each a "Claim" and collectively "Claims")
including Claims in connection with any investigative, administrative or
judicial proceedings, by reason of:
1.12.1. the Lien of this Deed of Trust on the Property or any
interest therein, or receipt of any rent or other sum from the Property;
1.12.2. any accident to, injury to or death of persons or loss of
or damage to property occurring on or about the Property or the adjoining
sidewalks, curbs, vaults or vault space, if any, streets or ways;
1.12.3. the ownership, leasing, use, non-use or condition of the
Property or the adjoining sidewalks, curbs, vaults or vault space, if any,
streets or ways;
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1.12.4. any failure on the part of Grantor to perform or comply
with any of the terms of this Deed of Trust, the Mortgage Note, the Loan
Agreement, any other Loan Document, or any agreement or document referred to
herein or therein; or
1.12.5. performance of any labor or services or the furnishing of
any materials or other property in respect of the Property or any part thereof
for construction or maintenance or otherwise.
The provisions of this Section 1.12 shall survive the termination of
this Deed of Trust; provided, however, that, notwithstanding anything contained
in this Section 1.12 to the contrary, the foregoing indemnity provisions in
favor of any Indemnitee shall not extend to claims arising out of the gross
negligence or willful misconduct of such Indemnitee. Any amounts payable to any
Indemnitee under this Section 1.12 which are not paid within ten (10) days after
written demand therefor shall bear interest at the lesser of (i) a rate per
annum equal to the Default Interest Rate or (ii) the maximum rate per annum then
permitted by law from the date of such demand and, to the fullest extent
permitted by law, shall be secured by this Deed of Trust. In the event any
action, suit or proceeding is brought against any Indemnitee by reason of any
such occurrence, notice thereof shall be given to Grantor promptly after such
Indemnitee becomes aware of any Claim or threat of Claim against which such
Indemnitee is indemnified hereunder. Grantor, upon the request of the
Indemnitees and at Grantor's expense, shall resist and defend such action, suit
or proceeding or cause the same to be resisted and defended by counsel
designated by Grantor and reasonably acceptable to the Indemnitees. The
Indemnitees will, insofar as is possible without risking material conflicts of
interests, coordinate their claims under this Section 1.12 and act through a
single counsel.
1.13. Expenses
Grantor, on demand, shall pay or reimburse (a) Beneficiary and the
Trustee for all reasonable costs and expenses, including, without limitation,
reasonable attorneys' fees and charges, incurred by Beneficiary or the Trustee
in any action, legal proceedings or dispute of any kind with respect to which
Beneficiary or the Trustee are made parties, or in which any appear as party
plaintiff or defendant, affecting the Property or any part thereof, this Deed of
Trust or the indebtedness secured hereby, including, without limitation, any
Taking involving any of the Property or any action to protect the security
hereof or thereof and (b) the Finance Trustee and the Servicer, if applicable,
for any amounts required to be paid pursuant to the Pooling and Servicing
Agreement and any amounts described in clauses (a) and (b) above that are paid
by Beneficiary or the Trustee and not reimbursed as aforesaid shall be added to
the Obligations secured by the Lien of this Deed of Trust.
1.14. Monthly Escrow Deposits
Without limiting its obligations under the Cash Management Procedures,
Grantor, upon request of Beneficiary, following an Event of Default, shall
deposit in escrow with Beneficiary monthly, commencing on the due date of the
next installment of principal and/or interest under the Mortgage Note, a sum
which, in the good faith estimation of Beneficiary shall be equal to one-twelfth
of the taxes, assessments, and hazard insurance premiums on the Property coming
due in the next succeeding twelve (12) months, and such escrow deposits shall be
held by the Beneficiary free of any liens or claims on the part of creditors,
and shall, except as otherwise provided in this Section 1.14, be used by
Beneficiary to pay taxes, assessments, and insurance premiums on the Property as
the same accrue and are payable. To the extent anything in this Section 1.14
conflicts with the requirements of the Cash Management Procedures, the
provisions of the Cash Management Procedures shall be controlling. If the amount
of such escrow deposits is insufficient to pay the taxes, assessments, and
insurance premiums in full as the same become payable, Grantor shall immediately
pay to Beneficiary such additional sums as are necessary in order for
Beneficiary to pay such taxes, assessments, and insurance premiums in full as
they become due. If the amount of such escrow deposits shall exceed payments
made by Beneficiary for such taxes, assessments, and insurance premiums, the
excess so deposited shall be credited to subsequent deposits to be made by
Grantor under this Section 1.14. Upon the occurrence and during the continuation
of any Event of Default, Beneficiary, may, at its option, apply any money in the
fund resulting from said escrow deposits to the payment of the Obligations in
the manner and in the order contemplated by Section 2.4.3 of the Loan Agreement.
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1.15. Further Assurances
At any time, and from time to time, upon request by Beneficiary or the
Trustee, as applicable, Grantor, at its expense, shall make, execute, deliver,
and record, or cause to be made, executed, delivered, and recorded, any and all
further instruments, certificates, and other documents, and shall take all such
further actions as may, in the reasonable opinion of Beneficiary or the Trustee
be necessary or desirable in order to effectuate, complete, perfect, continue,
and/or preserve the obligations of Grantor under this Deed of Trust, the lien
hereof, and all modifications, extensions, and other amendments hereof or
hereto.
1.16. Additions to Security
All right, title, and interest of Grantor in and to all extensions,
improvements, betterments, renewals, substitutes, and replacements of, and all
additions and appurtenances to the Property, hereafter acquired by or released
to the Grantor or constructed, assembled or placed by Grantor on the Property,
and all conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further pledge, grant of
security interest, conveyance, assignment or other act by Grantor of any kind,
shall, to the fullest extent permitted by law, become subject to the lien of
this Deed of Trust as fully and completely, and with the same effect, as though
now owned by Grantor and specifically described in the granting clauses hereof,
but at any and all times Grantor shall execute and deliver to Beneficiary or the
Trustee, as applicable, any and all such further assurances, deeds of trust,
conveyances or assignments thereof as Beneficiary or the Trustee, as applicable,
may reasonably require for the purpose of expressly and specifically subjecting
the same to the lien of this Deed of Trust.
1.17. U.C.C. Security Agreement and Fixture Filing
1.17.1. Grant of Security
This Deed of Trust is intended to be, among other things, a security
agreement within the meaning of the Uniform Commercial Code as in effect in each
of the State of New York and the State of California with respect to all
Property in which a security interest may be created and perfected under the
Uniform Commercial Code (the "U.C.C. Collateral"). Grantor hereby grants to
Beneficiary a security interest in and to all of Grantor's right, title, and
interest in all such U.C.C. Collateral to secure the Obligations. Grantor hereby
agrees that it will not change the location of its principal place of business
or the place where its books and records are kept from the location described in
Section 5.5 of the Loan Agreement without first giving Beneficiary at least
thirty (30) days advance written notice thereof. Any completely executed
counterpart of this instrument may be filed as a mortgage on real property or
fixtures, as a security agreement or financing statement on personal property,
or as both.
1.17.2. Financing Statements
Grantor shall cause financing and continuation statements and other
instruments with respect to the U.C.C. Collateral at all times to be kept
recorded, filed or registered in such manner and in such places as may be
required by law as fully as possible to evidence, perfect and secure the
interests of Beneficiary in all of the U.C.C. Collateral, and shall pay all
filing fees in connection therewith.
1.17.3. Multiple Remedies
If an Event of Default shall have occurred and be continuing,
Beneficiary shall have the option of proceeding, to the extent permitted under
applicable law, as to both real and personal property in accordance with its
rights and remedies in respect of the real property as an alternative to
proceeding in accordance with the provisions of the U.C.C., and Beneficiary may
exercise any and all of the other rights of a secured party under the U.C.C. All
of Beneficiary's rights and remedies hereunder, under any other Loan Document,
at law, under statute or otherwise shall be deemed cumulative and not exclusive
or exhaustive, and the exercise of any one remedy shall not impair Beneficiary's
right simultaneously or at any time or in any order to exercise any other remedy
nor shall the exercise
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of any remedy in one case impair or otherwise affect Beneficiary's right or
ability to exercise such remedy contemporaneously or again in the same case or
in any other case.
1.17.4. Waiver of Rights
To the extent permitted under applicable law, Grantor waives all rights
of redemption after foreclosure and all other rights and remedies of a debtor
under the Uniform Commercial Code or other applicable law, and all formalities
prescribed by law relative to the sale or disposition of the U.C.C. Collateral
(other than notice of sale) after the occurrence and during the continuation of
an Event of Default and all other rights and remedies of Grantor with respect
thereto. In exercising its right to take possession of the U.C.C. Collateral
upon the occurrence and during the continuation of an Event of Default
hereunder, Beneficiary, personally or by its agents or attorneys, and subject to
the rights of any Tenant (as hereinafter defined), may enter upon any part of
the Land without being guilty of trespass or any wrongdoing, and without
liability for damages thereby occasioned, except damages arising from
Beneficiary's gross negligence or willful misconduct. In the event Beneficiary
elects to proceed with respect to the U.C.C. Collateral, separately from the
real property, Beneficiary shall give at least ten (10) days notice of the sale
of the U.C.C. Collateral, which shall for all purposes be deemed to be
commercially reasonable.
1.17.5. Expenses of Disposition of the Properties
Grantor shall reimburse the Beneficiary, on demand, for all reasonable
expenses of retaking, holding, preparing for sale, lease or other use or
disposition, selling, leasing or otherwise using or disposing of the U.C.C.
Collateral which are incurred, including all reasonable attorneys' fees and
expenses, and all such expenses shall be added to Grantor's Obligations secured
hereby.
1.17.6. Fixture Filing
To the fullest extent permitted by law, this instrument, upon recording
or registration in the real estate records of the proper office of each City or
County in which a Building is located, shall constitute a "fixture-filing"
within the meaning of Sections 9-313 and 9-402 of the U.C.C. (or the local
state-law equivalents of such sections). The address of the Grantor, which is
the "Debtor" for purposes of the U.C.C. and this Section 1.17, and Beneficiary,
which is the "Secured Party" for purposes of the U.C.C. and this Section 1.17,
from whom information regarding the U.C.C. Collateral may be obtained, are as
stated in Section 5.1 of this Deed of Trust. Grantor agrees to sign any separate
"fixture filing" financing statements or similar instruments as Beneficiary may
request to confirm and perfect the security interest in fixtures intended to be
created by this Section 1.17.6.
1.18. INTENTIONALLY DELETED
1.19. Compliance with Access Laws
Grantor shall cause the Buildings and the other Improvements and the
Land to comply in all material respects with the requirements of the Americans
with Disabilities Act of 1990, all state and local laws and ordinances related
to access by the handicapped or disabled and all rules, regulations, and orders
issued pursuant thereto including, without limitation, the Americans with
Disabilities Act Accessibility Guidelines for Buildings and Facilities
(collectively, the "Access Laws"), to the extent such Access Laws are applicable
to the Buildings and the other Improvements, and give prompt notice to
Beneficiary of the receipt by Grantor of any complaints related to violation at
the Buildings or the other Improvements of any Access Laws and of the
commencement of any proceedings or investigations which relate to compliance at
the Buildings and the other Improvements with applicable Access Laws and will
use diligent efforts promptly to resolve the issues set forth in any such
complaint, proceedings or investigation.
1.20. Assignment of Rents and Grantor's Interest in Leases;
Lease Covenants
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1.20.1. Assignment and License
The assignment by Grantor in Granting Clause (vi) of this Deed of Trust
of all of Grantor's right, title and interest, if any, in and to all present and
future Leases by Grantor, as landlord, to any other Person, as tenant (each a
"Tenant"), shall also be deemed to be an assignment of any and all
modifications, renewals, extensions or replacements thereof, and of any
guaranties of the Tenant's obligations under any Lease (each, a "Guaranty") and
shall be deemed to be, and is, a present, absolute, effective, irrevocable and
complete assignment by Grantor to Beneficiary of the Leases and Guaranties and
the right to collect all Rents and all other sums payable to Grantor thereunder
and apply the same against the Obligations in accordance with the terms of this
Deed of Trust, which assignment is not conditioned upon Beneficiary being in
possession of the Property. However, so long as no Event of Default shall have
occurred and be continuing, Grantor shall have a license, to collect, receive
and retain from the Tenants under the Leases rent and all other sums payable
under the Leases, to enforce the obligations of Tenants under the Leases and to
exercise all the rights and remedies of the landlord under the Leases (except as
otherwise provided Schedule 5.11 to the Loan Agreement), subject, however, to
compliance with the provisions of this Deed of Trust. The portion of all sums
received by Grantor under the license granted hereby equal to the Obligations
then due and owing, shall be held in trust for the benefit of Beneficiary and
used, as necessary, to pay the Obligations then due and owing.
1.20.2. Rights and Powers Assigned
The assignment referred to in Section 1.20.1 shall include, without
limitation, an assignment of
(i) the immediate and continuing right to receive and
collect all amounts payable by all Tenants, subtenants or other parties pursuant
to the Leases and any Guaranty;
(ii) all claims, rights, powers, privileges and remedies
of the Grantor, whether provided for in any Lease or Guaranty or arising by
statute or at law or in equity or otherwise, upon any failure on the part of any
Tenant to perform or comply with any term of any Lease;
(iii) all right to take all action upon the happening of a
default under any Lease or Guaranty as shall be permitted by any Lease or by
law, including, without limitation, the commencement, conduct and consummation
of proceedings at law or in equity; and
(iv) the full power and authority, in the name of Grantor
or otherwise, to enforce, collect, receive and make receipt for any and all of
the foregoing and to do any and all other acts and things whatsoever that
Grantor is or may be entitled to do under any Lease or Guaranty.
1.20.3. No Set-Off
Grantor hereby waives any and all right to assert any setoff or
counterclaim of any nature whatsoever with respect to the Obligations in any
action or proceeding by Beneficiary to collect any such Rents or other sums, or
to enforce and realize upon the lien and security interest created by this
Section 1.20 or any other Loan Documents, provided, however, that Grantor
expressly reserves the right to assert any such claim in a separate proceeding
and provided further that Grantor expressly reserves the right to assert any
claim in the same action commenced by Beneficiary if such claim is of a
mandatory or compulsory nature or would be barred or materially impaired if not
asserted in the action commenced by Beneficiary.
1.20.4. Termination of License
If any Event of Default shall have occurred and be continuing, the
license granted in Section 1.20.1 hereof shall immediately cease and terminate,
without waiver of such Event of Default, with or without notice, any action or
proceeding, or the intervention of a receiver appointed by a court, and
Beneficiary or an agent or receiver appointed by Beneficiary (including, without
limitation, Trustee) may, without regard for the adequacy of the security for
the indebtedness secured hereby, the commission of waste or the solvency of
Grantor, and subject to
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applicable statutory requirements, if any, do any or all of the following:
(i) exercise any of Grantor's rights under the Leases and
Guaranties, including notifying Tenants to pay rent to an account or location
selected by Beneficiary or the Trustee;
(ii) enforce the Leases and Guaranties;
(iii) demand, collect, sue for, attach, levy, recover,
receive, compromise and adjust, and make, execute and deliver receipts and
releases for all rents or other payments that may then be or may thereafter
become due, owing or payable with respect to the Leases and Guaranties;
(iv) demand that any sums held by Grantor with respect to
any Lease or Guaranty (including, but not limited to, any security deposits,
other deposits or prepayments) be immediately remitted to Beneficiary or the
Trustee, to the extent permitted by applicable law; and
(v) generally, do, execute and perform any other act,
deed, matter or thing whatsoever that ought to be done, executed and performed
in and about or with respect to the Leases and Guaranties.
1.20.5. Right to Collect Upon Event of Default
Grantor hereby irrevocably authorizes and directs each Tenant under a
Lease and each other party under a Guaranty, upon receipt of notice from
Beneficiary that an Event of Default has occurred and is continuing, to pay
directly to, or as directed by, Beneficiary all rents, issues and profits
accruing or due under such Lease or Guaranty from and after the receipt of such
notice. Grantor agrees that any Tenant under a Lease or any party to a Guaranty
shall have the right to rely upon the notice from Beneficiary, and shall pay
such rents, issues and profits to or as directed by Beneficiary without any
obligation to inquire into the actual existence of any Event of Default claimed
by Beneficiary, and notwithstanding any notice from or contrary claim by
Grantor, and Grantor shall have no right or claim for any rents, issues or
profits so paid to Beneficiary.
1.20.6. Leases Unaffected
Grantor at its expense will prudently enforce in all material respects
each of the Leases and Guaranties in accordance with their terms to the extent
any failure so to enforce would reasonably be expected to have a material
adverse effect on the operation of any of the Buildings or other Improvements,
the value thereof, or the ability of Beneficiary or the Trustee, as applicable,
to exercise their rights and remedies hereunder. Neither the execution and
delivery of this Deed of Trust or any other Security Document nor any action or
inaction on the part of Beneficiary shall release (i) any Tenant from its Lease,
(ii) any guarantor from any Guaranty or (iii) Grantor from any of its
obligations under the Leases or constitute an assumption of any such obligation
under the Leases on the part of Beneficiary. No action or failure to act on the
part of Grantor shall, to the fullest extent permitted by applicable law,
adversely affect or limit the rights of Beneficiary under this Deed of Trust or,
through this Deed of Trust, under the Leases and Guaranties.
1.20.7. Inconsistent Actions Void
During the term hereof, all rights, powers and privileges of Beneficiary
herein set forth are coupled with an interest and are irrevocable, subject to
the terms and conditions hereof, and Grantor will not take any action under the
Leases or Guaranties or otherwise which is inconsistent with this Deed of Trust
or any of the terms hereof or thereof, and any such action inconsistent herewith
or therewith shall, to the fullest extent permitted by law, be void. Any further
assignment of any rents, issues, or profits from the Property shall to the
fullest extent permitted by law be void except as permitted by the terms hereof.
To the fullest extent permitted by applicable law, Grantor hereby waives any
requirement that Beneficiary commence any foreclosure proceeding with respect to
any or all of the Mortgaged Properties prior to enforcement of any remedies
pursuant to this Section 1.20, including the right to commence and prosecute an
action to appoint a receiver for rents and all other amounts due under any
Leases.
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Grantor will, from time to time, upon request of Beneficiary, at Grantor's sole
cost and expense, execute on a non-recourse basis all instruments and further
assurances and all supplemental instruments and take all such actions as
Beneficiary from time to time may reasonably request in order to perfect,
preserve and protect the interests intended to be assigned to Beneficiary by
this Section 1.20.
1.20.8. Satisfaction and Release
Upon satisfaction of the requirements of Section 1.22 hereof providing
for a release of the lien of this Deed of Trust, the assignment made in this
Section 1.20 and all rights hereunder assigned to Beneficiary shall cease and
terminate and shall revert to Grantor.
1.20.9. No Obligations
This Section 1.20 shall not be construed to bind Beneficiary or the
Trustee to the performance of any of the covenants, conditions or provisions
contained in any Lease or Guaranty or otherwise impose any obligation upon
Beneficiary or the Trustee. Neither Beneficiary nor the Trustee shall be liable
for any loss sustained by Grantor resulting from any act or omission of
Beneficiary or the Trustee in managing the Property after an Event of Default.
This Section 1.20 shall not operate to place any obligation or liability for the
control, care, management or repair of any part of the Property upon Beneficiary
or the Trustee, nor for the carrying out of any of the terms and conditions of
the Leases or any Guaranty; nor shall it operate to make Beneficiary or the
Trustee responsible or liable for any waste committed on the Land, including,
without limitation, the presence of any Hazardous Materials, or for any
negligence by any person (other than Beneficiary or the Trustee) in the
management, upkeep, repair or control of the Property resulting in loss or
injury or death to any tenant, licensee, employee or stranger. Nothing in this
Section 1.20 shall be construed as constituting Beneficiary or the Trustee a
"mortgagee in possession" in the absence of the taking of actual possession of
the Property by Beneficiary.
1.20.10. Rights in Litigation and Bankruptcy
(i) If an Event of Default shall have occurred and be
continuing, Beneficiary shall have the right to proceed in its own name or in
the name of Grantor in respect of any claim, suit, action or proceeding relating
to the rejection of any Lease by or on behalf of any lessee thereunder,
including, without limitation, the right to file and prosecute, to the exclusion
of Grantor, any proofs of claim, complaints, motions, applications, notices and
other documents, in any case in respect of the lessee under such Lease under the
Bankruptcy Code.
(ii) If there shall be filed by or against Grantor a
petition under the Bankruptcy Code, and Grantor, as lessor under any Lease,
shall determine to reject such Lease pursuant to Section 365(a) of the
Bankruptcy Code, then Grantor shall give Beneficiary not less than fifteen (15)
days prior notice of the date on which Grantor shall apply to the bankruptcy
court for authority to reject such Lease. Beneficiary shall have the right, but
not the obligation, to serve upon Grantor within such fifteen (15) day period a
notice stating that (a) Beneficiary demands that Grantor assume and assign such
Lease to Beneficiary pursuant to Section 365 of the Bankruptcy Code and (b)
Beneficiary covenants to cure or provide adequate assurance of future
performance under such Lease. If Beneficiary serves upon Grantor the notice
described in the preceding sentence, Grantor shall not seek to reject such Lease
and shall comply with the demand provided for in clause (a) of the preceding
sentence within thirty (30) days after the notice shall have been given, subject
to the performance by Beneficiary of the covenant provided for in clause (b) of
the preceding sentence.
1.20.11. Additional Lease Provisions
1.20.11.1.
Grantor covenants and agrees (i) to perform punctually all
obligations and agreements to be performed by it as lessor or party thereto
under any Lease, such that there will be no material and adverse impairment of
the value of the Property or Beneficiary's interest under this Deed of Trust,
and (ii) to do all things
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necessary or appropriate to compel performance by each Tenant of such Tenant's
obligations and agreements under the Lease to which such Tenant is a party.
Except as otherwise permitted hereunder, Grantor shall not give any notice,
approval or consent or exercise any rights under or in respect of any Lease or
any of such other instruments, which action, omission, notice, approval, consent
or exercise of rights would release any Tenant or other party from, or reduce
any Tenant's or any other party's obligations or liabilities under, or would
result in the termination, surrender or assignment of, or the amendment or
modification of in any material adverse respect, or would impair the validity
of, any Lease or any of such other instruments, if any of the foregoing would
affect any Individual Property in any material adverse respect, without the
prior written consent of Beneficiary, and any attempt to do any of the foregoing
without such consent shall be of no force and effect.
1.20.11.2.
Grantor will promptly deliver to Beneficiary a copy of any
notice from any Tenant under any Material Lease (defined below), in any such
case claiming that Grantor is materially in default in the performance or
observance of any of the terms, covenants or conditions thereof to be performed
or observed by Grantor and Grantor will provide in each Material Lease at the
Property executed after the date hereof to which Grantor is a party that any
tenant delivering any such notice shall send a copy of such notice directly to
Beneficiary. The term "Material Lease" as used herein shall mean (i) any Lease
covering seven and one-half percent (7.5%) or more of gross leaseable area of
any individual Building on any Individual Property or gross leaseable area of
any individual Building on any Individual Property in an amount of at least
eight thousand (8,000) rentable square feet and (ii) any Lease which represents
greater than five percent (5%) of income from Rents derived from any Individual
Property.
1.20.11.3.
Grantor may, without the consent of Beneficiary, enter
into any Lease after the date hereof or renew or extend any existing Lease on
the following terms and conditions: (i) the Lease is written on Grantor's
standard form of Lease that has been approved by Beneficiary (as revised from
time to time, the "Approved Form") without any material changes to the
provisions of the Approved Form relating to lender protections (including
subordination, non-disturbance and attornment), defaults and remedies, (ii) the
annual base rental income payable under the Lease would not exceed ten percent
(10%) of the annual base rental income from the Individual Property to which
such Lease relates, (iii) the Lease covers less than the greater of (A) ten
percent (10%) of the total rentable square footage in the Individual Property to
which such Lease relates or (B) eight thousand (8,000) rentable square feet,
(iv) the Lease is for a term of not more than fifteen (15) years; provided that
if the lease term extends beyond ten (10) years by virtue of renewal options
such renewal options must be at a rental rate not less than ninety-five percent
(95%) of the fair market value as of the commencement of the renewal term, (v)
the Lease shall be entered into in an arms length transaction and the tenant
thereunder shall be a bona fide third party tenant that is not an Affiliate of
Grantor, and (vi) such Lease shall not have a material adverse effect on the
value of the Individual Property to which such Lease relates or the ability of
Grantor to perform the Obligations. Any other Lease may be entered into or
renewed or extended only with the consent of Beneficiary, which consent shall
not be unreasonably withheld and which consent shall be deemed granted unless
Beneficiary notifies Grantor within ten (10) Business Days of any request for
such consent that it is withholding such consent.
1.20.11.4.
Grantor may, without the consent of the Beneficiary,
amend, modify or waive the provisions of any Lease, provided that such action
does not have a material adverse effect upon the value of any Individual
Property, and provided further that such Lease, as amended, modified or waived,
is otherwise in compliance with the requirements of this Deed of Trust
(including the requirements of Section 1.20.11.3 hereof) and a duplicate
original or certified copy of the amendment, modification or waiver is delivered
to the Beneficiary.
1.20.11.5.
Grantor may, without the consent of Beneficiary, terminate
or permit the early
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termination of any Lease (other than a Material Lease) of space or accept
surrender of all or any portion of the space demised under the Lease or acquire
any Lease (other than a Material Lease) or reduce the rentals reserved under or
shorten the term of any Lease (other than a Material Lease) so long as such
action (taking into account the planned alternative uses of the space) does not
materially adversely affect the value of any of the Property (it being agreed
that termination of the Lease of a Tenant that is in default, after any
applicable notice and cure periods, shall be considered to be for the benefit of
any of the Property) or the ability of Grantor to perform the Obligations.
1.20.11.6.
Grantor shall not enter into any Lease with an Affiliate
of Grantor at any of the Property, unless (i) the space is for the use and
occupancy of one or more of such Affiliates, and (ii) the material terms of such
Lease comply with the requirements set forth in Section 1.20.11.3 hereof;
provided, however, that a reasonable amount of office space not in excess of two
thousand five hundred (2500) net leaseable square feet in each Building can be
provided to Beneficiary for the purpose of management of such Building and the
Individual Property associated therewith at less than fair market rental or at
no rental, at the Grantor's discretion. Grantor shall have the right, subject to
the provisions of this Deed of Trust, to acquire Leases by way of assignment,
surrender, acquisition or further sublease.
1.20.11.7.
Upon receipt by Beneficiary of a written request from
Grantor therefor, Beneficiary shall execute and deliver to the tenant under any
Lease (other than a Lease to an Affiliate of Grantor) existing on the date
hereof or made in accordance with the provisions of this Section 1.20.11, a
non-disturbance and attornment agreement in a form reasonably satisfactory to
Beneficiary.
1.20.11.8.
Grantor shall not receive or collect, or permit the
receipt or collection of, any rental or other payments under any Lease more than
one (1) month in advance of the respective period in respect of which they are
to accrue, except that (i) in connection with the execution and delivery of any
Lease or of any amendment to any Lease, rental payments thereunder may be
collected and received in advance in an amount not in excess of one (1) month's
rent and a security deposit (including advance rents as or in lieu of a security
deposit) may be required thereunder (provided that such deposits are maintained
in accordance with applicable Laws and in accordance with the terms of this Deed
of Trust and the Assignment of Leases and Rents executed in connection
herewith), (ii) Grantor may receive and collect escalation, percentage rent and
other charges in accordance with the terms of each Lease and (iii) Grantor may
receive and collect more than one (1) month's rent in connection with a Tenant
terminating its Lease if the termination of the Lease is permitted under this
Deed of Trust.
1.20.11.9.
Grantor shall at all times hold monies representing
security deposits under the Leases in the manner required by applicable Laws.
1.20.12. Assignment to Beneficiary Controlling
The rights of Trustee in the Leases and the Rents created under
Granting Clause (vi) of this Deed of Trust shall be subject to (i) the rights of
Beneficiary in the Leases and the Rents created under this Section 1.20, and
(ii) the rights of Beneficiary in the Leases and the Rents created under the
Assignment of Rents and Leases executed in connection herewith.
1.21. Environmental Covenants and Representations
Except as described in any report listed on Schedule 3.21 to the Loan
Agreement, Grantor represents and
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covenants that:
1.21.1.
The operations of Grantor at the Land and Improvements, and the
Land and Improvements themselves, substantially comply with all applicable
Environmental Laws;
1.21.2.
Grantor will hereafter comply with and cause the Land and
Improvements to comply with and use diligent efforts to cause its employees,
agents and contractors on the Land or the Improvements to comply with all
applicable Environmental Laws;
1.21.3.
Grantor has obtained, and will hereafter maintain, all permits required
by applicable Environmental Laws for the operations of Grantor at the Land and
Improvements;
1.21.4.
Neither the Land and Improvements nor the Grantor's operations
thereat or thereon is subject to any order from or agreement with any
governmental authority or private party with respect to the release or
threatened release of Hazardous Materials from the Land and Improvements into
the environment;
1.21.5.
There are no pending or, to the best knowledge of the Grantor,
threatened judicial or administrative proceedings alleging a violation of any
Environmental Law with respect to the Land and Improvements or the Grantor's
operations thereon;
1.21.6.
None of the Grantor's operations at the Land and Improvements is
the subject of any investigation by any governmental authority evaluating
whether any remedial action is needed to respond to a release or threatened
release of Hazardous Materials from the Land and Improvements into the
environment;
1.21.7.
Grantor has not filed any notice under any statute, regulation,
or other governmental requirement with respect to the Land and Improvements
indicating present treatment, storage or disposal of Hazardous Materials
thereon; and
1.21.8.
Grantor has not filed any notice under any applicable statute,
regulation or other governmental requirement with respect to the Land and
Improvements reporting a release of any Hazardous Materials from the Land and
Improvements into the environment.
1.22. Release
1.22.1. Satisfaction of Obligations
If Grantor shall pay the principal of and interest on the Mortgage Note
in full at maturity or earlier as
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permitted in accordance with the terms of the Loan Agreement and this Deed of
Trust and shall pay all other Obligations payable to Beneficiary by Grantor
hereunder and under the other Loan Documents, then this Deed of Trust and all
the other Loan Documents shall be discharged and satisfied or, to the extent not
prohibited by law, assigned to Grantor or to any other Person at the Grantor's
direction, at the Grantor's option, without representation, recourse or
warranty, other than for the acts of the Beneficiary, at the expense of Grantor
upon its written request, except that the indemnifications of Grantor in favor
of Beneficiary set forth in Section 1.12 hereof and in the Environmental
Indemnity Agreement shall survive as set forth therein. Concurrently with such
release and satisfaction or assignment of this Deed of Trust and all the other
Loan Documents, Beneficiary will return to Grantor the Mortgage Note and all
title and other insurance policies relating to the Property and, on the written
request and at the expense of the Grantor, will execute and deliver such proper
instruments of release (including, without limitation, appropriate U.C.C.
termination statements) as may reasonably be requested by Grantor to evidence
such release and satisfaction or assignment, and any such instrument, when duly
executed by Beneficiary and duly recorded in the places where this Deed of Trust
and each other Security Document is recorded, shall conclusively evidence the
release and satisfaction or assignment of this Deed of Trust and the other Loan
Documents. Any release of this Deed of Trust with respect to the Property
pursuant to Section 1.22.2 shall be effected in accordance with the same
procedures specified in the immediately preceding two sentences to the extent
applicable to such release.
1.22.2. Release of Building; Partial Releases
Grantor shall further be entitled to partial release of the Lien hereof
in the circumstances and on the conditions specified in Section 2.8, Section
2.9, Section 2.10 and Section 11 of the Loan Agreement as it relates to a
particular Individual Property and to a release of the Lien hereof in the
circumstances and on the conditions specified in Section 2.7 of the Loan
Agreement. Beneficiary shall also grant partial releases of the Lien hereof on
certain Property to be sold under Section 1.23 of this Deed of Trust,
contemporaneously with such sales, provided the conditions set forth in said
Section 1.23 are satisfied.
1.23. Transfers, Indebtedness and Subordinate Liens
1.23.1. Transfers
(i) Unless such action is permitted by the provisions of
this Section 1.23, Grantor will not (1) sell, assign, convey, transfer or
otherwise dispose of or encumber the Property or any of the Grantor's right,
title or interest therein, (2) mortgage, hypothecate or otherwise encumber or
grant a security interest in all or any part of the Property, (3) file a
declaration of condominium with respect to any of the Property or (4) permit the
transfer or assignment of any interest in the Grantor.
(ii) Notwithstanding the provisions of Section 1.23.1(i),
Grantor may transfer or dispose of Fixtures that are either being replaced or
that are no longer necessary in connection with the operation of the Property
free from the interest of Beneficiary under this Deed of Trust, provided that
such transfer or disposal will not adversely affect the value of any of the
Property, and will not materially impair the utility of any of the Property, in
either case as a result thereof, and provided that any new Fixtures acquired by
Grantor (and not so disposed of) shall be subject to the interest of Beneficiary
under this Deed of Trust (unless leased to the Grantor, in which case the
Grantor's interest in such lease shall be collaterally assigned to the
Beneficiary). Beneficiary shall, from time to time, upon receipt of a
certificate of an officer of the Grantor requesting the same and confirming
satisfaction of the conditions set forth above, execute a written instrument in
form reasonably satisfactory to it to confirm that such Fixtures which are to
be, or have been, sold or disposed of are free from the interest of Beneficiary
under this Deed of Trust.
1.23.2. Indebtedness
Grantor shall not incur, create or assume any Indebtedness other than
Permitted Debt (as defined in the Loan Agreement).
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1.23.3. Additional Permitted Transfers
Notwithstanding the foregoing provisions of this Section 1.23.1, Grantor
without the consent of Beneficiary may (i) make transfers of portions of the
Property (by sale, ground lease, subordination of fee interest to a leasehold
mortgage, sublease or other conveyance of any interest) to any federal, state or
local government or any political subdivision thereof in connection with (and in
lieu of) Takings of any portion of the Property for dedication or public use
(and proceeds of any such transfer shall be deemed to be an Award subject to the
provisions of Section 1.9 hereof), and (ii) dedicate portions of the Property or
grant easements, restrictions, covenants, reservations and rights of way in the
ordinary course of business for traffic circulation, ingress, egress, parking,
access, water and sewer lines, telephone and telegraph lines, electric lines or
other utilities or for other similar limited purposes benefiting the Property,
provided, that no transfer, conveyance or other encumbrance set forth in the
foregoing clauses (i) and (ii) shall impair the utility and operation of any
Individual Property, adversely affect the value of any Individual Property, or
cause any Individual Property to be in violation of any applicable laws in each
case taken as a whole. Beneficiary hereby agrees to execute and deliver any
instrument reasonably necessary or appropriate to evidence any desired consent
to said action and, in the case of any transfers of fee interests referred to in
clauses (i) or (ii) of the first sentence of this Section 1.23.3, to release the
portion of the Land affected by such Taking or such transfer from the Lien of
this Deed of Trust upon receipt by Beneficiary of:
(1) a copy of the instrument of transfer;
(2) a certificate of an officer of the Grantor stating (x)
with respect to any Taking, the consideration, if any, being paid
for the transfer and (y) that such transfer does not materially
impair the utility and operation of the Land, reduce its value or
cause any Individual Property to be in violation of any
applicable laws, including laws relating to the number of parking
spaces at the applicable Building; and
(3) as to any Taking or transfers under clauses (i) or
(ii), an endorsement to Beneficiary's title insurance policy
insuring that the priority of the Lien of this Deed of Trust is
unaffected by reason of the fact that a portion of the Land has
been released from the Lien of this Deed of Trust, the cost of
any such endorsement to be paid for by the Grantor.
All proceeds from any Takings shall be applied in accordance with the
provisions of Section 1.9 hereof.
1.23.4. Delivery of Documents to the Beneficiary
No more than fifteen (15) days after the completion of any transaction
subject to this Section 1.23, Grantor shall provide Beneficiary with copies of
executed deeds, mortgages and such other similar closing documents as may be
reasonably requested by Beneficiary.
1.24. Utility Services
Grantor will pay or cause to be paid when due all charges for all public
or private utility services, all public or private highway services, all public
or private communication services and all sprinkler systems and protective
services at any time rendered to or in connection with the Property or any part
thereof and which are incurred by or on behalf of Grantor.
ARTICLE II
2. EVENTS OF DEFAULT
Grantor hereby agrees that the occurrence of any one or more of the
following shall constitute an Event of Default ("Event of Default") under this
Deed of Trust, entitling the Beneficiary, its successors and assigns, to
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exercise the remedies set forth in Article III hereof, and any other remedies
available at law, in equity, or under the other Security Documents:
2.1. Payment Default
(a) Failure by Grantor to make any payment of principal,
interest, Defeasance Deposit or Yield Maintenance Payment due on the Mortgage
Note when the same shall become due and payable (whether at maturity, on a date
fixed for any payment or prepayment thereof, upon acceleration or otherwise) or
(b) failure by Grantor to make any other payment required under the Mortgage
Note, this Deed of Trust, or any other Loan Document when due; or
2.2. Material Breach of Representation and Warranty
Any representation or warranty made by Grantor in this Deed of Trust or
any other Loan Document shall fail to have been true in any material and adverse
respect when made, which failure remains uncured for a period of thirty (30)
days after receipt of written notice of such failure; provided, however, that it
shall not be an Event of Default if such failure is curable but is not
reasonably capable of being cured within such thirty (30) day period but Grantor
shall have promptly commenced to cure within such thirty (30) day period and
thereafter diligently pursues such cure to completion (but in no event later
than one hundred eighty (180) days after receipt of such written notice); or
2.3. Material Breach of Covenant
Grantor shall fail to perform or comply in any material and adverse
respect with any non-monetary term, covenant or condition imposed in this Deed
of Trust or any other Loan Document, (a) which failure remains uncured for a
period of thirty (30) days after the Grantor's receipt of written notice of such
failure, or (b) in the case of any failure or breach of covenant relating to the
payment of taxes or maintenance of insurance as provided herein, which failure
remains uncured for a period of ten (10) days after receipt of written notice by
Grantor of such failure; provided, however, that, in the case of clause (a), it
shall not be an Event of Default if such failure is curable but is not
reasonably susceptible of being cured within such thirty (30) day period but
Grantor promptly commences to cure within such thirty (30) day period and
thereafter diligently pursues such cure to completion (but in no event later
than one hundred eighty (180) days after receipt of such written notice); or
2.4. Event of Default Under Loan Agreement
The occurrence of an "Event of Default" under the Loan Agreement.
ARTICLE III
3. REMEDIES
3.1. Legal Proceedings; Cost of Enforcement
3.1.1. Legal Proceedings
If an Event of Default shall have occurred and be continuing,
Beneficiary or the Trustee may institute proceedings for the complete or partial
foreclosure of this Deed of Trust or take such steps to protect and enforce its
rights whether by action, suit or proceeding in equity or at law for the
specific performance of any covenant, condition or agreement in the Mortgage
Note or in this Deed of Trust (without being required to foreclose this Deed
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of Trust), or in aid of the execution of any power herein granted, or for any
foreclosure hereunder, or for the enforcement of any other appropriate legal or
equitable remedy or otherwise as Beneficiary shall elect.
3.1.2. Cost of Enforcement
Grantor shall pay within ten (10) days after written demand therefor all
costs and expenses (including, without limitation, attorneys' fees and charges)
incurred by or on behalf of Beneficiary or the Trustee in enforcing or
sustaining the lien of this Deed of Trust or the priority thereof, the Mortgage
Note, or any and all other Loan Documents, or occasioned by any Event of
Default. Such costs and expenses shall constitute Obligations secured by this
Deed of Trust, payable on demand and shall bear interest at the Default Interest
Rate from the time of demand until paid.
3.2. Acceleration
If an Event of Default shall have occurred and be continuing, regardless
of the pendency of any proceeding which has or might have the effect of
preventing Grantor from complying with the terms of this Deed of Trust, the
Mortgage Note, or any other Loan Document, then, in any such event, the entire
unpaid amount of the indebtedness evidenced by the Mortgage Note, this Deed of
Trust or any other Loan Documents, and any other unpaid sum secured by this Deed
of Trust, shall, at the option of Beneficiary become immediately due and payable
in full without presentment, demand, protest or notice, all of which are hereby
waived by Grantor (except to the extent notice is expressly required herein) and
shall thereafter bear interest at the Default Interest Rate.
3.3. Right to Perform Grantor's Covenants, Etc.
If Grantor shall fail to make any payment or perform any act required to
be made or performed under this Deed of Trust, the Mortgage Note, or any other
Loan Document, within ten (10) days after written notice thereof (or such
shorter notice as shall be required to avoid a material impairment in the value
of the Property or in the Beneficiary's security, and without notice where
required to avoid such impairment), Beneficiary (or the Trustee at the request
of the Beneficiary, as applicable), without waiving or releasing any obligation
or Event of Default, may (but shall be under no obligation to) make such payment
or perform such act for the account, and at the expense, of Grantor and may
enter upon the Property or any part thereof for such purpose and take all such
actions thereon as, in the reasonable opinion of the Beneficiary, may be
necessary or appropriate therefor. All sums so paid by Beneficiary or the
Trustee and all costs and expenses (including, without limitation, reasonable
attorneys' fees and charges) so incurred, shall constitute part of the
Obligations secured by this Deed of Trust and shall be paid by Grantor to
Beneficiary or the Trustee upon demand and, if not so paid within ten (10) days
after demand, shall thereafter bear interest at the Default Interest Rate.
3.4. Possession Upon Default
3.4.1. Surrender or Taking of Possession
If an Event of Default shall have occurred and be continuing, the
Grantor, upon demand of the Beneficiary, shall forthwith surrender to
Beneficiary or to the Trustee, as applicable, the actual possession of the
Property or any part thereof from time to time (without limit as to the number
of times) as may be designated by Beneficiary or the Trustee and, to the extent
permitted by law, Beneficiary or the Trustee may enter and take possession of
all or any such part of the Property and may exclude Grantor and the Grantor's
agents and invitees wholly therefrom. If Grantor shall fail to surrender to
Beneficiary or to the Trustee, as applicable, the actual possession of such
Property upon demand, then Beneficiary or the Trustee, to the extent permitted
under applicable law, without further notice, may (1) enter upon and take
possession of the Property or any part thereof by force, summary proceedings,
ejectment or otherwise; (2) remove Grantor and all other persons from the
Property; and (3) remove from the Property any and all property owned by third
parties (so long as reasonable measures for the safekeeping of such third party
property are taken).
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3.4.2. Entering into Possession
Upon every such entering and taking of possession, Beneficiary or the
Trustee, as applicable, may hold, store, use, operate, manage, control, and
maintain the Property and conduct the business thereof, which right shall
include, without limitation, the right to (1) make all necessary and proper
repairs, renewals, replacements, additions, betterments and improvements thereto
and thereon and purchase and otherwise acquire additional fixtures, personalty,
and other property as may be necessary to preserve, maintain or restore the
value thereof to the condition required herein or in any other Loan Document;
(2) insure the Property or keep the Property insured; (3) manage and operate the
Property and exercise all the rights and powers of the Grantor, in its name or
otherwise, with respect to the Property; and (4) enter into any agreements with
respect to the exercise by others of any of the powers herein granted to
Beneficiary or the Trustee, all as Beneficiary or the Trustee may from time to
time determine to be necessary or desirable. Beneficiary or the Trustee also may
collect and receive all of the earnings, income, rents, profits, issues and
revenues of the Property or any part thereof, including those past due as well
as those accruing thereafter; provided, however, that any amount so received by
Beneficiary or the Trustee shall be applied as provided in Section 3.12 hereof.
Beneficiary or the Trustee shall not be liable for or by reason of any such
entry, taking of possession or removal, or holding, operation or management,
except for liability arising out of the gross negligence or willful misconduct
of the Beneficiary, the Trustee, or the agents, officers, directors or employees
of Beneficiary or the Trustee. All sums expended by Beneficiary or the Trustee
pursuant to this Section 3.4.2, including any such amount in excess of the
principal amount of the Mortgage Note, shall be deemed to have been advanced to
Grantor by the Beneficiary, shall be secured by this Deed of Trust and shall be
paid by Grantor to Beneficiary upon demand therefor and, if not so paid within
ten (10) days after written demand, shall thereafter bear interest at the
Default Interest Rate.
3.4.3. Satisfaction of Default
Whenever all Events of Default have been cured and satisfied,
Beneficiary may, in its sole and absolute discretion, upon receipt of a written
request therefor from Grantor, surrender possession or direct the Trustee, to
surrender possession of the Property to Grantor, provided that the right of
Beneficiary or the Trustee, as applicable, to take possession of the Property
from time to time pursuant to Section 3.4.1 shall continue to exist unimpaired
and undiminished if any subsequent Event of Default shall occur and be
continuing.
3.5. Sale of Property
Beneficiary or the Trustee may cause the Property and all estate,
right, title and interest, claim and demand therein, or any part thereof to be
sold as follows:
3.5.1.
Beneficiary may proceed as if all of the Property were real
property, in accordance with Section 3.5.4 below, or Beneficiary may elect to
treat any of the Property which consists of a right in action or which is
property that can be severed from the premises without causing structural damage
thereto as if the same were personal property, and dispose of the same in
accordance with Section 3.5.3 below, separate and apart from the sale of real
property, with the remainder of the Property being treated as real property.
3.5.2.
Beneficiary may cause any such sale or other disposition to be
conducted immediately following the expiration of any grace period, if any,
herein provided (or required by law) or Beneficiary may delay any such sale or
other disposition for such period of time as Beneficiary deems to be in its best
interest. Should Beneficiary desire that more than one such sale or other
disposition be conducted, Beneficiary may, at its option, cause the same to be
conducted simultaneously, or successively on the same day, or at such different
days or times and in such order as Beneficiary may deem to be in its best
interest.
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3.5.3.
Should Beneficiary elect to cause any of the Property to be
disposed of as personal property as permitted by Section 3.5.1 above, it may
dispose of any part thereof in any manner now or hereafter permitted by Division
9 of the U.C.C. or in accordance with any other remedy provided by law. Both
Grantor and Beneficiary shall be eligible to purchase any part of all of such
property at any such disposition. Any such disposition may be either public or
private as Beneficiary may so elect, subject to the provisions of the UCC.
Beneficiary shall give Grantor at least five (5) days prior written notice of
the time and place of any public sale or other disposition of such property or
of the time at or after which any private sale or any other intended disposition
is to be made, and if such notice is sent to Grantor it shall constitute
reasonable notice to Grantor.
3.5.4.
Should Beneficiary elect to sell the Property which is real
property or which Beneficiary has elected to treat as real property, upon such
election Beneficiary or the Trustee shall give such Notice of Default and
Election to Sell (a "Notice of Sale") as may then be required by law.
Thereafter, upon the expiration of such time and the giving of such Notice of
Sale as may then be required by law, the Trustee, at the time and place
specified in the Notice of Sale, shall sell such Property, or any portion
thereof specified by Beneficiary, at public auction to the highest bidder for
cash in lawful money or the United States, subject, however, to the provisions
of Section 3.5.5 below. Beneficiary may, from time to time, postpone the sale by
public announcement thereof at the time and place noticed therefor. If the
Property consists of several lots or parcels, Beneficiary may designate the
order in which such lots or parcels may be offered for sale or sold, and may
direct that such property be sold in one parcel, as an entirety, or in such
parcels as Beneficiary, in its sole discretion, may elect. Grantor expressly
waives any right which it may have to direct the order in which any of the
Property shall be sold, and its rights, if any, to require that the Property be
sold as separate tracts, lots, units or parcels. Any person, including Grantor,
the Trustee or Beneficiary, may purchase at the sale. Upon any sale, the Trustee
shall execute and deliver to the purchaser or purchasers a deed or deeds
conveying the property so sold, but without any covenant or warranty whatsoever,
express or implied, whereupon such purchaser or purchasers shall be let into
immediate possession.
3.5.5.
Upon any sale of the Property, whether made under a power of sale
herein granted or pursuant to judicial proceedings, if the holder of the
Mortgage Note is a purchaser at such sale, it shall be entitled to use and apply
all or any portion of the indebtedness then secured hereby for or in settlement
or payment of all or any portion of the purchase price of the property
purchased.
3.5.6.
In the event of a sale or other disposition of any such Property
or any part thereof, and the execution of a deed or other conveyance pursuant
thereto, the recitals in the deed or deeds of facts (such as of a default, the
giving of notice of default and notice of sale, demand that such sale should be
made, postponement of sale, terms of sale, sale, purchaser, payment of purchase
money, and any other fact affecting the regularity or validity of such sale or
disposition) shall be conclusive proof of the truth of such facts; and any such
deed or conveyance shall be conclusive against all persons as to such facts
recited therein.
3.6. Appointment of Receiver
Beneficiary shall be entitled, as a matter of strict right, without
notice and upon ex parte application, and without regard to the value or
occupancy of the security, or the solvency of Grantor, or the adequacy of the
Property or other collateral as security for the Mortgage Note, to have a
receiver appointed to enter upon and take possession of the Property, collect
the Rents and apply the same as the court may direct, such receiver to have all
the rights and powers permitted under the laws of the jurisdiction in which the
Property is located. Grantor hereby waives any
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requirements on the receiver or Beneficiary to post any surety or other bond.
Beneficiary or the receiver may also take possession of, and for these purposes
use, any and all personalty which is a part of the Property and used by Grantor
in the rental or leasing thereof or any part thereof. The expense (including the
receiver's fees, counsel fees, costs and agent's compensation) incurred pursuant
to the powers herein contained shall be secured by this Indenture. To the extent
not prohibited by applicable law, Beneficiary shall (after payment of all costs
and expenses incurred) apply such Rents received by it in the order set forth in
Section 3.12 of this Deed of Trust. The right to enter and take possession of
the Property, to manage and operate the same, and to collect the Rents, whether
by receiver or otherwise, shall be cumulative to any other right or remedy
hereunder or afforded by law, and many be exercised concurrently therewith or
independently thereof. Beneficiary shall be liable to account only for such
Rents actually received by Beneficiary.
3.7. Trustees Authorized to Execute Deeds, Etc.
Grantor irrevocably appoints the Trustee its true and lawful
attorneys-in-fact, with full power of substitution, in its name and stead and on
its behalf, for the purpose of effectuating any sale, assignment, transfer or
delivery for the enforcement of this Deed of Trust pursuant to foreclosure or
power of sale or otherwise, to execute and deliver all such certificates, deeds,
bills of sale, assignments, and other instruments as the Trustee may reasonably
consider necessary or appropriate. Grantor hereby ratifies and confirms all that
such attorneys-in-fact or any substitute therefor shall lawfully do by virtue
hereof. Nevertheless, if so requested by the Trustee or any purchaser, Grantor
shall ratify and confirm any such sale, assignment, transfer or delivery by
executing and delivering to the Trustee or such purchaser all proper
certificates, deeds, bills of sale, assignments, releases, and other instruments
as may reasonably be designated in any such request.
3.8. Purchase of the Property by the Beneficiary
Beneficiary may be a purchaser of the Property or of any part thereof or
of any interest therein at any sale thereof, whether pursuant to foreclosure or
power of sale or otherwise hereunder (subject to applicable provisions of the
U.C.C.), and may apply upon the purchase price the indebtedness secured hereby
owing to the Beneficiary. Beneficiary shall, upon any such purchase, acquire
good title to the properties so purchased, free of the lien of this Deed of
Trust and, to the fullest extent permitted by applicable law, free of all rights
of redemption in Grantor and free of all liens and encumbrances subordinate to
this Deed of Trust.
3.9. Foreclosure of Personalty
Upon the occurrence and during the continuation of an Event of Default,
should Beneficiary or the Trustee, as applicable, elect to cause any of the
Property to be disposed of as personal property because the same consists of a
right of action or property that can be severed from the Land or the
Improvements without causing material damage thereto, Beneficiary, or the
Trustee, as applicable, may dispose of all or any part thereof in any manner now
or hereafter permitted under the U.C.C. or in accordance with any other remedy
provided by law. Any such disposition may be conducted by an employee or agent
of Beneficiary or the Trustee. Beneficiary or the Trustee shall be entitled to
purchase any part or all of such property at such disposition. Any such
disposition may be by public or private sale as Beneficiary or the Trustee may
so elect, subject to the provisions of the U.C.C. Beneficiary shall have all the
rights and remedies of a secured party under the U.C.C. Expenses of retaking,
holding, preparing for sale, selling or the like shall include Beneficiary's and
the Trustee's attorneys' and accountants' fees and charges. Upon the occurrence
and during the continuation of any Event of Default, the Grantor, upon demand of
Beneficiary or the Trustee shall assemble such personal property and make it
available to Beneficiary and the Trustee at any of the Land, or at a place which
is deemed to be reasonably convenient to Beneficiary or the Trustee. It is
agreed that ten (10) days prior written notice to Grantor of the time and place
of any public sale or other disposition of such property or the time at or after
which any private sale or any other intended disposition is to be made shall
constitute commercially reasonable notice.
3.10. Receipt a Sufficient Discharge to Purchaser
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Upon any sale of the Property or any part thereof or any interest
therein, whether pursuant to foreclosure or power of sale or otherwise
hereunder, the receipt of the officer making the sale under judicial proceedings
or of the Trustee or auctioneer in the event of a private sale shall be
sufficient discharge to the purchaser for the purchase money, and such purchaser
shall not be obligated to see to the application thereof.
3.11. Sale Shall be a Bar Against Grantor
The sale of all or any portion of the Property in connection with the
exercise of remedies under this Deed of Trust after the Mortgage Note becomes
due and payable, whether at maturity, by declaration of acceleration or by
automatic acceleration after an Event of Default or otherwise, shall, upon the
expiration of any applicable redemption period, to the full extent legally
permitted, forever be a perpetual bar against Grantor asserting any claim to
title to such portion of the Property so sold.
3.12. Application of Proceeds of Sale and Other Monies
The proceeds of any sale of the Property or of any interest therein,
whether pursuant to foreclosure or power of sale or otherwise hereunder,
together with any other monies at any time held by Beneficiary or the Trustee,
as applicable, pursuant to this Deed of Trust, the Mortgage Note, or any Loan
Document, shall, unless otherwise elected by Beneficiary in its sole discretion
or unless otherwise required by applicable law, be applied in the manner and in
the order set forth in Section 2.4.3 of the Loan Agreement.
3.13. Remedies Cumulative
Each of the rights, powers, and remedies provided herein are intended
and are hereby deemed to be cumulative, concurrent and in addition to, and not
in limitation of, those rights, powers, and remedies provided elsewhere
hereunder or in any other Loan Document or now or hereafter existing at law or
in equity or by statute or otherwise. If the Obligations are secured by more
than one property, lot, or parcel pursuant to this Deed of Trust, or any other
Deed of Trust or Security Document, and if this Deed of Trust or any other
Security Document is foreclosed upon, or if Beneficiary or the Trustee shall
exercise the power of sale or any other remedy granted herein, execution may be
made upon, or Beneficiary or the Trustee may exercise their power of sale
against, any one or more of the properties, lots or parcels and not upon the
others, or upon all of such properties or parcels, either together or
separately, and at different times or at the same, and sales or sales by
advertisement may likewise be conducted separately or concurrently, in each case
at the Beneficiary's or the Trustee's election. In the event of a foreclosure of
this Deed of Trust or any other Security Document, the obligations then due
shall not be merged into any decree of foreclosure entered by the court, and
Beneficiary or the Trustee may concurrently or subsequently seek to foreclose
one or more other Security Document which also secure said Obligations listed
hereby or thereby.
3.14. No Waiver, Etc.
No failure by Beneficiary or the Trustee to insist upon the strict
performance of any term hereof or to exercise any right, remedy, power or
privilege provided herein or by statute or at law or in equity or otherwise, nor
delay therein, shall constitute a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The waiver of any Event of Default hereunder shall not
impair the rights of Beneficiary or the Trustee to enforce any concurrent or
future Event of Default, whether similar or dissimilar to the Event of Default
waived, or otherwise affect or alter this Deed of Trust, which shall continue in
full force and effect.
3.15. Cross-Collateralization; Waiver of Marshalling, Appraisal,
Valuation
Grantor acknowledges that the Obligations are secured by this Deed of
Trust, an Assignment of Leases and Rents and various other documents or
instruments securing or evidencing the Loan. Upon the occurrence of an
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Event of Default, Beneficiary shall have the right to institute a proceeding or
proceedings for the total or partial foreclosure of this Deed of Trust and any
or all of the other Security Documents, whether by court action, power of sale
or otherwise, under any applicable provisions of law, for all of the
indebtedness secured by the Security Documents or the portion of such
indebtedness allocated to the Property, and the liens and the security interests
created by the Security Documents shall continue in full force and effect as to
the Buildings (and the property related thereto) not foreclosed, without loss of
priority securing that portion of the indebtedness then due and payable and
still outstanding. Grantor acknowledges that the Buildings are located in four
(4) different counties in the State of California and agrees that, subject to
Section 3.5 of this Deed of Trust, upon the occurrence and during the
continuation of an Event of Default hereunder Beneficiary shall be entitled to
enforce payment of the indebtedness secured by the Security Documents and the
performance of any term, covenant or condition of the Security Documents and
exercise any and all rights and remedies under the Security Documents or as
provided by law or at equity, by one or more proceedings, whether
contemporaneous, consecutive or both, to be determined by Beneficiary in its
sole discretion, in any one or more counties in which the Buildings are located.
Neither the acceptance of this Deed of Trust or the other Security Documents nor
the enforcement thereof in any one state, whether by court action, foreclosure,
power of sale or otherwise, shall prejudice or in any way limit or preclude
enforcement by court action, foreclosure, power of sale or otherwise, of the
Mortgage Note, this Deed of Trust or the other Security Documents through one or
more additional proceedings in that state or in any other state. Any and all
sums received by Beneficiary under the Mortgage Note, this Deed of Trust or the
other Security Documents shall be applied toward the repayment of the
Obligations in such order and priority as Beneficiary shall determine,
consistent with the requirements of the Security Documents, but otherwise
without regard to the Allocated Loan Amount applicable to each Individual
Property or the appraised value of any of the Individual Properties. Grantor
hereby waives all rights, legal and equitable, it may now or hereafter have to
require marshalling of assets or to require, upon foreclosure, sales of assets
in a particular order. Each successor and assign of the Grantor, including a
holder of a Lien subordinate to the Lien created hereby (without implying that
Grantor has, except as expressly provided herein, a right to grant an interest
in, or a subordinate Lien on, any of the Property), by acceptance of its
interest or Lien agrees that it shall be bound by the above waiver, to the same
extent as if such holder gave the waiver itself. Grantor also hereby waives, to
the full extent it may lawfully do so, the benefit of all laws providing for
rights of appraisal, valuation, stay or extension or of redemption after
foreclosure now or hereafter in force.
GRANTOR HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER
CALIFORNIA LAW TO REPAY THE MORTGAGE NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY,
UPON ACCELERATION OF THE MORTGAGE NOTE, AND (ii) AGREES THAT IF, FOR ANY REASON,
A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE MORTGAGE NOTE
IS MADE INCLUDING WITHOUT LIMITATION UPON OR FOLLOWING ANY ACCELERATION OF THE
MORTGAGE NOTE BY BENEFICIARY ON ACCOUNT OF ANY DEFAULT BY GRANTOR INCLUDING,
WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED
OR RESTRICTED BY THIS DEED OF TRUST, THEN GRANTOR HEREBY DECLARES THAT (1) EACH
OF THE FACTUAL MATTERS SET FORTH IN THIS PARAGRAPH IS TRUE AND CORRECT, (2)
BENEFICIARY'S AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE MORTGAGE NOTE
CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT, AND HAS BEEN
GIVEN INDIVIDUAL WEIGHT BY GRANTOR AND BENEFICIARY, (3) GRANTOR IS A
SOPHISTICATED AND KNOWLEDGEABLE REAL ESTATE INVESTOR WITH COMPETENT AND
INDEPENDENT LEGAL COUNSEL AND (4) GRANTOR FULLY UNDERSTANDS THE EFFECT OF THIS
WAIVER AND AGREEMENT.
--------------------
GRANTOR INITIALS
ARTICLE IV
4. CONCERNING TRUSTEES
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4.1. Acts of One Trustee Valid
In the event at any time there is more than one Trustee hereunder, any
Trustee may act without the joining of any other Trustee under any provision of
this Deed of Trust with the same effect as if all Trustees under this Deed of
Trust acted jointly, and the act of any Trustee acting separately shall be
binding and conclusive upon all Trustees and all other parties in interest.
4.2. Removal and Substitution of Trustees
In the event at any time there is more than one Trustee hereunder, any
Trustee or any successor Trustee hereunder may at any time resign as a Trustee
or successor Trustees under this Deed of Trust upon the delivery of written
notice of such resignation to the Beneficiary. Beneficiary shall have, and is
hereby granted by Grantor, with warranty of further assurances, the irrevocable
power to remove the Trustees or any of them, without cause and without
specifying the reason therefor, by delivering a written instrument or
instruments to such effect to the Trustees and, if required by law, to Grantor,
and to appoint a successor Trustee or Trustees by delivering a written
instrument or instruments to such effect to such successor Trustee or Trustees
and by filing a substitution of trustee for recordation in the office where this
Deed of Trust is recorded. Such power of removal and appointment may be
exercised as often and whenever Beneficiary deems it advisable, and the exercise
of such power, no matter how often exercised, shall not be an exhaustion
thereof. Upon the recordation of such deed or deeds of appointment, the Trustee
or Trustees so appointed shall thereupon, without any further act or deed or
conveyance, be fully vested with identically the same title and estate in and to
the Property and with all of the rights, powers, trusts and duties of their, his
or its predecessors in the trust hereunder, with like effect as if originally
named as the Trustee or one of the Trustees hereunder. After the recordation of
such deed or deeds of appointment, the Trustee or Trustees who have been removed
shall, at the expense of the Grantor, duly assign, transfer, and deliver to such
successor Trustee or Trustees all monies at the time held hereunder by such
Trustee or Trustees who have been removed, and shall execute and deliver such
proper instruments as reasonably may be requested by Beneficiary or the
successor Trustee or Trustees to evidence such assignment, transfer, and
delivery. Whenever in this Deed of Trust reference is made to the Trustees or a
Trustee, it shall be construed to mean the Trustees or the Trustee for the time
being, whether original or successor or successors in trust and, as the context
may require, to any one of such Trustees acting alone.
4.3. Trustee's Compensation, Expenses, Etc.
Trustee shall be entitled to reasonable compensation for all services
rendered or expenses incurred in the administration or execution of the trust
hereby created in an amount not to exceed the maximum amount permitted by law
and Grantor hereby agrees to pay same.
ARTICLE V
5. MISCELLANEOUS
5.1. Notices
All notices, requests and demands to or upon the respective parties
hereto shall be in writing (except as is otherwise specifically provided in this
Deed of Trust) and shall be deemed to have been duly given or made when received
(or when delivery thereof is refused by the intended recipient) if mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, sent by facsimile transmission with confirmation of receipt or
delivery, sent by nationally recognized overnight courier, or delivered by hand,
addressed or directed as follows (or to such other address or facsimile
transmission number as may be hereafter designated in writing by the respective
parties hereto):
if to Grantor: Arden Realty Finance III, L.L.C.
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11601 Wilshire Boulevard
Suite 401
Los Angeles, California 90025
Attention: Diana M. Laing
if to Beneficiary: Lehman Brothers Realty Corporation
Three World Financial Center
New York, New York 10285
Attention: Commercial Mortgage Loan
Surveillance
Fax: (212) 528-6659
if to Trustee: Commonwealth Land Title Company
55 South Lake Avenue
Suite 600
Pasadena, California 91101
Attention: William F. Hunter, Esq.
Fax: (626) 449-9957
The Grantor, Beneficiary or the Trustee may from time to time, by
notice in writing served upon the others as described above, designate a
different mailing address to which all such notices or demands or communications
are thereafter to be addressed and delivered.
Grantor hereby requests that a copy of any notice of default and
every notice of sale hereunder be mailed to it as provided by law at Grantor's
address set forth in this Section 5.1.
5.2. Invalidity of Any Provision; Entire Agreement
All rights, powers and remedies provided herein may be exercised only to
the extent the exercise thereof does not violate any applicable law, and are
intended to be limited to the extent necessary so that they will not render this
Deed of Trust invalid, unenforceable or not entitled to be recorded, registered
or filed under any applicable law. The invalidity of any one or more phrases,
sentences, clauses, paragraphs or Sections hereof shall not affect the remaining
portions of this Deed of Trust or any part thereof. In the event that one or
more of the phrases, sentences, clauses, paragraphs or Sections contained herein
shall be invalid, or would operate to render this Deed of Trust invalid, this
Deed of Trust shall be construed as if such invalid phrase or phrases, sentence
or sentences, clause or clauses, paragraph or paragraphs or Section or Sections
had not been inserted. This Deed of Trust including the Exhibits hereto, and the
other documents and instruments referred to herein or delivered pursuant hereto,
contains the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior or written agreements, commitments or
understandings with respect to such matters.
5.3. Amendment
This Deed of Trust shall not be amended, altered, modified, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of such amendment, alteration, modification, waiver,
discharge or termination is sought.
5.4. Parties Bound and Benefited
This Deed of Trust shall be binding upon and be enforceable against
Grantor and Beneficiary and their respective successors and assigns, and shall
be enforceable by and inure to the benefit of Beneficiary and its successors and
assigns, and Grantor and its successors and permitted assigns.
5.5. Effect of Renewal, Amendment, Waiver, Etc.
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The Beneficiary, at its option, may at any time renew or extend this
Deed of Trust or the Mortgage Note or any other obligation secured hereby or,
with the consent of the Grantor, alter or modify the same in any way, and may
waive any of the covenants and conditions of the Mortgage Note or this Deed of
Trust imposing obligations on the Grantor, in whole or in part, either at the
request of Grantor or any other person then having an interest in the Property
or in any way liable on the indebtedness secured hereby, and may take other
security for said indebtedness or release any portion of the Property covered
hereby, or release any party primarily or secondarily liable on the Mortgage
Note or hereunder or on any such other security, and may grant extensions or
indulgences in relation to the Mortgage Note and this Deed of Trust and the
payment thereof, or may apply to the principal or interest of the indebtedness
or other sums secured hereby any part or all of the proceeds obtained by sale or
otherwise as herein provided, without resort or regard to any other security,
all without in any way releasing Grantor from any of the covenants, agreements
or conditions of the Mortgage Note, this Deed of Trust or any other Loan
Document or affecting the lien hereof or thereof on the Property or impairing
Beneficiary's or the Trustee's ability to proceed against the Grantor's
interests in the Property in such manner and at such times as Beneficiary may
see fit, upon the occurrence and during the continuation of an Event of Default.
5.6. Estoppel Certificates
(a) If requested by Beneficiary or the Trustee Grantor will
furnish Beneficiary or the Trustee within fifteen (15) days after written demand
therefor, an estoppel certificate or a written statement which shall set forth
the amount due under the Mortgage Note (whether of principal, interest or any
other amount) and shall indicate whether any offsets or defenses exist against
the payment of the indebtedness secured hereby and, if any offsets or defenses
are alleged to exist, a detailed description of such alleged offsets or defenses
and the amount or amounts thereof.
(b) Grantor shall use its best efforts to deliver to the
Beneficiary, promptly upon request, duly executed estoppel certificates from any
one or more Tenants as required by Beneficiary attesting to such facts regarding
the Leases as Beneficiary may require, including but not limited to attestations
that each Lease covered thereby is in full force and effect with no defaults
thereunder on the part of any party, that none of the Rents have been paid more
than one (1) month in advance, and that the lessee claims no defense or offset
against the full and timely performance of its obligations under the Lease.
5.7. Headings
Article, Section and subsection headings contained in this Deed of Trust
are inserted for convenience of reference only, shall not be deemed to be a part
of this Deed of Trust for any purpose, and shall not in any way define or affect
the meaning, construction or scope of any of the provisions hereof.
5.8. Pronouns
All pronouns and other words and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity or the context may require.
5.9. Governing Law; Service of Process
(a) This Deed of Trust, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of New York, except that, for
purposes of determining the creation, validity, priority and enforcement of the
Lien created hereby and the exercise of remedies hereunder in connection with
such Lien, the law of the State in which the Land is located shall govern.
(b) Grantor will maintain a place of business or an agent for
service of process in New York, New York and give prompt notice to Beneficiary
of the address of such place of business and of the name and
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address of any new agent appointed by it, as appropriate. Grantor further agrees
that the failure of its agent for service of process to give it notice of any
service of process will not impair or affect the validity of such service or of
any judgment based thereon. If, despite the foregoing, there is for any reason
no agent for service of process of Grantor available to be served, and if it at
that time has no place of business in New York, New York, then Grantor
irrevocably consents to service of process by registered or certified mail,
postage prepaid, to it at its address given in or pursuant to the first
paragraph hereof.
(c) Grantor initially and irrevocably designates CT Corporation
System with offices on the date hereof at 1633 Broadway, New York, New York
10019, to receive for and on behalf of Grantor service of process in New York,
New York with respect to this Deed of Trust.
5.10. Waiver of Jury Trial
THE PARTIES HERETO WAIVE ANY RIGHT THEY MAY HAVE TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER,
UNDER THE MORTGAGE NOTE, OR UNDER ANY LOAN DOCUMENT RELATING TO ANY OF THE
FOREGOING.
5.11. Limitation of Liability
Notwithstanding any contrary provision in any of the Loan Documents, it
is hereby expressly agreed that, except as otherwise provided in this Section
5.11 or in any Section of any Loan Document that is substantially similar to
this Section 5.11, there shall be no recourse to the assets of Grantor (other
than against the Property and any other property given as security for payment
of the Mortgage Note) for (i) the payment of principal, interest, Defeasance
Deposits, Yield Maintenance Payments or other charges hereunder or under the
Mortgage Note or for any other amount that is or may become due and owing to
Beneficiary by Grantor under this Deed of Trust or any of the other Loan
Documents or (ii) the performance or discharge of any covenant or undertaking
hereunder or under the other Loan Documents, and in the event of any Event of
Default hereunder or thereunder, Beneficiary agrees to proceed solely against
the Property and any other property given as security for payment of the
Mortgage Note, and Beneficiary shall not seek or claim recourse against Grantor
or any Member (other than against the Property and any other property given as
security for payment of the Mortgage Note) for any deficiency or for any
personal judgment after a foreclosure of the lien of this Deed of Trust or other
Security Documents or for the performance or discharge of any covenants or
undertakings of Grantor hereunder or under any of the other Loan Documents
(except that Grantor may be made a party to a proceeding to the extent legally
necessary for the conduct of a foreclosure or the exercise of other similar
remedies under this Deed of Trust or other Security Documents). Notwithstanding
the foregoing, nothing contained in this Section 5.11 shall relieve Grantor or
any Member of any personal liability for any loss, cost, expense, damage or
liability arising or resulting from (A) any breach of any representation or
warranty made by Grantor in this Deed of Trust that was materially incorrect
when made and that was made with fraudulent intent, (B) any amount paid or
distributed to the Members, Arden OP, the Manager or any Affiliate of any of
them in violation of the provisions of the Loan Documents, (C) fraud or breach
of trust including misapplication of Loan proceeds or Awards or other sums that
are part of the Property that may come into the possession or control of Grantor
or the a Member or any Affiliate of any of them, (D) liability of such person
under the Environmental Indemnity Agreement or (E) following the occurrence of a
Lockbox Event, the willful failure of Grantor to instruct tenants of the
Mortgaged Properties to make payments of Rents into the Lockbox Account or the
failure of Grantor or the Manager to deposit payments of Rents received by
Grantor or the Manager into the Lockbox Account promptly upon receipt thereof.
It is hereby expressly agreed that no director, officer, shareholder, partner,
member or employee of Grantor or a Member, nor the legal or personal
representative, successor or assign of any of the foregoing, nor any other
principal of Grantor or a Member, whether disclosed or undisclosed, shall have
any personal liability under this Deed of Trust or any of the other Loan
Documents, except as personal liability may be specifically imposed upon a
signatory to any Loan Document. It is the intention of the parties hereto that
this Section 5.11 shall govern every other provision of the Loan Documents and
that the absence of explicit reference to this Section 5.11 in any provision of
the Loan Documents or the absence of any Section similar to this Section 5.11 in
any Loan Document shall not be construed to deny the application of this Section
5.11 to such
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provision, notwithstanding the presence of explicit reference to this Section
5.11 in other provisions of the Loan Documents.
5.12. Assignment to Finance Trustee
5.12.1.Anticipated Assignment
Grantor acknowledges and agrees that, without limiting Beneficiary's
rights otherwise to assign this Deed of Trust and all other Loan Documents, this
Deed of Trust may be assigned together with all other Loan Documents, and along
with mortgage loans made to other borrowers, to the Finance Trustee, as trustee
under the Pooling and Servicing Agreement, and, pursuant to the Pooling and
Servicing Agreement, the Servicer will be appointed to service this Deed of
Trust and the other Loan Documents as provided therein. Upon such assignment,
the Finance Trustee shall for all purposes be the sole Beneficiary hereunder
(and all references herein to Beneficiary shall be deemed to refer to the
Finance Trustee) and the Finance Trustee, or the Servicer on behalf of the
Finance Trustee shall, among other things, (i) have the sole and exclusive
benefit of and the right and power to exercise, or to direct the exercise of,
all the rights and remedies of Beneficiary hereunder and under the other
Security Documents, including the right to inspect the Property, to receive
notices and financial information, to grant or withhold consents or approvals,
to benefit from indemnities, to receive, hold and apply proceeds or any other
amount or property provided by Grantor hereunder, and, upon the occurrence and
during the continuation of an Event of Default, to take any action required or
permitted of Beneficiary, all in the Finance Trustee's or Servicer's own name,
and to exercise all other rights and remedies of Beneficiary hereunder, (ii) be
bound by all the terms hereof which apply to Beneficiary, and (iii) except to
the extent otherwise specified or required herein or in the Pooling and
Servicing Agreement, if applicable, including any action or inaction required to
maintain the status of a portion of any trust fund of which the Mortgage Note
and other Loan Documents are a part as a qualified real estate mortgage
investment conduit under U.S. tax law or any action or inaction at the direction
of the Holders or as a result of the failure of the Holders to so direct, act in
a commercially reasonable manner in making any determination called for of it
under this Deed of Trust or the other Loan Documents or in granting or
withholding any approval or consent called for under or requested pursuant to
this Deed of Trust.
5.12.2.Recognition of Finance Trustee as Beneficiary
Grantor hereby acknowledges the foregoing and agrees to be bound to the
Finance Trustee, upon such assignment, recognizing the Finance Trustee as
Beneficiary hereunder as if the Finance Trustee were named in this Deed of Trust
as the Beneficiary, recognizing that the Servicer is entitled to act on behalf
of the Finance Trustee and the Holders under and as provided in the Pooling and
Servicing Agreement and is entitled to and shall receive all notices, financial
and other information, agreements and other documents to be delivered to
Beneficiary hereunder or under any of the other Loan Documents. Upon the
assignment contemplated by Section 5.12.1 hereof, Grantor's obligations to
Beneficiary specified in this Deed of Trust shall be satisfied by tendering full
and timely payment or performance thereof to the Finance Trustee or, if directed
by the Finance Trustee, the Servicer. With respect to delivery by Beneficiary of
documents and other written material, Beneficiary shall have only the
obligations expressly required of Beneficiary herein or in the other Loan
Documents or in the Pooling and Servicing Agreement. All rights and remedies of
the Finance Trustee as Beneficiary hereunder, including all indemnities running
to Beneficiary, shall also operate for the benefit of the Servicer and the
Holders and shall be exercised by the Finance Trustee and the Servicer in
accordance with and subject to the terms and conditions set forth in the Pooling
and Servicing Agreement. Grantor acknowledges and agrees that, until Grantor has
received notice to the contrary from the Finance Trustee, all deliveries and
notifications to be made by Grantor to the Finance Trustee pursuant to this Deed
of Trust or any other Loan Document, shall be made to the Servicer only and not
to the Finance Trustee.
5.12.3.Delivery of Amounts to Servicer
Following the assignment contemplated by Section 5.12.3 hereof, any
amounts to be delivered to Beneficiary pursuant to Sections 1.8, 1.9 or 1.11
hereof shall be delivered to the Servicer and shall be held by the
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Servicer in segregated subaccounts of the Cash Collateral Account (as defined in
the Loan Agreement) for application in accordance with said Sections and in
accordance with the Cash Management Procedures.
ARTICLE VI
6. DEFINITIONS
6.1. Certain Defined Terms
Wherever used in this Deed of Trust the capitalized terms set forth
below shall have the meanings ascribed to them below (or in the Sections of this
Deed of Trust or any other Loan Document referred to below) such definitions to
be equally applicable to the singular and plural forms of the terms defined
below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Loan Agreement.
"Access Laws" has the meaning set forth in Section 1.19 hereof.
"Affiliate" has the meaning set forth in the Loan Agreement.
"Allocated Loan Amount" has the meaning set forth in the Loan Agreement.
"Alteration" has the meaning set forth in Section 1.11.1 hereof.
"Assignment" has the meaning set forth in the Loan Agreement.
"Award(s)" has the meaning set forth in Section 1.9.1 hereof.
"Bankruptcy Code" has the meaning set forth in Granting Clause (vi)
hereof.
"Beneficiary" has the meaning set forth in the first paragraph of this
Deed of Trust.
"Building" has the meaning set forth in Paragraph B of the Recitals
hereof.
"Buildings" has the meaning set forth in Paragraph B of the Recitals
hereof.
"Cash Management Procedures" means has the meaning set forth in the Loan
Agreement.
"Casualty" has the meaning set forth in Section 1.8.1 hereof.
"Casualty Property" has the meaning set forth in Section 1.8.2 hereof.
"Certificates" has the meaning set forth in Paragraph E of the Recitals
hereof.
"Claim(s)" has the meaning set forth in Section 1.12 hereof.
"Collateral Assignment of Management Agreement" means that certain
Collateral Assignment of Management Agreement and Subordination Agreement dated
as of the date hereof by and among Grantor, the Manager and Beneficiary.
"Contracts" has the meaning set forth in Granting Clause (vii) hereof.
"Debtor" has the meaning set forth in Section 1.17.6 hereof.
"Deed of Trust" has the meaning set forth in the first paragraph of this
document.
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<PAGE> 48
"Default Interest Rate" has the meaning set forth in the Loan Agreement.
"Defeasance Deposit" has the meaning set forth in the Loan Agreement.
"Defeasance Period" has the meaning set forth in the Loan Agreement.
"Due Date" has the meaning set forth in the Loan Agreement.
"ERISA" has the meaning set forth in the Loan Agreement.
"Environmental Laws" has the meaning set forth in the Loan Agreement.
"Event of Default" has the meaning set forth in Article II hereof.
"Finance Trustee" has the meaning set forth in Paragraph E of the
Recitals hereof, being the same meaning ascribed to "Trustee" in the Loan
Agreement.
"Fixtures" has the meaning set forth in Granting Clause (iii) hereof.
"Grantor" has the meaning set forth in the first paragraph of this Deed
of Trust.
"Guaranty" has the meaning set forth in Section 1.20 hereof.
"Hazardous Material(s)" has the meaning set forth in the Loan Agreement.
"Holders" has the meaning set forth in the Loan Agreement.
"Impositions" has the meaning set forth in Section 1.5.1 hereof.
"Improvements" has the meaning set forth in Paragraph C of the Recitals
hereof.
"Indebtedness" has the meaning set forth in the Loan Agreement.
"Indemnitees" has the meaning set forth in Section 1.12 hereof.
"Individual Property" means any one of the parcels of Land set forth on
Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4, Exhibit A-5, Exhibit A-6,
Exhibit A-7, Exhibit A-8, Exhibit A-9, Exhibit A-10, Exhibit A-11, Exhibit A-12,
Exhibit A-13, Exhibit A-14, Exhibit A-15, Exhibit A-16, Exhibit A-17, Exhibit
A-18, Exhibit A-19, Exhibit A-20, Exhibit A-21 or Exhibit A-22, and the Building
and other Improvements on said parcel and all other Property relating to said
parcel, Building and other Improvements.
"Insurance Proceeds" has the meaning set forth in Section 1.8.2 hereof.
"Land" has the meaning set forth in Paragraph B of the Recitals hereof.
"Laws" has the meaning set forth in the Loan Agreement.
"Leases" has the meaning set forth in Granting Clause (vi) hereof.
"Lien(s)" has the meaning set forth in Section 1.2.5 hereof.
"Loan" has the meaning set forth in Paragraph A of the Recitals hereof.
"Loan Agreement" has the meaning set forth in Paragraph A of the
Recitals hereof.
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<PAGE> 49
"Loan Documents" has the meaning set forth in the Loan Agreement.
"Material Lease" has the meaning set forth in Section 1.20.11.2 hereof.
"Members" has the meaning set forth in the Loan Agreement.
"Mortgage Note" has the meaning set forth in Paragraph A of the Recitals
hereof.
"Mortgaged Properties" has the meaning set forth in the Loan Agreement.
"Net Sales Proceeds" has the meaning set forth in the Loan Agreement.
"Noteholder" has the meaning set forth in Paragraph A of the Recitals
hereof.
"Notice of Sale" has the meaning set forth in Section 3.5.4 hereof.
"Obligations" has the meaning set forth in the paragraph beginning with
the words "NOW, THEREFORE . . . " on page 1 hereof.
"Permitted Debt" has the meaning set forth in the Loan Agreement.
"Permitted Liens" has the meaning set forth in the Loan Agreement.
"Permitted Liens and Encumbrances" has the meaning set forth in Section
1.2.5 hereof.
"Person" has the meaning ascribed to such term in the Loan Agreement.
"Pooling and Servicing Agreement" has the meaning set forth in the Loan
Agreement.
"Property" has the meaning set forth in the first full paragraph
following the heading "GRANTING CLAUSES," on page 2 hereof.
"Qualified Insurance Company" has the meaning set forth in Section 1.7.2
hereof and "Qualified Insurance Companies" means any two or more insurers
constituting a Qualified Insurance Company.
"Qualified Supervising Professional" means a supervising engineer or
architect that is licensed to do business in the State in which the Property is
located and has at least five (5) years experience in the supervision of
commercial construction projects similar to the work to be supervised.
"Rating Agencies" has the meaning set forth in the Loan Agreement.
"Real Property Rights" has the meaning set forth in Granting Clause (ii)
hereof.
"Release Price" has the meaning set forth in the Loan Agreement.
"Renewal Lease" has the meaning set forth in Section 1.20.11.3 hereof.
"Rents" has the meaning set forth in Granting Clause (vi) hereof.
"Restoration" has the meanings set forth in Section 1.8.2 and Section
1.9.3 hereof.
"S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc.
"Secured Party" has the meaning set forth in Section 1.17.6 hereof.
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<PAGE> 50
"Securitization" has the meaning set forth in the Loan Agreement.
"Security Deposits" has the meaning set forth in Section 1.20.11.10
hereof.
"Security Documents" has the meaning set forth in the Loan Agreement.
"Servicer" has the meaning ascribed to it in Paragraph E of the Recitals
hereof.
"SPE Member" has the meaning set forth in the Loan Agreement.
"Taking" has the meaning set forth in Section 1.9.1 hereof.
"Tenant" has the meaning set forth in Section 1.20.1 hereof.
"TI Reserve Account" has the meaning set forth in the Loan Agreement.
"Title Company" has the meaning set forth in Section 1.3 hereof.
"Title Insurance Policy" has the meaning set forth in Section 1.3
hereof.
"Trustee" means Commonwealth Land Insurance Company, and its successors
and assigns as trustee hereunder.
"U.C.C." has the meaning set forth in Granting Clause (viii) hereof.
"U.C.C. Collateral" has the meaning set forth in Section 1.17.1 hereof.
"Yield Maintenance Payment" has the meaning set forth in the Loan
Agreement.
[SIGNATURE PAGE TO FOLLOW]
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<PAGE> 51
IN WITNESS WHEREOF, the undersigned has caused this Deed of
Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing to
be duly executed and delivered as of the date first set forth hereinabove.
GRANTOR:
ARDEN REALTY FINANCE III, L.L.C.,
a Delaware limited liability company
By:
Name:
Its:
This instrument prepared by:
Lee E. Berner, Esq.
Hogan & Hartson L.L.P.
8300 Greensboro Drive
McLean, Virginia 22102
<PAGE> 52
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On June 8, 1998, before me ____________________ a notary public,
personally appeared _________________________________, personally known to be
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(Seal)
<PAGE> 53
EXHIBIT A
Description Of Land
<PAGE> 54
Recording Requested By:
Commonwealth Land Title Insurance
Company
When recorded mail document to:
Hogan & Hartson L.L.P.
Suite 1100
8300 Greensboro Drive
McLean, Virginia 22102
Attention: Lee E. Berner, Esq.
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE RESERVED FOR
RECORDER'S USE
TITLE(S)
- --------------------------------------------------------------------------------
DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.9
Prepared by:
Lee E. Berner, Esq.
Hogan & Hartson L.L.P.
8300 Greensboro Drive
McLean, VA 22102
After recording return to:
Lee E. Berner, Esq.
Hogan & Hartson L.L.P.
8300 Greensboro Drive
McLean, VA 22102
ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT OF LEASES AND RENTS (this "ASSIGNMENT") is made as of
the 8th day of June, 1998, by ARDEN REALTY FINANCE III, L.L.C., a Delaware
limited liability company having an office at 11601 Wilshire Boulevard, Suite
401, Los Angeles, California 90025 ("ASSIGNOR"), to LEHMAN BROTHERS REALTY
CORPORATION, a Delaware corporation having an office at Three World Financial
Center, 200 Vesey Street, New York, New York 10285, its successors and assigns
("ASSIGNEE").
WITNESSETH THAT:
In consideration of Ten Dollars ($10.00), in hand paid, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor hereby grants, transfers, pledges, and assigns to
Assignee, its successors and assigns, (i) all leases, subleases, licenses,
concessions and other occupancy agreements which now or may hereafter affect all
those certain lots or pieces of land, more particularly described in EXHIBIT A-1
THROUGH EXHIBIT A-22 attached hereto and made a part hereof, or any of the
improvements now or hereafter located thereon (said land and improvements
hereinafter collectively shall be referred to as the "PROPERTY") or any part
thereof and all guarantees, modifications, renewals and extensions thereof
(collectively, the "LEASES") and all documents and instruments made or hereafter
made in respect of the Leases, together with (ii) all of the rents, additional
rents, income, revenue, issues and profits, due or to become due or to which
Assignor is now or may hereafter become entitled, arising out of the Leases
(exclusive of any security deposits given under any Lease that have not been
applied in accordance with the provisions of the applicable Lease), or the
Property or any part or parts thereof (collectively, the "RENTS").
THIS ASSIGNMENT is made in connection with that certain Mortgage Note
made by Assignor to the order of Assignee dated as of the date hereof, in the
principal amount of One Hundred Thirty-six Million One Hundred Thousand and
No/100 Dollars ($136,100,000.00) (the "Mortgage Note") pursuant to that certain
Loan Agreement dated as of the date hereof by and between Assignor and Assignee
(the "Loan Agreement"). Unless otherwise defined herein,
<PAGE> 2
capitalized terms used in this Assignment shall have the meanings ascribed to
them in the Loan Agreement. The principal, interest, and all other sums that may
now or hereafter be due and payable under the Mortgage Note and the other Loan
Documents are collectively referred to as the "OBLIGATIONS."
ASSIGNOR REPRESENTS AND WARRANTS that (i) none of the Leases and Rents
has been assigned or otherwise pledged or hypothecated to any other Person or
party whatsoever; (ii) Assignor has full power and authority to execute and
deliver this Assignment; and (iii) the execution and delivery of this Assignment
has been duly authorized by all necessary corporate or partnership actions by
Assignor and does not conflict with or constitute a default under any law,
judicial order or other agreement affecting Assignor or the Property.
ASSIGNOR COVENANTS with Assignee that Assignor (a) shall not execute any
other assignment of its interest as lessor or owner in the Leases and Rents to
any other Person or party whatsoever and (b) shall execute and deliver at the
request of Assignee all such further assurances, confirmations and assignments
in connection with the Property, the Leases and Rents or this Assignment as
Assignee shall from time to time reasonably require.
THIS ASSIGNMENT is made on the following terms, covenants and
conditions:
1. Present Assignment. Assignor does hereby absolutely and
unconditionally assign to Assignee Assignor's right, title and interest in all
current and future Leases and Rents, it being intended by Assignor that this
Assignment constitutes a present, absolute assignment and not an assignment for
additional security only. Such assignment to Assignee shall not be construed to
bind Assignee to the performance of any of the covenants, conditions or
provisions contained in any agreement relating to the Leases and Rents or
otherwise impose any obligation upon Assignee. Assignee hereby grants to
Assignor a revocable license to collect and receive the Rents as they become due
and payable until such time as an Event of Default (as defined in the Loan
Agreement) shall have occurred and be continuing; provided that the existence of
such license shall not operate to subordinate this Assignment to any subsequent
assignment of the Leases and Rents, in whole or in part, by Assignor, and any
such subsequent assignment shall be subject to the rights of Assignee hereunder.
Unless and until an Event of Default shall have occurred and be continuing,
Assignor shall have the right to possess and enjoy the Property, and to receive
the Rents, subject to the terms of the Mortgage Note and the other Loan
Documents (including, without limitation, SCHEDULE 5.11 of the Loan Agreement);
and provided, further, that if Assignor shall pay in full the principal of and
interest on the Mortgage Note and all other Obligations which this Assignment by
its terms secures, then this Assignment shall be released and reassigned upon
the written request, and at the expense, of Assignor.
2. Remedies of Assignee. Upon or at any time after an Event of
Default, Assignee may exercise any and all remedies available to it at law or
under any of the Loan Documents and may in addition, at its option, without
waiving such Event of Default, revoke the license granted to Assignor to collect
Rents, and then thereafter, without notice and without regard to the adequacy of
the security for the Obligations, either in person or by agent, with or without
bringing any action or proceeding, or, to the fullest extent permitted by
applicable law,
- 2 -
<PAGE> 3
by a receiver appointed by a court, either with or without taking possession of
the Property, in its own name, demand, sue for or otherwise collect and receive
all Rents, including, without limitation, those past due, and Assignee may apply
the Rents to the payment of the Obligations in such order and proportion,
consistent with the Loan Documents, as Assignee, in its sole discretion, may
determine. The exercise by Assignee of the option granted it in this Section 2
and the collection of the Rents and the application thereof as herein provided
shall not be considered a waiver of any default or Event of Default by Assignor
under the Mortgage Note or any other Loan Documents.
3. No Liability of Assignee. Assignee shall not be liable for any
loss sustained by Assignor resulting from Assignee's failure to let the Property
after an Event of Default or from any other act or omission of Assignee in
managing the Property after default. Assignee shall not be obligated to perform
or discharge any obligation, duty or liability under any Leases or under or by
reason of this Assignment, and Assignor shall, and hereby agrees to, indemnify
Assignee for, and to hold Assignee harmless from, any and all liability, loss or
damage which may or might be incurred thereunder or hereunder or by reason of
this Assignment and from any and all claims and demands whatsoever, including
the defense of any such claims or demands which may be asserted against Assignee
by reason of any alleged obligations and undertakings on its part in respect
thereof. Should Assignee incur any such liability, the amount thereof, including
costs, expenses and reasonable attorneys' fees, shall be secured by this
Assignment and by the other Loan Documents and shall accrue interest at the
Default Interest Rate until paid from the tenth (10th) day after the later of
(i) demand (which may be made prior to Assignee's expenditure) or (ii)
Assignee's expenditure, and Assignor shall reimburse Assignee therefor within
ten (10) days after demand. Assignee shall not be responsible or liable for any
waste committed on the Property by the tenants or any other parties, or for any
dangerous or defective condition of the Property arising on or after the date
hereof, or for any negligence in the management, upkeep, repair or control of
the Property resulting in loss or injury or death to any tenant, licensee,
employee or stranger on or after the date hereof.
4. Notice to Obligors. Assignor hereby authorizes and directs all
persons (including, without limitation, the Manager under the Management
Agreement) obligated to pay any Rents, upon receipt from Assignee of written
notice that an Event of Default has occurred and is continuing or otherwise upon
notice from Assignee, to pay over to Assignee all Rents and to continue so to do
until otherwise notified by Assignee.
5. Other Security. Assignee may take or release other security for
the payment of the Obligations, may release any party primarily or secondarily
liable therefor and may apply any other security held by it to the reduction or
satisfaction of the Obligations, in such order and manner as Assignee shall see
fit, without prejudice to any of its rights under this Assignment.
6. Other Remedies. Nothing contained in this Assignment and no act
done or omitted by Assignee pursuant to the power and rights granted to Assignee
hereunder shall be deemed to be a waiver by Assignee of its rights and remedies
under the Mortgage Note, or any other Loan Documents, and this Assignment is
made and accepted without prejudice to any of
- 3 -
<PAGE> 4
the rights and remedies possessed by Assignee under the terms thereof. The right
of Assignee to collect the Obligations and to enforce any other security
therefor held by it may be exercised by Assignee either prior to, simultaneously
with, or subsequent to any action taken by it hereunder or under any other Loan
Document.
7. No Mortgagee in Possession. Nothing herein contained shall be
construed as constituting Assignee a "mortgagee in possession" in the absence of
entry upon and the taking of actual possession of the Property by Assignee. In
the exercise of the powers herein granted Assignee, no liability shall be
asserted or enforced against Assignee, all such liability being expressly waived
and released by Assignor.
8. Assignee as Attorney in Fact. Assignor does hereby irrevocably
constitute and appoint Assignee, while this Assignment remains in force and
effect, and in each instance, to the fullest extent permitted by applicable law,
its true and lawful attorney in fact, coupled with an interest and with full
power of substitution, delegation and revocation, for Assignor and in its name,
place and stead, to enter and take possession of the Property by actual physical
possession without the commencement of any action to foreclose the Mortgage or
to exercise any power of sale Assignee may have thereunder and to do and perform
such actions with respect to the Property as Assignee may deem appropriate, as
fully as Assignor could do if personally present, Assignor hereby ratifying and
confirming all that Assignee, as attorney or its substitute, shall lawfully do
or cause to be done by virtue hereof; provided, however, that Assignee shall not
do or perform such actions until an Event of Default shall have occurred and be
continuing.
9. Conflict of Terms. In case of any conflict between the terms of
this Assignment and the terms of any other Loan Document, the terms of such Loan
Document shall prevail.
10. No Oral Change. This Assignment and any provisions hereof may
not be modified, amended, waived, extended, changed, discharged or terminated
orally, or by any act or failure to act on the part of Assignor or Assignee, but
only by an agreement in writing signed by the party against whom the enforcement
of any modification, amendment, waiver, extension, change, discharge or
termination is sought.
11. Non-Waiver. The failure of Assignee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Assignment. Assignor shall not be relieved of Assignor's obligations
hereunder by reason of (i) failure of Assignee to comply with any request of
Assignor or any other party to take any action to enforce any of the provisions
hereof or of the Mortgage, the Mortgage Note or any of the other Loan Documents
or, (ii) any agreement or stipulation by Assignee extending the time of payment
or otherwise modifying or supplementing the terms of this Assignment, the
Mortgage Note, the Mortgage or any of the other Loan Documents. Assignee may
resort for the payment of the Obligations to any other security held by Assignee
in such order and manner as Assignee, in its discretion, may elect. Assignee may
take any action to recover the Obligations, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Assignee
thereafter to enforce its rights under this Assignment. The rights of Assignee
under this Assignment shall be separate,
- 4 -
<PAGE> 5
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Assignee shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision.
12. Inapplicable Provisions. If any term, covenant or condition of
this Assignment is held to be invalid, illegal or unenforceable in any respect,
this Assignment shall be construed without such provision.
13. Counterpart Originals. This Assignment may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
14. Governing Law. This Assignment, the rights and obligations of
the parties hereto and any claims or disputes relating thereto, shall be
governed by and in accordance with the laws of the State of New York, except
that, for purposes of determining the creation, validity, priority and
enforcement of the assignment herein and the exercise of remedies hereunder, the
law of the State in which the Property is located shall govern.
15. Binding Effect. This assignment, together with the covenants and
warranties herein contained, shall inure to the benefit of Assignee and any
subsequent holder of the indebtedness secured by the Loan Documents and shall be
binding upon Assignor, its successors and assigns.
[SIGNATURE PAGE TO FOLLOW]
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, Assignor has executed this Assignment of Leases and
Rents under seal the day and year first above written.
ASSIGNOR:
ARDEN REALTY FINANCE III, L.L.C.,
a Delaware limited liability company
By: _____________________________
Name:________________________
Title:_________________________
STATE OF ________________ )
ss
COUNTY OF ______________ )
On June ___, 1998, before me ____________________ a notary public,
personally appeared _________________________________, personally known to be
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(Seal)
- 6 -
<PAGE> 7
EXHIBIT A
Description of Land
<PAGE> 8
Recording Requested By:
Commonwealth Land Title
Insurance Company
When recorded mail document to:
Hogan & Hartson L.L.P.
Suite 1100
8300 Greensboro Drive
McLean, Virginia 22102
Attention: Lee E. Berner, Esq.
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE
TITLE(S)
- --------------------------------------------------------------------------------
ASSIGNMENT OF LEASES AND RENTS
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.10
COLLATERAL ASSIGNMENT OF MANAGEMENT
AGREEMENT AND SUBORDINATION AGREEMENT
This COLLATERAL ASSIGNMENT OF MANAGEMENT AGREEMENT AND
SUBORDINATION AGREEMENT (the "Agreement") dated as of June 8, 1998 among ARDEN
REALTY FINANCE III, L.L.C., a Delaware limited liability company having its
principal place of business at 11601 Wilshire Boulevard, Suite 401, Los Angeles,
California 90025 ("BORROWER"), LEHMAN BROTHERS REALTY CORPORATION, a Delaware
corporation, having an address of Three World Financial Center, New York, New
York 10285 ("LENDER"), and ARDEN REALTY LIMITED PARTNERSHIP, a Maryland limited
partnership having its principal place of business at 11601 Wilshire Boulevard,
Fourth Floor, Los Angeles, California 90025 ("MANAGER").
W I T N E S S E T H:
WHEREAS, Lender is concurrently herewith making a loan to
Borrower in the original principal amount of One Hundred Thirty-six Million One
Hundred Thousand and No/100 Dollars ($136,100,000.00) (the "LOAN"), pursuant to
that certain Loan Agreement dated as of June 8, 1998 (the "LOAN AGREEMENT") and
the other Loan Documents (as defined in the Loan Agreement); the repayment of
the Loan is secured by, among other things, twenty-two (22) parcels of land (the
"LAND") owned by Borrower and the improvements thereon consisting of office and
industrial buildings, parking structures and related assets (the "IMPROVEMENTS";
the Land and the Improvements collectively shall be known as the "PROPERTIES").
WHEREAS, the Loan is evidenced by a certain Mortgage Note
dated the date hereof made by Borrower in favor of Lender (the "NOTE") and
secured by, among other things, a certain Deed of Trust, Assignment of Rents and
Leases, Security Agreement and Fixture Filing dated as of the date hereof and
encumbering the Properties (the "MORTGAGE");
WHEREAS, Borrower and Manager have entered into, and are bound
by the terms of, a certain Management Agreement dated as of June 8, 1998
providing for the management of the Properties (the "MANAGEMENT AGREEMENT");
WHEREAS, it is a condition precedent to the Lender's
obligation to make the Loan to Borrower that Borrower assign to Lender, as
further security for the Loan, Borrower's interest in the Management Agreement
and that Manager agree, among other things, to (i) subordinate its right to
receive payments under the Management Agreement to the payment by Borrower of
obligations under the Loan Agreement and other Senior Obligations (as defined
below) and (ii) make certain other agreements for the benefit of Lender;
WHEREAS, it is contemplated that, in connection with an
anticipated securitization of the Loan (the "SECURITIZATION"), all of Lender's
rights under the Loan Agreement and all other Loan Documents (as defined in the
Loan Agreement), including, without limitation, the Mortgage Note, the Mortgage
and this Agreement, may be assigned by Lender, along with mortgage loans made to
other borrowers, to, among others, an institutional trustee (the "TRUSTEE"), as
trustee for the benefit of the holders from time to time of certain commercial
mortgage-backed certificates (the "CERTIFICATES") pursuant to Section 9 of the
Loan Agreement and may be serviced by a professional loan servicing company
selected by Lender (the "SERVICER") on behalf of the Trustee; and
WHEREAS, upon the assignment of the Loan Documents to the
Trustee, the term "Lender" as used herein will mean the Trustee and the Servicer
(on behalf of the Trustee), as applicable.
NOW, THEREFORE, in consideration of the making of the Loan and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant,
<PAGE> 2
agree, represent and warrant as follows:
1. CERTAIN DEFINED TERMS. The following terms shall be defined
as follows:
(a) "SENIOR OBLIGATIONS" has the meaning ascribed to such term
in Section 2 hereof.
(b) "SUBORDINATED OBLIGATIONS" means the obligations of
Borrower, whether now existing or hereafter from time to time accruing or
arising, to pay any and all fees under or provided for in the Management
Agreement.
All capitalized terms not otherwise defined herein shall have
the meanings ascribed to such terms in the Loan Agreement.
2. COLLATERAL ASSIGNMENT. Borrower hereby grants to the Lender
a security interest in, and collaterally assigns to Lender, all of Borrower's
right, title and interest in, to and under the Management Agreement as further
security for the payment, when due, of all amounts to be paid by Borrower in
connection with the Loan, including, without limitation, all principal, interest
and other charges due from time to time in connection with the Loan, any balloon
payment that may be due at maturity of the Loan, whether by agreement of the
parties, by acceleration of the Mortgage Note following an Event of Default, or
otherwise, and any and all other payments, including Defeasance Deposits,
Accrued Interest, Default Interest, Late Payment Fees, Yield Maintenance
Payments or other prepayment premiums, if any, which must now or hereafter be
paid under, pursuant to, or in connection with any of the Loan Documents and the
performance of all other covenants, agreements and obligations of Borrower under
the Loan Documents (collectively, the "SENIOR OBLIGATIONS").
3. REPRESENTATIONS REGARDING MANAGEMENT AGREEMENT.
3.1 Borrower represents to Lender that: (i) attached
hereto as EXHIBIT A is a true and complete copy of the Management Agreement,
(ii) the Management Agreement has not been amended since the date of the last
amendment attached hereto, (iii) the Management Agreement is in full force and
effect, (iv) no notice of default under the Management Agreement has been given
or received by Borrower and neither Borrower nor, to the best knowledge of
Borrower, Manager is in default with respect to any obligation under the
Management Agreement, (v) Borrower does not have any defense, counterclaim or
right of offset with respect to any of its obligations under the Management
Agreement and (vi) the term of the Management Agreement, exclusive of renewal
rights, ends on April 16, 2008.
3.2 Manager represents to Lender that: (i) attached
hereto as EXHIBIT A is a true and complete copy of the Management Agreement,
together with all amendments thereto, (ii) the Management Agreement has not been
amended since the date of the last amendment attached hereto, (iii) the
Management Agreement is in full force and effect, (iv) no notice of default
under the Management Agreement has been given or received by Manager and neither
the Manager nor, to the best knowledge of Manager, Borrower is in default with
respect to any obligation under the Management Agreement, (v) Manager does not
have any defense, counterclaim or right of offset with respect to any of its
obligations under the Management Agreement, (vi) the term of the Management
Agreement, exclusive of renewal rights, ends on April 16, 2008.
4. COVENANTS OF MANAGER. Until such time as all of the Senior
Obligations shall have been fully paid, discharged and satisfied:
(a) Manager will (i) promptly perform and observe in all
respects all of the covenants and agreements to be performed and observed by it
under the Management Agreement in accordance with the terms thereof, and (ii)
promptly notify Lender of any material default under the Management Agreement of
which it becomes aware;
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(b) Manager will not (i) reduce or permit the reduction of the
term of the Management Agreement, (ii) increase or permit the increase of the
amount of any fees payable under the Management Agreement, or (iii) otherwise
modify any portion of the Management Agreement, orally or by a writing, in such
a manner as to materially reduce or limit Manager's obligations thereunder; and
(c) Manager shall, within twenty (20) days after demand by
Lender, deliver to Lender a written statement certifying any condition or state
of facts in connection with the Management Agreement which is reasonably
requested by Lender.
5. CONSENT. Manager hereby consents to the assignment to
Lender of Borrower's rights under the Management Agreement as security for
Borrower's obligations in respect of the Loan. Lender shall be entitled to
exercise any and all rights of Borrower under the Management Agreement in
accordance with the terms thereof, and Manager shall permit and comply in all
respects with such exercise. Lender may cure any Borrower's default under the
Management Agreement, and may perform any act, duty or obligation required to be
performed by Borrower under the Management Agreement; provided, however, that
nothing herein shall require Lender to cure any such default or to perform any
such act, duty or obligation.
6. SUBORDINATION. (a) Borrower and Manager agree that the
Subordinated Obligations shall, to the extent herein provided, be subject and
subordinate to the prior payment, discharge and satisfaction in full of the
Senior Obligations. Notwithstanding the foregoing, if and for so long as no
Default (as such term is defined in the Loan Agreement) shall have occurred and
be continuing, Borrower may pay, and Manager may receive and retain payment of,
all fees due and payable under the Management Agreement and all other amounts
due and payable to Manager under the Management Agreement.
(b) Except as expressly permitted hereby, Manager will not
request, demand, sue for, take, accept or receive from Borrower, by set-off or
otherwise, and Borrower will not pay to Manager, any monies including, without
limitation, fees and any other amounts due and payable to Manager under the Loan
Agreement under or provided for in the Management Agreement now or hereafter
payable by Borrower to Manager in respect of the Subordinated Obligations or any
security therefor, until the final payment, discharge and satisfaction in full
of the Senior Obligations.
(c) Upon any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the assets of Borrower or the proceeds thereof, to creditors of
Borrower, or upon any indebtedness of Borrower, by reason of the liquidation,
dissolution or other winding up of Borrower or Borrower's business, or any sale,
receivership, insolvency or bankruptcy proceeding, or assignment for the benefit
of creditors, or any proceeding by or against Borrower for any relief under any
bankruptcy or insolvency law or laws relating to the relief of debtors,
readjustment of indebtedness, reorganizations, compositions or extensions, then
and in any such event any payment or distribution of any kind or character,
whether in cash, securities or other property, which would otherwise be payable
or deliverable by Borrower to Manager in respect of any of the Subordinated
Obligations (including, without limitation, interest thereon) shall be paid and
delivered directly to Lender for application to the Senior Obligations, whether
or not then due, until the Senior Obligations shall have first been fully paid,
discharged and satisfied. Manager irrevocably authorizes and empowers Lender to
demand, sue for, collect and receive every such payment or distribution and give
acquittance therefor and to file claims and take such other actions, in Lender's
own name or in the name of Manager or otherwise, as Lender may deem necessary or
desirable for the enforcement of this Agreement. For the purposes set forth in
the foregoing sentence, Manager appoints Lender its attorney in fact, which
appointment is coupled with an interest and irrevocable. Manager will execute
and deliver to Lender any such additional documentation to evidence the
foregoing, including, without limitation, powers of attorney, assignments or
other instruments as may be reasonably requested by Lender in order to enable
Lender to enforce any
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<PAGE> 4
and all claims upon or with respect to any of the Subordinated Obligations, and
to collect and receive any and all payments or distributions which may be
payable or deliverable with respect to such Subordinated Obligations.
(d) Manager shall forthwith deliver to Lender, in precisely
the form received (endorsed or assigned by Manager as appropriate), any and all
payments, distributions and security, and the proceeds thereof, paid to and
received by Manager with respect to the Subordinated Obligations in violation of
the foregoing provisions, for application to the Senior Obligations. Until so
delivered, all such payments, distributions and security and the proceeds
thereof shall be held by Manager, in trust, as the property of Lender. In the
event of Manager's failure to endorse or assign any such payments,
distributions, security or proceeds, Lender is hereby irrevocably authorized to
do so on Manager's behalf.
(e) For so long as any of the Senior Obligations remain
outstanding, Manager will not assign or transfer to any third party any claim
which it has or may hereafter have against Borrower in respect of any of the
Subordinated Obligations, unless such assignment or transfer is made expressly
subject to the terms and conditions hereof in an instrument in form and
substance satisfactory to Lender.
(f) At any time and from time to time, Lender may enter into
such agreements with Borrower as it deems appropriate extending the time of
payment of, or renewing or otherwise altering the terms of, all or any of the
Senior Obligations, without notice to Manager and without in any way impairing
or affecting the obligations of Manager hereunder.
(g) Lender's right to enforce this Agreement in respect of the
Subordinated Obligations shall not be prejudiced by any act or failure to act on
the part of Borrower or anyone in custody of Borrower's assets or property.
7. RIGHT TO TERMINATE. (a) Upon the occurrence of an Event of
Default (as defined in the Loan Agreement), Lender may terminate the Management
Agreement upon forty-five (45) days notice to Manager. Upon such termination,
unless expressly assumed by Lender, Lender shall not have any liability to
Manager for any unpaid fees or expenses of any kind including, without
limitation, any termination fees or expenses of any kind including, without
limitation, any termination fees or penalties under the Management Agreement.
(b) Within thirty (30) days after acquiring title to any or
all of the Properties, through foreclosure, deed in lieu of foreclosure or the
exercise of any other remedy under the Mortgage or the other Security Documents,
Lender may terminate the Management Agreement as to the Properties acquired by
Lender without cause by written notice to Manager. Upon such termination, unless
expressly assumed by Lender, Lender shall not have any liability to Manager for
any unpaid fees or expenses of any kind including, without limitation, any
termination fees or penalties under the Management Agreement.
(c) At any time after acquiring title to the Properties,
through foreclosure, deed in lieu of foreclosure or the exercise of any other
remedy, Lender may exercise all rights of Borrower under the Management
Agreement to terminate the Management Agreement, in accordance with the terms
thereof.
8. ATTORNMENT. At any time after Lender has acquired title to
the Properties, through foreclosure, deed in lieu of foreclosure or the exercise
of any other remedy under the Mortgage or the other Security Documents, Manager
shall attorn to Lender and be bound by all of the terms, covenants and
conditions of the Management Agreement for so long as the Management Agreement
shall be in effect, including through the term of any extensions or renewals
thereof, with the same force and effect as if Lender were a party to the
Management Agreement. Such attornment shall be effective and self-operative as
an agreement between Manager and Lender without the execution of any further
instruments on the part of any party; provided, however, that at Lender's
request, Manager shall execute an instrument confirming such attornment.
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<PAGE> 5
9. DEFAULTS; RIGHT TO CURE. (a) Manager shall give Lender
prior written notice of any default by Borrower with respect to which Manager
intends to take any action (including, without limitation, any action to
terminate the Management Agreement and/or to withhold any payments thereunder).
Manager shall not take any action with respect to such default until the
expiration of sixty (60) days after Lender's receipt of such notice; provided,
however, that if, under the Management Agreement, Borrower is entitled to more
than sixty (60) days in which to cure such default, then Lender shall similarly
be entitled to such longer cure period. If such default has not been cured by
the expiration of the cure period provided herein, regardless of whether a
default has occurred and is continuing under the Loan Documents, or whether
Lender has exercised any rights or remedies with respect thereto, Manager shall
have all the rights otherwise available to it under the Management Agreement and
at law (including, without limitation, the right to terminate the Management
Agreement).
(b) If the Management Agreement is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding involving
Borrower, and if within ninety (90) days after such rejection (or such shorter
period within which Manager may be required to cease its activities pursuant to
such a proceeding, but in no event later than ten (10) days prior to any such
required cessation of activities), Lender shall certify in writing to Manager
that it intends to perform the obligations of Borrower as and to the extent
required under the Management Agreement and, upon Lender's request Manager will
execute and deliver to Lender a new Management Agreement. Manager and Lender
shall agree under such new Management Agreement to perform the obligations
contemplated to be performed by Manager and Borrower, respectively, under the
original Management Agreement, and such new Management Agreement shall be for a
term equal to the remaining term under the original Management Agreement before
giving effect to such rejection. Such new Management Agreement shall contain the
same conditions, agreements, terms, provisions and limitations as the original
Management Agreement (except for any requirements which were fulfilled by
Borrower prior to such rejection).
10. SECURITY AGREEMENT. (a) This Assignment shall also
constitute a security agreement as that term is used in the Uniform Commercial
Code in effect from time to time in the State of New York (the "UCC"). Lender
shall have, in addition to all other rights and remedies provided herein or in
any other Loan Document, at law, in equity or otherwise, all rights and remedies
of a secured party under the UCC. Lender shall give Borrower ten (10) days
written notice of the time and place of any public sale of any collateral in
which Lender has a security interest hereunder or the time after which any
private sale or any other intended disposition is to be made. After deducting
all expenses incurred in connection with the enforcement of its rights
hereunder, Lender shall cause the proceeds of the collateral in which Lender has
a security interest hereunder to be applied to the payment of the Secured
Obligations in such order as Lender may determine or otherwise as may be
provided under the Loan Documents.
(b) Concurrently with the execution and delivery of this
Agreement, Borrower shall file such financing statements and other documents in
such offices as Lender may request to perfect the security interests granted by
this Agreement.
11. TERMINATION OF MANAGEMENT AGREEMENT. Except as permitted
by the Loan Agreement, Borrower and Manager shall not (a) cancel, release,
terminate, or surrender, (b) amend, modify or supplement or (c) assign the
Management Agreement without the prior written consent of Lender, and, if the
Securitization has occurred, receipt of a Rating Comfort Letter from each Rating
Agency with respect thereto.
12. LIABILITY OF LENDER. Manager acknowledges that upon
succeeding to the interest of Borrower under the Management Agreement, Lender
shall not be:
(a) liable for any omission or default of Borrower under the
Management Agreement;
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<PAGE> 6
(b) subject to any offsets or defenses which Manager might
have had against Borrower;
(c) liable for any fees or commissions due to Manager for any
period prior to the date when Lender succeeded to such interest;
(d) bound by any sums or deposits which Manager may have paid
to Borrower unless such sums were actually paid and delivered to Lender; or
(e) bound by any amendment or supplement of the Management
Agreement made without Lender's prior written consent.
13. ATTORNEY-IN-FACT. Lender is hereby appointed Borrower's
attorney-in-fact (which appointment is coupled with an interest and is
irrevocable) for the purpose of carrying out the provisions of this Agreement
and taking any action and executing any instruments which Lender may deem
necessary or desirable to effect the intents and purposes hereof including,
without limitation, the right to sign and file any financing statement (or
amendment or extension thereof) deemed necessary by Lender in connection
herewith.
14. FURTHER ASSURANCES. Borrower shall, from time to time upon
Lender's written request, promptly execute and deliver such further documents
and take such further action as Lender may request in order to create, preserve,
perfect, protect or confirm the assignment granted hereby or to enable Lender to
exercise and enforce its rights and remedies hereunder; provided, no such
documents or actions shall materially increase Borrower's obligations hereunder.
All of the foregoing shall be undertaken at Borrower's expense, including,
without limitation: (a) all filing, registration and recording fees, if any; and
(b) all stamp taxes and other taxes, charges and similar impositions in
connection therewith.
15. NO WAIVER. No failure to exercise, and no delay in
exercising, and no course of dealing with respect to, any power, remedy or right
under this Agreement by Lender shall operate as a waiver thereof, nor shall any
single or partial exercise thereof by Lender preclude any other or further
exercise thereof or the exercise of any other power, remedy or right. The
remedies provided herein are cumulative and not exclusive of any remedies
available at law or under the Loan Documents.
16. NOTICE. Any notice, demand, statement, request or consent
made hereunder shall be in writing and shall be deemed given on the next
business day if sent by Federal Express or other reputable overnight courier and
designated for next business day delivery, or on the third day following the day
such notice is deposited with the United States postal service first class
certified mail, return receipt requested, addressed to the address, as set forth
above, of the party to whom such notice is to be given, or to such other address
or additional party as Borrower, Lender or Manager, as the case may be, shall in
like manner designate in writing. Notice may also be given in accordance with
the provisions of the Loan Agreement.
17. AMENDMENTS, WAIVERS IN WRITING. This Agreement cannot be
amended except by an agreement in writing, signed by Lender, Borrower and
Manager, and no provision hereof may be waived except by an instrument in
writing signed by Lender.
18. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York (but not
including the choice of law rules thereof).
19. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
illegal, invalid and/or unenforceable, the remainder of this Agreement or the
application of such provision to persons or circumstances other than those as to
which it
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<PAGE> 7
is illegal, invalid and/or unenforceable, as the case may be, shall not be
affected, and each provision of this Agreement shall be legal, valid and
enforceable to the extent permitted by law. The illegality, invalidity and/or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the legality, validity and/or enforceability thereof in any other
jurisdiction.
20. EXPENSES. If any suit or other proceeding is instituted by
Lender to enforce this Agreement (or any portion hereof), Borrower shall pay,
upon demand, all of the reasonable out-of-pocket costs and expenses (including,
without limitation, attorneys' fees and disbursements) incurred by Lender in
connection therewith. The obligations of Borrower under this Section shall
survive the expiration or termination of this Agreement.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Notwithstanding the foregoing, neither Borrower nor
Manager may assign its rights or obligations hereunder.
22. SECTION HEADINGS. The Section headings used in this
Agreement are for convenience of reference only and do not constitute part of
this Agreement for any purpose, and shall not be deemed to limit or expand the
express terms hereof.
23. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING BROUGHT BY ANY PARTY, DIRECTLY OR INDIRECTLY INVOLVING ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT.
24. COUNTERPARTS. This Agreement may be executed in separate
counterparts, none of which need contain the signatures of all parties, each of
which shall be deemed to be an original, and all of which taken together shall
constitute one and the same instrument. It shall not be necessary in making
proof of this Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto. In the event the parties hereto exchange signature pages of
this Agreement by facsimile, they agree to send the original executed
counterparts of this Agreement to one another by overnight delivery service, but
the facsimile signatures shall in any event be binding.
25. REINSTATEMENT. This Assignment and the security interest
created hereunder shall automatically be reinstated if and to the extent that
for any reason any payment by or on behalf of Borrower in respect of the Senior
Obligations is rescinded or must otherwise be restored by any holder of the
Senior Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise. Borrower hereby indemnifies Lender for all
reasonable costs and expenses (including, without limitation, reasonable
attorney's fees and disbursements) incurred by Lender in connection with such
rescission or reinstatement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 8
IN WITNESS WHEREOF, Borrower, Lender and Manager have caused
this Collateral Assignment of Management Agreement and Subordination Agreement
to be executed as of the day and year first above written.
BORROWER:
ARDEN REALTY FINANCE III, L.L.C.,
a Delaware limited liability company
By:
Name:
Title:
LENDER:
LEHMAN BROTHERS REALTY CORPORATION, a
Delaware corporation
By:
Name:
Title:
MANAGER:
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Arden Realty, Inc., General Partner
By:
Name:
Title:
<PAGE> 1
EXHIBIT 10.11
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered
into as of June 8, 1998 by and between ARDEN REALTY FINANCE III, L.L.C., a
Delaware limited liability company with its principal office at 11601 Wilshire
Boulevard, Suite 401, Los Angeles, California 90025 ("DEBTOR"), and LEHMAN
BROTHERS REALTY CORPORATION, a Delaware corporation with an office at Three
World Financial Center, 200 Vesey Street, New York, New York 10285 ("SECURED
PARTY").
W I T N E S S E T H
WHEREAS, Secured Party and Debtor have entered into a certain
Loan Agreement of even date herewith (the "LOAN AGREEMENT"), providing for a
loan (the "LOAN") from Secured Party to Debtor in the principal amount of One
Hundred Thirty-six Million One Hundred Thousand and No/100 Dollars
($136,100,000.00);
WHEREAS, in connection with the advance of the Loan, Debtor has
made and delivered to Secured Party a certain Mortgage Note of even date
herewith in the principal amount of One Hundred Thirty-six Million One Hundred
Thousand and No/100 Dollars ($136,100,000.00) (the "MORTGAGE NOTE");
WHEREAS, the Loan is to be secured by, among other things, first
priority liens on Debtor's assets consisting primarily of twenty-two (22)
parcels of land and the improvements thereon (which improvements consist
primarily of one or more office or industrial buildings on each parcel of land)
(each parcel of land and the improvements thereon individually shall be known as
a "PROPERTY" and collectively, the "PROPERTIES") and related assets, which
Properties are described on EXHIBIT A-1 THROUGH EXHIBIT A-22 hereto; and
WHEREAS, in order to further secure the full and timely payment
by Debtor of the Loan and all amounts due under or in connection with the Loan
Agreement, the Mortgage Note, and the other Loan Documents (as defined in the
Loan Agreement), Debtor has agreed to grant to Secured Party, among other
things, a security interest in the Collateral (as defined herein).
NOW, THEREFORE, for and in consideration of the foregoing and of
the mutual covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending legally to be bound, agree as
follows (and all capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in, or the meanings incorporated by
reference to other documents in, SECTION 7 hereof):
1. SECURITY INTEREST
<PAGE> 2
1.1 COLLATERAL
As security for the due and punctual payment and performance by
Debtor of each and every obligation, agreement, and covenant of Debtor to
Secured Party, including, without limitation, the payment when due of the full
amount of the Loan, together with interest thereon, the payment of all other
amounts from time to time owing under the Loan Documents, and the full
performance of all obligations of Debtor under the Loan Agreement, the Mortgage
Note, the Mortgage and all other Loan Documents (collectively the "SECURED
OBLIGATIONS"), Debtor hereby assigns and pledges to Secured Party, and grants to
Secured Party a security interest in and lien on, in addition to and together
with the interests granted under the Mortgage and other Security Documents, all
of Debtor's right, title and interest in and to the following, whether now owned
or hereafter acquired (collectively, the "COLLATERAL"):
(1) All personal property of whatever kind or nature
whatsoever used in the operation of the Properties or any of them, or in any way
related to the Land, the Improvements or any other improvements on the Land,
whether located on, affixed to, or attached to the Land or Improvements or any
of said Land or Improvements or otherwise related thereto or arising therefrom,
and whether tangible or intangible, direct or indirect, fully matured or
contingent, and all extensions, additions, Improvements, betterments, renewals,
substitutions, and replacements to or of any of the foregoing, including,
without limitation, all oil and gas rights, water rights, minerals and mineral
rights and other rights of every kind or nature, all machinery, all equipment,
all screens, window shades, blinds, storm doors and windows, floor coverings,
awnings, cabinets, chairs, desks, tables, lamps, vases and other items of
furniture and furnishings, all supplies and inventory, all art work, plants and
adornments, all bathroom and other fixtures and appliances, and all telephones,
televisions, radios, remote control units, cable boxes, and other electronic
equipment and all vending and ice machines, and including, without limitation,
all of the foregoing property that now are or hereafter become attached or
affixed to the Land or the Improvements in such a way as to constitute them
"fixtures" under applicable law (the "FIXTURES");
(2) Any and all additions and accessions to the foregoing,
and all proceeds thereof, including, without limitation, proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or
liquidated claims, including, without limitation, all Awards and other payments
as a result of any Taking, all Insurance Proceeds, and all proceeds of the Title
Insurance Policies, together with all amounts received by Secured Party or by
the Mortgage Trustee, as applicable, or due and payable to the Mortgage Trustee
or Secured Party, as applicable, pursuant to the Mortgage or other Loan
Documents, including, without limitation, any unearned premiums or refunds of
premiums on any insurance policies covering all or any part of the Collateral
and the right to receive and apply the proceeds of any insurance, or of any
judgments or settlements made in lieu thereof for damage to or diminution of the
Collateral, in accordance with the terms of the Mortgage;
(3) All real estate tax refunds and credits and all awards
or payments, including interest on any of them, and the right to receive the
same, which Debtor may have, which may be made with respect to any Collateral,
whether from a Taking thereof or for any
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<PAGE> 3
other injury to, decrease in the value of, or other occurrence affecting any
Collateral, subject to the rights of tenants under any leases or subleases of
the Collateral to the extent such leases are not subordinate to the terms of
this Security Agreement;
(4) All "accounts" (as defined in the U.C.C.), all accounts
receivable, and all Rents (as defined in the Loan Agreement), issues, profits,
revenues, royalties, bonuses, rights and benefits due, payable, accruing or
arising out of, or with respect to any Collateral, including, without
limitation, all vending machine receipts, all telephone revenues, all other
revenues derived from or generated at the Properties or any of them and all
deposits of money as advance rent, for security or as earnest money or as a down
payment or deposit for the purchase of all or any part of any Collateral
(collectively, the "RENTS AND REVENUES"), and Debtor does hereby transfer and
assign to Secured Party all present and future leases, subleases, underlettings,
management agreements, concession agreements, licenses, contracts or other
agreements relating to the ownership of any Collateral or to the occupancy or
use of all or any portion of any Property (including all of Debtor's rights
under any contracts for the sale of any portion of any Collateral, and all
revenues and royalties under any oil, gas and mineral leases relating to the
Land on which any of the Properties are located) (collectively, the "LEASES AND
CONTRACTS") and all Rents and Revenues derived by Debtor therefrom and otherwise
from any Collateral and the right to apply such Rents and Revenues to the
payment of the Mortgage Note and the other Secured Obligations, together with
the security deposits or other payments or instruments delivered as security
under such Leases and Contracts (the grant of such security deposits and other
security being subject to application in accordance with the express
requirements of such Leases and Contracts and any other agreements applicable
thereto); provided, however, that, subject to the provisions of the Loan
Agreement (including SCHEDULE 5.11 thereof) and the other Loan Documents,
Secured Party hereby grants to Debtor the right to collect and receive the Rents
and Revenues as they become due and payable under the Leases and Contracts until
such time as an Event of Default (as hereinafter defined) shall have occurred;
and provided further, that the existence of such right to collect and receive
Rents and Revenues shall not operate to subordinate this assignment to any
subsequent assignment, in whole or in part, by Debtor, and any such subsequent
assignment shall be subject to the rights of Secured Party hereunder and of
Secured Party or the Mortgage Trustee, as applicable, under the Mortgage and
other Security Documents;
(5) All "general intangibles" (as defined in the U.C.C.)
relating to any Property, including, without limitation, to the extent
assignable, all rights relating to design, development, operation, and use of
any Property, all certificates of occupancy, zoning variances, building, use or
other permits, approvals, authorizations, licenses and consents obtained from
any governmental agency in connection with the development, use, operation or
management of any Property, all construction, service, engineering, consulting,
architectural and other similar contracts concerning the design, construction,
operation, occupancy and/or use of any Property, all architectural drawings,
plans, specifications, soil tests, appraisals, engineering reports and similar
materials relating to all or any portion of any Property, and all payment and
performance bonds or warranties or guarantees relating to any Property; all
rights in deposit accounts, bank accounts and any investments of Rents and
Revenues, the Cash Collateral Account, the Lockbox Account, the TI Reserve
Account, all rights of Debtor in, to and under the Management Agreement,
Debtor's operating agreement, the Contribution Agreement, and all rights under
the
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<PAGE> 4
Leases and Contracts, all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos, other source and business identifiers, trademark registrations and
applications for registration used exclusively at or relating exclusively to any
part of any Property; all renewals, extensions and continuations-in-part of the
items referred to above; any written agreements granting to Debtor any right to
use any trademark or trademark registration at or in connection with any part of
the Property; and the right of Debtor to sue for past, present and future
infringements of the foregoing; and the right in the name and on behalf of
Debtor to appear in and defend any action or proceeding brought with respect to
any part of Debtor's real or personal property and to commence any action or
proceeding to protect the interest of Debtor in such Collateral;
(6) All equipment, inventory, motor vehicles, all items of
personal property described in clause (1) of this SECTION 1.1, all stocks,
bonds, interests in mutual funds and other investments, all rights under
equipment leases and all bills of lading and warehouse receipts and all
securities, security entitlements and other investment property held or for the
Cash Collateral Account, the Lockbox Account or the TI Reserve Account, any and
all related securities accounts in or through which any such security
entitlement is carried, all certificates and other evidences of ownership of or
other interests in securities or other investment property, and all proceeds of
or other distributions on or with respect to securities, security entitlements
or other investment property, including, without limitation, all dividends,
interest, principal payments, cash, options, warrants, rights, instruments,
subscriptions and other property or proceeds from time to time received,
receivable or otherwise distributed or distributable in respect of or in
exchange for any securities, security entitlements or other investment property;
(7) To the extent not otherwise included in any of the
classes or categories enumerated above, all equipment, inventory, documents,
instruments, and chattel paper (as each of such terms is defined in the U.C.C.);
(8) All extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, all or
any portion of the foregoing or of any other Property, and any Property
hereafter acquired or assembled by or released to Debtor or constructed,
assembled or placed by Debtor on any Property, immediately upon such
acquisition, assembling, release, construction or placement, as the case may be,
and in each such case, without any further mortgage, conveyance, assignment or
other act by Debtor, and any and all such extensions, improvements, betterments,
renewals, substitutes and replacements shall become to the fullest extent
permitted by law subject to the lien of this Security Agreement, and the
security and other interests created hereby, as fully and completely, and with
the same effect, as though now owned by Debtor and specifically described
herein; and
(9) To the extent not otherwise included in any of the
foregoing classes or categories of personal property, all proceeds (including,
without limitation, all proceeds as defined in the U.C.C. and all cash and
non-cash proceeds as referred to in Section 552 of the United States Bankruptcy
Code), products, offspring and profits of or from any of the foregoing.
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1.2 FINANCING STATEMENTS
Debtor shall execute all financing statements, continuation
statements, assignments, certificates, and other documents and instruments with
respect to the Collateral pursuant to the U.C.C. and otherwise as may be
necessary or reasonably requested by Secured Party to perfect or from time to
time to publish notice of, continue or renew the security interests granted
hereby (including, without limitation, such financing statements, continuation
statements, certificates, and other documents as may be necessary or reasonably
requested to perfect a security interest in any additional property or rights
hereafter acquired by Debtor or in any replacements, products or proceeds
thereof), in each case in form satisfactory to Secured Party, and Debtor will
pay the cost of filing the same in all public offices where filing is necessary
or reasonably requested by Secured Party and will pay any and all recording,
transfer or filing taxes that may be due in connection with any such filing.
Debtor grants Secured Party the right, at any time and at Secured Party's
option, and at Debtor's expense, to file any or all such financing statements,
continuation statements, and other documents pursuant to the U.C.C. and
otherwise as Secured Party reasonably may deem necessary or desirable.
1.3 INJURY TO COLLATERAL
No injury to, or loss or destruction of the Collateral or any
part thereof shall relieve Debtor of any of the Secured Obligations.
2. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants to Secured Party that:
2.1 TITLE TO COLLATERAL
Debtor is the sole owner of, and has good, valid, and marketable
title to, the Collateral, free from all mortgages, pledges, liens, security
interests, hypothecations, assignments, charges, rights, restrictions or
encumbrances (individually an "ENCUMBRANCE" and collectively the "ENCUMBRANCES")
in favor of any person other than Secured Party, except Encumbrances as are
permitted by and in accordance with the Loan Documents (collectively the
"PERMITTED ENCUMBRANCES"), and Debtor has full right and power to grant Secured
Party a lien thereon and a security interest therein.
2.2 PERFECTED SECURITY INTEREST
This Security Agreement creates a good and valid lien on and
security interest in the Collateral. Debtor will take all actions necessary to
ensure that such lien will be perfected as a first priority lien on the
Collateral.
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2.3 BANKRUPTCY MATTERS
Debtor has not made a general assignment for the benefit of
creditors, filed any voluntary petition in bankruptcy or suffered the filing of
an involuntary petition by its creditors, suffered the appointment of a receiver
to take possession of all or substantially all of its assets, suffered the
attachment or other judicial seizure of all or substantially all of its assets,
admitted its inability to pay its debts as they come due, or made an offer of
settlement, extension or composition to its creditors generally. Debtor is not
insolvent and will not be rendered insolvent by the consummation of the
transactions contemplated hereby or by the Loan Documents.
2.4 REPRESENTATIONS AND WARRANTIES UNDER THE LOAN AGREEMENT
The representations and warranties of the Borrower contained in
the Loan Agreement and each of the other Loan Documents are true and correct as
of the date hereof to the same extent as if set forth in full herein.
3. COVENANTS OF DEBTOR
3.1 GENERAL COVENANTS RELATING TO COLLATERAL
Until all of the Secured Obligations have been paid and
performed in full, Debtor hereby covenants that, unless Secured Party otherwise
consents in advance in writing:
3.1.1 COLLATERAL.
Debtor shall (a) execute and deliver any and all documents, or
cause the execution and delivery of any and all documents, necessary or, in
Secured Party's reasonable judgment, desirable to create, perfect, preserve,
validate or otherwise protect Secured Party's lien on and security interest in
the Collateral and the priority thereof, (b) maintain, or cause to be
maintained, at all times Secured Party's lien on and security interest in the
Collateral and the priority thereof, (c) promptly upon learning thereof, report
to Secured Party any matters that might materially and adversely affect the
value or enforceability or collectibility of any of the Collateral, (d) defend
the Collateral and Secured Party's interests therein against all claims and
demands of all persons at any time claiming the same or any interest therein
adverse to Secured Party and pay all costs and expenses (including, without
limitation, reasonable attorneys' fees and charges) incurred in connection with
such defense, (e) at Debtor's sole cost and expense, settle any and all such
claims and disputes and indemnify and protect Secured Party against any
liability, loss, cost or expense (including, without limitation, reasonable
attorneys' fees and charges), arising therefrom or out of any matter affecting
any of the Collateral (provided, however, if Secured Party shall so elect after
the occurrence and during the continuation of an Event of Default hereunder,
Secured Party shall have the right at all times to settle, compromise, adjust or
liquidate all claims or disputes directly with any debtor or other obligor of
Debtor upon such terms and conditions as Secured Party reasonably deems
advisable, and to charge all costs and expenses thereof (including, without
limitation, reasonable attorneys' fees and charges) to Debtor's account and to
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add them to the Secured Obligations, whereupon such costs and expenses shall be
and become part of the Secured Obligations).
3.1.2 NO CHANGE IN PLACES OF BUSINESS OR COLLATERAL.
Debtor shall (a) maintain its places of business and its
principal office only in the locations set forth in EXHIBIT B attached hereto,
and in such other places as Debtor may select, provided that Debtor shall
provide to Secured Party at least thirty (30) days prior written notice of any
changes in or additions to the locations of Debtor's places of business or of
Debtor's principal office and shall make all filings in the applicable
jurisdictions necessary to maintain Secured Party's lien on and security
interest in the Collateral and the priority thereof in connection with any such
changes or additions, (b) keep, store and maintain the Collateral only at the
foregoing locations, and (c) keep and maintain the records and books of account
relating to the Collateral only at Debtor's principal office or at the Property
to which they relate.
3.1.3 NO IMPAIRMENT.
Debtor shall not take or permit to be taken any action in
connection with the Collateral which would impair in any material respect the
value of the interests or rights of Debtor therein or which would impair the
interests or rights of Secured Party therein or with respect thereto.
3.2 AFFIRMATIVE COVENANTS
Until all Secured Obligations have been paid and performed in
full, Debtor hereby covenants and agrees that it shall, unless Secured Party
otherwise consents in advance in writing:
3.2.1 INSURANCE.
Maintain and keep in full force and effect with Qualified
Insurance Companies, insurance in such amounts and covering such risks as is
required under the Loan Agreement and the Mortgage. Secured Party shall be named
as an additional insured or loss payee, as applicable, with Debtor on all
policies insuring the Collateral or any part thereof, as its interests may
appear, and Debtor hereby assigns to Secured Party all monies payable under such
insurance after the occurrence and during the continuation of an Event of
Default. Debtor directs all insurers of the Collateral to make payment directly
to Secured Party if an Event of Default has occurred and is continuing.
3.2.2 PERFORMANCE OF CONTRACTUAL OBLIGATIONS.
Perform in accordance with its terms and conditions, and comply
with all provisions of, each security issued by Debtor and each indenture, note,
lease, commitment, or other agreement, contract, instrument or undertaking to
which Debtor is a party or by which it or any of its property is bound
(including, without limitation, the Mortgage, the Mortgage Note, and all other
agreements or documents referred to herein or therein or contemplated hereby or
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<PAGE> 8
thereby).
3.3 NEGATIVE COVENANTS
Until all Secured Obligations have been paid and/or performed in
full, Debtor hereby covenants and agrees that it shall not, unless Secured Party
otherwise consents in advance in writing:
3.3.1 ENCUMBRANCES.
Create, incur, assume or suffer to exist any Encumbrance upon
any of its properties, assets or revenues, whether now owned or hereafter
acquired, except: (i) Encumbrances for taxes not yet due and payable or taxes
which are being contested in good faith and by proper proceedings if adequate
reserves with respect thereto are maintained on the books of Debtor in
accordance with generally accepted accounting principles and in accordance with
the terms of the Loan Agreement and the Mortgage; (ii) Encumbrances created
under this Security Agreement; and (iii) Permitted Encumbrances.
3.3.2 SALE OF ASSETS.
Sell, lease, assign, pledge, transfer or otherwise dispose of
any of its assets, whether now owned or hereafter acquired, except as permitted
by the Loan Documents, the Mortgage and SECTION 6.5 hereof.
3.3.3 OTHER AGREEMENTS.
Enter into any commitment, agreement, or undertaking containing
any provision which would be violated or breached by Debtor's performance of any
of its obligations hereunder or any related agreement.
4. EVENTS OF DEFAULT
For purposes of this Security Agreement, the term "EVENT OF
DEFAULT" shall mean the occurrence of any one or more of the following events:
4.1 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by or on behalf of Debtor in
this Security Agreement shall prove to have been incorrect or breached in any
material respect on or as of any date made or deemed made, which failure remains
uncured for a period of thirty (30) days after the receipt of written notice of
such failure; provided, however, that it shall not be an Event of Default if
such failure is curable but is not reasonably susceptible of being cured within
such thirty (30) day period but Debtor promptly commences attempts to cure
within such thirty (30) day period and thereafter diligently pursues such cure
to completion (but in no event later than
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one hundred eighty (180) days after receipt of such written notice); or
4.2 MATERIAL BREACH OF COVENANT
Failure by Debtor to perform or comply in any material respect
with any non-monetary term, covenant or condition imposed in this Security
Agreement, (a) which failure remains uncured for a period of thirty (30) days
after receipt of written notice of such failure, or (b) in the case of any
failure or breach of covenant relating to the maintenance of insurance as
provided herein, which failure remains uncured for a period of ten (10) days
after receipt of written notice of such failure; provided, however, that, in the
case of clause (a), it shall not be an Event of Default if such failure is
curable but it is not reasonably susceptible of being cured within such thirty
(30) day period but Debtor promptly commences to cure within such thirty (30)
day period and thereafter diligently pursues such cure to completion (but in no
event later than one hundred eighty (180) days after receipt of such written
notice); or
4.3 EVENT OF DEFAULT UNDER THE LOAN AGREEMENT OR OTHER LOAN
DOCUMENTS
An Event of Default under the Loan Agreement, the Mortgage, or
any other Loan Document shall occur.
5. RIGHTS AND REMEDIES OF SECURED PARTY
5.1 MISCELLANEOUS RIGHTS OF SECURED PARTY
Upon the occurrence and during the continuation of any Event of
Default hereunder, Secured Party shall have the right (a) to declare all of the
monetary Secured Obligations including, without limitation, the obligations of
Debtor under the Mortgage Note, to be immediately due and payable, whereupon all
such Secured Obligations shall become immediately due and payable without
presentment, demand, notice of dishonor, protest or further notice of any kind,
all of which are hereby expressly waived by Debtor, anything contained herein to
the contrary notwithstanding; (b) to exercise any one or more of the rights and
remedies exercisable by Secured Party under any other provisions of this
Security Agreement, or any other related agreement or exercisable by a secured
party under the U.C.C. or under any other applicable law; and (c) to exercise,
in the name of Debtor or in the name of Secured Party, such rights and powers
with respect to the Collateral as Debtor might exercise, including, without
limitation, the right to:
(i) enter into any extension, reorganization, deposit,
merger, consolidation or other agreement pertaining to, or deposit, surrender,
accept, hold or apply other property in exchange for, the Collateral or any part
thereof;
(ii) insure, process, and preserve the Collateral;
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<PAGE> 10
(iii) transfer the Collateral or any part thereof to the name
of Secured Party or to the name of Secured Party's nominee;
(iv) receive, open, and dispose of mail addressed to Debtor
relating to the Collateral or any part thereof;
(v) collect and endorse, receive, and give receipts for all
dividends, interest, rent, payments, proceeds, and other sums and property now
or hereafter payable on or on account of the Collateral or any part thereof or
on account of its sale or lease;
(vi) initiate, pursue, compromise, settle or withdraw any
claims, suits or proceedings pertaining to the Collateral or any part thereof or
to any dividend, interest, rent or other payment on or on account of the
Collateral or any part thereof or on account of its sale or lease;
(vii) take possession of and endorse in the name of Debtor or
in the name of Secured Party, for the account of Debtor, any bills of exchange,
checks, drafts, money orders, notes or any other chattel paper, documents or
instruments constituting all or any part of the Collateral or received as a
dividend, interest, rent or other payment on or on account of the Collateral or
any part thereof or on account of its sale or lease;
(viii) appoint another (who may be an employee, officer or
other representative of Secured Party) to do any of the foregoing on behalf of
Secured Party; and
(ix) take any other action which Secured Party deems
necessary or desirable to protect or realize upon its security interest in the
Collateral or any part thereof, and Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact to take any such action, including, without
limitation, the execution and delivery of any and all documents or instruments
related to the Collateral or any part thereof in Debtor's name, and said
appointment shall create in Secured Party a power coupled with an interest which
shall be irrevocable.
provided, that, Secured Party shall have the option of proceeding, to the extent
permitted under applicable law, as to both real and personal property in
accordance with its rights and remedies in respect of the real property under
the Mortgage as an alternative to proceeding in accordance with the provisions
of the U.C.C.
5.2 RIGHT OF SECURED PARTY TO TAKE POSSESSION AND FORECLOSE
Upon the occurrence and during the continuation of any Event of
Default, Secured Party shall have the right and power to take possession of the
Collateral and of any and all books of account and records of Debtor relating to
any of the Collateral, the right to place Secured Party's representatives upon
any premises on which the Collateral or any part thereof or any such books of
account or records may be situated with full power to remove the same therefrom,
and the right to exclude Debtor and all persons claiming under Debtor from any
access to the
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<PAGE> 11
Collateral or to any part thereof, and Secured Party and such representatives
are hereby granted the irrevocable license to enter upon such premises
(including, without limitation, the Properties and all parts thereof) for such
purpose. Secured Party may require Debtor to assemble the Collateral or any part
thereof and to make the same (to the extent the same is moveable) available to
Secured Party at a place to be designated by Secured Party which is reasonably
convenient to Debtor and Secured Party. Secured Party may render the Collateral
or any part thereof unusable without removing the same from the premises on
which it may be situated, and may sell the same on the premises of Debtor if
such Collateral or part thereof is situated thereon. Secured Party may make
formal application for the transfer of all of Debtor's permits, licenses,
approvals, agreements, and the like relating to the Collateral or to Debtor's
business to Secured Party or to any assignee of Secured Party or to any
purchaser of any of the Collateral. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Secured Party will give Debtor at least ten (10) days prior
written notice of the time and place of any public sale thereof or of the time
after which any private sale or any other intended disposition thereof is to be
made, which notice shall constitute reasonable notice (and which notice may be
made in conjunction with the notice of any actions taken or to be taken under
the Mortgage). In addition to exercising the foregoing rights, Secured Party
may, to the extent permitted by law, arrange for and conduct the sale of the
Collateral at a public or private sale, as Secured Party may elect, which sale
may be conducted by an employee or representative of Secured Party and which
sale may, at Secured Party's election, be made contemporaneously with and as
part of any foreclosure or other sale of the Properties or any portion thereof
at which such Collateral is located, pursuant to the Mortgage, and any such sale
shall be considered or deemed to be a sale made in a commercially reasonable
manner. Secured Party may release, temporarily or otherwise, to Debtor any item
of Collateral of which Secured Party has taken possession pursuant to any right
granted to Secured Party by this Security Agreement without waiving any rights
granted to Secured Party under this Security Agreement, the Loan Agreement, the
Mortgage Note, any other Loan Document or any other agreement related hereto or
thereto. Debtor, in dealing with or disposing of the Collateral or any part
thereof, hereby waives all rights, legal and equitable, it may now or hereafter
have to require marshaling of assets or to require, upon foreclosure, sales of
assets in a particular order. Each successor and assign of Debtor, including a
holder of a lien subordinate to the lien created hereby (without implying that
Debtor has, except as expressly provided herein, a right to grant an interest
in, or a subordinate lien on, any of the Property), by acceptance of its
interest or lien agrees that it shall be bound by the above waiver, to the same
extent as if such holder gave the waiver itself. Debtor also hereby waives, to
the full extent it may lawfully do so, the benefit of all laws providing for
rights of appraisal, valuation, stay or extension or of redemption after
foreclosure now or hereafter in force.
5.3 RIGHT OF SECURED PARTY TO COLLECT AND SERVICE ACCOUNTS
Upon the occurrence and during the continuation of any Event of
Default, Secured Party may notify or may require Debtor to notify any person or
entity obligated to Debtor under any account forming all or any part of the
Collateral, whether now existing or hereafter acquired, that the same has been
assigned to Secured Party and that such obligor should make payment or
performance of its obligations under such account directly to Secured Party, and
Secured Party
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<PAGE> 12
may take possession of and exercise control over all proceeds of any such
account in Debtor's possession or otherwise, and may take any other action which
Secured Party deems necessary or desirable to collect any such account or the
proceeds thereof. To evidence Secured Party's rights hereunder, Debtor shall, at
Debtor's expense, execute such assignments or endorsements of any such account,
or of the proceeds thereof, as Secured Party may request.
5.4 RIGHT OF SECURED PARTY TO USE AND OPERATE COLLATERAL
Upon Secured Party's taking possession of all or any part of the
Collateral, pursuant to any right granted Secured Party by this Security
Agreement or otherwise, Secured Party shall have the right to hold, store,
and/or use, operate, manage, and control the same. Upon any such taking of
possession, Secured Party may (but shall not be obligated to), from time to
time, at the expense of Debtor, make all such repairs, replacements,
alterations, additions, and improvements to and of all or any of the Collateral
as Secured Party may deem proper. In any such case Secured Party shall have the
right to exercise all rights and powers of Debtor in respect of the Collateral
or any part thereof as Secured Party shall deem proper, including the right to
enter into any and all such agreements with respect to the leasing and/or
operation of the Collateral or any part thereof as Secured Party may see fit;
and Secured Party shall be entitled to collect and receive all rents, issues,
profits, fees, revenues, and other income of the same and every part thereof.
5.5 APPLICATION OF PROCEEDS
All dividends, interest, rents, issues, profits, fees, revenues,
income, and other proceeds from collecting, holding, managing, renting, selling
or otherwise disposing of the Collateral by Secured Party or any part thereof
shall be applied by Secured Party in the order described in SECTION 2.4.5 of the
Loan Agreement.
5.6 RIGHT OF SECURED PARTY TO APPOINT RECEIVER
Upon the occurrence and during the continuation of any Event of
Default, Secured Party shall, as a matter of right and without any requirement
of notice, to the extent permitted under applicable law, be entitled to appoint
a receiver for all of any part of the Property, whether such receivership be
incidental to a proposed sale of the Property or otherwise. All disbursements
made by the receiver under this SECTION 5.6 and the expenses of receivership
shall be added to and be a part of the Secured Obligations, and, whether or not
said principal sum, including such disbursements and expenses, exceeds the
indebtedness originally intended to be secured hereby, the entire amount of said
sum, including such disbursements and expenses, shall be secured by this
Security Agreement and shall be due and payable upon demand therefor and
thereafter shall bear interest at the Default Interest Rate.
5.7 REMEDIES CUMULATIVE
The rights and remedies of Secured Party under the Mortgage, the
Loan
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Agreement, this Security Agreement, or any other related agreement are
cumulative and shall in no way affect, or deprive Secured Party of, or be deemed
to constitute a waiver by Secured Party of, any other rights or remedies allowed
to the party at law or in equity. No notice to or demand on Debtor in any case
shall entitle Debtor to any other notice or demand in similar or other
circumstances and the exercise of any one remedy shall not impair Secured
Party's right simultaneously or at any time or in any order to exercise any
other remedy nor shall the exercise of any remedy in one case impair or
otherwise affect Secured Party's right or ability to exercise such remedy
contemporaneously or again in the same case or in any other case.
5.8 WAIVER OF RIGHTS
To the extent permitted under applicable law, Debtor waives all
rights and remedies of a debtor under the U.C.C. or other applicable law, and
all formalities prescribed by law relative to the sale or disposition of the
Collateral (other than notice of sale) after the occurrence and during the
continuation of an Event of Default and all other rights and remedies of Debtor
with respect thereto. In exercising its right to take possession of the
Collateral upon the occurrence and during the continuation of an Event of
Default hereunder, Secured Party, personally or by its agents or attorneys, and
subject to the rights of any tenant under any lease or sublease of the Property,
to the fullest extent permitted by law, may enter upon any part of the Land
without being guilty of trespass or any wrongdoing, and without liability for
damages thereby occasioned. In the event Secured Party elects to proceed with
respect to the Collateral, separately from the real property, Secured Party
shall give at least ten (10) days notice of the sale of the Collateral, which
shall for all purposes be deemed to be commercially reasonable.
6. MISCELLANEOUS PROVISIONS
6.1 ADDITIONAL ACTIONS AND DOCUMENTS
Debtor hereby agrees to take or cause to be taken such further
actions, to execute, deliver, and file or cause to be executed, delivered, and
filed such further documents and instruments, and to obtain such consents, as
may be necessary or as may be reasonably requested in order to fully effectuate
the purposes, terms, and conditions of, and the remedies set forth in, this
Security Agreement, whether before, at, or after the occurrence of an Event of
Default hereunder.
6.2 EXPENSES
Debtor agrees to reimburse and save Secured Party harmless
against liability for the payment of all out-of-pocket expenses arising in
connection with the administration or enforcement of, or the preservation or
exercise of, any rights (including the right to collect and dispose of the
Collateral) under, this Security Agreement, including, without limitation, the
reasonable fees and other charges of counsel to Secured Party arising in such
connection, and all
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such fees and other charges shall be added to Debtor's obligations secured
hereby.
6.3 NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served or sent by any party to any other
party pursuant to this Security Agreement shall be in writing and shall be
deemed to have been given when received by the addressee or upon refusal of the
addressee to accept delivery or upon failure of delivery due to change of
address or telecopy number other than in accordance with this SECTION 6.3. All
such notices, demands, requests, or other communications shall be delivered by
hand or by telecopy or mailed or delivered by registered or certified mail,
return receipt requested, postage prepaid, or by reputable,
nationally-recognized overnight courier, delivery charges prepaid, and addressed
or directed as follows:
IF TO SECURED PARTY:
Lehman Brothers Realty Corporation
Three World Financial Center
200 Vesey Street
New York, New York 10285
Attn.: Commercial Loan Surveillance
Telecopy: (212) 528-6659
IF TO DEBTOR:
Arden Realty Finance III, L.L.C.
11601 Wilshire Boulevard
Suite 401
Los Angeles, California 90025
Attn.: Diana M. Laing
6.4 WAIVER OF RIGHT TO JUDICIAL HEARING; JURY
DEBTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A JUDICIAL HEARING
PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED TO SECURED PARTY UNDER
THIS SECURITY AGREEMENT, AND WAIVES ITS RIGHTS, IF ANY, TO SET ASIDE OR
INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE FOREGOING PROVISIONS
HEREOF ON THE GROUNDS (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED
WITHOUT A PRIOR JUDICIAL HEARING. DEBTOR HEREBY COVENANTS AND AGREES NOT TO
ELECT TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHTS
TO TRIAL BY JURY TO THE FULL EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST. DEBTOR'S WAIVERS, COVENANTS AND
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AGREEMENTS UNDER THIS SECTION 6.4 HAVE BEEN MADE VOLUNTARILY AND KNOWINGLY
AND AFTER DEBTOR HAS BEEN APPRISED AND COUNSELED BY ITS ATTORNEYS AS TO THE
NATURE OF SUCH RIGHTS AND AS TO DEBTOR'S POSSIBLE ALTERNATIVE RIGHTS.
6.5 TRANSFER OF COLLATERAL
(1) Debtor hereby agrees that it will not sell, lease,
assign, transfer or otherwise dispose of any of the Collateral except as
permitted under the Loan Agreement. Debtor shall have the right, at any time and
from time to time, to sell, lease, assign, transfer or otherwise dispose of any
Collateral as and to the extent that such sale, lease, assignment, transfer or
other disposition is permitted by the Loan Agreement.
(2) No formal release by Secured Party shall be required in
connection with the disposition of any Collateral in accordance with this
SECTION 6.5. Nevertheless, if any purchaser of such Collateral or Debtor should
desire a release or other quitclaim from Secured Party in order to clear the
record title of such Collateral, Secured Party shall, at Debtor's expense and
promptly after receiving a written request from Debtor, execute an appropriate
release or such other instruments as may be reasonably required to evidence that
this Security Agreement does not constitute a lien on such Collateral.
(3) No release by any party of the Collateral pursuant to
this SECTION 6.5 shall in any way alter, vary or diminish the security of the
Collateral.
6.6 RELEASE AND SATISFACTION
Upon the termination of this Security Agreement and the payment
and performance in full of the Secured Obligations, (i) the security interest
created hereby shall terminate, (ii) upon written request of Debtor, Secured
Party shall execute and deliver to Debtor, at Debtor's expense, releases and
satisfactions of all financing statements, mortgages, notices of assignment and
other registrations of security, and Debtor shall deliver to Secured Party a
general release of all of Secured Party's liabilities and obligations under all
Loan Documents and an acknowledgment that the same have been terminated.
6.7 BENEFIT
This Security Agreement shall be binding upon, and shall inure
to the benefit of, the parties hereto and their respective successors, legal
representatives and assigns.
6.8 ASSIGNMENT TO TRUST
Debtor acknowledges and agrees that in connection with the
Securitization contemplated by SECTION 9 of the Loan Agreement, this Security
Agreement, together with the other Loan Documents, may be assigned, along with
mortgage loans made to other borrowers, to,
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among others, an institutional trustee (the "TRUSTEE"), as trustee under a
pooling and servicing agreement (the "POOLING AND SERVICING AGREEMENT"), and,
pursuant to the Pooling and Servicing Agreement, a professional loan servicer of
recognized standing (the "SERVICER") would be appointed to service the Loan,
this Security Agreement and the Loan Documents as provided therein. Upon such
assignment, the Trustee shall for all purposes be Secured Party hereunder (and
all references herein to the Secured Party shall be deemed to refer to the
Trustee). The Trustee, together with the Servicer, shall, among other things,
(i) have the sole and exclusive benefit of and the right and power to exercise,
or to direct the exercise of, all the rights and remedies of Secured Party
hereunder, including, without limitation, the right to inspect the Collateral,
to receive notices and financial information, to grant or withhold consents or
approvals, to benefit from indemnities, to receive, hold and apply proceeds or
any other amount or property provided by Debtor hereunder, and, upon the
occurrence and during the continuation of an Event of Default, to take any
action required or permitted of Secured Party, all in the Trustee's own name,
and to exercise all other rights and remedies of Secured Party hereunder and
under the Security Documents and (ii) be bound by all the terms hereof which
apply to Secured Party. Debtor hereby acknowledges the foregoing and agrees to
be bound to the Trustee, upon such assignment, recognizing the Trustee as
Secured Party hereunder as if the Trustee were named in this Security Agreement
as Secured Party, recognizing that the Servicer shall be entitled to act on
behalf of the Trustee and the Holders under and as provided in the Pooling and
Servicing Agreement and shall be entitled to and shall receive all notices,
financial and other information, agreements and other documents to be delivered
to Secured Party or the Trustee hereunder and accepting and agreeing to all of
the terms set forth in the Pooling and Servicing Agreement and the exhibits
thereto, all of which shall be secured under the Security Documents. Upon such
assignment, Debtor's obligations to the Secured Party specified in this Security
Agreement shall be satisfied by Debtor's tendering full and timely payment or
performance thereof to the Trustee or, if directed by the Trustee, to the
Servicer. With respect to the delivery of documents and other written material,
the Trustee and the Servicer shall have only the obligations expressly required
of Secured Party herein or in the other Loan Documents or of the Trustee or the
Servicer in the Pooling and Servicing Agreement. All rights and remedies of the
Trustee as Secured Party hereunder, including all indemnities running to Secured
Party, shall also operate for the benefit of the Servicer and the Holders as
provided in the Pooling and Servicing Agreement and shall be exercised by the
Trustee and the Servicer in accordance with and subject to the terms and
conditions set forth in the Pooling and Servicing Agreement. The Debtor
acknowledges and agrees that, until the Debtor has received notice to the
contrary from the Trustee, all deliveries and notifications to be made by the
Debtor to the Trustee pursuant to this Security Agreement or any other Loan
Document, shall be made to the Servicer only and not to the Trustee.
6.9 MODIFICATION; DISCHARGE; AND WAIVER
No amendment, modification or discharge of this Security
Agreement or waiver hereunder shall be valid or binding unless set forth in
writing and duly executed by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought.
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<PAGE> 17
6.10 PRONOUNS
All pronouns and any variations thereof in this Security
Agreement shall be deemed to refer to the masculine, feminine, neuter, singular,
or plural, as the identity of the person or entity may require.
6.11 HEADINGS
Section and subsection headings contained in this Security
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Security Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
6.12 GOVERNING LAW
This Security Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of New York (but not
including the choice of law rules thereof).
6.13 FILING
A photographic or other copy of this Security Agreement may be
filed in lieu of a financing statement.
6.14 COUNTERPARTS
This Security Agreement may be executed in separate
counterparts, none of which need contain the signatures of all parties, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same instrument. It shall not be necessary in making
proof of this Security Agreement to produce or account for more than the number
of counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto. In the event the parties hereto exchange signature pages of
this Security Agreement by facsimile, they agree to send the original executed
counterparts of this Security Agreement to one another by overnight delivery
service.
7. DEFINITIONS
7.1 DEFINED TERMS
The following terms, as used herein, shall have the following
respective meanings (and capitalized terms used herein but not defined herein
shall have the meanings ascribed to them in the Loan Agreement):
"AWARDS" shall have the meaning ascribed to it in the Mortgage.
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<PAGE> 18
"CASH COLLATERAL ACCOUNT" shall have the meaning ascribed to it
in the Loan Agreement.
"COLLATERAL" shall have the meaning set forth in SECTION 1.1
hereof.
"CONTRIBUTION AGREEMENT" shall have the meaning ascribed to it
in the Loan Agreement.
"DEFAULT INTEREST RATE" shall have the meaning ascribed to it in
the Loan Agreement.
"DEFEASED NOTE" shall have the meaning ascribed to it in SECTION
2.5(a)(v) of the Loan Agreement.
"ENCUMBRANCE" shall have the meaning set forth in SECTION 2.1
hereof.
"EVENT OF DEFAULT" shall have the meaning set forth in ARTICLE 5
hereof.
"FIXTURES" shall have the meaning set forth in SECTION 1.1(1)
hereof.
"IMPROVEMENTS" shall have the meaning ascribed to it in the Loan
Agreement.
"INSURANCE PROCEEDS" shall have the meaning ascribed to it in
the Mortgage.
"LAND" shall have the meaning ascribed to it in the Loan
Agreement.
"LEASES AND CONTRACTS" shall have the meaning set forth in
SECTION 1.1(4) hereof.
"LOAN AGREEMENT" shall have the meaning ascribed to it in the
recitals to this Agreement.
"LOAN DOCUMENTS" shall have the meaning ascribed to it in the
Loan Agreement.
"LOCKBOX ACCOUNT" shall have the meaning ascribed to such term
in the Loan Agreement.
"MANAGEMENT AGREEMENT" shall have the meaning ascribed to it in
the Loan Agreement.
"MORTGAGE" shall have the meaning ascribed to it in the Loan
Agreement.
"MORTGAGE NOTE" shall have the meaning ascribed to it in the
recitals to this
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<PAGE> 19
Agreement; provided, however that if the principal amount of such promissory
note shall be divided at any time into one or more Defeased Notes and one or
more Undefeased Notes pursuant to SECTION 2.5(a)(v) of the Loan Agreement,
"Mortgage Note" shall mean, collectively, all such Undefeased Note(s) and
Defeased Note(s).
"MORTGAGE TRUSTEE" means the "Trustee" as defined in the
Mortgage.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in
SECTION 2.1 hereof.
"PERMITTED INVESTMENTS" shall have the meaning ascribed to it in
the Loan Agreement.
"POOLING AND SERVICING AGREEMENT" shall have the meaning set
forth in SECTION 6.8 hereof.
"PROPERTY" and "PROPERTIES" shall have the meaning ascribed to
it in the recitals to this Agreement.
"QUALIFIED INSURANCE COMPANIES" shall have the meaning ascribed
to it in the Loan Agreement.
"RENTS AND REVENUES" shall have the meaning set forth in SECTION
1.1(4) hereof.
"SECURED OBLIGATIONS" shall have the meaning set forth in
SECTION 1.1 hereof.
"SECURITIZATION" shall have the meaning ascribed to it in the
Loan Agreement.
"SECURITY DOCUMENTS" shall have the meaning ascribed to it in
the Loan Agreement.
"SERVICER" shall have the meaning set forth in SECTION 6.8
hereof.
"TAKING" shall have the meaning ascribed to it in the Mortgage.
"TI RESERVE ACCOUNT" shall have the meaning ascribed to such
term in the Loan Agreement.
"TITLE INSURANCE POLICIES" shall have the meaning ascribed to it
in the Loan Agreement.
"TRUSTEE" shall have the meaning set forth in SECTION 6.8
hereof.
"U.C.C." means (i) the Uniform Commercial Code as in effect in
the State of
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<PAGE> 20
New York and (ii) "Revised Article 8" as such term is defined in 31 CFR Section
357.2, as adopted in any state as to which the United States Department of the
Treasury has published in the Federal Register a notice indicating that it has
concluded that 31 CFR Sections 357.10(c) and 357.11(d) are no longer applicable.
"UNDEFEASED NOTE" shall have the meaning ascribed to it in
SECTION 2.5(a)(v) of the Loan Agreement.
[SIGNATURE PAGE TO FOLLOW]
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<PAGE> 21
IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be duly executed and delivered in its name and on its
behalf, all as of the day and year first above written.
DEBTOR:
ARDEN REALTY FINANCE III, L.L.C.
By:
Name:
Title:
SECURED PARTY:
LEHMAN BROTHERS REALTY CORPORATION
By:
Name:
Title:
<PAGE> 22
EXHIBIT B TO
SECURITY AGREEMENT
OFFICES
Debtor's principal place of business is located at:
11601 Wilshire Boulevard
Fourth Floor
Los Angeles, California 90025
Debtor also maintains offices or does business at the following locations:
See Exhibit B-1 attached hereto
Debtor keeps and maintains the Collateral only at the above locations or at the
following locations (if none, indicate "None"):
NONE
<PAGE> 1
EXHIBIT 10.12
ENVIRONMENTAL INDEMNITY AGREEMENT
This ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT") is
made and entered into as of this 8th day of June, 1998 by ARDEN REALTY FINANCE
III, L.L.C., a Delaware limited liability company ("INDEMNITOR"), in favor of
LEHMAN BROTHERS REALTY CORPORATION, a Delaware corporation ("LENDER").
WHEREAS, Lender has made to Indemnitor a loan (the "LOAN") in
the original principal amount of One Hundred Thirty-six Million One Hundred
Thousand and No/100 Dollars ($136,100,000.00) pursuant to that certain Loan
Agreement of even date herewith between Indemnitor and Lender (the "LOAN
AGREEMENT");
WHEREAS, the Loan is evidenced by that certain Mortgage Note
of even date herewith, in the aggregate original principal amount of One Hundred
Thirty-six Million One Hundred Thousand and No/100 Dollars ($136,100,000.00)
made payable by Indemnitor to the order of Lender (the "MORTGAGE NOTE");
WHEREAS, the Mortgage Note is secured by, among other things,
the Mortgage (as defined in the Loan Agreement), granting to Lender a lien on,
among other things, the twenty-two (22) properties described on EXHIBIT A-1
THROUGH EXHIBIT A-22 attached hereto and the improvements thereon (collectively,
the "MORTGAGED PROPERTY");
WHEREAS, all of Lender's rights under this Agreement, the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement),
including, without limitation, the Mortgage (as defined in the Loan Agreement),
may be assigned by Lender, along with mortgage loans made to other borrowers,
to, among others, an institutional trustee (the "TRUSTEE"), as trustee for the
benefit of the holders from time to time of certain mortgage-backed certificates
(the "CERTIFICATES") pursuant to SECTION 9 of the Loan Agreement, and may be
serviced by a professional loan servicing company selected by Lender (the
"SERVICER") on behalf of the Trustee. Upon assignment of the Loan Documents to
the Trustee, the term "Lender" as used herein will mean the Trustee and the
Servicer (on behalf of the Trustee), as applicable;
WHEREAS, as a condition to making the Loan, Lender has
required Indemnitor to indemnify and hold harmless Lender from any Environmental
Claim, any requirements of Environmental Law, or the violation of any
Environmental Permit (as such terms are defined below), attributable to
Hazardous Substances (as defined below) and related to the Mortgaged Property,
or any portion thereof; and
WHEREAS, Lender would not make the Loan without this
Agreement, and Indemnitor acknowledges and understands that this Agreement is a
material inducement for Lender's agreement to make the Loan.
NOW THEREFORE, in order to induce Lender to make the Loan and
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Indemnitor hereby covenants and agrees with Lender as
follows:
<PAGE> 2
1. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "ENVIRONMENTAL CLAIM" shall mean any claim,
demand, action, suit, loss, cost, damage, fine, penalty, expense, liability,
judgment, proceeding, or injury, whether threatened, sought, brought, or
imposed, that seeks to impose costs, expenses, obligations or liabilities on any
Indemnitee (as hereinafter defined) for any of the following: (i) pollution or
contamination of the environment or handling, treatment, storage, disposal, or
transportation of Hazardous Substances, to the extent arising out of, or
relating to Indemnitor or the Mortgaged Property or any portion thereof; (ii)
exposure to Hazardous Substances for which Indemnitor or the operator of the
Mortgaged Property is responsible; (iii) the manufacture, processing,
distribution in commerce, use, or storage of Hazardous Substances by the
Indemnitor on or relating to the Mortgaged Property or any portion thereof; (iv)
injury to or death of any person or persons directly or indirectly connected
with Hazardous Substances on, under, over, or transported or released to or from
the Mortgaged Property or any portion thereof; (v) contamination of any property
caused by Hazardous Substances on, under, over, or transported or released to or
from the Mortgaged Property or any portion thereof; or (vi) any asserted or
actual breach or violation by Indemnitor or the Mortgaged Property of any
requirements of Environmental Law, or any event, occurrence, or condition
affecting the Mortgaged Property or any portion thereof or respecting any
Hazardous Substance on, under, over, or transported or released to or from the
Mortgaged Property or any portion thereof, as a consequence of which, pursuant
to any requirements of Environmental Law, (a) Indemnitor or any Indemnitee shall
be liable or suffer any disability, (b) the Mortgaged Property, or any portion
thereof, shall be subject to any restriction on use, ownership or
transferability, or (c) any remedial work shall be required. The term
"ENVIRONMENTAL CLAIM" also includes (i) the costs of removal of any and all
Hazardous Substances from all or any portion of the Mortgaged Property, (ii)
costs required to take necessary precautions to protect against the release of
Hazardous Substances on, in, under, or affecting the Mortgaged Property, or any
portion thereof, and (iii) costs incurred to comply, in connection with all or
any portion of the Mortgaged Property or any surrounding areas affected by
Hazardous Substances on, under, over, or transported or released to or from the
Mortgaged Property or any portion thereof, with all applicable Environmental
Laws; but shall not include losses suffered by an Indemnitee that consist solely
of a reduction in the fair market value of a Mortgaged Property due to any of
the foregoing Environmental Claims.
(b) "ENVIRONMENTAL LAWS" means any federal, state or
local statutes, regulations, ordinances, or rules of common law and all
requirements imposed by any law, rule, order, or regulation of any federal,
state or local executive, legislative, judicial, regulatory, or administrative
agency, board, or authority, in any way relating to the protection of the
environment (including air, surface water, groundwater or land) or of human
health and safety, exposure to Hazardous Substances or otherwise relating to the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transportation, or handling of Hazardous Substances now or hereinafter
in effect, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act ("HMTA") (49 U.S.C. App.
Section 1801 et seq.), the Resource Conservation and Recovery Act ("RCRA") (42
U.S.C. Section 6901 et
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<PAGE> 3
seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act
(42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.), and the regulations promulgated pursuant thereto.
(c) "ENVIRONMENTAL PERMIT" means any permit, license,
approval, or other authorization with respect to any activities, operations, or
businesses conducted on or in relation to the Mortgaged Property, or any portion
thereof, required under any applicable Environmental Laws.
(d) "HAZARDOUS SUBSTANCES" shall mean any material,
substance or waste, whether solid, liquid or gas:
(i) which is defined as "hazardous wastes,"
"solid wastes," "hazardous substances," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import under any applicable
Environmental Law, and in the regulations promulgated pursuant to said laws;
(ii) which is known to cause cancer or
reproductive toxicity, as published pursuant to the Safe Drinking Water and
Toxic Enforcement Act of 1986, or pursuant to any applicable Environmental Law;
(iii) which is listed in the United States
Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by
the Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
(iv) which is (A) petroleum or any fraction
thereof or a petroleum byproduct, (B) asbestos or asbestos-containing material,
(C) polychlorinated biphenyls, (D) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq.
(33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water
Act (33 U.S.C. Section 1317); (E) a flammable explosive; or (F) a radioactive
material; or
(v) which is or becomes regulated as
hazardous or toxic under applicable state or federal law or which is classified
as hazardous or toxic under federal or state laws or regulations.
(e) "INDEMNITEE" has the meaning set forth in SECTION
2 of this Agreement.
(f) "PERMITTED HAZARDOUS SUBSTANCES" means
prepackaged office supplies, cleaning materials, personal grooming items and
other items sold for consumer use or typically used in the operation,
maintenance and repair of properties and other commercial operations on or in
the vicinity of the Mortgaged Property or in the ordinary course of any
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<PAGE> 4
business operations on the Mortgaged Property and heating oil for the Mortgaged
Property which are generated, stored, handled, transported and disposed of in
compliance with applicable requirements of Environmental Law.
(g) "RELEASE" has the same meaning as given to that
term in the Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended (42 U.S.C. Section 9601, et seq.) and the regulations
promulgated thereunder.
2. Indemnification.
(a) Indemnitor shall protect, defend, indemnify, and
hold harmless Lender and its respective successors and assigns (including,
without limitation, the Trustee, following the Securitization (as defined in
SECTION 9 of the Loan Agreement)), and the officers, directors, shareholders,
and employees of each of them, in each case in their capacities as such (all
such persons and entities being referred to herein individually as an
"INDEMNITEE" and collectively as "INDEMNITEES") from and against all
liabilities, losses, costs, damages, expenses or claims, including, but not
limited to, remedial, removal, response, abatement, cleanup, legal,
investigative, and monitoring costs and other related costs, expenses, losses,
damages, penalties, fines, liabilities, obligations, defenses, judgments, suits,
proceedings, and disbursements (including, without limitation, reasonable
attorneys' and experts' fees and disbursements but excluding consequential
damages and losses consisting of a reduction in the fair market value of a
Mortgaged Property due to an Environmental Claim) which may at any time be
imposed upon or incurred by any Indemnitee to the extent arising out of or
relating to (directly or indirectly): (i) violation or breach by Indemnitor or
any of the Mortgaged Property of, or obligations imposed on Indemnitor or any of
the Mortgaged Property under, any Environmental Law; (ii) Environmental Claims
(other than Environmental Claims arising subsequent to the transfer of the
Mortgaged Properties as a result of Lender's exercise of remedies under the Loan
Documents); (iii) failure by Indemnitor, or any other party directly or
indirectly connected with any of the Mortgaged Property, or any portion thereof,
to obtain, maintain, or comply with any Environmental Permit; (iv) otherwise
from the presence or existence of Hazardous Substances on, under, over, or
released or transported from any of the Mortgaged Property, or any portion
thereof, and/or (v) any breach of any of the covenants set forth in SECTION 3
hereof.
(b) In the event that any investigation, site
monitoring, containment, cleanup, removal, restoration, closure or remedial work
of any kind or nature (the "REMEDIAL WORK") is (x) required under any applicable
Environmental Law, any judicial order, or by any governmental or
non-governmental entity or person enforcing any Environmental Law, or (y)
reasonably necessary in order to prevent a material adverse effect on any of the
Mortgaged Property, the operations of the improvements located thereon, or the
value or priority of Lender's lien thereon (each, a "MATERIAL ADVERSE EFFECT")
in either case because of, or in connection with, the current or future
presence, suspected presence, Release or suspected or threatened Release of a
Hazardous Substance in or on, about, under or within the Mortgaged Property (or
any portion thereof), Indemnitor shall, jointly and severally, within fifteen
(15) days after written demand for performance thereof by Indemnitees (or such
shorter period of time as may be required under any applicable law, regulation,
order or agreement, or such longer period as may
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<PAGE> 5
be approved by Lender, in Lender's good faith discretion), commence to perform
(or cause performance to be commenced), and thereafter diligently complete, all
such Remedial Work. All Remedial Work shall be performed by one or more
qualified contractors, approved in advance in writing by Lender, which approval
shall not be unreasonably withheld, conditioned or delayed, unless obtaining
such approval shall be impracticable due to the need for prompt action, and
shall be performed under the supervision of a consulting engineer approved in
advance in writing by Lender. All costs and expenses of such Remedial Work shall
be paid by Indemnitor including, without limitation, the charges of such
contractor(s) and/or the consulting engineer, and the attorneys' fees and costs
reasonably incurred by Indemnitees in connection with monitoring or review of
such Remedial Work. In the event Indemnitor shall fail to timely commence, or
cause to be commenced, or fail to diligently prosecute to completion, such
Remedial Work, Lender may, but shall not be required to, cause such Remedial
Work to be performed and all costs and expenses thereof, or incurred in
connection therewith, shall become an Environmental Claim hereunder. Any amounts
payable to Lender by reason of the application of this Section shall be
immediately due and payable, shall be added to the Debt (as defined in the Loan
Agreement), secured by the Mortgage and shall bear interest at the Default
Interest Rate (as defined in the Loan Agreement) from the date loss or damage is
sustained by Lender until paid.
(c) This Agreement is solely intended to protect the
Indemnitees from the matters set forth in this Agreement and is not intended to
secure payment of the Mortgage Note or amounts due under the Mortgage or other
Loan Documents.
(d) This Agreement, and all rights and obligations
hereunder, shall survive performance and repayment of the obligations evidenced
by and arising under the Loan Documents, surrender of the Mortgage Note,
reconveyance or release of the Mortgage, or foreclosure or exercise of other
remedies under the Mortgage and/or any of the other Loan Documents (whether by
deed or other assignment in lieu of foreclosure, or otherwise), acquisition of
the Mortgaged Property, or any portion thereof, by Lender, and transfer of all
of Lender's rights in the Loan, the Loan Documents, and the Mortgaged Property
or any portion thereof.
(e) Nothing contained in this Agreement shall prevent
or in any way diminish or interfere with any rights and remedies, including,
without limitation, the right to contribution, which Lender may have against
Indemnitor or any other party under CERCLA, as it may be amended from time to
time, or any other applicable Federal or state laws.
(f) Anything herein to the contrary notwithstanding,
Lender's rights under this Agreement shall be in addition to all rights of
Lender under the Loan Documents, and any payments by Indemnitor under this
Agreement shall not reduce Indemnitor's obligations and liabilities under any of
the Loan Documents.
3. Covenants of Indemnitor. Indemnitor covenants and agrees
with Lender as follows:
(a) Indemnitor will keep, and will require all
operators, tenants,
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<PAGE> 6
subtenants, licensees and occupants of the Mortgaged Property or any portion
thereof to keep, the Mortgaged Property free of all Hazardous Substances, except
for Permitted Hazardous Substances, and shall not cause or permit the Mortgaged
Property, or any portion thereof, to be used for the storage, treatment,
generation, transportation, processing, handling, production or disposal of any
Hazardous Substances (other than the storage and handling of Permitted Hazardous
Substances in compliance with all requirements of Environmental Laws).
(b) Indemnitor will comply with, and shall require
all operators, tenants, subtenants, licensees and occupants of the Mortgaged
Property or any portion thereof to comply with all applicable Environmental Laws
and shall obtain and comply with, and shall require all operators, tenants,
subtenants, licensees and occupants of the Mortgaged Property to obtain and
comply with, all Environmental Permits.
(c) Indemnitor will not cause or permit any change to
be made in the present or intended use of the Mortgaged Property or any portion
thereof which would (i) involve the storage, treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Substances other than Permitted Hazardous Substances or the use of the Mortgaged
Property or any portion thereof as a waste disposal site or for military,
manufacturing or industrial purposes or for the storage of petroleum or
petroleum based products (other than Permitted Hazardous Substances in
compliance with requirements of Environmental Law), (ii) violate any applicable
Environmental Law, (iii) constitute noncompliance with any Environmental Permit,
or (iv) increase materially the risk of a Release of any Hazardous Substances.
(d) To the extent required by Environmental Laws,
Indemnitor will undertake and complete all investigations, studies, sampling and
testing and all removal and other remedial actions necessary to contain,
mitigate, remove and clean up all Hazardous Substances that are determined to be
present at the Mortgaged Property or any portion thereof to the extent required
by any applicable Environmental Law or Environmental Permit or necessary to
prevent a Material Adverse Effect.
(e) Indemnitor will at all reasonable times allow
Lender and its officers, employees, agents, representatives, contractors and
subcontractors reasonable access to the Mortgaged Property and each portion
thereof for the purposes of ascertaining site conditions, including, but not
limited to, subsurface conditions. Lender shall give Indemnitor reasonable
notice of its desire for access to the Mortgaged Property or any portion
thereof, unless the need for prompt action makes such notice impracticable and
will cooperate with Indemnitor in good faith so as to minimize the disruptive
effect of such access.
(f) If Lender obtains reliable evidence or
information that a material environmental problem exists or may exist on, at or
under the Mortgaged Property or any portion thereof, Lender may, after
consultation with Indemnitor, require that a full or supplemental environmental
inspection and audit report with respect to the Mortgaged Property, of a scope
and level of detail reasonably satisfactory to Lender, be prepared by an
environmental engineer or other qualified person selected by Lender, at the sole
cost and expense of Indemnitor. If Lender
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<PAGE> 7
requires, such inspection will include a records search and, if said
environmental engineer or other person recommends the same as a matter which a
prudent owner of property under the circumstances should perform, subsurface
testing for the presence of Hazardous Substances in the soil, subsoil, bedrock,
surface water and/or ground water under the Mortgaged Property. Any so-called
"INTRUSIVE ACTIVITIES" (i.e., activities which require physical change to the
Mortgaged Property) shall be performed by contractors selected by Indemnitor and
reasonably acceptable to Lender. If said report indicates that a Release of any
Hazardous Substances has occurred and/or is occurring on, at, under or from the
Mortgaged Property, other than as permitted by any Environmental Permit,
Indemnitor will promptly undertake and diligently complete all investigative,
containment, removal, clean up and other remedial actions, which are either (x)
required by law, rule, regulation or court order, or (y) reasonably necessary in
order to prevent a Material Adverse Effect, in either case using methods
recommended by or acceptable to the engineer or other person who prepared said
audit report and acceptable to the appropriate federal, state and local agencies
or authorities having jurisdiction over the Mortgaged Property, or any portion
thereof.
4. Notice of Actions.
(a) Indemnitor shall give immediate written notice to
Lender of: (i) any proceeding, inquiry, notice, or other communication by or
from any governmental authority, including, without limitation, the United
States Environmental Protection Agency and any applicable state or local
agencies, regarding the presence or existence of any Hazardous Substances on,
under, or about any of the Mortgaged Property or any migration thereof from or
to any of the Mortgaged Property or any actual or alleged violation of
Environmental Law; (ii) all Environmental Claims and any other claims made or
threatened against Indemnitor or the Mortgaged Property relating to any loss or
injury resulting from or pertaining to any Hazardous Substances or any alleged
breach or violation of any Environmental Law; (iii) Indemnitor's discovery of
any occurrence or condition on any real property adjoining or in the vicinity of
any of the Mortgaged Property that reasonably may cause the Mortgaged Property,
or any portion thereof, to be subject to any restrictions on ownership,
occupancy, transferability, or use, or subject the owner or any person having
any interest in the Mortgaged Property, or any portion thereof, to any
liability, penalty, or disability under any Environmental Law; and (iv)
Indemnitor's receipt of any notice or discovery of any information regarding any
actual, alleged, or potential use, production, storage, spillage, seepage,
release, discharge, disposal or any other presence or existence of any Hazardous
Substances on, under, or about any of the Mortgaged Property (other than
Permitted Hazardous Substances) or any alleged breach or violation of any
Environmental Law pertaining to Indemnitor or the Mortgaged Property, or any
portion thereof.
(b) Immediately upon receipt of the same, Indemnitor
shall deliver to Lender copies of any and all Environmental Claims, and any and
all orders, notices, permits, applications, reports, and other communications
(other than privileged communications with legal counsel), documents, and
instruments pertaining to the actual, alleged, or potential presence or
existence of any Hazardous Substances (other than Permitted Hazardous
Substances) on, under, or about any of the Mortgaged Property.
-7-
<PAGE> 8
(c) Lender shall have the right to join and
participate in, as a party if it so elects, any legal proceedings or actions in
connection with the Mortgaged Property involving any Environmental Claim, any
Hazardous Substances or any requirements of Environmental Law, and Indemnitor
shall reimburse Lender upon demand for all of Lender's costs and expenses
reasonably incurred in connection therewith, including reasonable attorneys'
fees.
(d) Promptly upon Lender's reasonable request,
Indemnitor will execute and deliver such instruments as Lender reasonably may
deem useful or necessary to permit Lender to take any action referred to in
SECTION 4(c) above.
5. Procedures Relating to Indemnification.
(a) Indemnitor shall at its own cost, expense, and
risk: (i) defend all suits, actions, or other legal or administrative
proceedings that may be brought or instituted against an Indemnitee or
Indemnitees, as the case may be, on account of any matter or matters arising
under or within SECTION 2 above; (ii) pay in or satisfy any judgment or decree
that may be recorded against an Indemnitee or Indemnitees, as the case may be,
in any such suit, action, or other legal or administrative proceedings; (iii)
reimburse Indemnitee or Indemnitees, as the case may be, for the cost of, or any
payment made by any of them for, any reasonable expenses incurred in connection
with Hazardous Substances undertaken as a result of any demands, causes of
actions, lawsuits, proceedings, or any other claims threatened, made, or brought
against any Indemnitee or Indemnitees, as the case may be, arising out of the
obligations of Indemnitor under this Agreement; and (iv) reimburse Indemnitee or
Indemnitees, as the case may be, for any and all expenses, including, but not
limited to, all reasonable legal expenses arising out of or attributable to, the
above acts or in connection with enforcing the rights of Indemnitees under this
Agreement or in monitoring and participating in any action, proceeding, or
litigation, subject to the provisions of SECTION 5(b) below.
(b) Counsel selected by Indemnitor pursuant to
SECTION 5(a) above shall be subject to the approval of the Indemnitee or
Indemnitees, as the case may be, asserting a claim hereunder; provided, however,
that Indemnitee or Indemnitees, in good faith, as the case may be, may elect to
defend any such claim, lawsuit, action or legal or administrative proceeding,
if, in the judgment of the Indemnitee or Indemnitees, as the case may be, (i)
the defense is not proceeding or being conducted in a satisfactory manner, or
(ii) there is a conflict of interest between any of the parties to such lawsuit,
action, legal, or administrative proceeding. In the event the Indemnitee or
Indemnitees elect to defend any such claim, lawsuit, action or legal or
administrative proceeding pursuant to the preceding sentence, Indemnitor shall
be responsible for the costs and expenses of the legal counsel engaged by
Indemnitee or Indemnitees. Notwithstanding anything in this subsection, Lender
may, at any time and at its own expense, employ its own legal counsel and
consultants to prosecute, negotiate, or defend any such claim, action, or cause
of action, and Lender shall have the right at Lender's own expense to settle or
compromise any action, suit, proceeding, or claim as Lender may determine.
6. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of Indemnitor and Indemnitees and their respective heirs,
personal representatives,
-8-
<PAGE> 9
successors and assigns, including as to Lender, without limitation, any holder
of the Mortgage Note and any affiliate of Lender which acquires all or part of
the Mortgaged Property by any sale, assignment or foreclosure under the
Mortgage, by deed or other assignment in lieu of foreclosure, or otherwise.
7. Limitation of Liability of Indemnitees. Notwithstanding any
ownership by any Indemnitee at any time of all or any portion of the Mortgaged
Property, in no event shall any Indemnitee (including any successor or assign as
holder of the Mortgage Note) be bound by any obligations or liabilities of any
of the Indemnitor.
8. Liability of Indemnitor. The liability of Indemnitor under
this Agreement shall in no way be limited or impaired by, any amendment or
modification of the provisions of the Loan Documents to or with Lender by
Indemnitor or any person who succeeds Indemnitor as owner of the Mortgaged
Property, or any portion thereof. In addition, the liability of Indemnitor under
this Agreement shall in no way be limited or impaired by (i) any extensions of
time for performance required by any of the Loan Documents; (ii) any sale,
assignment, or foreclosure of the Mortgage Note or the Mortgage or any sale or
transfer of all or part of the Mortgaged Property; (iii) any exculpatory
provision in any of the Loan Documents limiting Lender's recourse to property
encumbered by the Mortgage or to any other security, or limiting Lender's rights
to a deficiency judgment against Indemnitor or any other party, including
without limitation, any provision of the Loan Documents entitled "LIMITATIONS ON
LIABILITY;" (iv) the accuracy or inaccuracy of the representations and
warranties made by Indemnitor under any of the Loan Documents; (v) the release
of Indemnitor or any other person or entity from performance or observance of
any of the agreements, covenants, terms, or conditions contained in any of the
Loan Documents by operation of law, Lender's voluntary act, or otherwise; (vi)
the release or substitution in whole or in part of any security for the Mortgage
Note; or (vii) Lender's failure to perfect, protect, secure, or insure any
security interest or lien given as security for the Mortgage Note; and, in any
such case, whether with or without notice to Indemnitor and with or without
consideration.
9. Delay. No delay on Lender's part in exercising any right,
power, or privilege under any of the Loan Documents shall operate as a waiver of
any such privilege, power, or right.
10. Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
11. Notices. All notices, requests and demands to or upon the
respective parties hereto shall be in writing (except as is otherwise
specifically provided in this Agreement) and shall be deemed to have been duly
given or made when received (or when delivery thereof is refused by the intended
recipient) if mailed by first-class registered or certified mail, return receipt
requested, postage prepaid, sent by facsimile transmission with confirmation of
receipt or delivery, sent by nationally recognized overnight courier, or
delivered by hand, addressed or directed as follows (or to such other address or
facsimile transmission number as may be hereafter designated in writing by the
respective parties hereto):
-9-
<PAGE> 10
IF TO INDEMNITOR: Arden Realty Finance III, L.L.C.
11601 Wilshire Boulevard
Suite 401
Los Angeles, CA 90025
Attention: Diana M. Laing
IF TO LENDER: Lehman Brothers Realty Corporation
Three World Financial Center
New York, New York 10285
Attention: Commercial Loan Surveillance
Fax: (212) 528-6659
12. Attorneys' Fees. In the event that any Indemnitor or
Indemnitee brings any suit or other proceeding with respect to the subject
matter or enforcement of this Agreement and is the prevailing party (as
determined by the court, agency or other authority before which such suit or
proceeding is commenced) the prevailing party shall, in addition to such other
relief as may be awarded, be entitled to recover reasonable attorneys' fees and
expenses (at all trial, appellate or other levels) and costs of investigation,
costs incurred in establishing the right to indemnification, or in any action or
participation in, or in connection with, any case or proceeding under Chapter 7,
11 or 13 of the Bankruptcy Code, 11 United States Code Sections 101 et seq., or
any successor statutes.
13. Successive Actions. A separate right of action hereunder
shall arise each time Lender acquires knowledge of any matter described in
SECTIONS 2 or 4 hereof. Separate and successive actions may be brought hereunder
to enforce any of the provisions hereof at any time and from time to time. No
action hereunder shall preclude any subsequent action, and Indemnitor hereby
waives and covenants not to assert any defense in the nature of splitting of
causes of action or merger of judgments.
14. Partial Invalidity. If any provision of this Agreement
shall be determined to be unenforceable in any circumstances by any court of
competent jurisdiction, then the balance of this Agreement nevertheless shall be
enforceable, and the subject provision shall be enforceable in all other
circumstances.
15. Interest on Unpaid Amounts. All amounts required to be
paid or reimbursed to any Indemnitee hereunder shall bear interest from the date
of expenditure by such Indemnitee or the date of written demand to any
Indemnitor hereunder, whichever is earlier, until paid to Indemnitee(s) at the
Default Interest Rate (as defined in the Loan Agreement).
16. Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of New York
(but not including the choice of law rules thereof).
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<PAGE> 11
17. Waiver of Trial By Jury. Indemnitor hereby knowingly,
voluntarily, and intentionally waives the right to a trial by jury in respect of
any litigation based hereon, arising out or, under or in connection with this
Agreement or any other Loan Documents contemplated to be executed in conjunction
herewith, or any course of conduct, course of dealings, statements (whether
verbal or written) or actions of any party or any exercise by any party of their
respective rights under the Loan Documents or in any way relating to the Loan
(including, without limitation, any action to rescind or cancel this Agreement,
and any claims or defenses asserting that this Agreement was fraudulently
induced or is otherwise void or voidable); this waiver being a material
inducement for Lender to accept this Agreement.
18. Consent to Jurisdiction. By execution and delivery of this
Agreement, Indemnitor accepts, generally and unconditionally, the jurisdiction
of any state or federal court in the State of New York and irrevocably agree to
be bound by any final judgment rendered thereby in connection with this
Agreement or any transaction contemplated hereby from which no appeal has been
taken or is available.
[SIGNATURE PAGE TO FOLLOW]
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<PAGE> 12
IN WITNESS WHEREOF, Indemnitor has executed this Agreement as
of the date first set forth above.
ARDEN REALTY FINANCE III, L.L.C.,
a Delaware limited liability company
By: ____________________________________
Name:_______________________________
Title:______________________________
-12-
<PAGE> 1
EXHIBIT 10.13
LEHMAN BROTHERS REALTY CORPORATION
3 World Financial Center
200 Vesey Street
New York, NY 10285
June 8, 1998
Arden Realty Finance III, L.L.C.
11601 Wilshire Boulevard
Suite 401
Los Angeles, California 90025
Attention: Diana Laing
Arden Realty Limited Partnership
Arden Realty, Inc.
11601 Wilshire Boulevard
Fourth Floor
Los Angeles, California 90025
Attention: Diana Laing
Ladies and Gentlemen:
Reference is hereby made to that certain mortgage loan being made by
Lehman Brothers Realty Corporation, or an affiliate thereof ("Lender") on the
date hereof in the aggregate principal amount of $136,100,000.00 (the "Loan")
pursuant to that certain Loan Agreement dated as of the date hereof between
Lender and Arden Realty Finance III, L.L.C. ("Borrower") (the "Loan Agreement").
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Loan Agreement.
This letter agreement is between Lender, Borrower, Arden Realty, Inc.
(the "REIT") and Arden Realty Limited Partnership (the "Operating Partnership";
the REIT and the Operating Partnership hereinafter are collectively referred to
as the "Companies"). To induce Lender to make the Loan and in consideration of
Lender's making the Loan, the sufficiency of such consideration being hereby
acknowledged, the parties hereto agree as follows:
1. Cooperation in Securitization.
<PAGE> 2
At the request of Lender, Borrower, the Companies and their
respective affiliates shall use reasonable efforts to satisfy the market
standards to which Lender customarily adheres or which may be reasonably
required in the marketplace or by the Rating Agencies in connection with the
sale of the Loan or participation therein or the securitization (such sale
and/or securitization, the "Securitization") of the Loan and/or the issuance of
rated single or multi-class securities (the "Securities"), including, but not
limited to:
(a) at Borrower's expense, (i) provide such financial and
other information with respect to each Mortgaged Property,
Borrower, the Companies and the manager of any Mortgaged
Property, and (ii) provide budgets relating to each
Mortgaged Property (the "Provided Information"), together,
if customary, with appropriate consents with respect to
and/or verification of the Provided Information through
letters of auditors or opinions of counsel of independent
attorneys reasonably acceptable to Lender and the Rating
Agencies:
(b) at Borrower's expense, assist in preparing descriptive
materials for presentations to any or all of the Rating
Agencies in connection with the Securitization (all
matters of form and content in respect of such materials
shall be subject to approval by Borrower, the Companies
and their respective affiliates, which shall be
responsible for the accuracy and completeness of such
materials);
(c) work with, and if requested, supervise, third-party
service providers engaged by Borrower, the Companies and
their respective affiliates, to obtain, collect, and
deliver information required by the Rating Agencies in
connection with the Securitization;
(d) if requested by Lender, execute such amendments to the
Loan Documents and required ancillary documents to
reallocate the Allocated Loan Amounts among the Mortgaged
Properties, provided that no such reallocation shall
result in the imposition of any additional mortgage
recording, intangibles or documentary stamp taxes, or
title insurance premiums or charges, and provided further
that no Allocated Loan Amount for any one Mortgaged
Property shall be increased or decreased by more than ten
percent (10%);
(e) if required by the Rating Agencies, and at Borrower's
expense, deliver revised opinions of counsel as to
non-consolidation, due execution and enforceability with
respect to the Mortgaged Properties, Borrower, the
Companies and their respective affiliates, and the Loan
Documents, which counsel and opinions shall be reasonably
satisfactory to Lender and the
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<PAGE> 3
Rating Agencies;
(f) if required by the Rating Agencies, and at Borrower's
expense, deliver such additional tenant estoppel letters
or other estoppels from parties to agreements that affect
the Mortgaged Properties, which estoppel letters shall be
reasonably satisfactory to Lender and the Rating Agencies;
(g) make such representations and warranties as of the closing
date of the Securitization with respect to the Mortgaged
Properties, Borrower, the Companies and the Loan Documents
as are customarily provided in securitization transactions
and as may be reasonably requested by Lender or the Rating
Agencies and consistent with the facts covered by such
representations and warranties as they exist on the date
thereof, in form and substance similar to the
representations and warranties made in the Loan Documents;
(h) execute such amendments to the Loan Documents as may be
requested by Lender or the Rating Agencies or otherwise to
effect the Securitization; provided, however, that
Borrower shall not be required to modify or amend any Loan
Documents if such modification or amendment would (i)
change the interest rate, the stated maturity or the
amortization of principal set forth in the Mortgage Note,
or (ii) materially modify or amend any other material or
economic term of the Loan except as permitted or required
pursuant to subparagraph 1(d) above;
(i) cooperate with Lender in the preparation of a private
placement memorandum, prospectus, including any amendment
or supplement to either thereof, or other disclosure
document (each, a "Disclosure Document") to be used by
Lender or any affiliate in connection with the sale or
securitization of the Loan or any securities representing
an interest in the Loan and providing indemnification
against securities liability with respect to information
provided by Borrower, the Companies or their respective
affiliates or disclosure about Borrower, the Companies,
their affiliates, the Loan and each Mortgaged Property;
(j) notwithstanding anything to the contrary contained in
subparagraph (h) above, upon Lender's request, the Loan
Documents shall be modified to provide for the delivery of
financial statements to Lender as may be required by the
Securities and Exchange Commission or the Rating Agencies;
and
(k) provide such other information and take such other action
in connection
-3-
<PAGE> 4
with the Securitization as may be reasonably requested by
Lender or the Rating Agencies.
2. Costs and Expenses.
All third-party costs and expenses and out-of-pocket expenses incurred
by Lender in connection with the Borrower's complying with requests made
hereunder shall be paid by Lender except for (i) the costs of third-party
service providers that prepared reports with respect to the Mortgaged Properties
in connection with the closing of the Loan, (ii) the fees and expenses of
counsel to Borrower or the Companies and any travel costs incurred by Borrower
or the Companies and (iii) any other costs or expenses expressly stated herein
to be borne by Borrower. Costs and expenses to be paid by Lender shall include,
but not be limited to, reasonable fees and disbursements of legal counsel,
accountants, and other professionals retained by Lender and fees and expenses
incurred for producing any offering documents or any other materials (including
travel by Lender and its agents, design, printing, photograph and document
production costs).
3. Indemnification.
(a) Borrower, the Companies and their affiliates understand
that certain of the Provided Information ("Disclosure Information") may be
included in a disclosure document (the "Disclosure Document") in connection with
the Securitization and may also be included in filings with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), or provided or made available to investors or prospective
investors in the Securities, the Rating Agencies, and service providers relating
to the Securitization. In the event that the Disclosure Document is required to
be revised prior to the sale of all Securities, Borrower, the Companies and
their respective affiliates will cooperate with Lender in updating the
Disclosure Document by providing all current information pertaining to Borrower,
the Companies and the Mortgaged Properties as is necessary to keep the
Disclosure Document accurate and complete in all material respects.
(b) Borrower and the Companies agree to provide in connection
with each Disclosure Document an indemnification certificate (A) certifying that
Borrower and the Companies have carefully examined such memorandum or
prospectus, as applicable, including without limitation, the section entitled
"Description of the Mortgage Loans and Mortgaged Properties," and such section
(and any other sections reasonably requested ) does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in light of the circumstances under which they were
made, not misleading pertaining to Borrower, the Companies or the Mortgaged
Properties, (B) indemnifying Lender (and for purposes of this paragraph, Lender
shall include its officers, directors and employees), any affiliate of Lender to
whom the Loan may be assigned prior to or in connection with the Securitization
and the officers, directors and employees of such affiliate, the affiliate of
Lender
-4-
<PAGE> 5
that has filed its registration statement relating to the Securitization (the
"Registration Statement"), each of its directors, each of its officers who have
signed the Registration Statement and each person or entity who controls the
affiliate within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act (collectively, the "Lehman Group"), and Lender, each of its
directors and each person who controls Lender within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act (collectively, the
"Underwriter Group") for any losses, claims, damages or liabilities (the
"Liabilities") to which Lender, the Lehman Group or the Underwriter Group may
become subject insofar as the Liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact pertaining to
Borrower, the Companies and/or the Mortgaged Properties contained in such
sections or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated in such sections pertaining
to Borrower, the Companies and/or the Mortgaged Properties or necessary in order
to make the statements in such sections pertaining to Borrower, the Companies
and/or the Mortgaged Properties in light of the circumstances under which they
were made, not misleading and (C) agreeing to reimburse Lender, the Lehman Group
and the Underwriter Group for any legal or other expenses reasonably incurred by
any of them in connection with investigating or defending the Liabilities;
provided, however, that Borrower and the Companies will be liable in any such
case under clauses (B) or (C) above only to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or omission made therein in reliance upon and in conformity with the
Provided Information furnished to Lender by or on behalf of Borrower and the
Companies in connection with the preparation of the memorandum or prospectus or
in connection with the underwriting of the debt, including, without limitation,
financial statements of Borrower and the Companies, operating statements, rent
rolls, environmental site assessment reports and property condition reports with
respect to the Mortgaged Properties. The indemnity provided in any such
indemnification certificate shall be in addition to any liability which Borrower
and the Companies, may otherwise have.
(c) In connection with subsequent filings under the Exchange
Act in connection with the Securitization, Borrower, the Companies and their
affiliates agree to indemnify (i) Lender, the Lehman Group and the Underwriter
Group for Liabilities to which the Lender, the Lehman Group or the Underwriter
Group may become subject insofar as the Liabilities arise out of or are based
upon the omission or alleged omission to state in the Disclosure Information a
material fact required to be stated in the Disclosure Information in order to
make the statements in the Disclosure Information or securities filings of
Borrower or either of the Companies, in light of the circumstances under which
they were made, not misleading and (ii) reimburse Lender, the Lehman Group or
the Underwriter Group for any legal or other expenses reasonably incurred by
Lender, the Lehman Group or the Underwriter Group in connection with defending
or investigating the Liabilities; provided none of Borrower or either of the
Companies shall have any obligation to review or examine such subsequent filings
or provide any additional information or take other actions subsequent to the
closing of the
-5-
<PAGE> 6
Securitization other than as required by the Loan Documents.
(d) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing of the commencement thereof, but the
omission to so notify the indemnifying party will not relieve the indemnifying
party from any liability which the indemnifying party may have to any
indemnified party hereunder except to the extent that failure to notify causes
prejudice to the indemnifying party. In the event that any action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled, jointly with any
other indemnifying party, to participate therein and, to the extent that it (or
they) may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party hereunder, the
indemnifying party shall be responsible for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnifying party shall have reasonably concluded
that there are legal defenses available to it and/or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, the indemnified party or parties may participate in the defense of such
action on behalf of such indemnified party or parties. The indemnifying party
shall not be liable for the expenses of more than one separate counsel unless an
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or in addition to those
available to another indemnified party.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for hereunder is for any
reason held to be unenforceable by an indemnified party in respect of any
losses, claims, damages or liabilities (or action in respect thereof) referred
to therein which would otherwise be indemnifiable hereunder, the indemnifying
party shall contribute to the amount paid or payable by the indemnified party as
a result of such losses claims, damages or liabilities (or action in respect
thereof); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. In determining the amount of contribution to which
the respective parties are entitled, the following factors shall be considered:
(i) the proportion as is appropriate to reflect the relative benefits to
Borrower and the Companies on the one hand, and Lender on the other in
connection with the transactions to which such indemnification or reimbursement
relates; or (ii) if the allocation provided by clause (i) is judicially
determined not to be permitted, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the relative
faults of Borrower and the Companies on the one
-6-
<PAGE> 7
hand, and Lender on the other, as well as any equitable considerations. Lender
and Borrower and the Companies herein agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per capita
allocation.
(f) The liabilities and obligations of Borrower, the Companies
and their respective affiliates hereunder shall survive the termination of the
Loan Agreement and the satisfaction and discharge of the Debt.
4. Miscellaneous.
The terms and conditions of this letter shall survive, and
continue in full force and effect after, the Loan closing, if any, and all
references herein to the Loan Agreement and the Loan Documents shall refer to
the actual Loan Agreement and Loan Documents executed and delivered upon the
closing of the Loan.
The failure of Borrower, the Companies and their
respective affiliates to pay any sums when due under this letter or to comply
with any of the covenants or obligations contained in this letter shall be an
Event of Default under the Loan Agreement.
This letter may not be amended by any provision hereof
waived or modified except by an agreement in writing signed by each of the
parties hereto. This letter shall be governed by, and construed in accordance
with, the laws of the State of New York (but not including the choice of law
rules thereof).
[SIGNATURE PAGES TO FOLLOW]
-7-
<PAGE> 8
ACCEPTANCE
If the foregoing correctly sets forth Lender's understanding with
Borrower and the Companies, Borrower and the Companies should indicate their
acceptance of the terms hereof by signing in the appropriate space below and
returning to Lender the enclosed duplicate original of this letter, whereupon
this letter shall become a binding agreement among Lender, the Borrower and the
Companies.
LEHMAN BROTHERS REALTY CORPORATION,
a Delaware corporation
By:
Name:
Title:
AGREED to on the 8th day of June, 1998
ARDEN REALTY FINANCE III, L.L.C.,
a Delaware limited liability company
By:
Name:
Title:
ARDEN REALTY, INC.,
a Maryland corporation
By:
Name:
Title:
<PAGE> 9
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Arden Realty, Inc., General Partner
By:
Name:
Title:
<PAGE> 1
EXHIBIT 10.14
LOAN AGREEMENT
by and between
ARDEN REALTY FINANCE IV, L.L.C.
AS BORROWER,
and
LEHMAN BROTHERS REALTY CORPORATION
AS LENDER
Dated as of June 8, 1998
$100,600,000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. DEFINITIONS AND REFERENCES.....................................................2
1.1. Defined Terms.............................................................2
1.2. Definitions Incorporated by Reference....................................21
1.3. Other Definitional Provisions............................................21
2. THE LOAN......................................................................22
2.1. Making the Loan..........................................................22
2.2. Mortgage Note............................................................22
2.3. Use of Loan Proceeds.....................................................22
2.4. Payment of Principal and Interest........................................23
2.5. Defeasance...............................................................26
2.6. Release of Property......................................................28
2.7. Partial Release in Connection with a Casualty or Taking before
Defeasance Period......................................................28
2.8. Release of All the Properties during Defeasance Period...................30
2.9. Release of Individual Mortgaged Properties During the Defeasance
Period.................................................................30
2.10. Partial Release after Defeasance Period.................................31
2.11. Yield Maintenance.......................................................32
2.12. Successor Borrower......................................................33
3. REPRESENTATIONS AND WARRANTIES................................................33
3.1. Organization and Power of Borrower and Managing Member...................34
3.2. Due Authorization and Execution..........................................34
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
3.3. No Consents Required; No Contravention...................................35
3.4. Title to Properties......................................................35
3.5. Management Agreement.....................................................35
3.6. Leases...................................................................36
3.7. Utilities................................................................36
3.8. No Violations............................................................37
3.9. Other Agreements.........................................................37
3.10. Payment of Taxes........................................................37
3.11. Litigation..............................................................37
3.12. Regulation U............................................................38
3.13. Investment Company Act..................................................38
3.14. Transactions with Affiliates............................................38
3.15. Business Purpose; Non-Subordination.....................................38
3.16. Permits and Licenses....................................................39
3.17. Patents and Trademarks..................................................39
3.18. Insurance...............................................................39
3.19. ERISA...................................................................39
3.20. No Notice of Non-Compliance.............................................39
3.21. Compliance With Laws....................................................40
3.22. Compliance with Environmental Laws......................................40
3.23. Concerning Mortgaged Properties; Financial Statements...................40
3.24. Access..................................................................41
</TABLE>
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<TABLE>
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3.25. No Liens................................................................41
3.26. Accuracy of Information.................................................41
3.27. Mortgage and Security Interests.........................................41
3.28. Assignment of Leases and Rents..........................................42
3.29. Foreign Person..........................................................42
3.30. No Defaults.............................................................42
3.31. No Fraudulent Conveyance................................................42
4. CLOSING; CONDITIONS PRECEDENT.................................................43
4.1. Representations, Warranties and Covenants................................43
4.2. Borrower's Actions.......................................................43
4.3. Delivery of Documents....................................................43
4.4. Evidence of Authorization; Related Documents.............................48
4.5. Closing Certificate......................................................49
4.6. Management Agreement.....................................................49
4.7. Existing Debt............................................................49
4.8. Payment of Lender Costs and Origination Fee..............................49
4.9. Independent Directors....................................................49
4.10. TI Reserve Requirement..................................................50
5. AFFIRMATIVE COVENANTS.........................................................50
5.1. Timely Payment of Amounts Due............................................50
5.2. Proceeds of the Loan.....................................................50
5.3. Management Agreement.....................................................50
5.4. Financial and Other Information..........................................52
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
5.5. Maintenance of Existence, Etc............................................55
5.6. Compliance with Applicable Laws..........................................55
5.7. Maintenance of Books; Inspection of Properties and Books.................56
5.8. Notice of Litigation; Disputes...........................................56
5.9. Mortgaged Property Operations; Maintenance...............................56
5.10. Separate Existence......................................................57
5.11. Cash Management.........................................................57
5.12. Independent Director....................................................58
5.13. Reserve Requirement.....................................................58
5.14. Repair Expenditures.....................................................58
6. NEGATIVE COVENANTS............................................................59
6.1. Limitation on Indebtedness...............................................59
6.2. Limitation on Liens......................................................59
6.3. Merger or Consolidation; Permitted Reorganization........................59
6.4. Single Purpose...........................................................59
6.5. Amendments to Agreements.................................................60
6.6. Distributions............................................................60
6.7. Permitted Transfers......................................................61
7. EVENTS OF DEFAULT.............................................................61
7.1. Default; an Event of Default.............................................61
7.2. Remedies.................................................................64
7.3. Remedies Cumulative......................................................65
</TABLE>
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<TABLE>
<S> <C> <C>
7.4. Default Interest.........................................................65
7.5. Default Indemnity........................................................66
8. INSURANCE.....................................................................66
8.1. Maintenance of Insurance.................................................66
8.2. Payment and Application of Insurance Proceeds............................67
8.3. Earthquake Insurance.....................................................67
9. SECURITIZATION................................................................67
9.1. Securitization...........................................................67
9.2. No Assignment by Borrower................................................68
9.3. Method of Payment........................................................68
10. ASSIGNMENT AND ARTICIPATION...................................................69
11. SUBSTITUTION OF PROPERTIES....................................................69
12. MISCELLANEOUS.................................................................77
12.1. Limitation on Liability.................................................77
12.2. Entire Agreement, Amendments............................................78
12.3. Notices.................................................................78
12.4. No Waiver; Cumulative Remedies..........................................79
12.5. Waiver of Jury Trial....................................................79
12.6. Governing Law; Consent to Jurisdiction..................................79
12.7. Payment of Expenses.....................................................80
12.8. Severability............................................................80
12.9. Gender, Etc.............................................................81
12.10. Headings...............................................................81
</TABLE>
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<TABLE>
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12.11. Counterparts; Facsimiles...............................................81
12.12. No Third Party Beneficiary.............................................81
12.13. No Liability of Lender.................................................81
12.14. Confidentiality........................................................82
</TABLE>
<PAGE> 8
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT") is entered into as of June
8, 1998, by and between ARDEN REALTY FINANCE IV, L.L.C., a Delaware limited
liability company having its principal office at 11601 Wilshire Boulevard, Suite
402, Los Angeles, California 90025 ("BORROWER"), and LEHMAN BROTHERS REALTY
CORPORATION, a Delaware corporation, having an office at Three World Financial
Center, 200 Vesey Street, 20th Floor, New York, New York 10285 ("LENDER").
WHEREAS, Borrower has requested Lender to make a loan (the
"LOAN") to Borrower, and Lender has agreed to make the Loan to Borrower, for the
purposes and on the terms and conditions described herein;
WHEREAS, the Loan is evidenced by that certain Mortgage Note
dated as of the date hereof by Borrower to the order of Lender and its
successors and assigns in the principal amount of One Hundred Million Six
Hundred Thousand and No/100 Dollars ($100,600,000), which is to be secured by,
among other things, first-priority liens on Borrower's assets, consisting
primarily of 12 office and industrial properties and related assets;
WHEREAS, the parties hereto desire to set forth their agreement
regarding the making of the Loan and the terms and conditions upon which the
Loan shall be made and repaid;
WHEREAS, without limiting any other rights that Lender has to
assign the Mortgage Note and the other Loan Documents (as hereinafter defined),
Lender may assign the Mortgage Note and the other Loan Documents, together with
mortgage loans made to other borrowers, to, among others, a Trustee (as
hereinafter defined) for the benefit of the Holders (as hereinafter defined),
who may appoint a Servicer (as hereinafter defined) and, following such
assignment, all rights of Lender hereunder will inure to the benefit of the
Trustee, for the benefit of the Holders, and to the Servicer, on behalf of the
Trustee, and the term "Lender" as used herein, shall, following such assignment,
include the Trustee and the Servicer, on behalf of the Trustee; and
WHEREAS, unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in SECTION 1.1 hereof;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS AND REFERENCES
1.1. DEFINED TERMS
Unless the context otherwise requires, capitalized terms used
herein shall have the respective meanings specified in this SECTION 1.1 (such
definitions to be equally applicable to both the singular and plural forms of
the terms defined).
<PAGE> 9
"ACCOUNT" means the Lockbox Account, the Cash Collateral Account,
the TI Reserve Account, the Environmental Reserve Account, the Tax and Insurance
Escrow Account or any subaccount of any of them or any other account or
subaccount thereof created pursuant to the Cash Management Procedures or
otherwise in accordance with the terms hereof.
"ACCOUNTING PERIOD" shall mean each calendar month.
"ACCOUNTING QUARTER" shall mean each of the fiscal quarters in a
calendar or a conventional three hundred sixty-five (365)-day fiscal year (i.e.,
there shall be four consecutive Accounting Quarters of three (3) months each).
"ACCRUED INTEREST" has the meaning ascribed to it in SECTION
2.4.4(C) hereof.
"ADJUSTED INTEREST RATE" means the rate per annum determined on
the Anticipated Repayment Date as the greater of (i) eleven and 74/100 percent
(11.74%) and (ii) the sum of (A) five percentage points (5%) and (B) the
average, calculated by linear interpolation (rounded to three decimal places),
of the yields of the United States Treasury Constant Maturities with the terms
(one longer and one shorter) most nearly approximating those of U.S. Obligations
having maturities as close as possible to the twentieth (20th) anniversary of
the Anticipated Repayment Date, as determined by Lender on the basis of Federal
Reserve Statistical Release H.15-Selected Interest rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or such other recognized
source of financial market information as may reasonably be selected by Lender,
in each case on the last Business Day of the week immediately prior to the
Anticipated Repayment Date.
"AFFILIATE" means, as to any Person, (a) any Person directly or
indirectly owning, controlling, or holding power to vote ten percent (10%) or
more of the outstanding equity securities as to the Person in question; (b) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
Person in question; (c) any Person directly or indirectly controlling,
controlled by, or under common control with the Person in question; (d) if the
Person in question is a corporation or limited liability company, any executive
officer, director, member or manager of the Person in question or of any
corporation or limited liability company directly or indirectly controlling,
controlled by, or under common control with the Person in question; and (e) if
the Person in question is a partnership, any general partner of such
partnership. As used in this definition of "AFFILIATE," the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"AGREEMENT" means this Loan Agreement, as it may be amended,
supplemented or modified from time to time.
"ALLOCATED LOAN AMOUNT" means, for any Mortgaged Property, the
portion of the Loan that is allocated to a particular Mortgaged Property, as set
forth on SCHEDULE 1.1 hereof, or if a Mortgaged Property is a Substitute
Property, the amount allocated thereto pursuant to SECTION 11 hereof.
"ANNUAL APPROVED BUDGET" shall have the meaning ascribed to such
term in SECTION 5.4.3 hereof.
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<PAGE> 10
"ANNUAL BUDGET" shall mean the operating budget, including all
planned capital expenditures, for the Mortgaged Properties prepared by Borrower
for the applicable Fiscal Year or portion thereof.
"ANTICIPATED REPAYMENT DATE" means April 16, 2008.
"ARDEN OP" means Arden Realty Limited Partnership, a Maryland
limited partnership.
"ARDEN REIT" means Arden Realty, Inc., a Maryland corporation
that is the general partner of Arden OP.
"ASSIGNMENT OF LEASES AND RENTS" means that certain Assignment of
Leases and Rents dated as of the date hereof made by Borrower to the Lender with
respect to the Mortgaged Properties.
"AUTHORIZED ACCOUNTING OFFICER" means the officer of Borrower who
has primary responsibility for accounting matters, or one of his or her duly
authorized representatives who, as set forth in a written notice of such officer
to the Lender, is duly authorized to act on behalf of such officer in connection
with this Agreement and the other Loan Documents.
"AWARD" has the meaning ascribed to it in the Mortgage.
"BANKRUPTCY LAW" means title 11, United States Code, or any
similar federal, state or foreign law for the relief of creditors.
"BASE RATE" means six and 74/100 percent (6.74%) per annum.
"BORROWER" has the meaning ascribed to it in the preamble hereto.
"BORROWER DOCUMENTS" has the meaning ascribed to it in SECTION
3.26 hereof.
"BUILDING EQUIPMENT" means all machinery, equipment, fixtures
(including, but not limited to, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every kind
and nature whatsoever owned by Borrower, or in which Borrower has or shall have
an interest, now or hereafter located upon the Land and the Improvements, or
appurtenant thereto, and usable in connection with the present or future
operation and occupancy of the Land and the Improvements.
"BUSINESS DAY" means a day other than (i) a Saturday or a Sunday
or (ii) a day on which federally insured depository institutions in the states
of New York and Illinois and the Commonwealth of Pennsylvania are required or
authorized by law, governmental decree or executive order to be closed.
"CASH COLLATERAL ACCOUNT" has the meaning specified in SCHEDULE
5.11 hereto.
"CASH EXPENSES" shall mean, for any period after the Anticipated
Repayment Date, the Operating Expenses for the operation of the Mortgaged
Properties as set forth in an
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<PAGE> 11
Approved Annual Budget to the extent that such expenses are actually incurred by
Borrower minus payments into the Tax and Insurance Escrow Account and the TI
Reserve Account.
"CASH MANAGEMENT PROCEDURES" shall mean the provisions of
SCHEDULE 5.11 hereto.
"CASUALTY" has the meaning ascribed to it in the Mortgage.
"CERTIFICATES" has the meaning ascribed to it in SECTION 9.1
hereof.
"CLOSING" has the meaning ascribed to it in the first paragraph
of SECTION 4 hereof.
"CLOSING DATE" has the meaning ascribed to is in the first
paragraph of SECTION 4 hereof.
"CODE" means the Internal Revenue Code of 1986, as the same may
be amended from time to time, and any successor statute of similar import, and
the regulations thereunder, in each case as in effect from time to time.
References to sections of the Code shall be construed also to refer to any
successor sections and all related regulations.
"COLLATERAL" means the "PROPERTY" (as defined in the Mortgage,
whether individually or taken as a group, as the context may require), together
with such other collateral or property as may be pledged, liened or encumbered
from time to time as security for the Loan under any other Security Documents.
"COLLATERAL ASSIGNMENT OF MANAGEMENT AGREEMENT" means that
certain Collateral Assignment of Management Agreement and Subordination
Agreement, dated as of the Closing Date, by and among Borrower, Manager, and
Lender in favor of Lender.
"CONTRIBUTION AGREEMENT" means that certain Property Contribution
Agreement dated as of the Closing Date by and among Arden OP and Borrower,
pursuant to which Arden OP agrees to contribute to Borrower, and Borrower agrees
to accept from Arden OP, the Mortgaged Properties and all operating assets
related thereto, and assume the liabilities associated with such Mortgaged
Properties.
"COOPERATION AGREEMENT" means that certain Cooperation Letter
Agreement dated as of the Closing Date, by and among Borrower, Arden OP, Arden
REIT and Lender.
"DEBT" means the obligations of Borrower under the Loan
Documents, together with all interest thereon, and all other sums, including,
without limitation, fees, expenses, commissions, premiums and indemnities, which
may or shall become due under any of the Loan Documents, including the costs and
expenses of enforcing any provision of the Loan Documents that may be
reimbursable hereunder.
"DEBT SERVICE" shall mean, with respect to any particular period
of time, scheduled interest payments under the Mortgage Note.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the
applicable period in
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<PAGE> 12
which:
(a) the numerator is the Net Operating Income
(excluding interest on credit accounts) for such
period; and
(b) the denominator is the aggregate amount of Monthly
Debt Service Payments due and payable on the
Mortgage Note, or in the event a Defeasance Event
has occurred, the Undefeased Note, for such period.
"DEBT SERVICE PERIOD" means the period commencing on (and
including) the first day of each calendar month (or with respect to the first
Debt Service Period, the period commencing on (and including) the Closing Date)
and ending on (and including) the last day of such calendar month.
"DEFAULT" has the meaning ascribed to it in SECTION 7.1 hereof.
"DEFAULT INTEREST" means (i) interest accruing on any overdue
principal amount of the Mortgage Note at a rate per annum equal to the
difference between the Default Interest Rate minus the Interest Rate, and (ii)
interest accruing on any overdue interest and any other overdue payments under
any Loan Documents at the Default Interest Rate.
"DEFAULT INTEREST RATE" has the meaning ascribed to it in SECTION
7.4 hereof.
"DEFEASANCE DATE" has the meaning ascribed to it in SECTION
2.5(a)(i).
"DEFEASANCE DEPOSIT" means an amount equal to the amount
necessary to purchase U.S. Obligations necessary to meet the Scheduled
Defeasance Payments, any costs and expenses incurred or to be incurred in the
purchase of such U.S. Obligations and any revenue, documentary stamp or
intangible taxes or any other tax or charge due in connection with the transfer
of the Mortgage Note or the Defeased Note, as applicable, the creation of the
Defeased Note, if applicable, or otherwise required to accomplish the agreements
of SECTION 2.5, SECTION 2.8, and SECTION 2.9.
"DEFEASANCE EVENT" has the meaning ascribed to it in SECTION
2.5(a).
"DEFEASANCE PERIOD" has the meaning ascribed to it in SECTION
2.5(a) hereof.
"DEFEASANCE SECURITY AGREEMENT" has the meaning ascribed to it in
SECTION 2.5(a)(vi) hereof.
"DEFEASED NOTE" has the meaning ascribed to it in SECTION
2.5(a)(v) hereof.
"DUE DATE" means the first (1st) day of each calendar month, or,
if in any calendar month the first (1st) day is not a Business Day, the Business
Day immediately succeeding the first (1st) day.
"ERISA" means the Employee Retirement Income Security Act of 1974
(together with all rules and regulations promulgated thereunder), as amended,
supplemented, or modified
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<PAGE> 13
from time to time.
"ERISA AFFILIATE" means any trade or business under common
control (as it is defined in Section 414(b) or 414(c) of the Code or Section
4001(b)(1) of ERISA) with Borrower.
"ELIGIBLE ACCOUNT" means either (i) an account maintained with a
federal or state chartered depository institution or trust company, the
long-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the long-term unsecured debt obligations of the holding company of
which) are rated by each Rating Agency in one of its two highest rating
categories (or such other ratings as will not result in the rating of any of the
Certificates being reduced below their respective ratings on the Closing Date
and as to which the Rating Agencies may otherwise agree) or the short-term
unsecured debt obligations of such depository institution or trust company or
holding company, as the case may be, are rated not lower than A-1+ by the
applicable Rating Agencies, or (ii) a segregated trust account maintained with
the trust department of a federal or state chartered depository institution or
trust company acting in its fiduciary capacity provided that such account is
subject to fiduciary funds on deposit regulations (or internal guidelines)
substantially similar to 12 C.F.R. Section 9.10(b), or (iii) an account in any
other insured depository institution reasonably acceptable to Lender, so long as
prior to the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating Comfort
Letter with respect thereto.
"ENGINEERING SURVEYS" means those reports of recent date prior to
the Closing Date prepared by those companies listed on SCHEDULE 3.23A concerning
the physical condition of the Mortgaged Properties.
"ENVIRONMENTAL INDEMNITY AGREEMENT" means the Environmental
Indemnity Agreement, dated as of the date hereof between Borrower and Lender.
"ENVIRONMENTAL LAWS " has the meaning ascribed to it in the
definition of "Hazardous Materials" herein.
"ENVIRONMENTAL RESERVE ACCOUNT" has the meaning ascribed to such
term in SCHEDULE 5.11 of this Loan Agreement.
"ENVIRONMENTAL RESERVE REQUIREMENT" means Five Hundred Thousand
and No/100 Dollars ($500,000).
"EQUITY MEMBER" means Arden OP in its capacity as equity member
of Borrower.
"EVENT OF DEFAULT" has the meaning ascribed to it in SECTION 7.1
hereof.
"EXCESS CASH FLOW" means, for any Accounting Period, the
difference between (i) Net Operating Income and (ii) the sum of (A) the Monthly
Debt Service Payments, (B) other Debt then due and payable to the Lender
pursuant to this Agreement or any of the other Loan Documents (other than
Default Interest, Accrued Interest, Late Payment Fees and payments required
under SECTION 2.4.4(C) hereof), and (C) in the event a Lockbox Event has
occurred, to the extent not duplicative of the foregoing, withdrawals from the
Cash Collateral Account
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<PAGE> 14
applied pursuant to clauses (E) through (J) of SECTION 4.4 of the Cash
Management Procedures.
"EXISTING DEBT" means indebtedness owed to Lender and secured by
one or more of the Mortgaged Properties, the obligation to repay such
indebtedness having been assumed by Borrower pursuant to the Contribution
Agreement.
"EXTRAORDINARY EXPENSE" shall have the meaning ascribed to such
term in SECTION 5.4.3(b) hereof.
"FINAL MATURITY DATE" means April 16, 2028.
"FINANCIAL STATEMENTS" means the financial statements of Borrower
furnished to Lender from time to time pursuant to SECTIONS 5.4.1 AND 5.4.2
hereof.
"FISCAL YEAR" means the period beginning January 1 of each year
through and including December 31 of such year.
"FORCE MAJEURE" means acts of God, acts of war, civil
disturbance, or governmental action, excluding any casualty customarily covered
by insurance.
"GAAP" means generally accepted accounting principles in the
United States of America (as such principles may change from time to time)
applied on a consistent basis (except for changes in application as to which
Borrower's independent certified public accountants concur), both as to
classification of items and amounts, within any applicable period and as to
prior periods.
"GOVERNMENTAL AUTHORITY" means any nation, government, state, or
political subdivision of any thereof, including any court or any other entity
exercising executive, legislative, regulatory, judicial, or administrative
functions of, or pertaining to, government.
"GROSS INCOME FROM OPERATIONS" shall mean all income of Borrower,
computed in accordance with GAAP, derived from the ownership and operation of
the Mortgaged Properties from whatever source, including, but not limited to,
Rents, utility charges, escalations, forfeited security deposits, interest on
credit accounts, service fees or charges, license fees, parking fees, rent
concessions or credits, and other required pass-throughs but excluding sales,
use and occupancy or other taxes on receipts required to be accounted for by
Borrower to any government or governmental agency, refunds and uncollectible
accounts, sales of furniture, fixtures and equipment, proceeds of casualty
insurance and condemnation awards (other than business interruption or other
loss of income insurance), and any disbursements to the Borrower from the Tax
and Insurance Escrow Account, the TI Reserve Account, the Environmental Reserve
Account or any other escrow fund established by the Loan Documents.
"HAZARDOUS MATERIALS" means any substances, materials, or wastes,
whether solids, liquids or gases, that are defined as "hazardous wastes,"
"hazardous substances," "toxic substances," "radioactive materials," or other
substantially similar designations in, or otherwise subject to regulation under,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, ("CERCLA"), as amended by the Superfund Amendments and
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<PAGE> 15
Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 et seq.; the Toxic
Substance Control Act ("TSCA"), 15 U.S.C. Section 2601 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1802 et seq.; the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 9601 et seq.; the
Clean Water Act ("CWA"), 33 U.S.C. Section 1251 et seq.; the Safe Drinking Water
Act, 42 U.S.C. Section 300f et seq.; the Clean Air Act ("CAA"), 42 U.S.C.
Section 7401 et seq.; or other applicable Laws pertaining to the regulation of
hazardous, toxic or dangerous materials or wastes or the protection of the
environment, including any plans, rules, regulations, orders or ordinances
adopted, or other criteria and guidelines promulgated, pursuant to such laws,
whether now or hereafter in effect (collectively referred to herein as
"ENVIRONMENTAL LAWS"). Hazardous Materials includes, but is not limited to,
polychlorinated biphenyls (PCBs), petroleum and petroleum products and
byproducts, and asbestos.
"HOLDERS" means the holders of record from time to time of the
Certificates.
"IMPROVEMENTS" means all buildings, structures, paving,
sidewalks, parking garages and other parking areas, curbing, landscaping,
signage, lighting, utilities and other improvements from time to time located on
all or any part of the Land (including, without limitation, the office and/or
industrial buildings that are located on the Land and any parking structures and
other parking facilities located on any of the Land), and any modifications,
additions, restorations or replacements of the whole or any part thereof.
"IMPOSITIONS" has the meaning ascribed to it in the Mortgage.
"INDEBTEDNESS" of any Person means (a) any liabilities and
obligations of such Person, contingent or otherwise, (i) in respect of borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (ii) evidenced by bonds, notes,
debentures, or similar instruments, (iii) representing the balance deferred and
unpaid of the purchase price of any property or services, except those incurred
in the ordinary course of such Person's business that would constitute
ordinarily a trade payable to trade creditors, (iv) evidenced by bankers'
acceptances, (v) for the payment of money relating to a capitalized lease
obligation or sale/leaseback obligation, or (vi) evidenced by a letter of credit
or a reimbursement obligation of such person with respect to any letter of
credit or (b) any liabilities and obligations of others of the kind described in
the preceding clause (a) that such Person has guaranteed or that are otherwise
its legal liability or which are secured by any assets or property of such
Person, including, without limitation, any obligations to purchase, redeem, or
acquire any capital stock or similar interests.
"INDEPENDENT MANAGER" means a person who is not, and has not
within the past five (5) years been, (i) an officer, director, employee,
partner, member, stockholder or beneficial-interest holder of Borrower, Arden OP
or Arden REIT; (ii) an officer, director, employee, partner, member,
beneficial-interest holder or stockholder of any "Affiliate" (as defined below)
of Borrower, Arden OP or Arden REIT; (iii) a customer or supplier of Borrower or
any Affiliate thereof; or (iv) a spouse, parent, sibling, or child of any person
described in (i), (ii), or (iii); provided, however, that a person shall not be
deemed to be a director of an Affiliate solely by reason of such person being a
director of a single-purpose entity that would otherwise be deemed to be an
Affiliate because they are under common control. For the purpose of this
definition alone, "Affiliate" means any person or entity (i) which owns
beneficially, directly or indirectly, more than ten percent (10%) of the
outstanding shares of common stock of the general partner of the Equity Member
or which is otherwise in control of Equity Member, (ii) of
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<PAGE> 16
which more than ten percent (10%) of the outstanding voting securities are owned
beneficially, directly or indirectly, by any person or entity described in
clause (i) above, or (iii) which is controlled by, or under common control with,
any person or entity described in clause (i) above; the terms "control" and
"controlled by" shall have the meanings assigned to them in Rule 405 under the
Securities Act of 1933.
"INFORMATION" has the meaning ascribed to it in SECTION 5.4
hereof.
"INSURANCE PROCEEDS" has the meaning ascribed to it in the
Mortgage.
"INTEREST RATE" means (i) prior to the Anticipated Repayment
Date, the Base Rate and (ii) from and after the Anticipated Repayment Date, the
Adjusted Interest Rate.
"LAND" means the parcels of land on which the Mortgaged
Properties are located, as more fully described on EXHIBIT A attached hereto.
"LAWS" means any statute or law, or any rules, regulations,
orders or determinations made by any applicable Governmental Authority,
including as to real property, but without limitation, any applicable
Environmental Laws and any zoning, building, subdivision or land use laws,
rules, or ordinances.
"LEASE" means any lease or other agreement (other than a Ground
Lease) affecting the use, enjoyment or occupancy of the Land or the
Improvements.
"LENDER" initially means Lehman Brothers Realty Corporation,
together with its successors and assigns, including, without limitation,
following the assignment and transfer contemplated by SECTION 9.1 hereof, (a)
the Trustee, on behalf of the Trust, or any of its successors and assigns, and
(b) the Servicer, on behalf of the Trustee.
"LENDER COSTS" means all of the costs and expenses of the Lender
of the kind described in SECTION 12.7.1 hereof.
"LIEN" means any mortgage, deed of trust, deed to secure debt,
lien, claim, option, security interest, pledge, preference, priority,
hypothecation, installment sale agreement, repurchase agreement or other
encumbrance or security arrangement of any kind or nature whatsoever, including,
without limitation, any conditional sale or title retention arrangement, and any
assignment, deposit arrangement, lease or other arrangement intended as, or
having the effect, of security.
"LLC AGREEMENT" means the Limited Liability Company Agreement of
Borrower dated June 4, 1998 by and between Borrower and Arden REIT.
"LOAN" means the loan made by Lender to Borrower pursuant to
SECTION 2.1 hereof.
"LOAN AMOUNT" means One Hundred Million Six Hundred Thousand and
No/100 Dollars ($100,600,000).
"LOAN DOCUMENTS" means this Agreement, the Mortgage Note, the
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Environmental Indemnity Agreement, the Collateral Assignment of Management
Agreement, the Security Agreement, the Mortgage, the Assignment of Leases and
Rents, and all of the other Security Documents, and any and all other documents,
agreements, certificates, notes or other instruments delivered pursuant to, or
in connection with, the Loan.
"LOCKBOX ACCOUNT" has the meaning specified in SECTION 1.1 of
SCHEDULE 5.11 of this Loan Agreement.
"LOCKBOX EVENT" has the meaning ascribed to such term in SCHEDULE
5.11 of this Loan Agreement.
"MANAGEMENT AGREEMENT" means that certain Management Agreement
dated as of the Closing Date by and between Borrower and Arden OP, as "Manager"
or any management agreement entered into between Borrower and a substitute
manager in accordance with SECTION 5.3 hereof.
"MANAGER" has the meaning ascribed to it in the definition of
"Management Agreement" herein, or any successor thereto, or any other Person who
becomes the manager of one or more of the Mortgaged Properties in compliance
with this Agreement.
"MEMBERS" shall mean Equity Member and Special Member in their
capacity as members of Borrower.
"MONTHLY DEBT SERVICE PAYMENT" means (i) prior to the fifth
anniversary of the date hereof, the Monthly Interest Payment, and (ii)
thereafter, the Scheduled Principal and Interest Payment.
"MONTHLY INTEREST PAYMENT" has the meaning ascribed to it in
SECTION 2.4.4.(b) hereof.
"MORTGAGE" means the Deed of Trust, Assignment of Rents and
Leases, Security Agreement and Fixture Filing executed by Borrower and delivered
to Lender or certain trustees for the benefit of Lender with respect to the
Mortgaged Properties, which is to be recorded in the land records of each
jurisdiction in which one or more of the Mortgaged Properties are located, as
security for the Loan.
"MORTGAGE NOTE" means the promissory note described in SECTION
2.2 hereof; provided, however, that if the principal amount of such promissory
note shall be divided at any time into one or more Defeased Notes and one or
more Undefeased Notes pursuant to SECTION 2.5(a)(v) hereof, "MORTGAGE NOTE"
shall mean, collectively, all such Undefeased Note(s) and Defeased Note(s).
"MORTGAGED PROPERTIES" means the twelve (12) office and
industrial properties transferred by Arden OP to Borrower, as of the Closing
Date, pursuant to the Contribution Agreement, including, without limitation,
Borrower's fee interest in the land associated with said office properties and
Borrower's ownership interest in all Improvements, which Mortgaged Properties
are identified on SCHEDULE 4.3.2 attached hereto.
"NET OPERATING INCOME" means, for any period the amount obtained
by
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<PAGE> 18
subtracting Operating Expenses from Gross Income from Operations.
"NET SALES PROCEEDS" means the aggregate amount of cash received
by Borrower in respect of the sale of any Mortgaged Property and related assets
less (i) the sum of all reasonable and customary out-of-pocket payments, fees,
commissions and expenses, plus interest thereon, if applicable (including,
without limitation, fees, commissions and expenses of legal counsel and
investment bankers) paid or payable to third parties and incurred in connection
with such sale, including, without limitation, the Lender, the Trustee (if any),
and the Servicer (if any), and (ii) the amount (estimated reasonably and in good
faith by Borrower) of income, franchise, sales and other applicable taxes
required to be paid by Borrower in connection with such sale.
"NEW NOTE" has the meaning ascribed to it in SECTION 2.2 hereof.
"OFFICER'S CERTIFICATE" means a certificate delivered to Lender
by Borrower which is signed by an authorized representative of Borrower.
"OPERATING EXPENSES" means the total of expenses, computed in
accordance with GAAP, of whatever kind relating to the operation, maintenance
and management of the Mortgaged Properties that are incurred on a regular
monthly or other periodic basis, including without limitation, utilities,
ordinary repairs and maintenance, insurance, license fees, property taxes and
assessments, advertising expenses, management fees, payroll and related taxes,
computer processing charges, operational equipment or other lease payments as
approved by Lender, and other similar costs, but excluding depreciation, Debt
Service, capital expenditures and contributions to the TI Reserve Account, the
Tax and Insurance Escrow Account and any other reserves required under the Loan
Documents.
"ORIGINATION FEE" means a fee equal to Six Hundred Thirty-Seven
Thousand Five Hundred Fifty-Five and No/100 Dollars ($637,555.00) to be paid by
Borrower to Lender on the Closing Date.
"PAYMENT DIFFERENTIAL" has the meaning ascribed to it in SECTION
2.11.1 hereof.
"PERMITTED DEBT" means, as to Borrower:
(i) unsecured trade indebtedness incurred by Borrower
for or in respect of the operation of the Mortgaged Properties in
the ordinary course of business, but only to the extent used to
pay Operating Expenses, which Indebtedness shall be paid not more
than sixty (60) days after the date incurred and which
Indebtedness may not be evidenced by any form of promissory note;
(ii) if no Default or Event of Default has occurred and
is continuing, purchase money Indebtedness and capitalized lease
obligations up to an aggregate amount not in excess of $3,000,000
outstanding at any one time, in each case, for the purchase or
lease of Building Equipment in the ordinary course of business
(and not inconsistent with customary industry practices), which
Indebtedness may be secured by a first priority lien on the goods
and equipment that have
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<PAGE> 19
been so purchased or leased, provided, no such Indebtedness shall
be evidenced by a promissory note; and
(iii) if no Event of Default has occurred and is
continuing, (a) unsecured Indebtedness payable or reimbursable to
a tenant under a Lease, payable or reimbursable to such tenant on
account of work performed or costs incurred (including tenant
improvements) by such tenant in connection with its occupancy of
space at a Mortgaged Property, provided such Lease is consistent
with, or has been approved by Lender if required by, Section
1.20.11.3 of the Mortgage, which Indebtedness may not be
evidenced by any form of promissory note and the aggregate
outstanding amount of which Indebtedness at any one time may not
exceed $5,000,000;
(iv) Indebtedness solely in respect of surety and appeal
bonds, performance bonds and other obligations of a like nature
(to the extent that such incurrence does not result in the
incurrence of any obligation to repay any obligation relating to
borrowed money of others), all in the ordinary course of business
in accordance with customary industry practices and, if not in
the ordinary course, in an individual amount not to exceed
$1,000,000;
"PERMITTED DEBT" means, as to a Member, any liability of a Member in its
capacity as a Member of Borrower for Permitted Debt of Borrower.
"PERMITTED INVESTMENTS" means any one or more of the following
obligations or securities which are payable on demand or available for
withdrawal, in each case without penalty, or which have a scheduled maturity on
or prior to the Business Day preceding the following Due Date, and having at all
times the required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to the Lender that a lower rating
would not result in the withdrawal, downgrading or qualification of the ratings
then assigned to the Certificates (and investments will not be disqualified as
"Permitted Investments" solely because they are issued by Lender or an Affiliate
of Lender):
(i) direct obligations of, or obligations guaranteed as
to full and timely payment of principal and interest by, the
United States or any agency or instrumentality thereof, provided
that such obligations are backed by the full faith and credit of
the United States of America, provided, however, that the
investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments have
a variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and must
move proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity;
(ii) direct obligations of, or obligations guaranteed as
to timely payment of principal and interest by, FHLMC, FNMA or
the Federal Farm Credit System, provided that any such obligation
is qualified by each Rating Agency as
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<PAGE> 20
an investment of funds backing securities having a long-term
unsecured debt rating of "AAA", provided, however, that the
investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that
cannot vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments have
a variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and must
move proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity;
(iii) demand and time deposits in, or demand notes of, or
certificates of deposit of, or bankers' acceptances having
maturities of not more than three hundred sixty-five (365) days
issued by, any bank or trust company, savings and loan
association or savings bank, provided that the commercial paper
or long-term unsecured debt obligations of such depository
institution or trust company (or in the case of the principal
depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such
holding company) are then rated not lower than the highest rating
category of each Rating Agency, in the case of commercial paper,
or in the highest category in the case of long-term debt
obligations, or such lower categories as will not result (as
evidenced in writing by each Rating Agency) in the withdrawal,
downgrading or qualification of the rating then assigned (or,
prior to the Securitization, proposed to be assigned) to the
Certificates by each Rating Agency, or, in the case of short-term
debt obligations which have maturities of thirty (30) days or
less, a rating of "A-1," provided, however, that the investments
described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change,
(B) if rated by S&P, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must
not be subject to liquidation prior to their maturity;
(iv) general obligations of, or obligations guaranteed
by, any state of the United States or the District of Columbia
receiving long-term debt ratings by each Rating Agency equal to
the highest rating then assigned (or, prior to the
Securitization, proposed to be assigned) to any Class of
Certificates by such Rating Agency or such lower category as will
not result in the withdrawal, downgrading, or qualification of
the rating then assigned (or, prior to the Securitization,
proposed to be assigned) to the Certificates by each Rating
Agency (as evidenced in writing by each Rating Agency) which
obligations shall have maturities of not more than three hundred
sixty-five (365) days, provided, however, that the investments
described in this clause must (A) have a predetermined fixed
dollar of principal due at maturity that cannot vary or change,
(B) if rated by S&P, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must
not be subject to liquidation prior to their maturity;
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<PAGE> 21
(v) commercial or finance company paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more
than one (1) year after the date of issuance thereof) that is
rated by each Rating Agency in its highest short-term unsecured
rating category, and is issued by a corporation the outstanding
senior debt obligations of which are then rated by each Rating
Agency in its highest short-term unsecured rating category or its
highest long-term unsecured rating category, as applicable,
provided, however, that the investments described in this clause
must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must
not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate
must be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and (D)
such investments must not be subject to liquidation prior to
their maturity;
(vi) repurchase obligations maturing in three hundred
sixty-five (365) days or less from the date of investment with
respect to any security described in clause (i) or (ii) above
entered into with a depository institution or trust company
(acting as principal) meeting the rating standards described in
(iii) above, provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with
that index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(vii) debt securities (other than stripped bonds or
stripped coupons) maturing in thirty (30) days or less from the
date of investment bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the
United States of America or any state thereof and rated by each
Rating Agency in its highest long-term unsecured rating category;
provided, however, that securities issued by any such corporation
will not be Permitted Investments to the extent that investment
therein would cause the outstanding principal amount of
securities issued by such corporation that are then held as part
of any Account, to exceed twenty percent (20%) of the aggregate
principle amount of all Permitted Investments then held in the
Accounts, provided, further, that the investments described in
this clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if
rated by S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with
that index, and (D) such investments must not be subject to
liquidation prior to their maturity;
(viii) any money market funds rated "AAAm" or "AAAm-G" (or
equivalent), provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar of
principal due at maturity that
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<PAGE> 22
cannot vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments have
a variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and must
move proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity; and
(ix) such other obligations as are acceptable as
Permitted Investments to each Rating Agency, as evidenced by the
delivery by each Rating Agency of a Rating Comfort Letter;
provided, however, that each such instrument continues to qualify as a "cash
flow investment" pursuant to Code Section 860G(a)(6) earning a passive return in
the nature of interest and that no instrument or security shall be a Permitted
Investment if (i) such instrument or security evidences a right to receive only
interest payments or (ii) the right to receive principal and interest payments
derived from the underlying investment provides a yield to maturity in excess of
one hundred twenty percent (120%) of the yield to maturity at par of such
underlying investment; and provided, further, that (a) variable interest on any
such investment shall be based on a single index and vary proportionally with
such index, and no such instrument or investment shall have a rating by the
Rating Agencies with the "r" symbol (or equivalent symbol) attached.
"PERMITTED LIENS" means any of the following:
(i) the Liens of the Mortgage and other Security
Documents;
(ii) Liens for taxes, assessments and other governmental
charges not yet due and payable or due and payable, but not yet
delinquent, or that are being contested in good faith by
appropriate proceedings and as to which adequate deposits have
been made with Lender as required by SECTION 6.2;
(iii) deposits or pledges to secure the payment of
workmen's compensation, unemployment insurance or other social
security benefits or obligations, or to secure the performance of
trade contracts, leases, public or statutory obligations, surety
or appeal bonds or other obligations of a like general nature
incurred in the ordinary course of business;
(iv) landlords', mechanics', materialmen's,
warehousemen's, carriers', or other like Liens arising in the
ordinary course of business securing obligations which are not
overdue for a period longer than thirty (30) days, or which are
being contested in good faith by appropriate proceedings which
are being diligently pursued (with deposits having been made with
Lender as required by SECTION 6.2) or as to which the Liens are
bonded to the satisfaction of Lender;
(v) easements, rights of way, zoning, similar
restrictions, and other similar encumbrances or title defects
that, singly or in the aggregate, do not in any case materially
detract from the value of the property subject thereto (as such
property is used by Borrower);
(vi) Liens arising by operation of law in connection
with judgments,
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only to the extent, for an amount, and for a period not resulting
in an Event of Default with respect thereto;
(vii) Liens securing capitalized lease obligations
insofar as such Liens cover assets acquired pursuant to such
capitalized lease obligations and such capitalized lease
obligations constitute Permitted Debt; and
(viii) Liens securing assets acquired pursuant to purchase
money Indebtedness, which Indebtedness constitutes Permitted
Debt.
"PERSON" means an individual, a partnership, a corporation, a
trust, an unincorporated organization, a joint venture or other business entity,
a limited liability company, or a government or any department, agency or
political subdivision thereof.
"PLAN" means any plan, program or arrangement, whether or not
written, that is or was an "employee benefit plan" as it is defined in ERISA and
(a) that was or is established or maintained by Borrower or any ERISA Affiliate;
(b) under which Borrower or any ERISA Affiliate has contributed or has been
obligated to contribute or to fund or provide benefits, or under which Borrower
or any ERISA Affiliate has any liability; or (c) that provides or promises
benefits to any person who performs or has performed services for Borrower or
any ERISA Affiliate who, because of such services, is or was a participant
therein or entitled to benefits thereunder.
"POOLING AND SERVICING AGREEMENT" has the meaning ascribed to it
in SECTION 9.1 hereof.
"PREPAYMENT DATE" means the date on which any voluntary or
involuntary prepayment of principal is made or required to be made.
"PRIME RATE" means the rate that is published from time to time
as the "prime rate" in The Wall Street Journal listing of "Money Rates" and
shall be the average of all such rates in effect at any one time if more than
one rate is quoted. If this index ceases to be published in The Wall Street
Journal, an alternate index of similar nature will be selected by Lender in its
reasonable discretion.
"QUALIFIED INSURANCE COMPANIES" has the meaning ascribed to it in
the Mortgage.
"QUALIFIED MANAGER" has the meaning ascribed to such term in
SECTION 5.3.2 hereof.
"REMIC" has the meaning ascribed to it in SECTION 2.5 hereof.
"RATING AGENCIES" shall mean (i) prior to the Securitization,
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc., and Moody's Investors Services, Inc. (except that, where a particular
provision in any Loan Document specifies one or more Rating Agencies by name,
"RATING AGENCIES" shall mean the rating agency or rating agencies so specified)
and (ii) after the Securitization, such of the following as actually rate the
securities issued in connection with the Securitization: Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc., Duff & Phelps
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<PAGE> 24
Credit Rating Co., Fitch Investors Service, L.P., or any other nationally
recognized statistical rating agency selected by Lender.
"RATING COMFORT LETTER" with respect to any event or proposed
course of action or inaction, means a written confirmation from the Rating
Agencies that no rating assigned by such Rating Agencies to any of the
Certificates will be downgraded, qualified or withdrawn, or placed on a credit
watch with negative implications, as a result of such event or proposed action
or inaction; provided that if the Securitization has not taken (or as certified
by Lender, will not take) the form of a transaction rated by the Rating
Agencies, then "RATING COMFORT LETTER" shall instead mean that the matter in
question shall be subject to the prior approval of Lender, which shall not be
unreasonably withheld unless expressly stated to be in Lender's sole and
absolute discretion.
"REFERENCE PERIOD" means the twelve (12) full consecutive
calendar months ended immediately preceding the date as of which any
determination with respect to a Reference Period is made hereunder and for which
internal financial statements of Borrower are available. As used herein, the
Reference Period "applicable" to any sale of a Mortgaged Property, Release, or
other event shall mean the Reference Period immediately preceding such event for
which internal financial statements of the Borrower are available.
"REINVESTMENT YIELD" has the meaning ascribed to it in SECTION
2.11.2 hereof.
"RELEASE" means the release of one or more Mortgaged Properties
from the Lien of the Mortgage and the other Security Documents pursuant to the
provisions of SECTION 2.7, SECTION 2.8, SECTION 2.9 or SECTION 2.10 hereof.
"RELEASED" shall have a correlative meaning.
"RELEASE PRICE" means, with respect to a specified Mortgaged
Property, one hundred twenty-five percent (125%) of the Allocated Loan Amount
for such Mortgaged Property, provided, however, that in no event shall the
Release Price for a Mortgaged Property be greater than the then outstanding
aggregate principal amount of the Loan.
"REMAINING MORTGAGED PROPERTIES" means the Mortgaged Properties
that will remain subject to the Lien of any Mortgage following a Release or
several Releases to be made on the same day.
"RENTS" means all rents, rent equivalents, moneys payable as
damages or in lieu of rent or rent equivalents, royalties (including, without
limitation, all oil and gas or other mineral royalties and bonuses, if any),
income, receivables, receipts, revenues, deposits (including, without
limitation, security, utility and other deposits), accounts, cash, issues,
profits, charges for services rendered, and other consideration of whatever form
or nature received by or paid to or for the account of or benefit of Borrower or
its agents or employees from any and all sources arising from or attributable to
the Mortgaged Properties, or any portion thereof, and proceeds, if any, from
business interruption or other loss of income insurance.
"RESTORATION" has the meaning ascribed to it in the Mortgage.
"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc.
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<PAGE> 25
"SCHEDULED DEFEASANCE PAYMENTS" has the meaning ascribed to it in
SECTION 2.5(B) hereof.
"SCHEDULED PRINCIPAL AND INTEREST PAYMENT" shall have the meaning
set forth in SECTION 2.4.4(B) hereof.
"SEC" means the Securities and Exchange Commission of the United
States of America.
"SECURITIZATION" has the meaning ascribed to it in SECTION 9.1
hereof.
"SECURITY AGREEMENT" means that certain Security Agreement dated
as of even date herewith between Borrower and the Lender.
"SECURITY DOCUMENTS" means, collectively or individually, as the
context may require, the Mortgage, the Collateral Assignment of Management
Agreement, the Assignment of Leases and Rents, the Security Agreement, and such
other documents as are executed and delivered by any Person to grant additional
security for the repayment of the Loan.
"SERVICER" has the meaning ascribed to it in SECTION 9.1 hereof.
"SINGLE PURPOSE" means, with respect to a Person, that such
Person, (A) at all times since its formation, except as otherwise permitted in
or contemplated by the Loan Documents (i) has been a duly formed and existing
limited partnership, limited liability company, or corporation, as the case may
be; (ii) has observed all customary formalities regarding its partnership,
limited liability company or corporate existence; (iii) has maintained financial
statements, accounting records, and other partnership, limited liability
company, or corporate documents separate from those of any other Person
(provided that nothing shall prohibit such Person from being included in the
consolidated financial statements or tax group of another Person); (iv) has not
commingled its assets with those of any other Person; (v) has paid its own
liabilities out of its own funds, including funds contributed to its capital by
its respective equity holders, and all such capital contributions have been
reflected properly in its books and records; (vi) has allocated fairly and
reasonably any overhead for shared office expenses; (vii) has identified itself
in all dealings with the public, under its own name and as a separate and
distinct entity (provided that nothing shall prohibit such Person from engaging
a manager to represent such Person with respect to tenants, vendors, and other
parties, in accordance with standard industry practice); (viii) has not
identified itself as being a division or part of any other Person; (ix) has not
identified any other Person as being a division or part of such Person; (x) has
corrected any known misunderstanding regarding their separate identities; (xi)
has been adequately capitalized in light of the nature of its business; (xii)
has not assumed or guaranteed the obligations of any other Person (other than by
virtue of being a general partner of such other Person but only if such other
Person is Borrower and provided, that this clause shall not be deemed to be
violated by reason of joint and several liabilities arising as a matter of law);
and (xiii) has not engaged in any other business other than as permitted by the
Loan Documents, (B) such person has agreed to or is subject to covenants
substantially to the effect of SECTIONS 5.10, 5.12, 6.1, 6.3, 6.4 AND 6.5 hereof
and (C) if such Person is an entity, such person's organizational documents
contain restrictions similar to those contained in Article X of the LLC
Agreement as in effect on the date hereof.
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"SPECIAL MEMBER" means the person acting as the special member of
Borrower under the LLC Agreement or a successor special member admitted in
accordance with the terms of the LLC Agreement and this Agreement.
"SUBSTANTIVE NON-CONSOLIDATION OPINION" means an opinion of
counsel substantially similar to the provisions of the opinion of Borrower's
counsel delivered on the Closing Date to the effect that the assets and
liabilities of Borrower will not be substantively consolidated with those of
Arden OP or Arden REIT in the event that Arden OP or Arden REIT were to become
the subject of bankruptcy or insolvency proceedings (with such changes as are
necessary to reflect the identity and operations of the parties addressed in
such Substantive Non-Consolidation Opinion).
"SUBSTITUTE PROPERTY" has the meaning ascribed to it in SECTION
11 hereof.
"SUBSTITUTED PROPERTY" has the meaning ascribed to it in SECTION
11 hereof.
"SUBSTITUTION CONDITIONS" has the meaning ascribed to it in
SECTION 11 hereof.
"SUCCESSOR BORROWER" has the meaning ascribed to it in SECTION
2.12 hereof.
"TAKING" has the meaning ascribed to it in any applicable
Mortgage.
"TAX AND INSURANCE ESCROW ACCOUNT" shall have the meaning
ascribed to such term in SECTION 5.11 hereof.
"TI RESERVE ACCOUNT" has the meaning ascribed to such term in
SCHEDULE 5.11 of this Loan Agreement.
"TI RESERVE REQUIREMENT" means Three Million Two Hundred Seventy
Thousand and No/100 Dollars ($3,270,000).
"TITLE COMPANY" has the meaning ascribed to it in SECTION 4.3.2
hereof.
"TITLE INSURANCE POLICY" and "TITLE INSURANCE POLICIES" have the
meanings ascribed to them in SECTION 4.3.2 hereof.
"TRANSACTION DOCUMENTS" means the Loan Documents, the
Contribution Agreement, and all documents to be delivered pursuant to the terms
hereof and thereof or that are executed and delivered by Borrower in connection
with the transactions contemplated hereby or thereby.
"TREASURY RATE" has the meaning ascribed to it in SECTION 2.11.2
hereof.
"TRUST FUND" has the meaning ascribed to it in SECTION 12.7.2
hereof.
"TRUSTEE" has the meaning ascribed to it in SECTION 9.1 hereof.
"U.C.C." or "UNIFORM COMMERCIAL CODE" means the Uniform
Commercial Code as in effect in the State of New York or, in the case of any
particular item of real or tangible personal property, in the State in which
such property is located.
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<PAGE> 27
"U.S. OBLIGATIONS" means direct, non-callable obligations of the
United States of America.
"UNDEFEASED NOTE" has the meaning ascribed to it in SECTION
2.5(a)(v) hereof.
"YIELD MAINTENANCE PAYMENT" has the meaning ascribed to it in
SECTION 2.11.1 hereof.
1.2 DEFINITIONS INCORPORATED BY REFERENCE
Any term defined in SECTION 1.1 by reference to another
agreement, instrument or other document shall mean such agreement, instrument or
document as it may be amended, supplemented or modified from time to time, but
only to the extent such amendment, supplement or modification is permitted by
the terms hereof. If any such agreement, instrument or other document shall be
replaced or superseded in accordance with the terms hereof (for example, if the
Management Agreement is replaced by an agreement with another Qualified Manager,
the definition incorporated by reference in SECTION 1.1 to such agreement,
instrument or other document shall thereafter have the meaning established under
the replaced or superseded document, with any such changes as (a) shall be
necessary to conform to the replacement or superseding agreement, instrument or
document or (b) are otherwise agreed to by the Lender in writing.
1.3. OTHER DEFINITIONAL PROVISIONS
The terms defined in SECTION 1.1 hereof may not comprise all of
the defined terms contained in this Agreement. Capitalized terms not defined in
SECTION 1.1 hereof shall have the meanings ascribed to them elsewhere herein.
Accounting terms used in this Agreement but not defined herein shall have the
respective meanings given to them under GAAP. The words "hereof," "herein" and
"hereunder" and words of similar character when used in this Agreement shall
refer to this Agreement as a whole and shall not be limited to any particular
provision of this Agreement.
2. THE LOAN
2.1. MAKING THE LOAN
In reliance upon the representations, warranties, covenants and
agreements of Borrower contained herein and in the other Loan Documents, and
upon full satisfaction by Borrower of the terms and conditions precedent set
forth in ARTICLE 4 of this Agreement, Lender agrees to make a loan (the "LOAN")
to Borrower, which Loan shall be advanced to Borrower in a single advance of
immediately available funds equal to the Loan Amount. The Loan Amount shall be
used solely for the purposes described in SECTION 2.3 hereof. The Loan will be
secured by, among other things, a Mortgage encumbering the Mortgaged Properties
and other Improvements and granting a lien on and security interest in certain
other Property described in the Mortgage and by other Security Documents
effecting and granting a lien on and security interest in such other Collateral,
and shall bear interest at the rates per annum specified in SECTION 2.4 hereof.
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2.2. MORTGAGE NOTE
The obligation of Borrower to repay the full Loan Amount,
together with interest thereon, and Yield Maintenance Payments, Defeasance
Deposits and other charges, if any, related thereto, shall be evidenced by that
certain Mortgage Note made by Borrower as of the Closing Date to the order of
Lender (the "MORTGAGE NOTE"), substantially in the form of EXHIBIT B attached
hereto and incorporated herein, in the original principal amount of One Hundred
Million Six Hundred Thousand and No/100 Dollars ($100,600,000).
The Borrower hereby irrevocably appoints the Lender and its
successors and assigns, with full power of substitution, as its
attorney-in-fact, solely for the purpose, from time to time in connection with a
foreclosure on any Mortgaged Property following an Event of Default and/or
acceleration of the maturity of the Loan, of executing two or more promissory
notes (each, a "NEW NOTE") substantially in the form of EXHIBIT B, with an
aggregate face principal balance equal to the principal amount then outstanding
under the Mortgage Note (with a notation on each such New Note as to the
outstanding principal amount of the Loan allocated to each such New Note) and
marking each promissory note that is to be replaced with such New Notes (whether
the original Mortgage Note or any Defeased Note or Undefeased Note)
"SUBSTITUTED." Such power of attorney is a limited power of attorney coupled
with an interest.
2.3. USE OF LOAN PROCEEDS
Borrower agrees that the proceeds of the Loan shall be used
solely for the purpose of repaying or causing repayment of a portion of the
Existing Debt (the obligation to repay such indebtedness having been assumed by
Borrower pursuant to the Contribution Agreement), including the payment of fees
and expenses associated therewith, for the purposes of paying certain fees and
expenses associated with the Loan, for the purpose of the funding of the TI
Reserve Account, for the purpose of funding the Environmental Reserve Account
and for general limited liability company purposes not inconsistent with the
terms of this Agreement.
2.4. PAYMENT OF PRINCIPAL AND INTEREST
2.4.1. PAYMENTS ON THE MORTGAGE NOTE
All payments made on the Mortgage Note shall be made in the
manner, and subject to the conditions, provided in this Agreement and the
Mortgage Note. The Mortgage Note shall not be prepayable except as expressly
provided for in this SECTION 2.4.1, and in SECTION 2.5, SECTION 2.7, SECTION
2.8, SECTION 2.9 and SECTION 2.10 hereof. On any Due Date occurring on or after
the Anticipated Repayment Date, the Mortgage Note may be prepaid, at the option
of the Borrower, in full or in part, without penalty or premium. To the extent
not previously paid, the entire Debt shall be due and payable on the Final
Maturity Date.
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2.4.2. INTEREST
(a) Except as set forth in SECTIONS 2.4.4(b) with respect to
interest accruing at the Default Interest Rate, the Debt shall bear interest for
each Debt Service Period at the applicable Interest Rate then in effect and
shall be payable as provided herein.
(b) Calculations of interest shall be made on the basis of a
three hundred sixty (360) day year and the actual number of days elapsed during
each Debt Service Period.
2.4.3. PAYMENTS WITHOUT DEDUCTION, ETC.
All payments of the Debt to Lender shall be absolute and
unconditional, shall be paid strictly in accordance with the terms of the Loan
Documents without being subject to any claim, set-off, defense or other right
which Borrower may have against Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
other circumstance or happening whatsoever. Borrower shall pay such payments to
the Lender free and clear of, and without deduction for, any and all present or
future taxes, levies, imposts, deductions, charges, penalties or withholdings,
and any liabilities with respect thereto, by whomever imposed, other than
present or future taxes on the income of Lender or franchise taxes imposed on
Lender as a result of its conducting business in specific jurisdictions.
Borrower shall pay and indemnify and hold Lender harmless from and against, any
present or future claim or liability for United States, state or local taxes or
assessments on the ownership by Lender of the debt obligations of Borrower
evidenced by the Mortgage Note, or on the principal, interest, fees or other
amounts payable under any Loan Documents or otherwise in respect of the Debt
(other than income or franchise taxes imposed on the Lender or its Affiliates by
any jurisdiction). The obligations of the Borrower hereunder shall survive
repayment of the Debt and termination of the Loan Documents.
2.4.4. PERIODIC PAYMENTS
(a) On July 1, 1998, Borrower shall pay to Lender interest on
the Mortgage Note at the Base Rate for the period commencing on the Closing Date
and ending on June 30, 1998.
(b) On August 1, 1998 and on each Due Date thereafter that
occurs on or prior to April 16, 2003 (the "INTEREST ONLY EXPIRATION DATE"),
Borrower shall pay interest on the outstanding principal of the Mortgage Note at
the Base Rate for the prior Debt Service Period (the "MONTHLY INTEREST
PAYMENT"). On each Due Date that occurs on or after the Interest Only Expiration
Date, Borrower shall pay to Lender a monthly payment of principal and interest
(the "SCHEDULED PRINCIPAL AND INTEREST PAYMENT") in an amount equal to the
amount of the monthly payment that would be necessary to fully amortize the
outstanding principal balance of the Loan as of the Interest Only Expiration
Date over a twenty-five (25) year period assuming a rate of interest per annum
equal to the Base Rate (with interest calculated on the basis of actual number
of days elapsed and a three hundred sixty (360) day year).
At any time while an Event of Default has occurred and is
continuing, the Borrower shall, in addition to the Monthly Debt Service Payment
and other amounts due hereunder, be liable for the payment of interest at the
Default Interest Rate (rather than the Interest Rate) (which interest is payable
both before and after Lender has obtained a judgment
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with respect to the Loan); provided, however, that for the purposes of this
sentence, an Event of Default shall be considered to have occurred and be
continuing only until such Event of Default has been cured, including, without
limitation, pursuant to the provisions of SECTION 7.1.3 hereof, if applicable.
Following the occurrence of a Lockbox Event, the priority of payment of Default
Interest shall be as set forth in the Cash Management Procedures attached as
Schedule 5.11 hereto). Payment or acceptance of the increased rates provided for
in this SECTION 2.4.4(b) is not a permitted alternative to timely payment or
full performance by Borrower and shall not constitute a waiver of any Default or
Event of Default or an amendment to this Agreement or any other Loan Document
and shall not otherwise prejudice or limit any rights or remedies of Lender.
(c) From and after the Anticipated Repayment Date, interest
shall accrue on the outstanding principal balance of the Mortgage Note at the
Adjusted Interest Rate. Payment of all interest accruing in respect of the
Mortgage Note after the Anticipated Repayment Date in the amount equal to the
difference between the amount that accrues at the Adjusted Interest Rate and the
amount that is paid (whether as part of each Scheduled Principal and Interest
Payment, if applicable, or otherwise) at the Base Rate ("ACCRUED INTEREST")
shall be (a) deferred, and (b) to the extent permitted by applicable law, accrue
interest at the Adjusted Interest Rate. If not sooner paid, all Accrued Interest
together with interest thereon (to the extent permitted by applicable law) shall
be due and payable in full on the Final Maturity Date. From and after the
Anticipated Repayment Date, Borrower shall pay to Lender on each Due Date
(without duplication), until the entire Debt is repaid in full, Excess Cash Flow
for the Debt Service Period relating to such Due Date; each monthly payment of
Excess Cash Flow made by Borrower under the Mortgage Note after the Anticipated
Repayment Date shall be applied first to the reduction of the outstanding
principal balance of the Mortgage Note and after the principal balance of the
Mortgage Note has been paid in full to the reduction of the outstanding amount
of Accrued Interest (together with any interest thereon).
(d) In addition to Default Interest, in the event Borrower
fails to make any Monthly Debt Service Payment, Yield Maintenance Payment or
other payment hereunder when due, Borrower shall be liable for the payment of a
late charge equal to five percent (5%) of the amount of the payment (the "LATE
PAYMENT FEE"); provided, however, prior to a Securitization, Borrower shall not
be liable to pay a Late Payment Fee the first time Borrower fails to make a
Monthly Debt Service Payment when due. Following the occurrence of a Lockbox
Event, the priority of payment of a Late Payment Fee shall be as set forth in
the Cash Management Procedures. Payment or acceptance of a Late Payment Fee
under this SECTION 2.4.4(d) is not a permitted alternative to timely payment or
full performance by Borrower and shall not constitute a waiver of any Default or
Event of Default or an amendment to this Agreement or any other Loan Document
and shall not otherwise prejudice or limit any rights or remedies of Lender.
Borrower acknowledges that its obligation to pay a Late Payment Fee may be
separated from the other obligations of Borrower hereunder, and may be held or
transferred separately from the other obligations of Borrower hereunder.
(e) Notwithstanding the foregoing SECTION 2.4.4(c), at the
option of Lender, which option shall be exercised prior to the Securitization,
Lender may require that the applicable provisions of Section 2.4.4(c) (and the
equivalent provisions of the Note) be modified to provide that all Monthly Debt
Service Payments from and after the Anticipated Repayment Date shall be interest
only. Borrower agrees to enter into such modifications to the Loan
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Documents as may be requested by Lender in order to effectuate the foregoing.
2.4.5. INSUFFICIENT PAYMENTS
In the event that Borrower fails to pay all amounts due and
payable on the Mortgage Note on any Due Date, unless otherwise determined by
Lender, all cash paid by the Borrower on such date and all proceeds realized on
the sale of Collateral pursuant to any of the Loan Documents shall be applied in
the following order of priority to the extent of the cash so paid or proceeds
realized:
FIRST: to pay (a) all amounts that are due and unpaid under
SECTION 12.7.1 hereof and under SECTION 7.5 hereof, if applicable, (b)
all costs, if any, incurred by Lender in acting on behalf of Borrower as
provided in the Loan Documents and (c), if applicable, all costs and
expenses incurred by the Lender in enforcing this Loan Agreement and any
of the other Loan Documents, including all costs and expenses of the
foreclosure and/or sale of the Collateral or any part thereof or any
interest therein, and all costs and expenses of entering upon, taking
possession of, removing, holding, constructing improvements on, and
operating and managing the Collateral or any part thereof, and all costs
and expenses of repairs, renewals, replacements, additions, betterments,
and improvements to the Collateral, in each case in accordance with the
Loan Documents, and all reasonable attorneys' and accountants' fees and
disbursements, including any appraisals that may reasonably be required
by Lender, incurred in connection with any of the foregoing, together
with any compensation payable under SECTION 4.3 of the Mortgage;
SECOND: to pay interest at the Base Rate then due and payable on
the Mortgage Note;
THIRD: to pay all amounts of principal due and payable on the
Mortgage Note (whether at maturity, on a date fixed for any payment or
prepayment thereof, upon acceleration, or otherwise), until the
principal balance has been reduced to zero;
FOURTH: to pay any Yield Maintenance Payments then due and
payable;
FIFTH: to pay any Default Interest and Late Payment Fees then due
and payable; and
SIXTH: to pay Accrued Interest, if any (plus interest thereon at
the Adjusted Rate).
All proceeds realized upon the sale of Collateral pursuant to any of the Loan
Documents shall be applied in accordance with the foregoing as of the Due Date
next occurring following any such sale.
2.5. DEFEASANCE
(a) At any time during the period commencing on (i) the first
Business Day after the date that is the earlier of (A) two (2) years after the
"startup day," within the meaning of
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Section 860G(a)(9) of the Code, of a "real estate mortgage investment conduit,"
within the meaning of Section 860D of the Code (a "REMIC"), that holds the
Mortgage Note and (B) three (3) years after the Closing Date, and ending on (ii)
the Anticipated Repayment Date (such period being sometimes referred to herein
as the "DEFEASANCE PERIOD"), and provided no Event of Default has occurred and
is continuing (other than an Event of Default that will be cured by the release
of a Mortgaged Property or Mortgaged Properties from the Lien of the Security
Documents pursuant to the provisions of SECTION 7.1.3 hereof), Borrower may
voluntarily defease all or any portion of the Loan by providing Lender with the
Defeasance Deposit (hereinafter, a "DEFEASANCE EVENT"). Each Defeasance Event by
the Borrower shall be subject to the satisfaction of the following conditions
precedent:
(i) Borrower shall provide not less than twenty (20) days
prior written notice to Lender specifying a regularly scheduled payment
date (the "DEFEASANCE DATE") on which the Defeasance Event is to occur.
Such notice shall indicate the principal amount of the Mortgage Note to
be defeased;
(ii) Borrower shall pay to Lender all accrued and unpaid
interest on the principal balance of the Mortgage Note to but not
including the Defeasance Date. If for any reason the Defeasance Date is
not a regularly scheduled payment date, the Borrower shall also pay
interest that would have accrued on the Mortgage Note through the next
regularly scheduled payment date;
(iii) Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, due under the Mortgage Note,
this Agreement, the Mortgage, and the other Loan Documents;
(iv) Borrower shall pay to Lender the required Defeasance
Deposit for the Defeasance Event;
(v) In the event only a portion of the Loan is the subject of
the Defeasance Event, Borrower shall prepare all necessary documents to
amend and restate the Note and issue two substitute notes, one note
having a principal balance equal to the defeased portion of the original
Note (the "DEFEASED NOTE") and the other note having a principal balance
equal to the undefeased portion of the Note (the "UNDEFEASED NOTE"). The
Defeased Note and Undefeased Note shall have identical terms as the Note
except for the principal balance. A Defeased Note cannot be the subject
of any further Defeasance Event;
(vi) Borrower shall execute and deliver a security agreement,
in form and substance satisfactory to Lender, creating a first priority
lien on the Defeasance Deposit and the U.S. Obligations purchased with
the Defeasance Deposit in accordance with this provision of this SECTION
2.5 (the "DEFEASANCE SECURITY AGREEMENT");
(vii) Borrower shall deliver an opinion of counsel for Borrower
in form satisfactory to Lender in its sole discretion stating, among
other things, that Borrower has legally and validly transferred and
assigned the U.S. Obligations and all obligations, rights and duties
under and to the Mortgage Note or Defeased Note (as applicable) to the
Successor Borrower, that Lender has a perfected first priority security
interest in the Defeasance Deposit and the U.S. Obligations delivered by
Borrower, that such
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Defeasance will not adversely affect the status of the entity holding
the interest in the Mortgage Note as a REMIC (assuming for such purpose
that such entity otherwise qualifies as a REMIC) and that such
Defeasance will not result in a deemed exchange of the Certificates
pursuant to Section 1001 of the Code;
(viii) Borrower shall deliver a Rating Comfort Letter from the
Rating Agencies in connection with the Defeasance Event. If required by
the applicable Rating Agencies, Borrower shall also deliver or cause to
be delivered a Substantive Non-Consolidation Opinion with respect to the
Successor Borrower in form and substance satisfactory to Lender and the
applicable Rating Agencies;
(ix) Borrower shall deliver an Officer's Certificate certifying
that the requirements set forth in this SECTION 2.5(a) have been
satisfied;
(x) Borrower shall deliver to Lender a certificate of
Borrower's independent certified public accountant certifying that the
U.S. Obligations purchased with the Defeasance Deposit will generate
monthly amounts equal to or greater than the required Scheduled
Defeasance Payments;
(xi) Borrower shall deliver such other certificates, documents
or instruments as Lender may reasonably request; and
(xii) Borrower shall pay all costs and expenses of Lender
incurred in connection with the Defeasance Event, including any costs
and expenses associated with a release of the Lien of the Mortgage as
provided in SECTION 2.8 hereof or SECTION 2.9 hereof, as applicable, as
well as reasonable attorneys' fees and expenses.
(b) In connection with each Defeasance Event, Borrower
hereby appoints Lender as its agent and attorney-in-fact for the purpose of
using the Defeasance Deposit to purchase U.S. Obligations which provide payments
on or prior to, but as close as possible to, all successive Due Dates after the
Defeasance Date upon which interest payments are required under the Mortgage
Note, in the case of a Defeasance Event for the entire outstanding principal
balance of the Loan, or the Defeased Note, in the case of a Defeasance Event for
only a portion of the outstanding principal balance of the Loan, as applicable,
and in amounts equal to the scheduled payments due on such Due Dates under the
Mortgage Note or the Defeased Note, as applicable, and assuming such Mortgage
Note or Defeased Note is paid in full on the Anticipated Repayment Date (the
"SCHEDULED DEFEASANCE PAYMENTS"). Borrower, pursuant to the Defeasance Security
Agreement or other appropriate document, shall authorize and direct that the
payments received from the U.S. Obligations may be made directly to the Cash
Collateral Account (unless otherwise directed by Lender) and applied to satisfy
the obligations of Borrower under the Mortgage Note or the Defeased Note, as
applicable.
2.6. RELEASE OF PROPERTY
Except as set forth in SECTION 2.7, SECTION 2.8, SECTION 2.9 or
SECTION 2.10, no repayment, prepayment or defeasance of all or any portion of
the Mortgage Note shall cause, give rise to a right to require, or otherwise
result in, the release of the Lien of the Mortgage on any of the Mortgaged
Properties.
2.7. PARTIAL RELEASE IN CONNECTION WITH A CASUALTY OR TAKING BEFORE
DEFEASANCE PERIOD
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In the event that, prior to (a) the first day of the Defeasance
Period, a Mortgaged Property has suffered a total or substantial Taking or
Casualty (in each case, as to which Restoration is not required or permitted
under the Mortgage) or (b) a Securitization, a Default of the type described in
SECTION 7.1.3 occurs that can be cured by a Release of a Mortgaged Property from
the lien of the Security Documents, Borrower shall cause the Release of such
Mortgaged Property from the Lien of the Security Documents upon the satisfaction
of the following conditions:
(a) Borrower shall provide not less than thirty (30) days
notice to Lender specifying a Due Date on which the amount set forth in clause
(c) below is to be provided to Lender, which notice shall be accompanied by a
certificate of Borrower, signed by a duly authorized officer of Borrower, to the
effect that no Default or Event of Default has occurred and is continuing (or,
in the case of a Default or Event of Default that shall be cured or avoided by
the Release of the affected Mortgaged Property, describing the nature of such
Default or Event of Default, and certifying that such Default or Event of
Default shall be cured by such Release) and that such Release will comply with
all applicable requirements of this SECTION 2.7;
(b) Borrower shall pay to Lender all interest that is accrued
and unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date, including,
without limitation, all reasonable costs and expenses of Lender incurred in
connection with the Release, including any costs and expenses associated with a
release of the Lien of the Security Documents and reasonable attorneys' fees and
expenses;
(c) Borrower shall pay to Lender, to be applied to prepayment
of the outstanding principal balance of the Loan, an amount equal to (1) in the
case of a prepayment pursuant to clause (b) of the first paragraph of this
SECTION 2.7, the Release Price and the Yield Maintenance Payment for such
Mortgaged Property or (2) in the case of a Release pursuant to clause (a) of the
first paragraph of this SECTION 2.7, an amount equal to the greater of (a) and
(b), in which (a) is the Allocated Loan Amount for such Mortgaged Property and
(b) is the lesser of (x) the Release Price for such Mortgaged Property and (y)
the sum of the Net Sales Proceeds received by Borrower from the sale of the
Mortgaged Property or the part thereof that remains following the Taking or
Casualty, plus the remaining Award or Insurance Proceeds not previously applied
to repayment of the Loan or Restoration;
(d) Borrower shall deliver to Lender, for execution, forms of
release of such Mortgaged Property from the Lien of the Security Documents
appropriate for the jurisdiction in which such Mortgaged Property is located;
(e) if the Release is being requested in order to avoid an
Event of Default pursuant to SECTION 7.1.3 hereof, Borrower shall deliver to
Lender evidence reasonably satisfactory to Lender, that after giving effect to
such Release, the Debt Service Coverage Ratio for the Remaining Mortgaged
Properties shall be equal to the greater of (i) 2.22:1 (on or before April 16,
2003) or 1.81:1 (on or after April 17, 2003), and (ii) the Debt Service Coverage
Ratio for the Remaining Mortgaged Properties and the Mortgaged Properties to be
released for the twelve (12) full calendar months immediately preceding the
release of the Mortgaged Properties to be released;
(f) Borrower shall provide to Lender an opinion of counsel in
form and
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substance, and from a firm, acceptable to Lender in the exercise of its sole
discretion, that such Release would not adversely affect the status of the
entity holding the interest in the Mortgage Note as a REMIC (assuming for such
purpose that such entity otherwise qualifies as a REMIC) and that such Release
will not result in a deemed exchange of the Certificates pursuant to Section
1001 of the Code.
2.8. RELEASE OF ALL THE PROPERTIES DURING DEFEASANCE PERIOD
(a) At any time during the Defeasance Period, if Borrower has
elected to defease the entire outstanding principal balance of the Mortgage Note
and the requirements of SECTION 2.5 have been satisfied, all of the Mortgaged
Properties shall be released from the Lien of the Mortgage and the U.S.
Obligations, pledged pursuant to the Defeasance Security Agreement, shall be the
sole source of collateral securing the Note.
(b) In connection with the release of the Lien, Borrower shall
submit to Lender, not less than thirty (30) days prior to the Release Date, a
release of Lien (and related Loan Documents) for each Mortgaged Property for
execution by Lender. Such release shall be in a form appropriate in each
jurisdiction in which a Mortgaged Property is located and satisfactory to Lender
in its sole discretion. In addition, Borrower shall provide all other
documentation Lender reasonably requires to be delivered by Borrower in
connection with such release, together with an Officer's Certificate certifying
that such documentation (i) is in compliance with all Laws, and (ii) will effect
such Releases in accordance with the terms of this Agreement.
2.9. RELEASE OF INDIVIDUAL MORTGAGED PROPERTIES DURING THE DEFEASANCE
PERIOD
At any time during the Defeasance Period, in connection with any
Defeasance of less than the entire principal balance of the Mortgage Note,
Borrower may obtain (i) the Release of one or more Mortgaged Properties from the
Lien of the Mortgage thereon (and related Loan Documents) and (ii) the release
of Borrower's obligations under the Loan Documents with respect to such
Mortgaged Properties (other than those expressly stated to survive), upon
satisfaction of each of the following conditions:
(a) the principal balance of the Defeased Note issued in
connection with such Defeasance shall equal or exceed the aggregate Release
Prices for the Mortgaged Properties then being Released;
(b) the requirements of SECTION 2.5 have been satisfied;
(c) Borrower shall submit to Lender, not less than thirty (30)
days prior to the date of such Release, a release of Lien (and related Loan
Documents) for each such Mortgaged Property for execution by Lender. Such
release shall be in a form appropriate in the jurisdiction in which such
Mortgaged Property is located and satisfactory to Lender in its sole discretion.
In addition, Borrower shall provide all other documentation Lender reasonably
requires to be delivered by Borrower in connection with such release, together
with an Officer's Certificate certifying that such documentation (i) is in
compliance with all Laws, (ii) will effect such release in accordance with the
terms of this Agreement, and (iii) will not impair or otherwise adversely affect
the Liens, security interests and other rights of Lender under the
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Loan Documents not being released (or as to the parties to the Loan Documents
and Mortgaged Properties subject to the Loan Documents not being released); and
(d) After giving effect to such release, the Debt Service
Coverage Ratio for the Remaining Mortgaged Properties shall be equal to the
greater of (i) 2.22:1 (on or before April 16, 2003) or 1.81:1 (on or after April
17, 2003), and (ii) the Debt Service Coverage Ratio for the Remaining Mortgaged
Properties and the Mortgaged Properties to be released for the twelve (12) full
calendar months immediately preceding the release of the Mortgaged Properties to
be released.
2.10. PARTIAL RELEASE AFTER DEFEASANCE PERIOD
On any Due Date occurring on or after the last day of the
Defeasance Period, upon the sale of any Mortgaged Property to any Person,
Borrower may cause the Release of such Mortgaged Property from the Lien of the
Security Documents upon the satisfaction of the following conditions:
(a) Borrower shall provide not less than thirty (30) days
notice to Lender specifying a Due Date on which the amount set forth in clause
(c) below is to be provided to Lender, which notice shall be accompanied by a
certificate of Borrower, signed by a duly authorized officer of Borrower, to the
effect that no Default or Event of Default has occurred and is continuing (or,
in the case of a Default or Event of Default that shall be cured or avoided by
the Release of the affected Mortgaged Property, describing the nature of such
Default or Event of Default, and certifying that such Default or Event of
Default shall be cured by such Release) and that such Release will comply with
all applicable requirements of this SECTION 2.10;
(b) Borrower shall pay to Lender all interest that is accrued
and unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date;
(c) Borrower shall pay to Lender, to be applied to the
outstanding principal balance of the Loan, an amount equal to the Release Price
of such Mortgaged Property; provided, however, that (A) if a Mortgaged Property
is released pursuant to this SECTION 2.10 as a result of a Casualty or a Taking
as to which Restoration is not required or permitted under the Mortgage, such
payment shall be an amount equal to the greater of (a) and (b), in which (a) is
the Allocated Loan Amount for such Mortgaged Property and (b) is the lesser of
(x) the Release Price for such Mortgaged Property and (y) the sum of the Net
Sales Proceeds received by Borrower from the sale of the Mortgaged Property or
the part thereof that remains following the Taking or Casualty plus the
remaining Award or Insurance Proceeds not previously applied to repayment of the
Loan or Restoration;
(d) Borrower shall deliver to Lender, for execution, forms of
release of such Mortgaged Property from the Lien of the Security Documents
appropriate for the jurisdiction in which such Mortgaged Property is located;
(e) unless the Release is being made in connection with a
Casualty or Taking (as to which Restoration is not required or permitted under
the Mortgage), after giving effect to such Release, the Debt Service Coverage
Ratio for the Remaining Mortgaged
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Properties shall be at least equal to the greater of (i) 2.22:1 (on or before
April 16, 2003) or 1.81:1 (on or after April 17, 2003), and (ii) the Debt
Service Coverage Ratio for the Remaining Mortgaged Properties and the Mortgaged
Property to be released for the twelve (12) full calendar months immediately
preceding the release of the Mortgaged Property to be released; and
(f) Borrower shall provide to Lender an opinion of counsel in
form and substance, and from a firm, acceptable to Lender in the exercise of its
sole discretion, that such Release would not adversely affect the status of the
entity holding the interest in the Mortgage Note as a REMIC (assuming for such
purpose that such entity otherwise qualifies as a REMIC) and that such
Defeasance will not result in a deemed exchange of the Certificates pursuant to
Section 1001 of the Code.
Sales of personal property at a Mortgaged Property in the
ordinary course of business may be made pursuant to SECTION 1.23 of the Mortgage
without regard to SECTION 2.7, SECTION 2.8, SECTION 2.9 OR SECTION 2.10 hereof.
2.11. YIELD MAINTENANCE
2.11.1.
If all or any part of the principal amount of the Loan is prepaid
after the Closing Date but prior to the last day of the Defeasance Period as a
result of the acceleration of the maturity of the Mortgage Note after an Event
of Default (or if a Mortgaged Property is released for the purpose set forth in
SECTION 7.1.3 after the Closing Date but prior to the Securitization), Borrower
shall be required to pay a prepayment premium (the "YIELD MAINTENANCE PAYMENT")
on the Mortgage Note equal to the greater of (A) one percent (1%) of the amount
of the principal prepayment that is to be applied to the Mortgage Note and (B)
the present value as of the end of the applicable Debt Service Period,
discounted at the Reinvestment Yield, of a series of payments each equal to the
Payment Differential on each of the remaining Due Dates prior to and including
the Anticipated Repayment Date, after giving effect to the regularly scheduled
payment of principal that is to be made on the Prepayment Date. No Yield
Maintenance Payment shall be required in connection with prepayments made on or
after the last day of the Defeasance Period.
2.11.2.
Promptly following the acceleration of the Mortgage Note or
following the occurrence of any other event, the occurrence of which obligates
Borrower to make a Yield Maintenance Payment, Lender shall notify Borrower of
the amount and basis of determination of the applicable Yield Maintenance
Payment promptly upon determining the Treasury Rate, as contemplated below.
Absent manifest error, Borrower shall not dispute Lender's calculations
hereunder.
For purposes of this SECTION 2.11, the following terms shall have
the meanings ascribed to them below:
"PAYMENT DIFFERENTIAL" means, an amount equal to (x) the Base
Rate, minus the Reinvestment Yield, divided by (y) 12, and multiplied by
(z) the amount of the principal
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prepayment.
"REINVESTMENT YIELD" is the Treasury Rate converted to a monthly
compounded nominal annual yield.
"TREASURY RATE" is equal to the lesser of (A) the annual yield on
the United States Treasury issue (primary issue) with a maturity date
closest to the Final Maturity Date and (B) the yield on the United
States Treasury issue (primary issue) with a maturity equal to the
remaining average life of the Mortgage Note, with each such yield being
based on the bid price for such issue as published in The Wall Street
Journal on the date that is fourteen (14) days prior to (x) the
applicable Prepayment Date set forth in the notice of prepayment
provided by the Borrower or (y) the date of acceleration by the Lender
(or if such bid price is not published on that date, the next preceding
date on which such bid price is so published).
2.12. SUCCESSOR BORROWER
In connection with any release of a Lien under SECTION 2.8 or
SECTION 2.9, Lender shall establish or designate a successor entity (the
"SUCCESSOR BORROWER") which shall be a single purpose bankruptcy remote entity
approved by Lender, and Borrower shall transfer and assign all obligations,
rights and duties under and to the Mortgage Note (in the event of a Release
pursuant to SECTION 2.8) or the Defeased Note (in the event of a Release
pursuant to SECTION 2.9), as applicable, together with the pledged U.S.
Obligations to such Successor Borrower. Such Successor Borrower shall assume the
obligations under the Mortgage Note or the Defeased Note, as applicable, and the
Defeasance Security Agreement and Borrower shall be relieved of its obligations
under such documents. The Borrower shall pay $1,000 to any such Successor
Borrower as consideration for assuming the obligations under the Mortgage Note
or the Defeased Note, as applicable, and the Defeasance Security Agreement.
Notwithstanding anything in this Agreement to the contrary, no other assumption
fee shall be payable upon a transfer of the Mortgage Note in accordance with
this SECTION 2.12, but Borrower shall pay all costs and expenses incurred by
Lender, including Lender's attorneys' fees and expenses, incurred in connection
therewith.
3. REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement and the other Loan
Documents and to make the Loan to Borrower, Borrower makes the following
representations and warranties. For purposes of this Article 3, references to
the knowledge of Borrower or to information known by Borrower, shall be deemed
to include the knowledge of, or information known by Arden OP and Arden REIT.
3.1. ORGANIZATION AND POWER OF BORROWER AND EQUITY MEMBER
Borrower (i) is duly organized and validly existing as a limited
liability company in good standing under the laws of the State of Delaware, (ii)
has full power and authority to enter into, execute, deliver and perform this
Agreement, the Mortgage Note, and the other Loan Documents and Transaction
Documents and to consummate the transactions contemplated
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hereby and thereby, (iii) has full power and authority to mortgage or assign all
of its right, title and interest in and to the Mortgaged Properties and the
other Collateral, (iv) has full power and authority to transact the business in
which it is now engaged, or proposes to engage, (v) has power and authority and
is duly qualified to transact such business as a foreign limited liability
company under the laws of all jurisdictions in which the Mortgaged Properties
are located, and in all jurisdictions where the nature of Borrower's business or
the character of properties owned, leased, operated or otherwise held by
Borrower makes such qualification necessary and (vi) is a special purpose entity
established for the sole purpose of owning and operating the Mortgaged
Properties or causing the Mortgaged Properties to be operated and entering into
the transactions contemplated by the Transaction Documents and performing
activities incidental and related to the operation of the Mortgaged Properties.
All of the membership interests in Borrower have been duly and validly
authorized and issued and are owned by the Equity Member and Special Member free
and clear of any liens, encumbrances, equities or claims. The Equity Member (i)
is duly organized and validly existing as a limited partnership in good standing
under the laws of the State of Maryland, (ii) has full power and authority to
execute, deliver, and perform this Agreement and the other Loan Documents and
Transaction Documents to which it is a party, whether for itself or on behalf of
Borrower, and (iii) is duly qualified to transact business as a foreign limited
partnership in good standing under the laws of each jurisdiction which requires
such qualification, except when the failure to be so qualified, considering all
such failures in the aggregate, would not be reasonably likely to have a
material adverse effect on the financial condition, business or results of
operations of Equity Member or Borrower or on the ownership, use or value of any
of the Mortgaged Properties. Borrower has its principal place of business,
principal office and office where it keeps its records and other documents and
instruments relating to the Mortgaged Properties (except for certain records,
documents and instruments kept at the Mortgaged Properties) at its address set
forth in SECTION 12.3.
3.2. DUE AUTHORIZATION AND EXECUTION
The execution, delivery and performance by Borrower of this
Agreement and each of the other Loan Documents and Transaction Documents have
been duly authorized by all requisite actions by and on behalf of Borrower and
are within the limited liability company power of Borrower, and this Agreement
and all other Loan Documents and Transaction Documents executed and delivered by
Borrower have been duly executed by Borrower and constitute the valid and
binding obligations of Borrower, enforceable against Borrower, in accordance
with their respective terms, subject to the effects of applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws
relating to or affecting creditors' rights generally and general principles of
equity (whether considered in a proceeding in equity or at law).
3.3. NO CONSENTS REQUIRED; NO CONTRAVENTION
Except for consents and approvals that have already been obtained
and are in full force and effect, no consent, license, approval or authorization
of, or registration or declaration with, any Governmental Authority, commission,
bureau, agency or other Person is required in connection with the execution,
delivery and performance of this Agreement, the Mortgage Note, or any of the
other Loan Documents or Transaction Documents or the consummation of the
transactions contemplated hereby and thereby. Neither the execution and
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delivery by Borrower of this Agreement nor of the other Loan Documents or other
Transaction Documents, the consummation of the transactions contemplated hereby
or thereby, nor the fulfillment by Borrower of, or compliance by Borrower with,
the terms and conditions of this Agreement or the Loan Documents or other
Transaction Documents:
(a) will result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any Laws or any judgment,
decree or order binding on Borrower or its properties or assets;
(b) will conflict with or result in any breach or violation of
any of the terms, conditions or provisions of the organizational documents of
Borrower; or
(c) will result in a breach or violation of or constitute a
default under any existing material agreement or instrument to which Borrower or
its assets are a party or by which Borrower is bound.
3.4. TITLE TO PROPERTIES
Borrower has good and marketable title to the Mortgaged
Properties, including good and marketable fee simple in and to the Land, and
good and marketable title in and to the Improvements located thereon, in each
case free and clear of all Liens except for Permitted Liens, and Borrower has
good title in all other assets that serve as Collateral for the Loan (which, in
the case of assets leased by Borrower, shall mean a good and valid leasehold
interest in such assets), free and clear of all Liens except Permitted Liens.
The Permitted Liens do not and will not materially and adversely affect (i) the
ability of Borrower to pay in full the principal and interest when due on the
Mortgage Note or (ii) the use of the Mortgaged Properties for the use currently
being made thereof or the operation of the Mortgaged Properties as they
currently are being operated. Borrower has no interest in real property other
than the Mortgaged Properties, including the Land and Improvements related
thereto. Each Mortgaged Property constitutes one or more separate tax lots that
do not share tax liability with other real property except property that is (a)
owned in full by Borrower and (b) encumbered by a Lien in favor of the Lender
securing the Loan.
3.5. MANAGEMENT AGREEMENT
The execution, delivery and performance by Borrower of the
Management Agreement has been duly authorized by all requisite actions by and on
behalf of Borrower and are within the limited liability company power of
Borrower and the Management Agreement has been duly executed by Borrower and the
Manager and constitute the valid and binding obligations of Borrower and the
Manager, enforceable against Borrower and the Manager in accordance with their
terms, subject to the effects of applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights generally and general principles of equity (whether
considered in a proceeding in equity or at law).
3.6. LEASES
(a) Borrower is the sole owner of the entire lessor's interest
in the Leases; (b) the
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Leases are valid and enforceable subject to the effects of applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
similar laws relating to or affecting creditors' rights generally and general
principles of equity (whether considered in a proceeding in equity or at law);
(c) the material economic terms of all alterations, modifications and amendments
to the Leases are reflected in the certified occupancy statement delivered to
and approved by Lender; (d) none of the rents reserved in the Leases have been
assigned or otherwise pledged or hypothecated (other than to Lender); (e) except
as may otherwise be permitted herein, none of the Rents have been collected for
more than one (1) month in advance; (f) the premises demised under the Leases
have been completed and the tenants under the Leases have been accepted the same
and have taken possession of the same on a rent-paying basis except as otherwise
shown on SCHEDULE 3.6 attached hereto and except for tenant improvement work
that is in process that has been previously disclosed to Lender; (g) there
currently exist no offsets or defenses to the payment of any portion of the
Rents, except as otherwise shown on SCHEDULE 3.6 attached hereto; (h) no Lease
contains an option to purchase, right of first refusal to purchase, or any other
similar provision; and (i) no person or entity has any possessory interest in,
or right to occupy, the Property except under and pursuant to a Lease.
3.7. UTILITIES
(i) All utility services and facilities (including water,
sanitary sewer, storm sewer, gas and electrical services and facilities)
necessary for the present and proposed use of the Mortgaged Properties are
available to the Mortgaged Properties and, except as shown on the surveys or
title reports for the Mortgaged Properties, enter the Mortgaged Properties
either through adjoining public streets or through private lands pursuant to
valid, unsubordinated, perpetual, enforceable and recorded public or private
easements; (ii) all utility connections for the Mortgaged Properties have been
completed, installed and paid for; (iii) except as shown on the surveys or title
reports for the Mortgaged Properties and except for encroachments that would not
reasonably be expected to materially and adversely affect the operation of the
applicable Mortgaged Property, no Improvements on the Land are located upon any
public utility lines or upon any private utility lines serving property other
than the Mortgaged Properties, or encroach upon any property adjoining the
Mortgaged Properties or encroach upon any utility easements or rights-of-way;
and (iv) neither Borrower nor Equity Member has received any notice from any
utility that any utility services utilized by the Mortgaged Properties will be
revoked or otherwise terminated.
3.8. NO VIOLATIONS
No notices of any material violation of law or municipal
ordinances or of federal, state, county or municipal or other governmental
agency regulations, orders or requirements relating to the Collateral have been
entered against or received by Borrower or Equity Member and neither Borrower
nor Equity Member has reason to believe that any such notice may or will be
entered or received.
3.9. OTHER AGREEMENTS
Neither Borrower nor Equity Member is a party to any agreement,
instrument,
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indenture, or other contract or subject to any charter or other restriction that
could materially adversely affect, or threaten to materially adversely affect,
its business, operations, prospects, properties, assets or condition (financial
or otherwise). No material default by Borrower or Arden REIT has occurred or is
continuing (nor has there occurred any continuing event which, with giving of
notice or the passage of time or both, would constitute such a default) under
any material contracts, material agreements or material orders to which Borrower
or Equity Member, as the case may be, is a party or by which it is bound and, to
the knowledge of Borrower, no material default by a third party has occurred or
is continuing (nor has there occurred any continuing event which, with the
giving of notice or the passage of time, or both, would constitute such a
default) under any such contracts, agreements or orders. No holder of any
indebtedness of Borrower or Equity Member has given notice of any default
thereunder, and no liquidation or dissolution of Borrower or Equity Member, and
no receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to Borrower or Equity Member or any of their properties, is
pending or, to the knowledge of Borrower or Equity Member, threatened against
them or their properties.
3.10. PAYMENT OF TAXES
(i) Borrower and Equity Member have filed or have caused to be
filed all federal, state, local, and foreign income, excise, property and other
tax returns with respect to their operations, that are required to be filed,
(ii) all such returns are true and correct in all material respects, and (iii)
Borrower and Equity Member have paid or caused to be paid in full all taxes as
shown on such returns or on any assessment received by them, to the extent that
such taxes have become due. Except as so disclosed, the amounts reserved as a
liability for income and other taxes that may become payable are sufficient for
the payment of all such unpaid taxes of Borrower or Equity Member, whether or
not disputed, for which Borrower or Equity Member may be liable in its own right
or as a transferee of the assets of, or as successor to, any other person or
entity.
3.11. LITIGATION
There is no legal or governmental action, suit or proceeding
(including any condemnation proceeding) pending to which Borrower or Equity
Member is a party or of which any property of Borrower or Equity Member is
subject which, if determined adversely to Borrower or Equity Member, as the case
may be, would individually or in the aggregate have a material adverse effect on
the Mortgaged Properties, or on the financial position, business or results of
operations of Borrower or Equity Member or that might affect in any material
respect the transactions contemplated by this Agreement and, to the knowledge of
Borrower and Equity Member, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others.
3.12. REGULATION U
Neither Borrower nor Equity Member is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as now and
from time to time hereafter in effect, and no proceeds of the Loan
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will be used for any purpose (and Borrower has not taken or will take any
action) which might cause this Agreement or any Loan Document to violate said
Regulation U or any other regulation of the Board of Governors of the Federal
Reserve System (in each case as in effect on the date hereof or as the same may
hereinafter be in effect).
3.13. INVESTMENT COMPANY ACT
Neither Borrower nor the Equity Member is an "investment company"
or a company "controlled" by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended and none is an open-ended
investment company, unit trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act.
3.14. TRANSACTIONS WITH AFFILIATES
Excluding all transactions contemplated by the Loan Documents, no
officer of Borrower, and no other Affiliate of Borrower or of any such officer,
is currently a party to any transaction with Borrower, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
advisory or other services by, purchase or lease of real or personal property
from, or otherwise requiring payments to, any such officer or Affiliate, except
on terms that are fair and reasonable and no less favorable to Borrower than
would be expected in arms-length transactions with third parties where neither
party is under duress or under any extraordinary compulsion to enter into such
contract, agreement or arrangement.
3.15. BUSINESS PURPOSE; NON-SUBORDINATION
The Loan is solely for the business purpose of Borrower, and is
not for personal, family, household or agricultural purposes. The obligations of
Borrower under this Agreement, the Mortgage Note, and each of the other Loan
Documents, and the indebtedness evidenced by the Mortgage Note, are not
subordinated in right of payment or otherwise to any other obligation of
Borrower or to any rights of others.
3.16. PERMITS AND LICENSES
Borrower has all material permits, licenses and authorizations
necessary to conduct its business in the same manner as the business conducted
by Arden OP and Arden REIT immediately prior to the transfer of the Mortgaged
Properties to Borrower. No proceedings are pending or, to the best of Borrower's
and Equity Member's knowledge, threatened seeking the revocation or suspension
of any permits, licenses or approvals issued with respect to the Mortgaged
Properties the revocation of which might reasonably be expected to result in any
material adverse change in the business, operations, prospects, properties,
assets or condition (financial or otherwise) of Borrower or any of the Mortgaged
Properties. No such permits, licenses or approvals shall be altered or amended
in any materially adverse respect, nor shall Borrower or Equity Member make any
attempt to alter or amend the same, in any materially adverse respect, without
the prior written consent of Lender, which shall not be unreasonably withheld.
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3.17. PATENTS AND TRADEMARKS
Borrower owns or possesses the right to use all patents,
trademarks, service marks, trade names, copyrights, licenses, franchises,
permits and rights with respect to the foregoing, necessary to own and operate
its properties and to carry on its business as presently conducted and presently
planned to be conducted without conflict with any rights of others.
3.18. INSURANCE
Borrower has obtained or caused to be obtained all insurance
policies required by SECTION 8.1 hereof and by each of the Mortgages, in each
case with Qualified Insurance Companies and all such policies are in full force
and effect.
3.19. ERISA
Borrower has no employees, and Borrower does not maintain or
sponsor any Plan. Borrower is not obligated to make contributions on behalf of
the employees of any Person to any Plan.
3.20. NO NOTICE OF NON-COMPLIANCE
Neither Borrower nor Equity Member nor Arden REIT has received
any notice from any insurance company which has issued a policy with respect to
the Mortgaged Properties or from any State Board of Fire Underwriters (or any
other body exercising similar functions) requiring the performance of any
repairs, alterations or other work, which repairs, alterations or other work
have not been completed at the Mortgaged Properties. Neither Borrower nor Equity
Member nor Arden REIT has received any notice of default or breach which has not
been cured under any covenant, condition, restriction, right-of-way, reciprocal
easement agreement or other easement or agreement affecting the Mortgaged
Properties which is to be performed or complied with by it.
3.21. COMPLIANCE WITH LAWS
Borrower and each Mortgaged Property is in compliance with all
Laws, except for such non-compliance as would not reasonably be expected, singly
or in the aggregate, to materially and adversely affect any Mortgaged Property
or the business, operations, prospects, assets, properties or condition
(financial or otherwise) of Borrower.
3.22. COMPLIANCE WITH ENVIRONMENTAL LAWS
To the best of Borrower's knowledge, each of the Mortgaged
Properties is in compliance in all material respects with, all applicable
Environmental Laws, except for such matters as may be described in the reports
listed on SCHEDULE 3.22 and in reports previously delivered to Lender. There are
not pending (and, to the best of Borrower's knowledge, there are not
threatened), any actions, suits, claims, legal proceedings or any other
proceedings claiming or involving the presence on, at or under the Mortgaged
Properties, or any part thereof, of any Hazardous Materials (other than
Hazardous Materials in quantities customary in
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operations similar to the operation of the Mortgaged Properties that are
contained, stored and used in compliance in all material respects with
applicable Environmental Laws or claiming violation of Environmental Laws
relating to the Mortgaged Properties or any part thereof, and neither Borrower
nor Arden REIT has received, directly or indirectly, formal or informal notice
of any complaint, order directive, citation, notice of responsibility, notice of
potential responsibility, or information request from any Governmental Authority
or any other person or entity relating to the foregoing.
3.23. CONCERNING MORTGAGED PROPERTIES; FINANCIAL STATEMENTS
(a) All certifications, permits, licenses and approvals
required for the legal use, occupancy and operation of each Mortgaged Property
as used immediately prior to the transfer of such Mortgaged Property to Borrower
including any applicable certificate of completion and occupancy permit, have
been obtained and are in full force and effect; (b) Engineering Surveys have
been performed by a surveyor or registered professional engineer duly licensed
in the jurisdictions in which the Mortgaged Properties are situated for each of
the Mortgaged Properties and, except as set forth in the Engineering Surveys or
in reports previously delivered by Borrower to Lender, the Mortgaged Properties
and other Improvements are in sound condition and repair and neither Borrower
nor Equity Member has knowledge that any such Engineering Survey contains any
material inaccuracy or omission; (c) there are no proceedings pending or, to the
best of Borrower's or Equity Member's knowledge, threatened for the total or
partial condemnation of or affecting, any Mortgaged Property; (d) the Mortgaged
Properties are not subject to any leases, licenses or other use or occupancy
agreements other than the Leases, and leases of Building Equipment described on
SCHEDULE 3.23B; (e) other than the tenants pursuant to the Leases, no Person has
any possessory interest in any Mortgaged Property or right to occupy any portion
thereof except under and pursuant to the provisions of the Leases; (f) Borrower
does not have on the date hereof any contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments which in each case are known to Borrower
and which, in Borrower's opinion, are reasonably likely to result in a material
adverse effect on the Mortgaged Properties or the operation thereof, except as
referred to or reflected or provided for in the financial statements heretofore
furnished to Lender or as otherwise disclosed to Lender herein; (g) since the
last date of such financial statements, (i) Borrower has not entered into any
material transaction or incurred any material liability or obligation,
contingent or otherwise, other than in the ordinary course of business, except
as disclosed to Lender and (ii) there has not been any material adverse change
in the condition (financial or otherwise), business, net worth or results of
operations of Borrower or the condition (financial or otherwise) of the
Mortgaged Properties; and (h) no Mortgaged Property is located in a flood hazard
area as defined by the Federal Insurance Administration.
3.24. ACCESS
Each Mortgaged Property has access and is contiguous to publicly
dedicated streets, roads or highways, or if not so contiguous, access to and
from each Mortgaged Property and publicly dedicated streets, roads or highways
is available through private lands pursuant to valid, perpetual, enforceable and
recorded public or private easements or rights-of-way; and pedestrian and
vehicular access to and from each Mortgaged Property via the easements or
rights-of-way is not limited or restricted in any unreasonable manner.
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3.25. NO LIENS
There are no Liens of any type with respect to any of the
Mortgaged Properties, except the Liens created by the Loan Documents and the
Permitted Liens. There has been no construction or other activities at any of
the Mortgaged Properties within such periods of time as would permit the
imposition of any mechanics' or materialmen's Liens on any of the Mortgaged
Properties except as set forth on SCHEDULE 3.25.
3.26. ACCURACY OF INFORMATION
To the best knowledge of Borrower and Equity Member, neither the
Loan Documents nor any document, agreements, instrument, schedule, certificates,
statements, or cash flow schedules (collectively, the "BORROWER DOCUMENTS")
furnished by Borrower, Arden OP or Arden REIT to Lender contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading. Since the furnishing of the Borrower
Documents, there has been no change nor any development or event involving a
prospective change known to Borrower or Equity Member which would render any of
the Borrower Documents untrue or misleading in any material respect.
3.27. MORTGAGE AND SECURITY INTERESTS
When executed and delivered, and, if necessary under applicable
laws, recorded, the Mortgage will create valid mortgage, deed of trust, or
similar Liens upon the Mortgaged Properties, the Land underlying them and the
Improvements and valid security interests in the fixtures located thereon, and
the Mortgage and accompanying financing statements (if any) will be recorded and
filed in such places as may be required and, where appropriate, applicable
mortgage, transfer, recording and UCC taxes and fees will be paid, such that the
Mortgage will constitute valid first priority mortgage, deed of trust, or
similar Liens on the Land and Mortgaged Properties and will create valid
perfected first priority security interests of record with respect to the
respective Mortgaged Property and related Collateral (except Collateral as to
which a security interest cannot be created and perfected by a Mortgage or the
filing of a financing statement under the U.C.C.), subject only to the Permitted
Liens.
When executed and delivered, and, if necessary under applicable
laws, when appropriate filings of financing statements are made, the Security
Agreement by and between Borrower and Lender will create valid first priority
security interests with respect to the Collateral named therein, which security
interests shall be perfected to the extent that security interests in such
Collateral can be perfected by the filing of a financing statement under the
U.C.C.
3.28. ASSIGNMENT OF LEASES AND RENTS
When executed and delivered by Borrower and the other parties
thereto, the Assignment of Leases and Rents will create a valid assignment of
the Collateral described therein. The Assignment of Leases and Rents, and
accompanying financing statements (if any) will be recorded by the Title Company
and filed in such places as may be required so that all such documents will
create valid assignments of record with respect to the Collateral described
therein, subject only to the Permitted Liens.
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3.29. FOREIGN PERSON
Borrower is not a "foreign person" as defined in Section 1445 of
the Internal Revenue Code of 1986 and any regulations promulgated thereunder
(including temporary or proposed regulations).
3.30. NO DEFAULTS
No Default or Event of Default exists hereunder or under the
other Loan Documents.
3.31. NO FRAUDULENT CONVEYANCE
Borrower (i) is entering into this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby in good faith and
with no actual intent to disturb, hinder, delay, or defraud any present or
future creditor of Borrower, Equity Member or any other Person, and (ii) has
received reasonably equivalent value in exchange for its obligations under the
Loan Documents. After giving effect to the transactions contemplated by the Loan
Documents, the fair salable value of Borrower's assets exceeds and will,
immediately following the execution and delivery of the Loan Documents, exceed
Borrower's total liabilities, including subordinated, unliquidated, disputed or
contingent liabilities known to Borrower. The fair salable value of Borrower's
assets is and will, immediately following the execution and delivery of the Loan
Documents, be greater than Borrower's probable liabilities, including the
maximum amount of its contingent liabilities known to the Borrower or its debts
as such debts become absolute and matured. Borrower's assets do not and,
immediately following the execution and delivery of the Loan Documents will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to, and does not believe
it will, incur debts and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).
4. CLOSING; CONDITIONS PRECEDENT
The Loan shall be made at a closing (the "CLOSING") on a date
(the "CLOSING DATE") that coincides with the closing of the transactions
contemplated by the Contribution Agreement. Without limiting the foregoing, the
obligation of Lender to make the Loan to Borrower and to proceed with the
Closing is subject to the satisfaction on or before the Closing Date of each and
all of the following conditions (and the occurrence of the Closing shall be
conclusive evidence that all such conditions have been satisfied in full or
knowingly waived):
4.1. REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties of Borrower and Equity Member
made in this Agreement or in any other Loan Document shall have been true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date, with the same effect as if such
representations and warranties were made on the Closing Date. As of the Closing
Date, Borrower shall each have performed and complied in all material
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respects with all covenants and agreements required by this Agreement or by any
other Loan Document to be performed or complied with by Borrower as of such
date.
4.2. BORROWER'S ACTIONS
Borrower shall have taken all actions under the laws of any state
having jurisdiction over Borrower necessary to effectuate the transactions
contemplated by this Agreement and by the other Loan Documents.
4.3. DELIVERY OF DOCUMENTS
The Borrower shall have delivered to the Lender the following
documents, instruments and agreements, each of which shall be in form and
substance reasonably satisfactory to the Lender:
4.3.1.
All Loan Documents, fully executed by the Borrower and, as
applicable, Equity Member, including the following;
(i) This Agreement;
(ii) The Mortgage Note;
(iii) The Mortgage;
(iv) The Environmental Indemnity Agreement;
(v) The Collateral Assignment of Management Agreement
(and the Manager's consent to same);
(vi) The Security Agreement;
(vii) The Assignment of Leases and Rents; and
(viii) The Cooperation Agreement;
4.3.2.
Mortgagee's forms of title insurance policies (each a "TITLE
INSURANCE POLICY" and, collectively, the "TITLE INSURANCE POLICIES"), or
marked-up commitments evidencing such policies, each in form and content
reasonably acceptable to the Lender, and each in an amount not less than the
Allocated Loan Amount applicable to the particular Mortgaged Property (as
specified in SCHEDULE 1.1 attached hereto), with premiums fully paid, insuring
that (i) each Mortgage constitutes a valid first priority mortgage or similar
lien on, and security interest in, the Land and the Improvements and all rights
appurtenant thereto described therein, in each case free and clear of all
defects and encumbrances other than as set forth in SCHEDULE B to the applicable
Title Insurance Policy, and containing, to the extent such coverage is available
in the
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state in which the particular Mortgaged Property is located, (A) full coverage
(by affirmative insurance) against liens of mechanics, materialmen, laborers,
and any other Persons who might claim statutory or other common law liens
relating to services performed prior to Closing; (B) no survey exceptions other
than those set forth in SCHEDULE B to each Title Insurance Policy; (C) such
other endorsements as the Lender may deem reasonably necessary to insure that
any off-site easements benefiting any of the Mortgaged Properties are valid and
enforceable in accordance with their terms; (D) a "tie-in" endorsement
aggregating the insurance amount indicated for the applicable Mortgaged Property
with the amounts indicated for other Mortgaged Properties; and (E) such other
endorsements as are required by Lender. Such Title Insurance Policies shall be
issued by Commonwealth Land Title Insurance Company or any other nationally
recognized title insurance company (the "TITLE COMPANY") reasonably satisfactory
to Lender.
4.3.3.
Evidence reasonably satisfactory to the Lender that the
requirements set forth in SECTION 8.1 and SECTION 8.3 hereof have been complied
with and that all policies of insurance required by SECTION 8.1 and SECTION 8.3
are in full force and effect;
4.3.4.
Evidence reasonably satisfactory to Lender that funds necessary
to pay all taxes related to the Mortgage and all other recording and filing fees
and other expenses necessary in connection with the recordation of the Mortgage
and the perfection of the security interests under all of the other Security
Documents have been paid to the Title Company, or to other Persons reasonably
satisfactory to the Lender, for payment to the applicable taxing authorities or
recording officials;
4.3.5.
A certificate of Borrower, dated as of the Closing Date (together
with copies of the documents referred to therein) certifying that: (i) attached
thereto is a true and complete copy of the LLC Agreement, together with all
amendments thereto, (ii) the LLC Agreement has not been amended since the date
of the last amendment attached to the certificate, and (iii) the LLC Agreement
is in full force and effect;
4.3.6. [INTENTIONALLY DELETED]
4.3.7.
A certified copy of the certificate of formation of Borrower,
certified as of a date no more than two weeks prior to the Closing Date by the
Delaware Secretary of State as being a true and complete copy of such
certificate as on file in such state, and a certificate of a duly authorized
officer of Borrower, dated as of the Closing Date (together with copies of the
documents referred to therein) certifying that: (i) attached thereto are true
and complete copies of the Borrower's certificate of formation, together with
all amendments thereto, (ii) the certificate of formation has not been amended
since the date of the last amendment attached to the certificate, and (iii) the
certificate of formation is in full force and effect;
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4.3.8.
A certified copy of the articles of incorporation of Arden REIT,
certified as of a date no more than two weeks before the Closing Date by the
Maryland State Department of Assessments and Taxation as being a true and
complete copy of such articles as on file in such State, and a certificate of a
duly authorized officer of Arden REIT, dated as of the Closing Date (together
with copies of the documents referred to therein) certifying that: (i) attached
thereto is a true and complete copy of such company's articles of incorporation,
together with all amendments thereto, (ii) attached thereto is a true and
complete copy of such company's bylaws, together with all amendments thereto,
(iii) such organizational documents and bylaws have not been amended since the
date of the last amendment attached to the certificate, (iv) such organizational
documents and bylaws are in full force and effect, and (v) attached thereto are
currently effective resolutions of the board of directors of such company
authorizing the consummation of the transactions contemplated hereby by Arden
REIT on its own behalf and as the sole general partner of Arden OP;
4.3.9.
A certified copy of the certificate of limited partnership of
Arden OP, certified as of a date no more than two weeks prior to the Closing
Date by the Maryland State Department of Assessments and Taxation as being a
true and complete copy of such certificate as on file in such state, and a
certificate of a duly authorized office or Arden REIT, as sole general partner
of Arden OP, dated as of the Closing Date (together with copies of the documents
referred to therein) certifying that: (i) attached thereto are true and complete
copies of Arden OP's limited partnership agreement and certificate of limited
partnership, together with all amendments thereto, (ii) the limited partnership
agreement has not been amended since the date of the last amendment attached to
the certificate, and (iii) the limited partnership agreement is in full force
and effect.
4.3.10.
Original fictitious name certificates, certificates of existence
and, if available, certificates of good standing for Borrower and Equity Member
from the Secretary of State's office (or equivalent) of their respective
jurisdictions of organization, as well as certificates of qualification to
transact business in California, for Borrower and Equity Member from the
Secretary of State for the State of California, each dated as of a date recent
to the Closing Date.
4.3.11.
Certificates of each of Borrower and Manager, each dated as of
the Closing Date (together with copies of the documents referred to therein)
certifying that: (i) attached thereto is a true and complete copy of the
Management Agreement, together with all amendments thereto, (ii) the Management
Agreement has not been amended since the date of the last amendment attached to
the certificate, (iii) the Management Agreement is in full force and effect,
(iv) no notice of default under the Management Agreement has been given or
received by such party, and neither such party nor, to the best knowledge of
such party, the other party
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is in default with respect to any obligation under the Management Agreement, and
(v) such party does not claim to have any defense, counterclaim or right of
offset with respect to any of its obligations under the Management Agreement.
4.3.12.
As-built surveys for each Mortgaged Property that conform to the
1992 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys and
that meet the accuracy standards of an Urban Land Survey, each such survey to be
prepared by a surveyor registered in California, and to contain a certificate
from such surveyor to Lender and the Title Company, dated within ninety (90)
days immediately preceding the Closing Date, in form and content reasonably
acceptable to Lender and the Title Company. Each survey shall show (i) the
boundaries of the applicable Land, (ii) the location and dimension of all
Improvements located on the Land, (iii) the location and identity of all visible
or recorded easements and rights-of-way across or serving the Land, (iv) that
the Improvements comply with all setback requirements and zoning restrictions,
except for violations that do not materially adversely affect the Mortgaged
Properties or as to which Lender is affirmatively insured under the applicable
Title Insurance Policy, (v) that the Improvements do not encroach on adjoining
property or on any easement or right of way, except for encroachments that do
not materially adversely affect the Mortgaged Properties or as to which Lender
is affirmatively insured under the applicable Title Insurance Policy, (vi) that
there are no encroachments on the Land, except for encroachments that do not
materially adversely affect the Mortgaged Properties or as to which Lender is
affirmatively insured under the applicable Title Insurance Policy, (vii) that
the Land is not located within any flood plain area (unless flood insurance
reasonably satisfactory to Lender is provided), and (viii) any other matters
that Lender may reasonably require;
4.3.13.
A report of the Title Company or a professional records-search
firm stating that a search of the public records in each state and county in
which a Mortgaged Property is located, disclosed no conditional sales contracts,
chattel mortgages, leases of personalty, financing statements or title retention
agreements, that affect any Mortgaged Property or Land or any other Collateral
assigned or pledged to Lender, except such matters as may be listed in such
report, and such matters must be reasonably acceptable to Lender;
4.3.14.
A copy of the certificate of occupancy for each Mortgaged
Property and the Improvements located on each parcel of Land, or evidence
satisfactory to Lender that no certificate of occupancy is required by
applicable Laws, and a copy of all licenses and permits required for the legal
operation of each Mortgaged Property and all other Improvements located on each
parcel of Land, or evidence satisfactory to Lender that no other licenses or
permits are required by applicable Laws or that the absence of particular
licenses or permits will not have a materially adverse effect on the business,
properties, prospects, assets or condition (financial or otherwise) of the
Mortgaged Property;
4.3.15.
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The Engineering Surveys for all of the Mortgaged Properties,
which shall show that no material defects or conditions affect any of the
Mortgaged Properties.
4.3.16.
Seismic studies showing probable maximum loss with respect to
each Mortgaged Property;
4.3.17.
Current reports prepared by an environmental surveying firm
reasonably satisfactory to Lender and in form and scope reasonably satisfactory
to Lender;
4.3.19.
Estoppel certificates, in form and content substantially in
accordance with the form attached hereto as EXHIBIT C, from (i) each tenant of
each Mortgaged Property that accounted for more than five percent (5%) of the
gross rents from such Mortgaged Property during the most recently completed four
full Accounting Quarters and (ii) tenants of each Mortgaged Property that
accounted, in the aggregate, for at least seventy-five percent (75%) of the
gross rents from such Mortgaged Property for the most recently completed four
full Accounting Quarters;
4.3.20.
Letters from the holders of the Existing Debt showing the amounts
necessary to pay such indebtedness in full as of the Closing Date, together with
evidence that the Title Company has received into escrow from such holders all
instruments of release, in recordable form, necessary to release any Liens
securing such debt immediately following the Closing;
4.3.21.
The Management Agreement duly executed by Borrower and Manager.
4.4. EVIDENCE OF AUTHORIZATION; RELATED DOCUMENTS
Lender shall also have received:
4.4.1.
A certificate of the corporate secretaries of Borrower, Arden
REIT and the Manager certifying as to the incumbency and genuine signature of
each officer of such corporation executing any of the Loan Documents or other
statements, reports, certificates and documents called for by the terms of the
Loan Documents and who will otherwise act under the Loan Documents for and on
behalf of Borrower or any such entity, including specimen
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signatures of each individual that will be signing any of the Loan Documents on
behalf of Borrower or Manager, which specimen signatures shall be certified by
an appropriate officer to be a true specimen thereof (and the signature,
authority and incumbency of the certifying officer shall be similarly
certified).
4.4.2.
One or more written opinions addressed to Lender, dated as of the
Closing Date, from Latham & Watkins, special counsel to Borrower, and from
Richards, Layton & Finger, special Delaware counsel to Borrower, in form and
substance reasonably acceptable to Lender;
4.4.3.
One or more written opinions addressed to Lender, dated as of the
Closing Date, from Ballard, Spahr, Andrews & Ingersoll, special Maryland counsel
to Equity Member and Arden REIT, in form and substance acceptable to Lender.
4.5. CLOSING CERTIFICATE
The Lender shall have received a certificate of Borrower signed
by a duly authorized officer of Borrower, dated as of even date herewith,
stating that:
(i) The representations and warranties of Borrower and Equity
Member contained in each of the Loan Documents to which Borrower or Equity
Member is a party, and in all certificates, documents and instruments delivered
by Borrower or Equity Member pursuant to the Loan Documents are true and correct
in all material respects on and as of the Closing Date; and
(ii) All conditions precedent to be performed by the Borrower
or Equity Member have been satisfied as of the Closing Date.
4.6. MANAGEMENT AGREEMENT
The Management Agreement shall be in full force and effect.
4.7. EXISTING DEBT
All actions necessary to repay the Existing Debt, and to release
all mortgages or other Liens relating thereto, shall have been taken, and Lender
shall have received evidence reasonably satisfactory to the Lender to that
effect.
4.8. PAYMENT OF LENDER COSTS AND ORIGINATION FEE
Borrower shall pay at the Closing, (i) the Origination Fee and
(ii) all Lender Costs, the amounts of which are known to the Lender at such
time. In the event that the amounts paid or withheld by Lender at the Closing
are insufficient to pay all such Lender Costs, Borrower shall promptly, upon
demand, provide additional funds to Lender to pay such Lender Costs.
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4.9. INDEPENDENT MANAGER
Borrower shall have at least one Independent Manager.
4.10. TI RESERVE REQUIREMENT
An amount at least equal to the TI Reserve Requirement shall have
been deposited in the TI Reserve Account.
5. AFFIRMATIVE COVENANTS
Borrower agrees that, so long as any amount of principal,
interest, Yield Maintenance Payment, or any other charges relating to the Loan
shall be outstanding, or so long as there exist any other charges owing on or
under this Agreement, the Mortgage Note, or any other Loan Document, Borrower
shall comply with all of the following:
5.1. TIMELY PAYMENT OF AMOUNTS DUE
Borrower shall duly pay or cause to be paid, when due, the
principal of, interest on, Yield Maintenance Payments, if any, and other amounts
payable under or in connection with this Agreement, the Mortgage Note and each
other Loan Document in accordance with the terms hereof and thereof, at the
times and places and in the manner provided herein or therein.
5.2. PROCEEDS OF THE LOAN
Borrower shall apply the Loan Amount solely for the purposes set
forth in SECTION 2.3 hereof.
5.3. MANAGEMENT AGREEMENT
5.3.1.
Borrower shall duly and punctually pay all sums required to be
paid by Borrower under the Management Agreement and otherwise perform in all
material respects the obligations contemplated to be performed by it under the
Management Agreement, subject to the provisions of the Collateral Assignment of
Management Agreement, and will, with due diligence and in a reasonable and
prudent manner, enforce its rights under the Management Agreement to the extent
failure to perform or protect its rights thereunder might materially and
adversely affect the business, operations, prospects, assets, properties or
condition (financial or otherwise) of Borrower. Without limiting the foregoing,
Borrower agrees that:
(a) Borrower shall at all times promptly and faithfully keep,
perform and comply with, or cause to be kept, performed and complied
with, prior to the expiration of any applicable grace period, the
provisions of the Management Agreement to be complied with by it.
(b) Borrower shall give Lender prompt notice of any notice of
default given to
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or received from the Manager under the Management Agreement, which
notice shall include a copy of such notice whether or not Lender may be
entitled to such notice directly from the Manager. Borrower shall
promptly furnish to Lender upon Lender's reasonable request any and all
information concerning the performance by it of the provisions of the
Management Agreement and shall permit Lender or its representative at
all reasonable times to make investigation or examination concerning the
performance by it of the provisions of the Management Agreement. Within
ten (10) days after receipt by Borrower, Borrower shall deliver to
Lender a copy of any notice, communication, plan, specification or other
instrument or document received or given by it in any way relating to or
affecting the Management Agreement which may materially concern or
affect the rights of Borrower under the Management Agreement.
(c) If any legal action or proceeding shall be instituted to
terminate the Management Agreement, or for any other purpose materially
affecting the Management Agreement, Borrower will, promptly upon service
thereof on or to it, deliver to Lender a copy of each petition, summons,
complaint, notice of motion, order to show cause and of all other
provisions, pleadings and papers, however designated, served in any such
action or proceeding. Borrower will consult with Lender before
instituting suit against the Manager.
(d) Notwithstanding any other provision of this Agreement, of
the Management Agreement, if Borrower shall fail so to do, Lender may
(but shall not be obligated to) take any such action as Lender
reasonably deems required to prevent, mitigate or cure, in whole or in
part, any default by Borrower under the Management Agreement, and upon
the receipt by Lender from Borrower or the Manager, of any written
notice of default by Borrower under the Management Agreement, Lender may
rely thereon, and such notice shall constitute full authority and
protection to Lender for any action taken by the Lender or its agents in
good faith reliance thereon. All expenses, including reasonable
attorneys' fees, incurred by Lender to prevent, mitigate or cure any
such default, or to sustain the Lien of Lender on or security interest
in the Management Agreement or the applicable Mortgaged Property, or the
priority thereof, together with interest thereon at the Default Interest
Rate, shall be deemed secured by the Security Documents and shall be
payable within fifteen (15) days after demand. Nothing in this paragraph
(d) shall limit Borrower's right under the Management Agreement to
contest issues concerning requirements of law or other similar matters
to the extent permitted by the Management Agreement. Without limiting
the foregoing, Lender shall, upon ten (10) days prior written notice to
Borrower (except in the case of an emergency) have the absolute and
immediate right (but shall not be obligated) to enter in and upon the
Mortgaged Properties or any part thereof to such extent and as often as
Lender, in its reasonable judgment, deems necessary or desirable to
prevent or cure any such default or condition reasonably believed by
Lender to constitute a material default by Borrower.
(e) Borrower shall give Lender prompt notice of the
commencement of, and consult with Lender in connection with the conduct
of, any arbitration or appraisal proceeding under and pursuant to the
provisions of the Management Agreement.
(f) Borrower shall do, or cause to be done, all things
necessary to preserve and keep unimpaired its rights under the
Management Agreement and its rights and will
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enforce the obligations of the Manager under the Management Agreement to
the end that it may enjoy all of the rights granted to it thereunder.
5.3.2. SUBSTITUTE MANAGER
Notwithstanding the foregoing SECTION 5.3.1, Borrower may replace
the Manager and designate and retain a substitute manager for all (but not less
than all) of the Mortgaged Properties on the following terms and conditions:
(i) no Default or Event of Default shall have occurred and be
continuing;
(ii) the substitute manager shall either be (x) a manager that
is an Affiliate of Arden REIT and in which Arden REIT owns
directly or indirectly at least a seventy-five percent
(75%) economic or beneficial interest or (y) a third party
manager of recognized standing and experience in the
management of office and industrial properties comparable
to the Mortgaged Properties that is acceptable to Lender;
(iii) Lender shall have approved the management agreement to be
entered into between Borrower and the substitute manager;
(iv) the fee payable to the substitute manager shall not exceed
the five percent (5%) of the Gross Income from Operations
from the Mortgaged Properties; and
(v) if the Securitization has occurred, each of the Rating
Agencies delivers to Lender a Rating Comfort Letter with
respect thereto.
5.4. FINANCIAL AND OTHER INFORMATION
Borrower shall furnish to Lender the Financial Statements,
notices, and other items described below in this SECTION 5.4 (the "INFORMATION")
at the times indicated. Whenever any Financial Statements, notice or other item
shall be stated to be due on a day other than a Business Day, such Financial
Statement, notice or other item shall be due on the next succeeding Business
Day. All Financial Statements relating to earnings and expenses shall set forth
separately, or otherwise identify all extraordinary and non-recurring items to
the extent required by GAAP.
5.4.1. QUARTERLY FINANCIAL STATEMENTS
Borrower shall furnish to Lender, as soon as practicable, and in
any event within thirty (30) days after the end of each Accounting Quarter
(other than the last Accounting Quarter in any Fiscal Year), an unaudited
consolidated balance sheet of Borrower as at the end of such Accounting Quarter
and unaudited consolidated statement of income and expense of Borrower for each
such Accounting Quarter, and for that part of the Fiscal Year to date, and an
unaudited consolidated statement of cash flow of Borrower for that part of the
Fiscal Year to date, all in the form that would be required of Borrower if
Borrower were required to file quarterly reports with the SEC on Form 10-Q,
setting forth in each case, in comparative form, the corresponding figures for
the corresponding period(s) of the preceding Borrower Fiscal
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Year, which statements shall, as a whole, fairly present the financial position
of Borrower as at the end of the periods indicated and the results of the
operations of Borrower for such periods and which shall be certified by an
Authorized Accounting Officer as having been prepared under his or her
supervision in accordance with GAAP, subject to year-end audit adjustments, and
stating that such Authorized Accounting Officer knows of no facts inconsistent
with such Financial Statements and that such Financial Statements, as a whole,
fairly present the financial position of Borrower as of the end of the periods
indicated and the results of the operations of Borrower for such periods. Any
financial statements furnished pursuant to this Section shall be accompanied by
a certificate of an Authorized Accounting Officer stating that, to his or her
knowledge, no Default or Event of Default has occurred and is continuing or, if
a Default or Event of Default has occurred and is continuing, a statement as to
the nature thereof, the period of its existence, and the action that Borrower
has taken or proposes to take with respect thereto.
5.4.2. BORROWER'S ANNUAL FINANCIAL STATEMENTS
Borrower shall furnish to Lender, as soon as practicable, and in
any event within seventy-five (75) days after the end of each Fiscal Year of
Borrower, a consolidated balance sheet of Borrower as at the end of such Fiscal
Year and a consolidated statement of income, partners' capital or deficit and
consolidated cash flow of Borrower for such Fiscal Year, setting forth in each
case, in comparative form, the corresponding figures for the preceding Fiscal
Year, prepared in accordance with GAAP, and in the form that would be required
of Borrower if Borrower were required to file annual reports with the SEC on
Form 10-K. Such Financial Statements shall be accompanied by (A) (1) an audit
report and opinion in respect of such Financial Statements of Ernst & Young or
other "Big Six" independent certified public accounting firm selected by
Borrower and reasonably acceptable to Lender, which report and opinion shall be
unqualified as to the scope of the audit and reasonably satisfactory to Lender,
and (2) the written statement of the accountants described in clause (1) that,
in making the examination necessary for their report and opinion on such
Financial Statements, they have obtained no knowledge of any condition, event or
act that constitutes a Default or Event of Default, or, if such accountants
shall have obtained such knowledge, a statement as to the nature and status
thereof, and (B) a certificate of an Authorized Accounting Officer, stating that
(1) such Financial Statements have been prepared under his or her supervision in
accordance with GAAP and that he or she knows of no facts inconsistent with such
Financial Statements and (2) to his or her knowledge, no Default or Event of
Default has occurred is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof, the period of
its existence, and the action that Borrower has taken or proposes to take with
respect thereto.
5.4.3. BUDGETS
(a) For the partial year period commencing on the Anticipated
Repayment Date, and for each Fiscal Year thereafter, Borrower shall submit to
Lender for Lender's written approval the Annual Budget not later than thirty
(30) days prior to the commencement of such period or Fiscal Year. Such Annual
Budget shall be in form and substance reasonably satisfactory to Lender setting
forth in reasonable detail budgeted monthly operating income and monthly
operating capital and monthly operating and other expenses for the Mortgaged
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Properties, including all planned capital expenditures in respect of the
Mortgaged Properties for such period or Fiscal Year. Each such Annual Budget
approved by Lender shall hereinafter be referred to as an "APPROVED ANNUAL
BUDGET". Until such time that Lender approves a proposed Annual Budget, the most
recently Approved Annual Budget shall apply; provided that, such Approved Annual
Budget shall be adjusted from time to time to reflect actual increases in real
estate taxes, insurance premiums and utilities expenses.
(b) In the event that, after the Anticipated Repayment Date,
Borrower must incur an extraordinary operating expense or capital expense not
set forth in the Annual Budget (each an "EXTRAORDINARY EXPENSE"), then the
Borrower shall promptly deliver to Lender a reasonably detailed explanation of
such proposed Extraordinary Expense for the Lender's approval.
5.4.4. PROPERTY OPERATING STATISTICS
Borrower shall furnish to Lender operating statements setting
forth the Net Operating Income and occupancy statements for each Mortgaged
Property for each calendar month together with rent rolls (which rent rolls
shall contain the same information as the rent rolls provided by Borrower to
Lender in connection with the Closing) within fifteen (15) days following the
end of such calendar month in each case certified as true and correct by an
Authorized Accounting Officer and accompanied by a calculation of the Debt
Service Coverage Ratio as of the end of such calendar month.
5.4.5. CERTIFICATES REGARDING DEFAULTS
Within five (5) Business Days after any officer of Borrower
obtains knowledge of any Default or Event of Default, Borrower shall furnish to
Lender a statement of such officer specifying the nature of such Default or
Event of Default, the period of existence thereof, and the action that Borrower
has taken or proposes to take with respect thereto.
5.4.6. PROPOSED AMENDMENTS TO LLC AGREEMENT
Not less than ten (10) days prior to the execution thereof,
Borrower shall furnish to Lender a true and complete copy of any proposed
amendment to the LLC Agreement, which proposed amendments shall be subject to
the provisions of SECTION 6.5.1 hereof.
5.4.7. ENVIRONMENTAL CONDITIONS
Within five (5) Business Days after any officer of Borrower
obtains knowledge of or discovers any occurrence or condition on any real
property adjoining or in the vicinity of any Mortgaged Property that might
reasonably be expected to cause such Mortgaged Property or the Land on which it
is located to be subject to any investigation or cleanup pursuant to any
Environmental Law which could reasonably be expected to lead or result in a
material adverse effect upon the business, operations, prospects, assets,
properties or condition (financial or otherwise) of Borrower or any Mortgaged
Property, Borrower shall furnish to Lender written notice thereof describing the
nature thereof and the actions, if any, that Borrower proposes to take to
address it.
5.4.8. EVIDENCE OF TAX PAYMENTS
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Concurrently with the delivery of Financial Statements required
by SECTIONS 5.4.1 and 5.4.2, Borrower shall provide to Lender evidence of the
payment of all real estate taxes that were due and payable on the Mortgaged
Properties during the preceding Accounting Quarter.
5.5. MAINTENANCE OF EXISTENCE, ETC.
At all times (a) maintain its principal place of business,
principal office, and office where it keeps its records and other documents and
instruments, relating to the Mortgaged Properties (except for certain records,
documents and instruments kept at the Mortgaged Properties) at its address set
forth in SECTION 12.3 hereof or such other address of which Lender may be given
written notice not less than thirty (30) days prior to the date on which a
change of location is to occur; (b) obtain and maintain in full force and effect
all authorizations, consents, approvals, licenses, exemptions and other actions
by, and all registrations, qualifications, designations, declarations and other
filings, if any, with, any governmental or administrative board, body,
commission, authority, bureau, or agency necessary (i) in connection with the
execution and delivery of this Agreement, the Mortgage Note, and the other Loan
Documents, the consummation of the transactions contemplated herein or therein,
and the performance of or compliance with the terms and conditions thereof, or
(ii) to ensure the legality, validity and enforceability hereof or thereof; and
(c) maintain in effect its existence pursuant to the LLC Agreement and cause
Equity Member to (x) maintain its partnership existence in effect and in good
standing and (y) comply with all requirements of Law material to the conduct of
its business (including continuing to be qualified to engage in business in each
jurisdiction where such qualification is required) and the performance of the
obligations of Borrower or Equity Member under the Loan Documents to which
Borrower or Equity Member is a party.
5.6. COMPLIANCE WITH APPLICABLE LAWS
Comply in all material respects with all requirements of Law
applicable to the conduct of its business (including continuing to be registered
or qualified to do business in each jurisdiction where such registration or
qualification is required), the operation of the Mortgaged Properties, and the
performance of the obligations of Borrower under the Loan Documents to which
Borrower is a party, including Environmental Laws, rules, regulations and orders
of any governmental authority.
5.7. MAINTENANCE OF BOOKS; INSPECTION OF PROPERTIES AND BOOKS
Keep and maintain adequate and proper records and books of
account, in which complete entries are made in accordance with GAAP and in
accordance with all applicable laws and regulations, and permit authorized
representatives of Lender to discuss the business, operations, prospects,
assets, properties and condition (financial or otherwise) of Borrower with its
officers and employees and, at reasonable times and on reasonable notice (except
during the existence of an Event of Default, in which case no notice shall be
required) to examine its books of account and other records and make copies
thereof or extracts therefrom, all at such reasonable times as Lender may
request.
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5.8. NOTICE OF LITIGATION; DISPUTES
Give written notice to Lender within five (5) Business Days after
learning of:
(i) Any action, suit or proceeding instituted against
Borrower or any action, suit or proceeding instituted by Borrower in any federal
or state court or before any commission or other regulatory body (federal, state
or local, domestic or foreign), or any such proceedings threatened against
Borrower (including (i) any proceeding initiated by any party with respect to
the presence or release, or alleged presence or release, of any Hazardous
Materials at, on, under, from or about any Mortgaged Property or the Land on
which any Mortgaged Property is located and (ii) any claim made or threatened by
any third party against Borrower or any such Mortgaged Property or Land relating
to any loss or injury resulting from any Hazardous Materials) an adverse
determination of which could reasonably be expected to lead to or result in a
material adverse effect upon the business, operations, prospects, assets,
properties or condition (financial or otherwise) of Borrower or any Mortgaged
Property, in each case containing the details thereof;
(ii) The filing, recording or assessment of any Federal,
state or local tax lien against it, or any of its assets, an adverse
determination of which could reasonably be expected to lead to or result in a
material adverse effect upon the business, operations, prospects, assets,
properties or condition (financial or otherwise) of Borrower or any Mortgaged
Property;
(iii) Any dispute between Borrower and any Governmental
Authority or other Person which, if adversely determined, could reasonably be
expected to materially interfere with the normal business operations of Borrower
or any Mortgaged Property.
Borrower shall permit Lender to join and participate as a party,
if Lender so elects, in any legal proceedings or actions initiated with respect
to any Mortgaged Property or the Land on which any Mortgaged Property is located
in connection with any Environmental Law or Hazardous Materials.
5.9. MORTGAGED PROPERTY OPERATIONS; MAINTENANCE
At all times, (a) conduct continuously and operate actively its
business at the Mortgaged Properties (subject to temporary cessation of, or
other limitations on, its activities due to strikes, lockouts, casualties,
events of Force Majeure, or other causes beyond the reasonable control of
Borrower, provided prompt written notice thereof is given to Lender); (b) keep
in full force and effect and existence all rights, licenses, permits and
franchises required for the use or operation of the Mortgaged Properties; (c)
maintain the Mortgaged Properties in good and clean order and condition such
that the utility and operation of the Mortgaged Properties will not be affected
in any material and adverse respect, subject to ordinary wear and tear and
damage caused by fire or other casualty; (d) make or cause to be made all
necessary or appropriate repairs, replacements and renewals to the Mortgaged
Properties in the manner and within the periods required by the Management
Agreement and the applicable Mortgage; and (iii) not commit or permit any waste
to the Mortgaged Properties or any part thereof.
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5.10. SEPARATE EXISTENCE
Borrower is familiar with all of the criteria of the Rating
Agencies required to qualify as a special-purpose bankruptcy-remote entity and
Borrower shall preserve and keep in full force and effect its existence as a
Single Purpose Entity. Borrower shall (i) maintain its books and records and
bank accounts separate from any other person or entity (except that, for
accounting and reporting purposes, Borrower may be included in the consolidated
financial statements of Arden REIT in accordance with generally accepted
accounting principles); (ii) maintain an arm's length relationship with its
members, Affiliates and any other party furnishing services to it; (iii)
maintain its books, records, resolutions and agreements as official records;
(iv) conduct its business in its own name and through its own authorized
officers and agents; (v) prepare and maintain its financial statements,
accounting records and other limited liability company or corporation documents
separate from those of any other Person (except for inclusion of Borrower in
consolidated financial statements of Arden REIT); (vi) pay its own liabilities
out of its own funds and other assets; (vii) observe all limited liability
company formalities necessary to maintain its identity as an entity separate and
distinct from Arden REIT, Arden OP and all other Affiliates; (viii) participate
in the fair and reasonable allocation of any and all overhead expenses and other
common expenses for facilities, goods or services provided to multiple entities;
(ix) use its own stationery, invoices and checks (except when acting in a
representative capacity); (x) hold and identify itself as a separate and
distinct entity under its own name and not as a division or part of any other
Person (except for inclusion of Borrower in consolidated financial statements of
Arden REIT); (xi) comply, with the provisions of its certificate of formation
and LLC Agreement, and the laws of its jurisdiction of organization relating to
limited liability companies; (xii) at all times continue to be, adequately
capitalized in light of the nature of its business; and (xiii) hold its assets
in its own name. Borrower shall comply with all of the assumptions set forth in
the Substantive Non-Consolidation Opinion delivered by Borrower's counsel at
Closing.
5.11. CASH MANAGEMENT
Borrower will comply with, and will direct the Manager to comply
with, the provisions of SCHEDULE 5.11 hereto, which shall govern the collection
and application of Operating Income, Awards, and Insurance Proceeds and the
administration of the TI Reserve Account, the Environmental Reserve Account, the
Cash Collateral Account, and the Lockbox Account. Lender agrees that it shall
administer the Cash Collateral Account, the TI Reserve Account, the
Environmental Reserve Account and the Lockbox Account in accordance with the
provisions of SCHEDULE 5.11 hereto.
5.12. INDEPENDENT MANAGER
Borrower shall have an Independent Manager acceptable to Lender
at all times, or if the Independent Manager has resigned or otherwise is no
longer the Special Member of Borrower, Borrower shall not take any action which
may not be taken pursuant to the organizational documents of Borrower without
the consent of the Independent Manager, until such new Independent Manager shall
have been appointed as Independent Manager of Borrower and admitted to Borrower
as the Special Member.
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5.13. TI RESERVE REQUIREMENT
(a) If, at any time, the amount on deposit in the TI Reserve
Account is less than the TI Reserve Requirement, the Excess Cash Flow for each
Accounting Period shall be deposited into the TI Reserve Account until the
amount on deposit in the TI Reserve Account equals the TI Reserve Requirement
(provided, that following the occurrence of a Lockbox Event, any deficiency in
the TI Reserve Account shall be paid pursuant to Section 4.4 of the Cash
Management Procedures).
(b) Borrower shall not make any distributions to its Members
at any time that the amount on deposit in the TI Reserve Account is less than
the TI Reserve Requirement.
5.14. REPAIR EXPENDITURES
Not later than June 8 1999, Borrower shall have expended for
repairs at each Mortgaged Property at least the amount set forth next to the
name of each Mortgaged Property on SCHEDULE 5.14 hereto; provided, in the event
for any of the Mortgaged Properties Borrower shall have failed to expend at
least the amount for such Mortgaged Property set forth on SCHEDULE 5.14 on or
before June 8, 1999, Borrower, if then requested by Lender, shall deposit any
deficiency with Lender. Lender shall establish an account into which any such
deficiencies shall be deposited; such account shall be an Eligible Account and
shall otherwise be similar to Accounts established pursuant to the Cash
Management Procedures; such account shall be in the name of Lender, under the
sole dominion and control of Lender and shall be pledged to Lender as additional
security for the obligations of Borrower under the Loan Documents. The amount
deposited by Borrower in such account for a particular Mortgaged Property shall
be released to Borrower upon presentation by Borrower to Lender of evidence that
Borrower has expended at least the amount of the deficiency for repairs at such
Mortgaged Property (which amount shall be released only so long as no Event of
Default shall have occurred and be continuing).
6. NEGATIVE COVENANTS
Borrower agrees that, so long as this Agreement shall remain in
effect, or so long as there exists any principal, interest or Yield Maintenance
Payment due or outstanding under the Mortgage Note, or any other unpaid charges
or amounts under this Agreement or under any other Loan Document, then:
6.1. LIMITATION ON INDEBTEDNESS
Borrower shall not incur, create or assume any Indebtedness of
any kind, provided that Borrower may incur, create or assume any Permitted Debt.
6.2. LIMITATION ON LIENS
Borrower shall not create, assume or suffer to exist, any Lien of
any kind, upon any of its properties, assets or Collateral, whether now owned or
hereafter acquired, except Permitted Liens.
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In the event Borrower contests the payment of a tax, assessment
or other governmental charge or contests a landlords', mechanics',
materialmen's, warehousemen's, carriers', or other like Lien, Borrower, prior to
the commencement of such contest and prior to the date such payment would
otherwise be due and payable, shall deposit with Lender (or, following the
assignment contemplated by SECTION 9.1 hereof, deposit with the Servicer) an
amount equal to one hundred twenty-five percent (125%) of the amount of the
contested payment, to be held in a segregated subaccount of the Cash Collateral
Account; provided, however, Borrower shall not be required to make such a
deposit so long as the aggregate of all such Liens that Borrower is contesting
without deposit is less than Fifty Thousand Dollars ($50,000). Upon the
conclusion of such contest and upon written request by Borrower accompanied by
supporting documentation, Lender (or the Servicer) shall disburse from the
deposit made by Borrower with Lender (or the Servicer) any amounts required to
be paid by Borrower and shall remit the excess to Borrower. Notwithstanding the
foregoing, Lender (or the Servicer) may pay over to the appropriate Person any
or all of the funds on deposit with Lender (or the Servicer) when, in Lender's
(or the Servicer's) reasonable judgment, the entitlement of such Person to such
funds is firmly established or if necessary to avoid the foreclosure of a Lien
that secures the contested payment.
6.3. MERGER OR CONSOLIDATION; PERMITTED REORGANIZATION
Borrower shall not be a party to any merger or consolidation.
6.4. SINGLE PURPOSE
Borrower shall not engage in any business or operate for any
purpose other than as set forth in the LLC Agreement as in effect on the date
hereof and shall not have or create any subsidiaries. Borrower will not: (i)
seek or consent to any dissolution, winding up, liquidation, consolidation,
merger or sale of all or substantially all of its assets; (ii) fail to correct
any known misunderstanding regarding its separate identity; (iii) commingle its
funds or other assets with those of any other Person; (iv) assume or guarantee
or become obligated for the debts of any other Person or hold out its credit as
being available to satisfy the obligations of any other Person (other than as
permitted by the Loan Documents); (v) acquire obligations or securities of its
members; (vi) pledge any of its assets for the benefit of any other Person other
than Lender (except as permitted by the Loan Documents); (vii) make any loans to
any other Person; (viii) identify its members or any of its Affiliates as a
division or part of it (except for inclusion of the Borrower in consolidated
financial statements of Arden REIT); (ix) engage (either as transferor or
transferee) in any material transaction with any Affiliate other than for fair
value and on terms similar to those obtainable in arms-length transactions with
unaffiliated parties, or engage in any transaction with any Affiliate involving
any intent to hinder, delay or defraud any entity; (x) engage in any business
activity or operate for any purpose other than as stated in Section X of its LLC
Agreement as in effect on the date hereof or (xi) without the consent of all its
members and managers including the consent of an Independent Manager, file a
bankruptcy or insolvency petition or otherwise institute bankruptcy proceedings.
Borrower will not acquire any assets not related to the business and operation
of the Mortgaged Properties.
6.5. AMENDMENTS TO AGREEMENTS
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6.5.1.
Borrower shall not, without the consent of Lender, (i) amend,
modify or alter the terms of the LLC Agreement, (ii) admit any additional
members, (iii) cancel, release, terminate or surrender the Management Agreement,
or permit any cancellation, release, termination or surrender of the Management
Agreement or (iv) amend, modify or alter the terms of the Management Agreement
in any material respect; provided that Borrower shall be entitled to cancel,
release, terminate, surrender, amend, modify or alter the Management Agreement
in connection with the replacement of the Manager if, before the date on which
the Manager ceases to be the Manager of any Mortgaged Property, (a) Borrower
causes such Mortgaged Property to come under management by a third party
property manager in accordance with the provisions of clauses (i), (ii)(y),
(iii), (iv) and (v) of SECTION 5.3.2 above, (b) each of the Rating Agencies
delivers to the Lender a Rating Comfort Letter with respect thereto.
6.5.2.
[INTENTIONALLY DELETED]
6.6. DISTRIBUTIONS
Borrower shall make no distributions of cash or other assets to
the Members if an Event of Default has occurred and is continuing.
6.7. PERMITTED TRANSFERS
Borrower shall not transfer, pledge, hypothecate or assign any of
the Mortgaged Properties except (a) to Lender or (b) in connection with the
simultaneous Release of such Mortgaged Property pursuant to SECTION 2.7, SECTION
2.8, SECTION 2.9, SECTION 2.10 or SECTION 11 hereof.
7. EVENTS OF DEFAULT
7.1. DEFAULT; AN EVENT OF DEFAULT
The occurrence of any of the following events beyond any
applicable notice and cure period set forth in this SECTION 7.1 shall be an
"EVENT OF DEFAULT" hereunder (and the occurrence of any of the following which,
with the giving of notice or the passage of time, or both, would become an Event
of Default shall, prior to the giving of such notice or the passage of such
time, be a "DEFAULT" hereunder).
7.1.1.
Borrower shall fail to pay, when due, any principal or interest
on the Mortgage Note or any Yield Maintenance Payment or Defeasance Deposit that
may be due.
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7.1.2.
Borrower shall fail to pay, when due, any other amount due under
or pursuant to the Mortgage Note, this Agreement, or any of the other Loan
Documents (other than principal, interest, and any Yield Maintenance Payments or
Defeasance Deposits).
7.1.3.
Borrower shall fail to perform or observe in any material and
adverse respect any of the covenants and agreements of Borrower set forth in
this Agreement, or any representation and warranty made by Borrower in this
Agreement or in any of the other Loan Documents shall fail to have been true in
any material and adverse respect when made and, in either case, such failure
shall continue uncured for a period of more than (i) ten (10) days with respect
to any failure or breach of covenant relating to the payment of taxes or the
maintenance of insurance, or (ii) with respect to all other such failures or
breaches, thirty (30) days following Borrower's receipt of written notice
thereof from Lender; provided that with respect to clause (ii) above, it shall
not be an Event of Default hereunder if (a) such failure is curable but is not
reasonably capable of being cured within such thirty (30)-day period and
Borrower shall have promptly commenced to cure such failure (including by
consummation of a sale of the affected Mortgaged Properties and the payment of
the applicable Release Price, Defeasance Deposit and Yield Maintenance Payment,
if any) and thereafter shall diligently pursue such cure to completion, but in
no event later than ninety (90) days after the date on which Borrower received
such written notice from Lender.
7.1.4.
The Manager shall cease to be Manager of all of the Mortgaged
Properties or the Management Agreement shall terminate with respect to one or
more Mortgaged Properties, unless, before the date on which the Manager ceases
to be the Manager of any such Mortgaged Property, or the Management Agreement
terminates with respect to any such Mortgaged Property, (a) Borrower causes such
Mortgaged Property to come under management by a third party property manager in
accordance with clauses (i), (ii)(y), (iii), (iv) and (v) of SECTION 5.3.2,
hereof, and (b) if the Securitization has occurred, each of the Rating Agencies
delivers to Lender a Rating Comfort Letter with respect thereto.
7.1.5.
Borrower shall default in its payment of any Indebtedness with an
aggregate principal amount in excess of $2,000,000.
7.1.6.
If at any one time there shall be any final nonappealable
judgment or judgments rendered by any court or Governmental Authority not
covered by insurance aggregating in excess of $5,000,000 against Borrower, which
shall not have been satisfied, fully stayed or bonded within sixty (60) days
after the entry thereof.
7.1.7.
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Either of the following shall occur with respect to Borrower:
(a) a decree, judgment, or order by a court of
competent jurisdiction shall have been entered adjudicating
Borrower as bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization of Borrower under any
Bankruptcy Law, and such decree or order shall have continued
undischarged and unstayed for a period of sixty (60) consecutive
days; or a decree, judgment or order of a court of competent
jurisdiction appointing a receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency for Borrower, or any
substantial part of the property of Borrower, or for the winding
up or liquidation of the affairs of Borrower, and such decree,
judgment, or order shall have remained in force undischarged and
unstayed for a period of sixty (60) days; or
(b) Borrower shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing
of a bankruptcy proceeding against it, or shall file a petition
or answer or consent seeking reorganization under any Bankruptcy
Law, or shall consent to the filing of any such petition, or
shall consent to the appointment of a custodian, receiver,
liquidator, trustee, or assignee in bankruptcy or insolvency of
it or any substantial part of its assets or property, or shall
make a general assignment for the benefit of creditors, or shall
admit in writing its inability to pay its debts generally as they
become due, or shall, within the meaning of any Bankruptcy Law,
become insolvent, fail generally to pay its debts as they become
due, or shall, within the meaning of any Bankruptcy Law, become
insolvent, fail generally to pay its debts as they become due, or
take any corporate action in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing.
7.1.8.
Unless Borrower causes all of the Mortgaged Properties to come
under management by a third party manager in accordance with clauses (i),
(ii)(y), (iii), (iv) and (v) of SECTION 5.3.2 hereof, either of the following
shall occur with respect to the Manager:
(a) a decree, judgment, or order by a court of
competent jurisdiction shall have been entered adjudicating the
Manager as bankrupt or insolvent, or approving as properly filed
a petition seeking reorganization of the Manager under any
Bankruptcy Law, and such decree or order shall have continued
undischarged and unstayed for a period of sixty (60) consecutive
days; or a decree, judgment or order of a court of competent
jurisdiction appointing a receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency for the Manager, or any
substantial part of the property of the Manager, or for the
winding up or liquidation of the affairs of the Manager shall
have been entered, and such decree, judgment, or order shall have
remained in force undischarged and unstayed for a period of sixty
(60) days; or
(b) the Manager shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing
of a bankruptcy proceeding
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against it, or shall file a petition or answer or consent seeking
reorganization under any Bankruptcy Law, or shall consent to the
filing of any such petition, or shall consent to the appointment
of a custodian, receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of it or any substantial part of its
assets or property, or shall make a general assignment for the
benefit of creditors, or shall admit in writing its inability to
pay its debts generally as they become due, or shall, within the
meaning of any Bankruptcy Law, become insolvent, fail generally
to pay its debts as they become due, or take any corporate action
in furtherance of or to facilitate, conditionally or otherwise,
any of the foregoing.
7.1.9.
An Event of Default shall occur under any other Loan Document.
7.1.10.
If a Securitization has not yet occurred, Borrower shall default
in a material respect under the Cooperation Agreement after the giving of any
required notice and/or the expiration of any required cure period.
7.1.11.
The Special Member shall cease to be a member of Borrower or
Borrower shall fail to have at least one member who is an Independent Manager,
other than as a result of the resignation or removal of an Independent Manager,
so long as Borrower is then diligently searching for a new Independent Manager.
7.1.12.
Borrower acquires any assets not related to the business and
operation of the Mortgaged Properties (other than a direct or indirect interest
in a residual class certificate issued pursuant to the Securitization).
7.1.13. [INTENTIONALLY DELETED]
7.1.14.
Following the occurrence of a Lockbox Event, the willful failure
of Borrower to instruct tenants of the Mortgaged Properties to make payments of
Rents into the Lockbox Account or the failure of Borrower or Manager to deposit
payments of Rents received by Borrower or Manager into the Lockbox Account
promptly upon receipt thereof.
7.1.15.
In the event Borrower shall fail to perform or observe any of the
covenants set forth in SECTION 5.10 or SECTION 6.4 hereof.
7.2. REMEDIES
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If an Event of Default shall have occurred and be continuing,
Lender shall have the right, in its sole discretion, by written notice to
Borrower (except upon the occurrence of an Event of Default under SECTION 7.1.7
affecting Borrower, in which case all principal and accrued interest thereon
will be immediately due and payable on the Mortgage Note without any declaration
or other act on the part of Lender) to take one or more of the following
actions:
7.2.1.
To declare the principal of and all amounts accrued but unpaid
under the Mortgage Note, this Agreement and the other Loan Documents, together
with a Yield Maintenance Payment calculated in accordance with SECTION 2.11
hereof, to be immediately due and payable, and such amounts shall thereupon
become immediately due and payable, without presentment, demand, protest or
notice of any kind, other than any notice specifically required by this SECTION
7.2, all of which are hereby expressly waived by Borrower.
7.2.2.
Pursue such rights and remedies against Borrower, or otherwise,
as are provided under and pursuant to this Agreement, the Mortgage or any of the
other Loan Documents and as may be available to the Lender at law or in equity.
7.2.3.
If the Event of Default involves Borrower's failure to pay any
tax, assessment, encumbrance or other imposition binding on Borrower or any of
the Collateral or to perform its obligation to furnish insurance hereunder, or
to perform or observe any other covenant, condition or term in any Loan Document
or in the Management Agreement, Lender may, at its option, without waiving or
affecting any of its other rights or remedies hereunder, pay, perform or observe
the same, and, in connection therewith, Lender shall be entitled to rely on any
representations and statements of the Manager under the Management Agreement in
regard to alleged breaches or violations thereof, and all payments made or costs
or expenses incurred by Lender in connection therewith shall be repaid by
Borrower to Lender within fifteen (15) days after demand therefor, together with
interest at the Default Interest Rate, and shall be added to and become a part
of the Indebtedness secured by the Mortgage and other Security Documents. Lender
is hereby empowered to enter and to authorize others to enter upon any Land and
all Improvements located on any Land for the purpose of performing or observing
any such defaulted covenant, condition or term, without thereby becoming liable
to Borrower or any Person in possession holding under Borrower.
7.2.4.
Appoint as a matter of right, without notice, to the fullest
extent permitted under applicable law, a receiver for Borrower or for all or any
part of the Collateral, whether such receivership be incidental to a proposed
sale of the Collateral or otherwise. All disbursements made by the receiver and
the expenses of receivership, shall be added to and be a part of the principal
amount of the obligations secured by the Security Documents, and, whether or not
said principal sum, including such disbursements and expenses, exceeds the
indebtedness
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originally intended to be secured thereby, the entire amount of said sum,
including such disbursements and expenses, shall bear interest at the Default
Interest Rate, be secured by the Security Documents and shall be due and payable
within fifteen (15) days after demand therefor.
7.3. REMEDIES CUMULATIVE
Each of the rights, powers, and remedies provided herein are
intended and are hereby deemed to be cumulative, concurrent and in addition to,
and not in limitation of, those rights, powers, and remedies provided elsewhere
hereunder or in any other Loan Document or now or hereafter existing at law or
in equity or by statute or otherwise. No waiver of any Event of Default in one
instance shall constitute a waiver of any other or any succeeding Event of
Default, except to the extent provided in such waiver.
7.4. DEFAULT INTEREST
In addition to the provisions of SECTION 2 hereof, if Borrower
shall fail to make payment when and as due of any amounts due hereunder (whether
at the stated date for payment, or earlier upon an acceleration hereunder),
Borrower shall pay, to the fullest extent permitted by applicable law, interest
to Lender on such past due amounts beginning on the date such payment becomes
past due at a per annum rate of interest (the "DEFAULT INTEREST RATE") equal to
the greater of (a) the Interest Rate in effect from time to time plus three
percentage points (3%) and (b) the Prime Rate plus two percentage points (2%).
Borrower acknowledges that its obligation to pay Default Interest may be
separated from the other obligations of Borrower hereunder, and may be held or
transferred separately from the other obligations of the Borrower hereunder.
7.5. DEFAULT INDEMNITY
Borrower hereby agrees to, and shall, indemnify and hold harmless
Lender against the reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and expenses) which it may sustain or incur as a
consequence of any Default or Event of Default hereunder and in the enforcement
of Lender's rights and remedies in connection therewith. Lender shall provide to
Borrower a satisfactory statement, signed by an officer of Lender and supported,
where applicable, by documentary evidence, explaining the amount of all such
costs or expenses. Any amounts that Borrower must pay to Lender under this
SECTION 7.5 shall bear interest at the Default Interest Rate and shall be due
fifteen (15) days after demand therefor accompanied by documentation sufficient
to establish the amount of Borrower's liability, and shall be added to and
become a part of the Indebtedness secured by the Mortgage and other Security
Documents.
8. INSURANCE
8.1. MAINTENANCE OF INSURANCE
Borrower shall maintain at all times with Qualified Insurance
Companies all
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policies of insurance required under the Mortgage, which policies shall name
Lender, as an additional insured or loss payee, as applicable, as their
interests may appear. Each policy of insurance required hereunder shall require
the insurer to give not less than thirty (30) days prior written notice to
Lender in the event of cancellation of such policy for any reason whatsoever
(ten (10) days in the case of non-payment of premium) and, with respect to
property insurance, shall provide that the interest of the additional insureds
or loss payees thereunder shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of any of the insured property or by the
occupation of the premises wherein such property is located for purposes more
hazardous than are permitted by such policy. If Borrower fails to provide and
pay for such insurance, Lender may, at Borrower's expense, procure the same, but
shall not be required to do so, and any amounts reasonably expended by Lender to
do so, together with interest at the Default Interest Rate shall become part of
the debt secured by the Security Documents.
8.2. PAYMENT AND APPLICATION OF INSURANCE PROCEEDS
Insurance proceeds payable with respect to damage to or
destruction of any Mortgaged Property or the Improvements related thereto,
including damage by earthquake, if in effect, shall be applied in accordance
with the terms of the applicable Mortgage. All other insurance proceeds shall be
payable in accordance with the provisions of the applicable policy.
8.3. EARTHQUAKE INSURANCE
Borrower shall maintain at all times or cause to be maintained
for its benefit with a Qualified Insurance Company, a blanket policy of
insurance insuring all of the Mortgaged Properties against damage by earthquake
in an aggregate insured amount not less than $24,700,000 and having a deductible
of not more than five percent (5%) per unit of earthquake insurance subject to a
$100,000 minimum (a unit being defined as each individual building on each
Mortgaged Property). Such earthquake insurance shall otherwise comply with the
requirements of SECTION 1.7.3 of the Mortgage.
9. SECURITIZATION
9.1. SECURITIZATION
Borrower shall use commercially reasonable best efforts to
cooperate with Lender in its activities in connection with the sale of the Loan
as a whole loan or any securitization of the Loan (the "SECURITIZATION"),
including obtaining ratings by the Rating Agencies in accordance with the terms
hereof and in accordance with the Cooperation Agreement. The Securitization will
involve the issuance of rated single- or multi-class securities secured by or
evidencing ownership interests in the Loan Documents (the "CERTIFICATES").
Borrower acknowledges and agrees that, in connection with the Securitization,
(a) this Agreement, the Mortgage Note, the Security Documents and the other Loan
Documents may be assigned, pursuant to the assignment, to a trustee (the
"TRUSTEE"), as trustee under a pooling and servicing agreement (the "POOLING AND
SERVICING AGREEMENT") in form substantially similar to those commonly used in
rated commercial mortgage-backed securities offerings and (b) pursuant to the
Pooling and Servicing Agreement, a professional loan servicer of recognized
standing (the "SERVICER") would be appointed to service the Loan, this Agreement
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and the Loan Documents as provided therein. The addresses of the Trustee and the
Servicer will be provided to Borrower in writing before the Securitization is
consummated. Upon such assignment, the Trustee shall for all purposes be the
sole Lender hereunder and the sole mortgagee or beneficiary under the Mortgage
(and all references herein to the "Lender" shall be deemed to refer to the
Trustee) and shall, together with the Servicer, among other things, (i) have the
sole and exclusive benefit of and the right and power to exercise, or to direct
the exercise of, all the rights and remedies of Lender hereunder and under the
Security Documents, including the right to inspect the Collateral, to receive
notices and financial information, to grant or withhold consents or approvals,
to benefit from indemnities, to receive, hold and apply proceeds or any other
amount or property provided by Borrower hereunder, and, upon the occurrence and
during the continuation of an Event of Default, to take any action required or
permitted of Lender with respect thereto, all in the Trustee's own name, and to
exercise all other rights and remedies of Lender hereunder and under the
Security Documents, and (ii) be bound by all the terms hereof which apply to
Lender. Borrower hereby acknowledges the foregoing and agrees to be bound to the
Trustee, upon such assignment, recognizing the Trustee as Lender hereunder as if
the Trustee were named in this Agreement as Lender, recognizing that the
Servicer shall be entitled to act on behalf of the Trustee and the Holders under
and as provided in the Pooling and Servicing Agreement and shall be entitled to
and shall receive all notices, financial and other information, agreements and
other documents to be delivered to Lender or the Trustee hereunder or under any
of the other Loan Documents and accepting and agreeing to all of the terms
reasonably set forth in the Pooling and Servicing Agreement and the exhibits
thereto, all of which shall be secured under the Security Documents. Upon such
assignment, Borrower's obligations to Lender specified in this Agreement shall
be satisfied by Borrower's tendering full and timely payment or performance
thereof to the Trustee or, if directed by the Trustee, to the Servicer. With
respect to the delivery of documents and other written material, the Trustee and
the Servicer shall have only the obligations expressly required of Lender herein
or in the other Loan Documents or of the Trustee or the Servicer in the Pooling
and Servicing Agreement. All rights and remedies of the Trustee as Lender
hereunder, including all indemnities running to Lender, shall also operate for
the benefit of the Servicer and the Holders, as provided in the Pooling and
Servicing Agreement, and shall be exercised by the Trustee and the Servicer in
accordance with and subject to the terms and conditions set forth in the Pooling
and Servicing Agreement. Borrower acknowledges and agrees that, until Borrower
has received notice from the Trustee to the contrary, and subject to the terms
and conditions set forth in the Pooling and Servicing Agreement to the contrary,
all deliveries and notifications to be made by Borrower to the Trustee, as
Lender, pursuant to this Agreement or any other Loan Document shall be made to
the Servicer only and not to the Trustee.
Borrower will cooperate with Lender to retain the Rating Agencies
to provide rating surveillance services on any Certificates issued in a
Securitization. Such rating surveillance shall be at the expense of Borrower.
Prior to the Securitization (or in the event the Securitization does not occur),
Lender may appoint a professional loan servicer of recognized standing to
service the Loan, this Agreement and the Loan Documents on terms and conditions
acceptable to Lender. The costs, fees and expenses of any such servicer shall be
paid by Lender.
9.2. NO ASSIGNMENT BY BORROWER
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The rights and obligations of Borrower under this Agreement are
personal to Borrower and, accordingly, Borrower shall not assign this Agreement
or any other Loan Document or any other right, interest, or obligation of
Borrower hereunder or thereunder, either in whole or in part, to any Person
whatsoever.
9.3. METHOD OF PAYMENT
Following the assignment contemplated by SECTION 9.1 hereof,
Borrower shall make or cause to be made all payments under the Mortgage Note,
and any other payments required to be made by Borrower to or on behalf of Lender
hereunder or pursuant to any other Loan Document, to the Servicer by application
of the provisions of SCHEDULE 5.11 hereto or by wire transfer through the
Federal Reserve Bank of New York of immediately available funds in lawful tender
of the United States of America, in accordance with instructions provided by the
Servicer, which payments shall be held and applied by the Servicer in accordance
with the Pooling and Servicing Agreement.
10. ASSIGNMENT AND PARTICIPATION
Notwithstanding anything to the contrary set forth herein or in
any other Loan Document, Lender and any assignee of Lender shall have the right
at any time and from time to time to (a) assign (and thereafter, at any time and
from time to time, repurchase) all or any portion of its rights and obligations
with respect the Loan, including, without limitation, all or any portion of the
outstanding principal balance of the Loan and thereafter be released from its
rights and obligations as Lender in respect of such portion of the Loan (except
to the extent such portion of the Loan is repurchased by Lender or such
assignee), and (b) sell participations in the Loan. If requested by Lender,
Borrower shall execute and deliver a written acknowledgment acknowledging the
assignment of all or a portion of the Loan to an assignee.
11. SUBSTITUTION OF PROPERTIES
Subject to the terms and conditions set forth in this Section, at
any time following the commencement of the Defeasance Period, Borrower may
obtain a release of the Lien of the Mortgage (and the related Loan Documents) to
the extent it encumbers one or more Mortgaged Properties (a "SUBSTITUTED
PROPERTY") by substituting therefor one or more office properties acquired by
Borrower (individually, a "SUBSTITUTE PROPERTY" and collectively, the
"SUBSTITUTE PROPERTIES"), provided that (a) the Substitution Conditions are
satisfied with respect to the Substitute Properties, (b) no such substitution
may occur after the Anticipated Repayment Date, (c) such substitution shall not
be allowed more than two (2) times during the term of the Loan and (d) not more
than five (5) Mortgaged Properties may be released from the Lien of the Mortgage
(and the related Loan Documents) during the term of the Loan pursuant to this
SECTION 11. Any such substitution shall be subject, in each case, to the
satisfaction of the following conditions precedent (collectively, the
"SUBSTITUTION CONDITIONS"):
(i) Lender shall have received a copy of a deed conveying all
of Borrower's right, title and interest in and to the
Substituted Property or Substituted Properties then being
Released to an entity other than Borrower and a
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letter from Borrower countersigned by the Title Company
acknowledging receipt of such deed or assignment and
assumption, as applicable, and agreeing to record such
deed or assignment and assumption, as applicable, in the
real estate records for the county in which the
Substituted Property is located or in the counties in
which the Substituted Properties are located;
(ii) Lender shall have received an appraisal of the Substitute
Property or Substitute Properties, as applicable, dated no
more than sixty (60) days prior to the substitution by an
appraiser acceptable to the Rating Agencies, indicating an
appraised value of the Substitute Property or Substitute
Properties, as applicable, that is equal to or greater
than the Release Price of the Substituted Property or
Substituted Properties, then being Released, determined by
Lender as of the Closing Date;
(iii) after giving effect to the substitution, the Debt Service
Coverage Ratio for the Mortgaged Properties (including the
Substitute Properties but excluding the Substituted
Properties) shall be at least equal to the greater of (i)
2.22:1 (on or before April 16, 2003) or 1.81:1 (on or
after April 17, 2003), and (ii) the Debt Service Coverage
Ratio for the Loan for all of the Mortgaged Properties
immediately preceding the substitution;
(iv) the Net Operating Income for any Substitute Property does
not show a downward trend over the three (3) years
immediately prior to the date of substitution or, with
respect to a Substitute Property for which information
regarding the Net Operating Income of such Substitute
Property for the three (3) years immediately prior to the
date of substitution cannot be obtained by Borrower after
Borrower's exercise of diligent efforts, the Net Operating
Income shall not show a downward trend for such period of
time immediately prior to the date of substitution as may
be determined from the information regarding such Net
Operating Income available (which period of time, in any
event, shall not be less than one (1) year);
The Net Operating Income for a Substitute Property shall
be deemed to show a downward trend, if the Net Operating
Income for the Substitute Property for each Determination
Period (as defined below) was less than the Net Operating
Income for the immediately preceding Determination Period,
commencing with the Determination Period that commenced on
the date that is three (3) years prior to the first day of
the calendar month in which the substitution is to occur.
A "Determination Period" is a twelve (12) month period
that commences on a prior anniversary of the first day of
the calendar month in which the substitution is to occur
and ends on the last day of the calendar month (or prior
anniversary thereof) immediately preceding the month in
which the substitution is to occur;
(v) the Net Operating Income and Debt Service Coverage Ratio
(for the twelve (12) month period immediately preceding
the substitution) for the Substitute Property or
Substituted Properties, as applicable, is greater than one
hundred twenty-five percent (125%) of the Net Operating
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Income and Debt Service Coverage Ratio (for the twelve
(12) month period immediately preceding the substitution)
for the Substituted Property or Substituted Properties
then being substituted. For purposes of this clause (v),
the Debt Service Coverage Ratio with respect to a
Substitute Property (or Substitute Properties, as
applicable) or a Substituted Property (or Substituted
Properties, as applicable) shall be calculated using the
Net Operating Income with respect to such Substitute
Property (or Substitute Properties, as applicable) or
Substituted Property, (or Substituted Properties, as
applicable) and the principal, if any, and interest due
and payable on the Mortgage Note allocable to the Release
Price for the Substitute Property or Substituted Property,
as applicable (or the aggregate Release Prices for the
Substitute Properties or Substituted Properties, as
applicable);
(vi) Lender shall have received a Rating Comfort Letter from
each Rating Agency with respect to the substitution;
(vii) no Default or Event of Default shall have occurred and be
continuing and Borrower shall be in compliance with all
terms and conditions set forth in this Agreement and in
each Loan Document on Borrower's part to be observed or
performed. Lender shall have received a certificate from
Borrower confirming the foregoing, stating that the
representations and warranties of Borrower contained in
this Agreement and the other Loan Documents are true and
correct in all material respects on and as if made on the
date of the substitution with respect to Borrower, the
Mortgaged Properties and each Substitute Property and
containing any other representations and warranties with
respect to Borrower, the Mortgaged Properties, each
Substitute Property and the Loan as the Rating Agencies
may require, such certificate to be in form and substance
satisfactory to the Rating Agencies;
(viii) Borrower shall have executed, acknowledged and delivered
to Lender (A) a Mortgage, an Assignment of Leases and
Rents and one or more UCC Financing Statements with
respect to each Substitute Property, together with a
letter from Borrower countersigned by the Title Company
acknowledging receipt of such Assignment of Leases and
Rents and UCC-1 Financing Statements and agreeing to
record or file, as applicable, such Mortgage, Assignment
of Leases and Rents and, if applicable, one of the UCC-1
Financing Statements in the real estate records for the
county in which such Substitute Property is located and
agreeing to file one of the UCC-1 Financing Statements in
the office of the Secretary of State of the State in which
such Substitute Property is located, so as to effectively
create upon such recording and filing valid and
enforceable Liens upon such Substitute Property, of the
requisite priority, in favor of Lender (or such other
trustee as may be desired under local law), subject only
to Permitted Encumbrances and Permitted Liens and (B) a
Security Agreement and an Environmental Indemnity
Agreement with respect to such Substitute Property. The
Mortgage,
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Assignment of Leases and Rents, UCC-1 Financing
Statements, Security Agreement and Environmental Indemnity
Agreement shall be the same in form and substance as the
counterparts of such documents executed and delivered on
the Closing Date subject to modifications reflecting such
Substitute Property as a Mortgaged Property that is the
subject of such documents and such modifications
reflecting the laws of the state in which such Substitute
Property is located as shall be recommended by the counsel
admitted to practice in such state and delivering the
opinion as to the enforceability of such documents
required pursuant to clause (xv) below. Borrower shall
also have executed, acknowledged and delivered any
amendments to the Loan Documents required in connection
with a substitution and, where applicable, a letter from
Borrower countersigned by the Title Company agreeing to
record such amendments in the real estate records for each
county where the Mortgage was recorded. The Mortgage
encumbering the Substitute Property shall secure all
amounts evidenced by the Mortgage Note. The amount of the
Loan allocated to the Substitute Property or Substitute
Properties (such amount being hereinafter referred to as
the "Substitute Release Amount") shall equal the Allocated
Loan Amount of the Substitute Property or Substituted
Properties then being Released (and, if applicable,
equitably allocated among the Substitute Properties);
(ix) Lender shall have received (A) any "tie-in" or similar
endorsement to each Title Insurance Policy insuring the
Lien of the existing Mortgage as of the date of the
substitution available with respect to the Title Insurance
Policy insuring the Lien of the Mortgage with respect to
each Substitute Property and (B) a Title Insurance Policy
(or a marked, signed and redated commitment to issue such
Title Insurance Policy) insuring the Lien of the Mortgage
encumbering each Substitute Property, issued by the Title
Company insuring the Lien of the existing Mortgage and
dated as of the date of the substitution, with reinsurance
and direct access agreements that replace such agreements
issued in connection with the Title Insurance Policy
insuring the Lien of the Mortgage encumbering the
Substituted Property. The Title Insurance Policy issued
with respect to each Substitute Property shall (1) provide
coverage in the amount of the Loan Amount of the "tie-in"
or similar endorsement described above, (2) insure Lender
that the relevant Mortgage creates a valid first lien on
the Substitute Property encumbered thereby, free and clear
of all exceptions from coverage other than Permitted
Encumbrances (as modified by the terms of any
endorsements), (3) contain such endorsements and
affirmative coverages as are contained in the Title
Insurance Policies insuring the Liens of the existing
Mortgage, and (4) name Lender as the insured. Lender also
shall have received copies of paid receipts showing that
all premiums in respect of such endorsements and Title
Insurance Policies have been paid;
(x) Lender shall have received a current title survey for each
Substitute Property, certified to the Title Company and
Lender and their successors
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and assigns, in the same form and having the same content
as the certification of the Survey of the Substituted
Property prepared by a professional land surveyor licensed
in the state in which the Substitute Property is located
and acceptable to the Rating Agencies in accordance with
the 1992 Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys. Such survey shall reflect
the same legal description contained in the Title
Insurance Policy relating to such Substitute Property and
shall include, among other things, a metes and bounds
description of the real property comprising part of such
Substitute Property. The surveyor's seal shall be affixed
to each survey and each survey shall certify that the
surveyed property is not located in a "one hundred year
flood hazard area;"
(xi) Lender shall have received valid certificates of insurance
indicating that the requirements for the policies of
insurance required for an Mortgaged Property hereunder
have been satisfied with respect to the Substitute
Property and evidence of the payment of all premiums
payable for the existing policy period;
(xii) Lender shall have received a Phase I environmental report
and, if recommended under the Phase I environmental
report, a Phase II environmental report (in each case
prepared by an environmental consultant acceptable to
Lender), which conclude that the Substitute Property does
not contain any Hazardous Materials (as defined in the
Mortgage) and is not subject to any risk of contamination
from any off-site Hazardous Materials;
(xiii) Borrower shall deliver or cause to be delivered to Lender
(A) updates certified by Borrower of all organizational
documentation related to Borrower and/or the formation,
structure, existence, good standing and/or qualification
to do business delivered to Lender in connection with the
closing of the Loan; (B) good standing certificates,
certificates of qualification to do business in the
jurisdiction in which the Substitute Property is located
(if required in such jurisdiction) and (C) resolutions of
Borrower authorizing the substitution and any actions
taken in connection with such substitution;
(xiv) Lender shall have received the following opinions of
Borrower's counsel: (A) an opinion or opinions of counsel
admitted to practice under the laws of the state in which
the Substitute Property is located stating that the Loan
Documents delivered with respect to the Substitute
Property pursuant to clause (viii) above are valid and
enforceable in accordance with their terms, subject to the
laws applicable to creditors' rights and equitable
principles, and that Borrower is qualified to do business
and in good standing under the laws of the jurisdiction
where the Substitute Property is located; (B) an opinion
of counsel acceptable to the Rating Agencies stating that
the Loan Documents delivered with respect to the
Substitute Property pursuant to clause (viii) above were
duly authorized, executed and delivered by Borrower and
that the execution and delivery
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of such Loan Documents and the performance by Borrower of
its obligations thereunder will not cause a breach of, or
a default under, any agreement, document or instrument to
which Borrower is a party or to which it or its
properties are bound; (C) an opinion of counsel
acceptable to the Rating Agencies stating that subjecting
the Substitute Property to the Lien of the related
Mortgage and the execution and delivery of the related
Loan Documents does not and will not affect or impair the
ability of Lender to enforce its remedies under all of
the Loan Documents or to realize the benefits of the
cross-collateralization provided for thereunder; (D) an
update of the Substantive Non-Consolidation Opinion
indicating that the substitution does not affect the
opinions set forth therein; (E) an opinion of counsel
acceptable to the Rating Agencies stating that the
substitution and the related transactions do not
constitute a fraudulent conveyance under applicable
bankruptcy and insolvency laws or other evidence
pertaining thereto acceptable to the Rating Agencies and
(F) an opinion of counsel acceptable to the Rating
Agencies stating that the substitution would not
adversely affect the status of the entity holding the
interest in the Mortgage Note as a REMIC (assuming for
such purpose that such entity otherwise qualifies as a
REMIC) and that such substitution will not result in a
deemed exchange of the Certificates pursuant to Section
1001 of the Code;
(xv) all real estate taxes due and payable with respect to the
Substitute Property shall have been paid and Borrower
shall have delivered evidence thereof to Lender;
(xvi) Borrower shall have paid or reimbursed Lender for all
costs and expenses incurred by Lender (including, without
limitation, reasonable attorneys fees and disbursements)
in connection with the substitution and Borrower shall
have paid all recording charges, filing fees, taxes or
other expenses (including, without limitation, mortgage
and intangible taxes and documentary stamp taxes) payable
in connection with the substitution. Borrower shall have
paid all costs and expenses of the Rating Agencies
incurred in connection with the substitution;
(xvii) Lender shall have received annual operating statements
and occupancy statements for each Substitute Property for
the most recently completed Fiscal Year and an operating
statement for each Substituted Property for all
Accounting Periods and Accounting Quarters for which such
statements have been prepared, each certified to Lender
as being true and correct and certificate from Borrower
certifying that there has been no adverse change in the
financial condition of such Substitute Property since the
date of such operating statements;
(xviii) Borrower shall have delivered to Lender estoppel
certificates from (i) each tenant of each Substitute
Property that accounted more than five percent (5%) of
the gross rents from the Substitute Property during the
most recently completed four full Accounting Quarters
("Major Tenants"), and (ii) tenants of the Substitute
Property that accounted, in the
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aggregate, for at least seventy-five percent (75%) of the
gross rents from the Substitute Property for the most
recently completed for full accounting quarters. All such
estoppel certificates shall be in the form attached
hereto as EXHIBIT C and shall indicate that (1) the
subject lease is a valid and binding obligation of the
tenant thereunder, (2) there are no defaults under such
lease on the part of the landlord or tenant thereunder,
(3) the tenant thereunder has no defense or offset to the
payment of rent under such leases, (4) no rent under such
lease has been paid more than one (1) month in advance,
(5) the tenant thereunder has no option or right of first
refusal under such lease to purchase all or any portion
of the Substitute Property and (6) all tenant improvement
work required under such lease has been completed and the
tenant under such lease is in actual occupancy of its
leased premises. If an estoppel certificate indicates
that all tenant improvement work required under the
subject lease has not yet been completed, Borrower shall,
if required by the Rating Agencies, deliver to Lender
financial statements indicating that Borrower has
adequate funds to pay all costs related to such tenant
improvement work as required under such lease;
(xix) Lender shall have receive copies of all tenant leases and
any ground leases affecting the Substitute Property
certified by Borrower as being true and correct. Lender
shall have received a current rent roll of the Substitute
Property certified by Borrower as being true and correct;
(xx) Lender shall have received subordination, nondisturbance
and attornment agreements in the form attached hereto as
EXHIBIT D with respect to each of the Material Leases
affecting the Substitute Property other than such Leases
that are, by their terms, subordinate to the Mortgage
with respect to the Substitute Property;
(xxi) Lender shall have received (A) an endorsement to the
Title Insurance Policy insuring the Lien of the Mortgage
encumbering the Substitute Property insuring that the
Substitute Property constitutes a separate tax lot or, if
such an endorsement is not available in the state in
which the Substitute Property is located, a letter from
the Title Company issuing such Title Insurance Policy
stating that the Substitute Policy constitutes a separate
tax lot or (B) a letter from the appropriate taxing
authority stating that the Substitute Property
constitutes a separate tax lot;
(xxii) Lender shall have received a physical conditions report
(substantially similar in form and scope to the physical
conditions report delivered with respect to the
Substituted Property in connection with the Closing) with
respect to the Substitute Property stating that the
Substitute Property and its use comply in all material
respects with all applicable Laws (including, without
limitation, zoning, subdivision and building laws) and
that the Substitute Property is in good condition and
repair and free of material damage or waste. If
compliance with Laws is not addressed by the physical
conditions report, such compliance shall be confirmed by
delivery to Lender of a certificate of an architect
licensed in the state in
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which the Substitute Property is located, a letter from
the municipality in which such Property is located, a
certificate of a surveyor that is licensed in the state
in which the Substitute Property is located (with respect
to zoning and subdivision laws), an ALTA 3.1 zoning
endorsement to the Title Insurance Policy delivered
pursuant to clause (ix) above (with respect to zoning
laws) or a subdivision endorsement to the Title Insurance
Policy delivered pursuant to clause (ix) above (with
respect to subdivision laws). If the physical conditions
report recommends that any repairs be made with respect
to the Substitute Property, such physical conditions
report shall include an estimate of the cost of such
recommended repairs and Borrower shall deposit with
Lender an amount equal to one hundred fifty percent
(150%) of such estimated cost, which deposit shall
constitute additional security for the Loan and shall be
released to Borrower upon the delivery to Lender of (A)
an update to such physical conditions report or a letter
from the engineer that prepared such physical conditions
report indicating that the recommended repairs were
completed in good and workmanlike manner and (B) paid
receipts indicating that the costs of all such repairs
have been paid;
(xxiii) Lender shall have received a certified copy of an
amendment to the Management Agreement reflecting the
deletion of the Substituted Property and the addition of
the Substitute Property as a property managed pursuant
thereto and Manager shall have executed and delivered to
Lender an amendment to the Collateral Assignment of
Management Agreement reflecting such amendment to the
Management Agreement;
(xxiv) Lender shall have received such other and further
approvals, opinions, documents and information in
connection with the substitution as the Rating Agencies
have requested;
(xxv) Lender shall have received copies of all contracts and
agreements relating to the leasing and operation of the
Substitute Property (other than the Management Agreement)
together with a certification of Borrower attached to
each such contract or agreement certifying that the
attached copy is a true and correct copy of such contract
or agreement and all amendments thereto;
(xxvi) Borrower shall submit to Lender, not less than thirty
(30) days prior to the date of such substitution, a
release of Lien (and related Loan Documents) for the
Substituted Property for execution by Lender. Such
release shall be in a form appropriate for the
jurisdiction in which the Substituted Property is located
and satisfactory to Lender in its sole discretion.
Borrower shall deliver an Officer's Certificate
certifying that the requirements set forth in this
SECTION 11 have been satisfied.
Upon the satisfaction of the foregoing conditions precedent, Lender will release
its Lien from the Substituted Property or Substituted Properties, as applicable,
to be released and the Substitute Property or Substitute Properties, as
applicable, shall be deemed to be an Mortgaged Property
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for purposes of this Agreement and the Allocated Loan Amount with respect to
such Substituted Property or Substituted Properties, as applicable, shall be
deemed to be the Allocated Loan Amount with respect to such Substitute
Property(or the aggregate Allocated Loan Amounts for such Substitute Properties,
as applicable) for all purposes hereunder (and, if there is more than one
Substitute Properties, the Allocated Loan Amounts for such Substitute Properties
shall be equitably determined).
12. MISCELLANEOUS
12.1. LIMITATION ON LIABILITY
Notwithstanding any contrary provision in any of the Loan
Documents, it is hereby expressly agreed that, except as otherwise provided in
this SECTION 12.1 or in any Section of any Loan Document that is substantially
similar to this SECTION 12.1, there shall be no recourse to the assets of
Borrower or any of its Members (other than against the Collateral and any other
property given as security for the payment of the Mortgage Note) for (i) the
payment of principal, interest, Defeasance Deposits, Yield Maintenance Payments
or other charges under this Agreement or the Mortgage Note or for any other
amount that is or may become due and owing to Lender by Borrower under this
Agreement or any of the other Loan Documents or (ii) the performance or
discharge of any covenant or undertaking hereunder or under the other Loan
Documents, and in the event of any Event of Default hereunder or thereunder,
Lender agrees to proceed solely against the Collateral and any other property
given as security for payment of the Mortgage Note, and Lender shall not seek or
claim recourse against Borrower or either Member (other than against the
Collateral and any other property given as security for payment of the Mortgage
Note) for any deficiency or for any personal judgment after a foreclosure of the
lien of the Mortgage or other Security Documents or for the performance or
discharge of any covenants or undertakings of Borrower hereunder or under any of
the other Loan Documents (except that Borrower may be made a party to a
proceeding to the extent legally necessary for the conduct of a foreclosure or
the exercise of other similar remedies under the Mortgage or other Security
Documents). Notwithstanding the foregoing, nothing contained in this SECTION
12.1 shall relieve Borrower or either Member of any personal liability for any
loss, cost, expense, damage or liability arising or resulting from (A) any
breach of any representation or warranty made in this Agreement that was
materially incorrect when made and that was made with fraudulent intent, (B) any
amount paid or distributed to the Members, the Manager or any Affiliate of any
of them in violation of the provisions of the Loan Documents, (C) fraud or
breach of trust, including misapplication of Loan proceeds or any Insurance
Proceeds or Awards or other sums that are part of the Collateral that may come
into the possession or control of Borrower or either Member or any Affiliate of
any of them, (D) liability of such Person under the Environmental Indemnity
Agreement or (E) following the occurrence of a Lockbox Event, the willful
failure of Borrower to instruct tenants of the Mortgaged Properties to make
payments of Rents into the Lockbox Account or the failure of Borrower or Manager
to deposit payments of Rents received by Borrower or Manager into the Lockbox
Account promptly upon receipt thereof. It is hereby expressly agreed that no
director, officer, shareholder, partner, member or employee of Borrower or a
Member, nor the legal or personal representative, successor or assign of any of
the foregoing, nor any other principal of Borrower or either Member, whether
disclosed or undisclosed, shall have any personal liability under this Agreement
or any of the other Loan Documents, except as personal liability may be
specifically imposed upon a signatory to any Loan Document. It is the intention
of the parties
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hereto that this SECTION 12.1 shall govern every other provision of the Loan
Documents and that the absence of explicit reference to this SECTION 12.1 in any
provision of the Loan Documents or the absence of any Section similar to this
SECTION 12.1 in any Loan Document shall not be construed to deny the application
of this SECTION 12.1 to such provision, notwithstanding the presence of explicit
reference to this SECTION 12.1 in other provisions of the Loan Documents.
12.2. ENTIRE AGREEMENT, AMENDMENTS
This Agreement, including the Schedules and Exhibits hereto and
the other instruments and documents referred to herein or delivered pursuant
hereto, contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written agreements,
commitments or understandings with respect to such matters. No amendment,
modification or discharge of this Agreement shall be valid or binding unless set
forth in writing and duly executed by both parties.
12.3. NOTICES
All notices, requests and demands to or upon the respective
parties hereto shall be in writing (except as is otherwise specifically provided
in this Agreement) and shall be deemed to have been duly given or made when
received (or when delivery thereof is refused by the intended recipient) if
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid, or sent by facsimile transmission, with confirmation of receipt
or delivery, or sent by nationally recognized overnight courier, delivery
charges prepaid or delivered by hand, in each case addressed or directed as
follows (or to such other address or facsimile transmission number as may be
hereafter designated in writing by the respective parties hereto):
IF TO BORROWER: Arden Realty Finance IV, L.L.C.
11601 Wilshire Boulevard
Suite 402
Los Angeles, California 90025
Attention: Diana M. Laing
IF TO LENDER: Lehman Brothers Realty Corporation
Three World Financial Center
200 Vesey Street
New York, New York 10285
Attention: Commercial Mortgage Loan
Surveillance
Fax: (212) 528-6659
12.4. NO WAIVER; CUMULATIVE REMEDIES
No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Agreement or under any other instrument
or document given in connection with or pursuant to this Agreement shall impair
any such right, power or privilege or
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be construed as a waiver of any default or any acquiescence therein. No single
or partial exercise of any such right, power or privilege shall preclude the
further exercise of such right, power or privilege, or the exercise of any other
right, power or privilege. No waiver shall be valid against any party hereto
unless made in writing and signed by the party against whom enforcement of such
waiver is sought and then only to the extent expressly specified therein. The
rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
12.5. WAIVER OF JURY TRIAL
Each of the parties hereto (i) covenants and agrees not to elect
trial by jury of any issue triable of right by a jury and (ii) waives any rights
to trial by jury to the full extent that any such right shall now or hereafter
exist. This waiver of right to trial by jury is separately given, knowingly and
voluntarily, by each party hereto, and this waiver is intended to encompass
individually each instance and each issue as to which the right to a jury trial
would otherwise accrue. The parties are hereby authorized to submit this
Agreement to any court having jurisdiction over the subject matter so as to
serve as conclusive evidence of the other party's herein contained waiver of the
right to jury trial. Further, each party hereto certifies that no representative
of the other party (including such other party's counsel) has represented,
expressly or otherwise, to that party, that the other party will not seek to
enforce this waiver by the such certifying party of the right to a jury trial.
12.6. GOVERNING LAW; CONSENT TO JURISDICTION
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (but not including the choice of law
rules thereof). In the event of any litigation arising out of this Loan
Agreement, Borrower agrees that the substantive law of the State of New York
shall apply. Borrower hereby consents to jurisdiction within the State of New
York for purposes of such litigation and agrees that service of process may be
made, and personal jurisdiction over Borrower obtained, by serving a copy of the
summons and complaint upon Borrower, at the notice address set forth herein, in
accordance with the applicable laws of the State of New York. Nothing herein
contained, however, shall prevent any owner or holder of the Mortgage Note from
bringing any action or exercising any right against any security or against
Borrower, personally, or against any property of Borrower, within any other
jurisdiction or state. Initiating such proceeding or taking such action in any
other jurisdiction or state shall not, however, constitute a waiver of the
agreement contained herein that the laws of the State of New York shall govern
the rights and obligations of the parties hereunder.
12.7. PAYMENT OF EXPENSES
12.7.1.
Borrower shall pay all expenses incurred by Lender in connection
with this Agreement and in the preparation for, and consummation of, the
transactions provided for herein and in connection with the enforcement hereof,
and Borrower shall pay all costs of conveyances, initial Servicer fee and
Trustee fee, initial rating fees and ongoing activity of any special Servicer
incurred as a result of an Event of Default, bank charges relating to the
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operation of the Operating Account, the Lockbox Account, the Cash Collateral
Account and any other Account, after the Securitization has occurred, its
proportionate share of initial and annual surveillance fees, if any, of the
Rating Agencies, any processing fees, reasonable attorney's fees and
disbursements, auditor's fees, costs of appraisals, environmental reports, and
engineering reports, all title insurance premiums, all notary fees, all filing
and application fees to any federal, state or local agencies, all sales, stamp,
documentary, transfer, and other taxes and fees applicable to the transactions
contemplated by this Agreement and the instruments and documents called for
hereunder and all other costs and charges incurred by the parties in connection
with such transactions. In addition, the Borrower shall reimburse Lender for any
expenses incurred by the Lender to the extent provided in SECTION 4.8 hereof.
12.7.2.
Except as provided in SECTION 12.7.1, if the Securitization
occurs, the Servicer Fee (as defined in the Pooling and Servicing Agreement) and
the Trustee Fee (as defined in the Pooling and Servicing Agreement) and any
other amounts required to be paid to the Servicer or the Trustee under the
Pooling and Servicing Agreement in reimbursement of expenses of the Servicer or
the Trustee shall be paid by Lender or the Trust Fund (the "TRUST FUND") created
under the Pooling and Servicing Agreement.
12.8. SEVERABILITY
In the event that any term or provision of this Agreement or of
any other Loan Document or the application thereof to any Person or circumstance
shall, to any extent, be held to be invalid or unenforceable, the remainder of
such term or provision or the application thereof to Persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and shall be enforced to the fullest extent permitted by law.
12.9. GENDER, ETC.
Whenever used herein and where the context so requires, the
singular shall include the plural, the plural shall include the singular, and
the use of the masculine, feminine or neuter gender shall include all genders;
and the word "including" shall mean "including, without limitation."
12.10. HEADINGS
The Article, Section and Subsection headings of this Agreement
are for convenience of reference only, and shall not limit or otherwise affect
any of the terms hereof.
12.11. COUNTERPARTS; FACSIMILES
This Agreement may be executed in separate counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
to be an original, and all of
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which taken together shall constitute one and the same instrument. It shall not
be necessary in making proof of this Agreement to produce or account for more
than the number of counterparts containing the respective signatures of, or on
behalf of, all of the parties hereto. In the event the parties hereto exchange
signature pages of this Agreement by facsimile, they agree to send the original
executed counterparts of this Agreement to one another by overnight delivery
service, but the facsimile signatures shall in any event be binding.
12.12. NO THIRD PARTY BENEFICIARY
The parties do not intend the benefits of this Agreement to inure
to any third party other than the Trust (and the Servicer and Trustee on behalf
of the Trust), upon assignment hereof by Lender to the Trustee, on behalf of the
Trust, as contemplated by SECTION 9.1 hereof. Notwithstanding anything contained
herein or in the Mortgage Note or any other Loan Document to the contrary, or
any conduct or course of conduct by any or all of the parties hereto, before or
after signing this Agreement or any of the other Loan Documents, nothing herein
shall be construed as creating any right, claim or cause of action against
Lender, or any of Lender's officers, directors, agents or employees, in favor of
any materialman, supplier, contractor, subcontractor, purchaser or lessee of any
property owned by Borrower any other person or entity other than Borrower.
12.13. NO LIABILITY OF LENDER
The relationship between Borrower and Lender is, and shall at all
times remain, solely that of borrower and lender, and Lender will not undertake
or assume any responsibility or duty to Borrower to review, inspect, supervise,
pass judgment upon, or inform Borrower of any matter in connection with any
phase of Borrower's business, operations, or condition, financial or otherwise.
Borrower shall rely entirely upon its own judgment with respect to such matters,
and any review, inspection, supervision, exercise of judgment, or information
supplied to Borrower by Lender in connection with any such matter is for the
protection of Lender, and neither Borrower nor any third party is entitled to
rely thereon.
12.14. CONFIDENTIALITY
Lender agrees that it shall maintain confidentiality with regard
to nonpublic information concerning Borrower obtained from Borrower pursuant to
this Agreement that is identified by Borrower as nonpublic, provided that Lender
shall not be precluded from making disclosure regarding such information: (i) to
Lender's counsel, accountants and other professional advisors (who are, in each
case, subject to this confidentiality agreement), (ii) to officers, directors,
employees, agents and partners of Lender who typically would be provided with
such information (who are, in each case, subject to this confidentiality
agreement), (iii) in response to a subpoena or order of a court or governmental
agency, (iv) in connection with the Securitization, to the Rating Agencies, the
Trustee and the Servicer, provided, Lender shall require that any such entity be
subject to this SECTION 12.14, however, Lender shall have no duty to monitor any
such entity and shall have no liability in the event that any such entity
violates this SECTION 12.14, (v) as required by law, GAAP or applicable
regulation, or (vi) following the public disclosure of such information (other
than by Lender). In connection with enforcing its rights pursuant to this
SECTION 12.14, Borrower shall be entitled to the equitable
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remedies of specific performance and injunctive relief against Lender or other
entity subject to this Section 12.14 which shall breach the confidentiality
provisions of this Section 12.14.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Loan
Agreement or have caused this Loan Agreement to be executed on their behalf as
of the day and year first above written.
BORROWER:
ARDEN REALTY FINANCE IV, L.L.C.
By:
Name:
Its:
LENDER:
LEHMAN BROTHERS REALTY CORPORATION
By:
Name:
Its:
<PAGE> 87
LIST OF SCHEDULES
Schedule 1.1 Allocated Loan Amounts
Schedule 3.6 Lease Defaults
Schedule 3.22 Environmental Reports
Schedule 3.23A Engineering Surveys
Schedule 3.23B Equipment Leases
Schedule 4.3.2 Mortgaged Properties
Schedule 5.11 Cash Management Procedures
Schedule 5.14 Required Expenditures
<PAGE> 88
LIST OF EXHIBITS
Exhibit A Description of Land
Exhibit B Form of Mortgage Note
Exhibit C Tenant Estoppel Certificate
Exhibit D Subordination, Non-Disturbance
and Attornment Agreement
<PAGE> 1
EXHIBIT 10.15
MORTGAGE NOTE
$100,600,000 June 8, 1998
FOR VALUE RECEIVED, the undersigned, ARDEN REALTY FINANCE IV,
L.L.C., a Delaware limited liability company ("MAKER"), promises to pay to the
order of LEHMAN BROTHERS REALTY CORPORATION, a Delaware corporation, its
successors and assigns ("HOLDER"), at such place as Holder may from time to time
designate in writing, the principal sum of ONE HUNDRED MILLION SIX HUNDRED
THOUSAND AND NO/100 DOLLARS ($100,600,000.00) in lawful money of the United
States of America, together with interest thereon, to be computed and paid as
specified in SECTION 1 below.
Except as otherwise defined or limited herein, capitalized terms
used herein shall have the meanings ascribed to them in that certain Loan
Agreement (the "LOAN AGREEMENT") dated as of the date hereof by and between
Maker and Holder. This is the Mortgage Note referred to in the Loan Agreement.
1. PAYMENTS OF PRINCIPAL AND INTEREST.
1.1 INTEREST; MATURITY DATE
The outstanding principal balance hereof from time to time shall
bear interest (a) on or prior to April 16, 2008 (the "Anticipated Repayment
Date"), at a rate per annum equal to six and 74/100 percent (6.74%) (the "Base
Rate") and (b) from and after April 17, 2008, at a rate per annum (the "Adjusted
Interest Rate") equal to the greater of (i) eleven and 74/100 percent (11.74%)
and (ii) the sum of (A) five percentage points (5%) and (B) the average,
calculated by linear interpolation (rounded to three decimal places), of the
yields of the United States Treasury Constant Maturities with the terms (one
longer and one shorter) most nearly approximating those of U.S. Obligations
having maturities as close as possible to the 20th anniversary of the
Anticipated Repayment Date, as determined by the Holder on the basis of Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or such other recognized
source of financial market information as may reasonably be selected by the
Holder, in each case on the last Business Day of the week immediately prior to
the Anticipated Repayment Date. Interest accrued from the date hereof to (and
including) June 30, 1998 shall be due and payable on July 1, 1998. Thereafter,
payments of interest or principal and interest, as applicable, and other amounts
to be paid hereunder shall be made, in arrears, on the first (1st) day of each
calendar month, or, if in any calendar month the first (1st) day is not a
Business Day, then on the Business Day succeeding the first (1st) day,
commencing August 1, 1998 (each, a "Due Date") for the period (the "Debt Service
Period") beginning on (and including) the first (1st) day of the calendar month
immediately preceding the month in which such Due Date occurs, through (but
excluding) the Due Date. Interest shall be computed on the basis of a 360 day
year and the actual number of days elapsed in each Debt Service Period.
<PAGE> 2
For the period that commences on the date hereof and ends on
April 16, 2003 (the "Interest Only Period"), Holder shall pay interest only on
the outstanding principal balance hereof. On each Due Date after the expiration
of the Interest Only Period, Maker shall pay to Holder a monthly payment of
principal and interest (the "Scheduled Principal and Interest Payment") in an
amount equal to the amount of the monthly payment that would be necessary to
fully amortize the outstanding principal balance of the Loan as of the last day
of the Interest Only Period over a 25-year period assuming a rate of interest
per annum equal to the Base Rate (with interest calculated on the basis of
actual number of days elapsed and a 360 day year).
Following the Anticipated Repayment Date, interest on the
outstanding principal balance hereof shall continue to accrue at the Base Rate
and Maker shall continue to make the Scheduled Principal and Interest Payment on
each Due Date.
Payment of all interest accruing in respect of this Mortgage Note
after the Anticipated Repayment Date in the amount equal to the difference
between the amount that accrues at the Adjusted Interest Rate and the amount
that is paid (whether as part of the Scheduled Principal and Interest Payment,
if applicable, or otherwise) at the Base Rate ("Accrued Interest") shall be (a)
deferred, (b) added to the principal amount of this Mortgage Note, and (c) to
the extent permitted by applicable law, accrue interest at the Adjusted Interest
Rate. If not sooner paid, all Accrued Interest together with interest thereon
(to the extent permitted by applicable law) shall be due and payable in full on
the Final Maturity Date (as defined below).
Subsequent to the Anticipated Repayment Date and in accordance
with the Cash Management Procedures, Maker shall pay to Holder on each Due Date
(without duplication), until the entire Debt is repaid in full, Excess Cash Flow
for the Debt Service Period relating to such Due Date. Each monthly payment of
Excess Cash Flow made by Borrower under this Mortgage Note shall be applied
first to the reduction of the outstanding principal balance of this Mortgage
Note and after the principal balance of this Mortgage Note has been paid in full
to the reduction of the outstanding amount of Accrued Interest (and interest
thereon).
The outstanding principal balance of this Mortgage Note, together
with accrued and unpaid interest thereon through April 16, 2028 (including any
unpaid Accrued Interest and interest thereon) shall be due and payable on April
16, 2028 (the "Final Maturity Date").
1.2 PREPAYMENT RESTRICTIONS
On any Due Date occurring on or after the Anticipated Repayment
Date, all or any portion of the principal balance hereof may be prepaid, at
Maker's option, in full or in part, without penalty or premium; provided,
however, that the requirements of SECTION 2.10 of the Loan Agreement shall have
been satisfied. In addition, a portion of the principal amount hereof may be
prepaid prior to the first day of the Defeasance Period, upon satisfaction of
the conditions in SECTION 2.7 of the Loan Agreement but without payment of a
Yield Maintenance Payment, in connection with a Casualty or Taking (provided
that the Mortgage does not require a Restoration of the applicable Mortgaged
Property). Neither Holder nor, following the Securitization, the
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Trustee or the Servicer shall be required to accept or apply any prepayment
requiring payment of a Yield Maintenance Payment, as provided in this paragraph
or in SECTION 1.3 hereof, unless such prepayment is accompanied by the payment
of such Yield Maintenance Payment, and if any legal and other expenses are due
and owing to Holder, Trustee or Servicer in connection with such prepayment
under the terms of the Pooling and Servicing Agreement or any Loan Document,
neither Holder nor the Servicer shall be required to accept or apply any
prepayment unless the prepayment also is accompanied by the amount that is due
and payable to Holder, Trustee or Servicer with respect to such expenses. Except
as provided above, this Mortgage Note may not be prepaid.
1.3 YIELD MAINTENANCE
If (i) all or any part of the principal amount of the Loan is
prepaid after the Closing Date but prior to the last day of the Defeasance
Period as a result of the acceleration of the maturity of the Mortgage Note
after an Event of Default, Maker shall be required to pay a Yield Maintenance
Payment equal to the greater of (A) 1% of the amount of the principal prepayment
that is to be applied to the outstanding principal balance hereof and (B) the
present value as of the end of the applicable Debt Service Period, discounted at
the Reinvestment Yield, of a series of payments each equal to the Payment
Differential on each of the remaining Due Dates prior to and including the
Anticipated Repayment Date, after giving effect to the regularly scheduled
payment of principal that is to be made on the Prepayment Date. No Yield
Maintenance Payment shall be required in connection with prepayments made on or
after the last day of the Defeasance Period.
Promptly following acceleration of this Mortgage Note or
following the occurrence of any other event, the occurrence of which obligates
Maker to make a Yield Maintenance Payment, Holder shall notify Maker of the
amount and basis of determination of the Yield Maintenance Payment promptly upon
determining the Treasury Rate, as contemplated below. Absent manifest error,
Maker shall not dispute Holder's calculations hereunder.
For purposes of this SECTION 1.3, the following terms shall have
the meanings ascribed to them below:
"PAYMENT DIFFERENTIAL" means, an amount equal to (x) the Base
Rate, minus the Reinvestment Yield, divided by (y) 12, and multiplied by
(z) the amount of the principal prepayment.
"REINVESTMENT YIELD" is the Treasury Rate converted to a monthly
compounded nominal annual yield.
"TREASURY RATE" is equal to the lesser of (A) the annual yield on
the United States Treasury issue (primary issue) with a maturity date
closest to the Final Maturity Date and (B) the annual yield on the
United States Treasury issue (primary issue) with a maturity equal to
the remaining average life of this Mortgage Note with each such yield
being based on the bid price for such issue as published in The Wall
Street Journal on the
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date that is 14 days prior to (x) the applicable Prepayment Date set
forth in the notice of prepayment provided by the Maker or (y) the date
of acceleration by the Holder (or if such bid price is not published on
that date, the next preceding date on which such bid price is so
published).
1.4 METHOD OF PAYMENT; PAYMENTS ABSOLUTE
All payments due hereunder shall be made in legal currency of the
United States of America in immediately available federal funds by credit to the
Holder's account in the United States as announced by the Holder from time to
time in writing to Maker. If any payment is due on a day that is not a Business
Day, the date for payment thereof shall be extended to the next Business Day,
without additional interest, except that, if the Final Maturity Date is not a
Business Day, the date for payment of the amount, if any, that is due on the
Final Maturity Date shall be extended to the next succeeding Business Day, and
any interest payable thereon shall accrue and be payable for such extension of
time at the Adjusted Interest Rate.
The terms of this Mortgage Note are hereby supplemented in full
by the terms of the Loan Agreement and the other Loan Documents.
2. SECURITY FOR THE LOAN.
This Mortgage Note is secured by, among other things, twenty-two
(22) Mortgaged Properties owned by Maker, including all assets of Maker related
thereto, pursuant to a Mortgage encumbering the Land, the Buildings located
thereon and other Improvements relating to such Buildings and granting a lien on
and security interest in certain other Property described therein, and by other
Security Documents effecting and granting a lien on and security interest in
other Collateral, including but not limited to, the Security Agreement, the
Assignment of Rents and Leases, and the Collateral Assignment of Management
Agreement.
3. EVENTS OF DEFAULT.
The entire outstanding principal balance of this Mortgage Note,
together with all accrued and unpaid interest thereon and all other sums due
hereunder or under any of the Loan Documents (all such sums, collectively, the
"DEBT"), or any portion thereof, shall without notice, except such notice as is
required under the terms of any Loan Document, become immediately due and
payable at the option of Holder: (a) if payments of principal, interest and
premium, if any, due hereunder are not made when due or (b) an Event of Default
shall have occurred and be continuing under the Loan Agreement (each of the
foregoing, an "EVENT OF DEFAULT"). In the event that Holder retains counsel to
collect all or any part of the Debt, or to protect or foreclose the security
provided in connection herewith, Maker agrees to pay reasonable costs of
collection incurred by Holder, including reasonable attorneys' fees.
4. DEFAULT INTEREST; LATE PAYMENT FEE.
Maker does hereby agree that, if any amount due hereunder is not
paid when due,
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including, without limitation, Maker's failure to pay the Debt in full on the
Maturity Date or on the date set for acceleration following an Event of Default,
Holder shall be entitled to receive, and Maker shall pay, to the extent
permitted by applicable law, interest to Holder on such past due amounts
beginning on the date such payment becomes past due at a rate of interest equal
to the lesser of (a) the greater of (i) the Base Rate plus three percentage
points (3%) (or, on and after the Anticipated Repayment Date, the Adjusted
Interest Rate plus three percentage points (3%)) and (ii) the Prime Rate plus
two percentage points (2%), and (b) the maximum rate of interest allowed to be
collected under applicable law.
In addition to Default Interest, in the event Borrower fails to
make any payment of interest, Yield Maintenance Payment or other payment
hereunder when due, Borrower shall be liable for the payment of a late charge
equal to five percent (5%) of the amount of the payment; provided, however,
prior to a Securitization, Borrower shall not be liable to pay such a late
payment fee the first time Borrower fails to make a Monthly Debt Service Payment
when due.
5. LIMITATIONS ON RECOURSE.
Notwithstanding any contrary provision in this Mortgage Note or
any of the Loan Documents, it is hereby expressly agreed that, except as
otherwise provided in this SECTION 5 or in any section of any Loan Document that
is substantially similar to this SECTION 5, there shall be no recourse to the
assets of Maker or any of its Members (other than against the Collateral and any
other property given as security for the payment of this Mortgage Note) for (i)
the payment of principal, interest, Defeasance Deposits, Yield Maintenance
Payments or other charges hereunder or for any other amount that is or may
become due and owing to Holder by Maker under this Mortgage Note or any of the
other Loan Documents or (ii) the performance or discharge of any covenant or
undertaking hereunder or under the other Loan Documents, and in the event of any
Event of Default hereunder or thereunder, Holder agrees to proceed solely
against the Collateral and any other property given as security for payment of
this Mortgage Note, and Holder shall not seek or claim recourse against Maker or
any Member (other than against the Collateral and any other property given as
security for payment of this Mortgage Note) for any deficiency or for any
personal judgment after a foreclosure of the lien of the Mortgage or other
Security Documents or for the performance or discharge of any covenants or
undertakings of Maker hereunder or under any other Loan Documents (except that
Maker may be made a party to a proceeding to the extent legally necessary for
the conduct of a foreclosure or the exercise of other similar remedies under the
Mortgage or other Security Documents). Notwithstanding the foregoing, nothing
contained in this SECTION 5 shall relieve Maker or any Member of any personal
liability for any loss, cost, expense, damage or liability arising or resulting
from (A) any breach of any representation or warranty made in the Loan Agreement
that was materially incorrect when made and that was made with fraudulent
intent, (B) any amount paid or distributed to the Members, the Manager or any
Affiliate of any of them in violation of the provisions of the Loan Documents,
(C) fraud or breach of trust, including misapplication of Loan proceeds or any
Insurance Proceeds or Awards or other sums that are part of the Collateral that
may come into the possession or control of Maker or a Member or any Affiliate of
any of them, (D) liability under the Environmental Indemnity Agreement or (E)
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following the occurrence of a Lockbox Event, the willful failure of Maker to
instruct Tenants of the Mortgaged Properties to make payments of Rents into the
Lockbox Account or the failure of Maker or the Manager to deposit payments of
Rents received by Maker or Manager into the Lockbox Account promptly upon
receipt thereof. It is hereby expressly agreed that no director, officer,
shareholder, partner, member or employee of Maker or any Member, nor the legal
or personal representative, successor or assign of any of the foregoing, nor any
other principal of Maker or any Member, whether disclosed or undisclosed, shall
have any personal liability under the Loan Agreement or any of the other Loan
Documents, except as personal liability may be specifically imposed upon a
signatory to any of the Loan Documents. It is the intention of the parties
hereto that this SECTION 5 shall govern every other provision of the Loan
Documents and that the absence of explicit reference to this SECTION 5 in any
provision of the Loan Documents or the absence of any Section similar to this
SECTION 5 in any Loan Document shall not be construed to deny the application of
this SECTION 5 to such provision, notwithstanding the presence of explicit
reference to this SECTION 5 in other provisions of the Loan Documents.
6. NO USURY.
It is expressly stipulated and agreed to be the intent of Maker
and Holder at all times to comply with applicable state law and with applicable
United States federal law (to the extent that it permits Holder to contract for,
charge, take, reserve, or receive a greater amount of interest than under state
law) and that this Section shall control every other covenant and agreement in
this Mortgage Note and the other Loan Documents. If the applicable law (state or
federal) is ever judicially interpreted so as to render usurious any amount
called for under this Mortgage Note or under any of the other Loan Documents, or
contracted for, charged, taken, reserved, or received with respect to the Debt,
or if Holder's exercise of the option to accelerate the maturity of this
Mortgage Note, or if any prepayment by Maker results in Maker having paid any
interest in excess of that permitted by applicable law, then it is Maker's and
Holder's express intent that all excess amounts theretofore collected by Holder
shall be credited to the principal balance hereof and all other debt in the
order specified above (or, if this Mortgage Note and all other Debt have been or
would thereby be paid in full, shall be refunded to Maker), and the provisions
of this Mortgage Note and the other Loan Documents shall immediately and
automatically be deemed to be reformed, and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder. All
sums paid or agreed to be paid to Holder for the use, forbearance, or detention
of the Debt shall, to the fullest extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Debt until payment in full so that the rate or amount of interest on account
of the Debt does not exceed the maximum lawful rate from time to time in effect
and applicable to the Debt for so long as the Debt is outstanding.
7. AUTHORITY.
Maker represents that Maker has full power, authority and legal
right to execute
-6-
<PAGE> 7
and deliver this Mortgage Note and to perform its obligations hereunder, and
that this Mortgage Note constitutes the valid and binding obligation of Maker,
enforceable against Maker in accordance with its terms, except as enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity, regardless of whether
considered in proceedings at law or in equity.
8. NOTICES.
All notices or other communications required or permitted to be
given pursuant hereto shall be given in the manner specified in the Loan
Agreement directed to the parties at their respective addresses as provided
therein.
9. WAIVER OF JURY TRIAL.
MAKER, AND BY ACCEPTANCE HEREOF, HOLDER, EACH (1) COVENANTS AND
AGREES NOT TO ELECT TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND
(2) WAIVES ANY RIGHTS TO TRIAL BY JURY TO THE FULL EXTENT THAT ANY SUCH RIGHT
SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH PARTY HERETO, AND THIS
WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. THE PARTIES ARE HEREBY
AUTHORIZED TO SUBMIT THIS MORTGAGE NOTE TO ANY COURT HAVING JURISDICTION OVER
THE SUBJECT MATTER TO BE TRIED SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE
OTHER PARTY'S HEREIN CONTAINED WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, EACH
PARTY HERETO CERTIFIES THAT NO REPRESENTATIVE OF THE OTHER PARTY (INCLUDING SUCH
OTHER PARTY'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO THAT PARTY,
THAT THE OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER BY SUCH CERTIFYING
PARTY OF THE RIGHT TO A JURY TRIAL.
10. GOVERNING LAW.
This Mortgage Note shall be governed by and construed under and
in accordance with the laws of the State of New York, excluding the choice of
law rules thereof.
11. MISCELLANEOUS.
(a) No release of any security for the Debt or any person liable
for payment of the Debt, no extension of time for payment of this Mortgage Note
or any installment hereof, and no alteration, amendment or waiver of any
provision of the Loan Documents made by agreement between Holder and any other
person or party shall release, modify, amend, waive, extend, change, discharge,
terminate or affect the liability of Maker or any other person or party who
-7-
<PAGE> 8
might be or become liable for the payment of all or any part of the Debt, under
the Loan Documents.
(b) Maker and all others who may become liable for the payment of
all or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest, notice of protest, notice of non-payment,
and notice of intent to accelerate the maturity hereof and of acceleration.
(c) This Mortgage Note may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Maker or Holder, but only by an agreement in writing signed
by the party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
(d) Whenever used, the singular number shall include the plural,
the plural the singular, and the words "Holder" and "Maker" shall include their
respective successors, assigns, heirs, executors and administrators.
[SIGNATURE PAGE TO FOLLOW]
-8-
<PAGE> 9
IN WITNESS WHEREOF, Maker has duly executed or has caused its
duly authorized officer to execute this Mortgage Note on its behalf, as of the
day and year first above written.
MAKER:
ARDEN REALTY FINANCE IV, L.L.C.,
a Delaware limited liability company
By:
Name:
Its:
-9-
<PAGE> 1
EXHIBIT 10.16
TENANT ESTOPPEL CERTIFICATE
Lehman Brothers Realty Corporation
Three World Financial Center
20th Floor
New York, New York 10285
RE: TENANT LEASE FOR _______________, CALIFORNIA, SUITE _______
Ladies and Gentlemen:
We understand that Lehman Brothers Realty Corporation ("Lender") has
made or is proposing to make a loan (the "Loan") to __________________ ("Owner")
that will be secured by an Deed of Trust, Assignment of Rents and Leases,
Security Agreement and Fixture Filing (the "Mortgage") and an associated
Assignment of Leases and Rents (the "Assignment") relating in whole or in part
to an office complex commonly known as _________________________,
__________________, California (the "Property") in which the undersigned is a
tenant. In connection with the Loan, we hereby (i) agree with you as follows and
(ii) warrant and represent to you that with respect to our lease, as amended
(the "Lease") and more particularly described in Schedule "A" attached hereto
(the "Schedule") the following is true and correct:
1. The Lease constitutes the entire agreement between the undersigned
and the landlord thereunder with respect to the subject matter thereof and the
Lease has not been modified, amended or supplemented in any way except by the
amendments or other agreements described in the Schedule.
2. The summary of the basic terms of the Lease contained in the
Schedule is true and correct.
3. Except as provided in the Schedule, the undersigned has not
assigned, transferred or hypothecated the Lease or any interest therein or
entered into a sublease for any portion of the premises covered by the Lease and
no person or firm other than the undersigned or its employees is in possession
of such premises or any portion thereof.
4. The undersigned is not in default (or with the giving of notice or
the passage of time or both will not be in default) under the Lease and the
undersigned has no claim against, off-set, credit, defense, counterclaim or
deductions against the landlord thereunder or any rent or other sums due or
payable under the Lease and, the landlord thereunder is not in default (or with
the giving of notice or the passage of time or both will not be in default)
under the Lease.
<PAGE> 2
5. Except as set forth on the Schedule, the undersigned has no option,
right of first refusal or other right to purchase the Property or any portion
thereof or any interest therein or to lease additional space in the Property or
to extend the term of the Lease and the only interest of the undersigned in the
Property is that of a tenant pursuant to the terms of the Lease.
6. The undersigned has not and does not engage in the generation,
storage or disposal of "Hazardous Materials" on the Property and to the best of
the undersigned's knowledge, there are no Hazardous Materials located in, on,
under or in the vicinity of the Premises demised by the Lease except for normal
office supplies. The undersigned agrees not to use, store, or permit the use,
storage or release of any Hazardous Materials on, under or about the Premises or
the Property other than what is permitted by applicable law, codes, regulations
or restrictions and used by the undersigned in accordance with applicable laws
and in amounts as dictated by the normal conduct of the undersigned's business.
The term "Hazardous Material" means any toxic or hazardous substance, material
or wastes which if or becomes regulated by any local government, the State of
California, the United States government or any agency or division thereof.
7. The undersigned is not the subject of any bankruptcy, insolvency,
debtor's relief, reorganization, receivership or other similar proceedings.
8. The person executing this Certificate hereby warrants and represents
that he or she has the power and authority to execute and deliver this
Certificate on behalf of the tenant named herein.
9. The undersigned as tenant hereby ratifies and confirms the Lease and
the tenancy created thereby and upon consummation of the acquisition by Owner,
agrees to accept Owner as the landlord thereunder.
10. The undersigned agrees to notify you at the address set forth above
(or at such other address of which the undersigned may be advised by you) of any
default on the part of landlord under the Lease, and further agrees that
notwithstanding any provisions of the Lease, no notice, cancellation or
termination thereof shall be effective unless Lender shall have received such
notice and have failed to cure or commence to cure such default within a
reasonable time following receipt of such notice and the expiration of any cure
period applicable thereto.
11. All conditions under the Lease to be performed by landlord as of
the date hereof (including, without limitation, all work to be performed by
landlord in the leased premises) have been satisfied, and all contributions, if
any, required to be paid by landlord under the Lease to date for improvements to
the leased premises have been paid. The undersigned is in possession of the
Premises and is fully obligated to perform and is performing all of the other
obligations of the undersigned under the Lease.
12. So long as the Loan remains outstanding, the undersigned shall not
amend, modify or cancel the Lease, or consent to an amendment, modification or
cancellation of the Lease, or agree to subordinate the Lease to any other
mortgage, without Lender's prior written consent in each instance.
<PAGE> 3
We understand that you will rely on this Certificate. This Certificate
may be relied upon by your successors and assigns.
Very truly yours,
_________________________________________
Name of Tenant
_________________________________________
Signature
_________________________________________
Date
[Add Notary Paragraph]
<PAGE> 4
SCHEDULE "A"
Summary of Lease Terms
(1) Name of Tenant:
--------------------------------------------------------
(2) Lease Date:
-----------------------------------------------------------
(3) Amendment Dates, Separate Agreements, if any:
--------------------------
(4) Suite No.: ; Estimated Square Footage:
---------------- -----------------
(5) Lease Commencement Date: ; Expiration of Term:
------------------- ------
(6) Option(s) to Extend:
---------------------------------------------------
(7) Option(s) for Additional Space:
----------------------------------------
(8) Monthly Base Rent: $ ;
-----------------
Escalations/CAM Charges: $ ;
-----------------
Total Monthly Rent: $ .
-----------------
Date on which Rent last paid:
-------------------------
(9) Tenant's Percentage Share of Increased Operating Costs: %
--------------
(10) Security Deposit: $ ; Prepaid Rent:
------------------------ ------------
(11) Assignees/Subtenants:
--------------------------------------------------
(12) Parking Spaces:
--------------------------------------------------------
(13) Lease Guarantor(s):
----------------------------------------------------
(14) Uncured Defaults by Landlord: None
-----------------------------------------
(15) Exclusive Uses:
--------------------------------------------------------
(16) Free Rent Months remaining after 6/01/98:
-------------------------------
(17) Tenant Improvements or other allowances due Tenant: $
------------------
(18) Comments, if any:
------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------
Name of Tenant
By:
-------------------------------------------
Date:
------------------------------------------
<PAGE> 1
EXHIBIT 10.17
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the
"Agreement") is made as of the ___ day of _________, 1998, among LEHMAN BROTHERS
REALTY CORPORATION, a Delaware corporation having a place of business at Three
World Financial Center, 200 Vesey Street, 20th Floor, New York, New York 10285,
its successors and assigns ("Lender"), ARDEN REALTY FINANCE __________, L.L.C.,
a Delaware limited liability company, with its principal office at 11601
Wilshire Boulevard, Suite ____, Los Angeles, California 90025 ("Landlord" or
"Borrower"), and ______________________, a ______________ corporation having a
place of business at ________________________________ ("Tenant").
INTRODUCTORY PROVISIONS
WHEREAS, Lender has made or is making a loan in the amount of
________________________________ ($______________) (the "Loan") to Borrower
pursuant to a Loan Agreement entered into between Borrower and Lender on or
about June __, 1998 (the "Loan Agreement");
WHEREAS, Borrower's obligation to repay the Loan is or will be secured,
in part, by first priority mortgage liens on ___________ (____) office and
industrial properties owned or to be owned by Borrower, including, without
limitation, the office property commonly known as _________________, (the
"Property") pursuant to a certain Deed of Trust, Assignment of Rents and Leases,
Security Agreement and Fixture Filing by Borrower to the trustee named therein
for the benefit of Lender and recorded or to be recorded in the land records of
[__________ COUNTY, CALIFORNIA] (the "Deed of Trust");
WHEREAS, Borrower's obligation to repay the Loan will be further
secured by an Assignment of Leases and Rents by Borrower to Lender recorded or
to be recorded among said land records (the "Assignment");
WHEREAS, Tenant is the tenant under that certain lease ("Lease") dated
___________, 19_____ made with Landlord, covering certain premises ("Premises")
at the Property as more particularly described in the Lease;
WHEREAS, Lender requires, as a condition to the making of the Loan,
that the Deed of Trust be and remain superior to the Lease and that its rights
under the Assignment be recognized;
WHEREAS, Tenant requires as a condition to the Lease being subordinate
to the Deed of Trust that its rights under the Lease be recognized; and
WHEREAS, Lender, Landlord, and Tenant desire to confirm their
understanding with respect to the Deed of Trust and the Lease.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein, and other valuable consideration, the receipt
and adequacy of which are hereby acknowledged, and with the understanding by
Tenant that Lender shall rely hereon in making and maintaining the Loan, Lender,
Landlord, and Tenant agree as follows:
1. Subordination. The Lease and the rights of Tenant thereunder are
subordinate and inferior to the Deed of Trust and any amendment, renewal,
substitution, extension or replacement thereof and each advance made thereunder
as though the Deed of Trust, and each such amendment, renewal, substitution,
extension or replacement were executed and recorded, and the advance made,
before the execution of the Lease.
2. Non-Disturbance. So long as Tenant is not in default (beyond any
period expressed in the Lease within which Tenant may cure such default) in the
payment of rent or in the performance or observance of any of the terms,
covenants or conditions of the Lease on Tenant's part to be performed or
observed, (i) Tenant's occupancy of the Premises shall not be disturbed by
Lender in the exercise of any of its rights under the Deed of Trust during the
term of the Lease, or any extension or renewal thereof made in accordance with
the terms of the Lease, and (ii) Lender will not join Tenant as a party
defendant in any action or proceeding for the purpose of terminating of Tenant's
interest and estate under the Lease because of any default under the Deed of
Trust.
3. Attornment and Certificates. In the event Lender succeeds to the
interest of Borrower as Landlord under the Lease, or if the Property or the
Premises are sold pursuant to the power of sale under the Deed of Trust or
otherwise pursuant to the exercise of remedies under the Deed of Trust, Tenant
shall attorn to Lender, or a purchaser upon any such foreclosure sale, and shall
recognize Lender, or such purchaser, thereafter as the Landlord under the Lease.
Such attornment shall be effective and self-operative without the execution of
any further instrument. Tenant agrees, however, to execute and deliver at any
time and from time to time, upon the request of any holder(s) of any of the
indebtedness or other obligations secured by the Deed of Trust, or upon request
of any such purchaser, (a) any instrument or certificate which, in the
reasonable judgment of such holder(s), or such purchaser, may be necessary or
appropriate in any such foreclosure proceeding or otherwise to evidence such
attornment, and (b) an instrument or certificate regarding the status of the
Lease, consisting of statements, if true (and if not true, specifying in what
respect), (i) that the Lease is in full force and effect, (ii) the date through
which rentals have been paid, (iii) the duration and date of the commencement of
the term of the Lease, (iv) the nature of any amendments or modifications to the
Lease, (v) that no default, or state of facts, which with the passage of time,
or notice, or both, would constitute a default, exists on the part of either
party to the Lease, (vi) the dates on which payments of additional rent, if any,
are due under the Lease and (vii) such other matters as such holder(s) or such
purchaser shall reasonably request.
4. Limitations. If Lender exercises any of its rights under the
Assignment or the Deed of Trust, or if Lender shall succeed to the interest of
Landlord under the Lease in any manner, or if any purchaser acquires the
Property, or the Premises, upon or after any foreclosure
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<PAGE> 3
of the Deed of Trust, or any deed in lieu thereof, Lender or such purchaser, as
the case may be, shall have the same remedies by entry, action or otherwise in
the event of any default by Tenant (beyond any period expressed in the Lease
within which Tenant may cure such default) in the payment of rent or in the
performance or observance of any of the terms, covenants and conditions of the
Lease on Tenant's part to be paid, performed or observed that the Landlord had
or would have had if Lender or such purchaser had not succeeded to the interest
of the present Landlord. From and after any such attornment, Lender or such
purchaser shall be bound to Tenant under all the terms, covenants and conditions
of the Lease and Tenant shall, from and after such attornment to Lender, or to
such purchaser, have the same remedies against Lender, or such purchaser, for
the breach of an agreement contained in the Lease that Tenant might have had
under the Lease against Landlord, if Lender or such purchaser had not succeeded
to the interest of Landlord. Provided, however, that Lender or such purchaser
shall only be bound during the period of its ownership, and that in the case of
the exercise by Lender of its rights under the Deed of Trust, or the Assignment,
or any combination thereof, or a foreclosure, or deed in lieu of foreclosure,
all Tenant claims shall be satisfied only out of the interest, if any, of
Lender, or such purchaser in the Property, and Lender and such purchaser shall
not be (a) liable for any act or omission of any prior landlord (including the
Landlord); or (b) liable for or incur any obligation with respect to the
construction of the Property or any improvements of the Premises or the
Property; or (c) subject to any offsets or defenses which Tenant might have
against any prior landlord (including the Landlord); or (d) bound by any rent or
additional rent which Tenant might have paid for more than the then current
rental period to any prior landlord (including the Landlord); or (e) bound by
any amendment or modification of the Lease, or any consent to any assignment or
sublet, made without Lender's prior written consent; or (f) bound by or
responsible for any security deposit not actually received by Lender; or (g)
liable for or incur any obligation with respect to any breach of warranties or
representations of any nature under the Lease or otherwise including without
limitation any warranties or representations expecting use, compliance with
zoning, landlord's title, landlord's authority, habitability and/or fitness for
any purpose, or possession; or (h) liable for consequential damages.
5. Rights Reserved. Nothing herein contained is intended, nor shall it
be construed, to abridge or adversely affect any right or remedy of: (a) the
Landlord under the Lease, or any subsequent Landlord, against the Tenant in the
event of any default by Tenant (beyond any period expressed in the Lease within
which Tenant may cure such default) in the payment of rent or in the performance
or observance of any of the terms, covenants or conditions of the Lease on
Tenant's part to be performed or observed; or (b) the Tenant under the Lease
against the original or any prior Landlord in the event of any default by the
original Landlord to pursue claims against such original or prior Landlord
whether or not such claim is barred against Lender or a subsequent purchaser.
6. Notice and Right to Cure. Tenant agrees to provide Lender with a
copy of each notice of default given to Landlord under the Lease, at the same
time as such notice of default is given to the Landlord, and that in the event
of any default by the Landlord under the Lease, Tenant will take no action to
terminate the Lease (a) if the default is not curable by Lender (so long as the
default does not interfere with Tenant's use and occupation of the premises), or
(b) if the default is curable by Lender, unless the default remains uncured for
a period of thirty (30)
-3-
<PAGE> 4
days after written notice thereof shall have been given, postage prepaid, to
Landlord at Landlord's address, and to Lender, at the address provided in
Section 7 below; provided, however, that if any such default is such that it
reasonably cannot be cured within such thirty (30) day period, such period shall
be extended for such additional period of time as shall be reasonably necessary
(including, without limitation, a reasonable period of time to obtain possession
of the Property and to foreclose the Deed of Trust), if Lender gives Tenant
written notice within such thirty (30) day period of Lender's election to
undertake the cure of the default and if curative action (including, without
limitation, action to obtain possession and foreclose) is instituted within a
reasonable period of time and is thereafter diligently pursued. Lender shall
have no obligation to cure any default under the Lease.
7. Notices. Any notice or communication required or permitted hereunder
shall be in writing, and shall be given or delivered: (i) by United States mail,
registered or certified, postage fully prepaid, return receipt requested, or
(ii) by recognized courier service or recognized overnight delivery service; and
in any event addressed to the party for which it is intended at its address set
forth below:
To Lender: Lehman Brothers Realty Corporation
Three World Financial Center
200 Vesey Street
New York, New York 10285
To Tenant: _______________________________________
_______________________________________
_______________________________________
_______________________________________
or such other address as such party may have previously specified by notice
given or delivered in accordance with the foregoing. Any such notice shall be
deemed to have been given and received on the date delivered or tendered for
delivery during normal business hours as herein provided.
8. No Oral Change. This Agreement may not be modified orally or in any
manner than by an agreement in writing signed by the parties hereto or their
respective successors in interest.
9. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective heirs, personal
representatives, successors and assigns, and any purchaser or purchasers at
foreclosure of the Property or any portion thereof, and their respective heirs,
personal representatives, successors and assigns.
10. Payment of Rent to Lender. Tenant acknowledges that it has notice
that the Lease and the rent and all sums due thereunder have been assigned to
Lender as part of the security for the obligations secured by the Deed of Trust.
In the event Lender notifies Tenant and demands that Tenant pay its rent and all
other sums due under the Lease to Lender, Tenant agrees that it
-4-
<PAGE> 5
will honor such demand and pay its rent and all other sums due under the Lease
to Lender, or Lender's designated agent, until otherwise notified in writing by
Lender. Borrower unconditionally authorizes and directs Tenant to make rental
payments directly to Lender following receipt of such notice and further agrees
that Tenant may rely upon such notice without any obligation to further inquire
as to whether or not any default exists under the Deed of Trust or the
Assignment, and that Borrower shall have no right or claim against Tenant for or
by reason of any payments of rent or other charges made by Tenant to Lender
following receipt of such notice.
11. No Amendment or Cancellation of Lease. So long as the Deed of Trust
remains undischarged of record, Tenant shall not amend, modify, cancel or
terminate the Lease, or agree to subordinate the Lease to any other mortgage,
without Lender's prior written consent in each instance.
12. Options. With respect to any options for additional space provided
to Tenant under the Lease, Lender agrees to recognize the same if Tenant is
entitled thereto under the Lease after the date on which Lender succeeds as
Landlord under the Lease by virtue of foreclosure or deed in lieu of foreclosure
or Lender takes possession of the Premises; provided, however, Lender shall not
be responsible for any acts of any prior landlord under the lease, or the act of
any tenant, subtenant or other party which prevents Lender from complying with
the provisions hereof and Tenant shall have no right to cancel the Lease or to
make any claims against Lender on account thereof.
13. Cautions. Captions and headings of sections are not parts of this
Agreement and shall not be deemed to affect the meaning or construction of any
of the provisions of this Agreement.
14. Counterparts. This Agreement may be executed in several
counterparts each of which when executed and delivered is an original, but all
of which together shall constitute one instrument.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of ___________________.
16. Parties Bound. The provisions of this Agreement shall be binding
upon and inure to the benefit of Tenant, Lender and Borrower and their
respective successors and assigns; provided, however, reference to successors
and assigns of Tenant shall not constitute a consent by Landlord or Borrower to
an assignment or sublet by Tenant, but has reference only to those instances in
which such consent is not required pursuant to the Lease or for which such
consent has been given.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
LENDER:
LEHMAN BROTHERS REALTY CORPORATION
By:___________________________________
Name:______________________________
Title:_____________________________
Date executed by Lender:______________
TENANT:
______________________________________
By:___________________________________
Name:______________________________
Title:_____________________________
Date executed by Tenant:______________
STATE OF ________________
COUNTY OF ______________
On the ___ day of ___________, 1998, before me, a notary public
personally appeared _______________________, a ______________, of Lehman
Brothers Realty Corporation personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument he person(s), or the entity upon which the person(s) acted,
executed this instrument.
WITNESS my hand and official seal.
_________________________________________
Notary Public
My commission expires:
-6-
<PAGE> 7
STATE OF ________________
COUNTY OF ______________
On the ___ day of ___________, 1998, before me, a notary public
personally appeared _______________________, a ______________, of , personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument he
person(s), or the entity upon which the person(s) acted, executed this
instrument.
WITNESS my hand and official seal.
_________________________________________
Notary Public
My commission expires:
-7-
<PAGE> 8
AGREEMENT OF BORROWER
Arden Realty Finance _____________, L.L.C., as Landlord under the
Lease, and Borrower under the Loan Agreement, the Deed of Trust and the other
Loan Documents, agrees for itself and its successors and assigns that:
1. The above agreement does not (a) constitute a waiver by Lender of
any of its rights under the Deed of Trust or any of the other Loan Documents; or
(b) in any way release Borrower from its obligations to comply with the terms,
provisions, conditions, covenants and agreements and clauses of the Deed of
Trust and other Loan Documents;
2. The provisions of the Deed of Trust remain in full force and effect
and must be complied with by Borrower;
3. Tenant shall have the right to rely on any notice or request from
Lender which directs Tenant to pay rent to Lender without any obligation to
inquire as to whether or not a default exists and notwithstanding any notice
from or claim of Borrower to the contrary. Borrower shall have no right or claim
against Tenant for rent paid to Lender after Lender so notifies Tenant to make
payment of rent to Lender; and
4. The Borrower shall be bound by all of the terms, conditions and
provisions of the foregoing Agreement in all respects.
Executed and delivered as a sealed instrument as of the __ day of
_____________, 1998.
BORROWER:
ARDEN REALTY FINANCE ___________,
L.L.C.
By:_____________________________________
Name:________________________________
Title:_______________________________
Date executed by Borrower:___________
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<PAGE> 9
STATE OF ________________
COUNTY OF ______________
On the ___ day of ___________, 1998, before me, a notary public
personally appeared _______________________, a ______________, of Arden Realty
________, III, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument he person(s), or the entity upon which the person(s) acted,
executed this instrument.
WITNESS my hand and official seal.
_________________________________________
Notary Public
My commission expires:
-9-
<PAGE> 1
EXHIBIT 10.18
DEED OF TRUST,
ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT, AND
FIXTURE FILING
Dated as of June 8, 1998
Made by
ARDEN REALTY FINANCE IV, L.L.C.
as Grantor,
to
COMMONWEALTH LAND TITLE COMPANY
as Trustee
for the benefit of
LEHMAN BROTHERS REALTY CORPORATION
as Beneficiary
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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RECITALS ...............................................................1
GRANTING CLAUSES........................................................2
1. COVENANTS, REPRESENTATIONS AND WARRANTIES......................................5
1.1. Payment of Mortgage Note; Performance of Other Obligations................5
1.2. General Representations, Warranties and Covenants.........................5
1.2.1. Authority, Enforceability, Etc...................................5
1.2.2. No Defaults......................................................5
1.2.3. No Litigation....................................................5
1.2.4. Compliance with Law, Etc.........................................5
1.2.5. Good Title.......................................................6
1.2.6. Covenant of Title................................................6
1.2.7. Negative Pledge..................................................7
1.2.8. Necessary Permits................................................7
1.2.9. Flood Zone.......................................................7
1.2.10. Separate Tax Lot; Assessments...................................7
1.3. Title Insurance...........................................................7
1.4. Recordation; Preservation of Lien.........................................8
1.5. Taxes, Liens, and Permitted Encumbrances..................................8
1.5.1. Taxes............................................................8
1.5.2. Liens; Permitted Encumbrances....................................8
1.5.3. Permitted Contests...............................................8
1.5.4. No Credit for Payment of Taxes or Impositions....................9
1.6. Care of the Property......................................................9
1.6.1. Condition of the Property........................................9
1.6.2. Alterations; Building Only.......................................9
1.6.3. Right to Inspect................................................10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
1.6.4. Compliance with Laws and Covenants..............................10
1.7. Insurance................................................................10
1.7.1. Risks to Be Insured.............................................10
1.7.2. Qualified Insurers..............................................11
1.7.3. Policy Provisions...............................................11
1.7.4. Delivery of Certificates........................................12
1.7.5. No Separate Insurance...........................................12
1.8. Damage to or Destruction of Property.....................................13
1.8.1. Notice..........................................................13
1.8.2. Restoration.....................................................13
1.8.3. Application of Insurance Proceeds or Awards.....................13
1.9. Condemnation.............................................................14
1.9.1. Grantor to Give Notice, Etc.....................................14
1.9.2. Total and Substantial Taking....................................15
1.9.3. Partial and Temporary Taking....................................15
1.10. Notices Concerning the Property.........................................15
1.11. Alterations.............................................................16
1.11.1. Alteration Conditions..........................................16
1.11.2. Right to Inspect...............................................16
1.11.3. Cooperation....................................................16
1.12. Indemnification by the Grantor..........................................17
1.13. Expenses................................................................17
1.14. Monthly Escrow Deposits.................................................18
1.15. Further Assurances......................................................18
1.16. Additions to Security...................................................18
1.17. U.C.C. Security Agreement and Fixture Filing............................18
1.17.1. Grant of Security..............................................18
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
1.17.2. Financing Statements...........................................19
1.17.3. Multiple Remedies..............................................19
1.17.4. Waiver of Rights...............................................19
1.17.5. Expenses of Disposition of the Properties......................19
1.17.6. Fixture Filing.................................................19
1.18. INTENTIONALLY DELETED...................................................20
1.19. Compliance with Access Laws.............................................20
1.20. Assignment of Rents and Grantor's Interest in Leases; Lease Covenants...20
1.20.1. Assignment and License.........................................20
1.20.2. Rights and Powers Assigned.....................................20
1.20.3. No Set-Off.....................................................21
1.20.4. Termination of License.........................................21
1.20.5. Right to Collect Upon Event of Default.........................21
1.20.6. Leases Unaffected..............................................22
1.20.7. Inconsistent Actions Void......................................22
1.20.8. Satisfaction and Release.......................................22
1.20.9. No Obligations.................................................22
1.20.10. Rights in Litigation and Bankruptcy...........................22
1.20.11. Additional Lease Provisions...................................23
1.20.12. Assignment to Beneficiary Controlling.........................25
1.21. Environmental Covenants and Representations.............................25
1.22. Release.................................................................26
1.22.1. Satisfaction of Obligations....................................26
1.22.2. Release of Building; Partial Releases..........................26
1.23. Transfers, Indebtedness and Subordinate Liens...........................27
1.23.1. Transfers......................................................27
1.23.2. Indebtedness...................................................27
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
1.23.3. Additional Permitted Transfers.................................27
1.23.4. Delivery of Documents to the Beneficiary.......................28
1.24. Utility Services........................................................28
2. EVENTS OF DEFAULT.............................................................28
2.1. Payment Default..........................................................28
2.2. Material Breach of Representation and Warranty...........................28
2.3. Material Breach of Covenant..............................................28
2.4. Event of Default Under Loan Agreement....................................29
3. REMEDIES......................................................................29
3.1. Legal Proceedings; Cost of Enforcement...................................29
3.1.1. Legal Proceedings...............................................29
3.1.2. Cost of Enforcement.............................................29
3.2. Acceleration.............................................................29
3.3. Right to Perform Grantor's Covenants, Etc................................29
3.4. Possession Upon Default..................................................30
3.4.1. Surrender or Taking of Possession...............................30
3.4.2. Entering into Possession........................................30
3.4.3. Satisfaction of Default.........................................31
3.5. Sale of Property.........................................................31
3.6. Appointment of Receiver..................................................32
3.7. Trustees Authorized to Execute Deeds, Etc................................32
3.8. Purchase of the Property by the Beneficiary..............................33
3.9. Foreclosure of Personalty................................................33
3.10. Receipt a Sufficient Discharge to Purchaser.............................33
3.11. Sale Shall be a Bar Against Grantor.....................................33
3.12. Application of Proceeds of Sale and Other Monies........................33
3.13. Remedies Cumulative.....................................................34
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
3.14. No Waiver, Etc..........................................................34
3.15. Cross-Collateralization; Waiver of Marshalling, Appraisal, Valuation....34
4. CONCERNING TRUSTEES...........................................................35
4.1. Acts of One Trustee Valid................................................35
4.2. Removal and Substitution of Trustees.....................................35
4.3. Trustee's Compensation, Expenses, Etc....................................36
5. MISCELLANEOUS.................................................................36
5.1. Notices..................................................................36
5.2. Invalidity of Any Provision; Entire Agreement............................37
5.3. Amendment................................................................37
5.4. Parties Bound and Benefited..............................................37
5.5. Effect of Renewal, Amendment, Waiver, Etc................................37
5.6. Estoppel Certificates....................................................37
5.7. Headings.................................................................38
5.8. Pronouns.................................................................38
5.9. Governing Law; Service of Process........................................38
5.10. Waiver of Jury Trial....................................................38
5.11. Limitation of Liability.................................................39
5.12. Assignment to Finance Trustee...........................................39
5.12.1. Anticipated Assignment.........................................39
5.12.2. Recognition of Finance Trustee as Beneficiary..................40
5.12.3. Delivery of Amounts to Servicer................................40
6. DEFINITIONS...................................................................40
6.1. Certain Defined Terms....................................................40
</TABLE>
<PAGE> 7
EXHIBITS
EXHIBIT A Description of Land
<PAGE> 8
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY
AGREEMENT, AND FIXTURE FILING (this "Deed of Trust") is made and entered into as
of this 8th day of June, 1998, by and between ARDEN REALTY FINANCE IV, L.L.C., a
Delaware limited liability company having its principal offices at 11601
Wilshire Boulevard, Los Angeles, California 90025 ("Grantor") to COMMONWEALTH
LAND TITLE COMPANY (the "Trustee"), for the benefit of LEHMAN BROTHERS REALTY
CORPORATION having an address at Three World Financial Center, 200 Vesey Street,
New York, New York 10285 ("Beneficiary").
RECITALS
A. Beneficiary has, on or about the date hereof, made a loan (the
"Loan") to Grantor in the aggregate principal amount of One Hundred Million Six
Hundred Thousand Dollars ($100,600,000.00) pursuant to that certain Loan
Agreement by and between Beneficiary and Grantor, dated as of June 8, 1998 (the
"Loan Agreement"), which Loan is evidenced by the Mortgage Note (the "Mortgage
Note") of even date herewith by Grantor to the order of Beneficiary (together
with its successors and assigns thereto, the "Noteholder") in the aggregate
principal amount of the Loan, which Mortgage Note has a final maturity date of
April 16, 2028.
B. The Grantor is the owner of, among other things, a fee interest
in the twelve (12) parcels of land described on Exhibit A-1 through Exhibit A-12
attached hereto and incorporated herein (collectively, the "Land").
C. On each parcel of Land is located one or more office buildings
(the building or buildings located on an individual parcel of Land, whether one
or more, shall be known as a "Building" and the buildings located on all twelve
(12) parcels of Land collectively shall be known as the "Buildings").
D. In connection with the execution and delivery of the Mortgage
Note and as additional security for the Mortgage Note, Grantor is executing and
delivering this Deed of Trust for the purpose of granting, conveying,
transferring and assigning to the Trustee for the benefit of the Beneficiary a
first priority lien on and security interest in all of Grantor's right, title
and interest in and to the Land, together with the Buildings and all other
buildings, structures, parking structures, fixtures and improvements now or
hereafter located or placed thereon (which Buildings and other buildings,
structures, fixtures and improvements, together with any additions thereto or
alterations or replacements thereof, are sometimes herein referred to as the
"Improvements") and in certain other Property more fully described herein, as
security for the Loan and the payment and satisfaction when due of the
Obligations (as defined herein).
E. Without limiting Beneficiary's rights otherwise to assign this
Deed of Trust, the Loan Agreement, the Mortgage Note and all other Loan
Documents (as defined in the Loan Agreement), all of Beneficiary's rights under
this Deed of Trust, the Loan Agreement, the Mortgage Note and all other Loan
Documents (as defined in the Loan Agreement) may be assigned by Beneficiary,
along with mortgage loans made to other borrowers, to, among others, an
institutional trustee (the "Finance Trustee") under the Pooling and Servicing
Agreement (as defined in the Loan Agreement) for the benefit of the holders from
time to time of certain mortgage-backed certificates (the "Certificates"), and
may be serviced by a professional loan servicing company selected by Beneficiary
(the "Servicer") on behalf of the Finance Trustee.
F. A glossary of capitalized terms used herein may be found at
Article VI hereof.
NOW, THEREFORE, in order to secure: (i) payment by Grantor, as and when
due, of the principal of and interest on the Mortgage Note, (ii) any Defeasance
Deposits and Yield Maintenance Payments (as defined in the Loan Agreement) that
may become due thereunder or under any other Loan Document, (iii) any and all
other amounts that may become due and payable under the Mortgage Note, (iv) the
payment of all amounts payable under this Deed of Trust, the Loan Agreement and
the other Loan Documents, (v) the performance by Grantor of its covenants and
agreements contained in this Deed of Trust, the Loan Agreement and the other
Loan Documents, (vi) if the Securitization has occurred, the reimbursement by
Grantor to Beneficiary of all sums required to be paid by Beneficiary under the
Pooling and Servicing Agreement as the same may be amended, modified or
supplemented
<PAGE> 9
(the items in clauses (i) through (vi) of this paragraph being sometimes
collectively referred to herein as the "Obligations"); and for other good and
valuable consideration, the receipt and sufficiency of which the parties hereto
acknowledge, Grantor, Beneficiary and the Trustee by these presents do hereby
agree as follows:
GRANTING CLAUSES
Grantor by these presents hereby grants, bargains, sells, assigns,
mortgages, pledges, conveys, confirms, transfers and warrants to the Trustee,
and its successors and assigns, IN TRUST for Beneficiary, with power of sale and
right of entry and possession, all estate, right, title and interest of Grantor,
whether now owned or hereafter acquired, and grants to the Trustee for the
benefit of Beneficiary a security interest in and to, all right, title and
interest of Grantor in and to the following (such right, title and interest of
the Grantor being hereinafter referred to as the "Property"):
(i) the Land described in Exhibit A-1 through Exhibit A-12
attached hereto, together with the Buildings and all other Improvements located
on the Land;
(ii) all rights and interests appurtenant to or benefiting the
Land and/or the Improvements, including, without limitation, (a) all easements,
rights of way, streets, ways, alleys or passages, all sewer rights, water, water
courses, water rights and powers, riparian rights, and public places adjoining,
benefiting or appurtenant to said Land, and any other interests in property
constituting appurtenances to the Land or the Improvements, or which hereafter
shall in any way belong, relate or be appurtenant thereto and all land lying in
the bed of any street, road or avenue opened or proposed, in front of or
adjoining the Land and (b) all hereditaments, tenements, gas, oil, minerals and
mineral rights and other rights of every kind and nature whatsoever, relating to
or located in, on or under the Land or the Improvements and all other rights and
privileges thereunto belonging or appertaining, and all extensions, additions,
improvements, betterments, renewals, substitutions and replacements to or of any
of the rights and interests described in subparagraphs (a) and (b) above
(hereinafter, together with the items described in Granting Clause (i) and the
real property, if any, described in Granting Clause (iii) being hereinafter
sometimes referred to as the "Real Property Rights");
(iii) all real and personal property of whatever kind or nature
whatsoever used or useful in the operation of the Buildings, or any of them or
the other Improvements, or in any way related to the Land, the Buildings of any
of them or the other Improvements, whether located on, affixed to, or attached
to the Land, the Buildings or the other Improvements or otherwise related
thereto or arising therefrom, and whether tangible or intangible, direct or
indirect, fully matured or contingent, and all extensions, additions,
improvements, betterments, renewals, substitutions, and replacements to or of
any of the foregoing, including, without limitation all machinery; all
equipment; all screens, window shades, blinds, storm doors and windows; all
lighting, laundry, incinerating and power equipment; all engines, boilers,
machines, motors, furnaces, compressors and transformers, all generating
equipment; all pumps, tanks, ducts, conduits, wires, switches, fans,
switchboards, and other electrical equipment and fixtures; all telephones,
televisions, radios, remote control units, cable boxes, and other electronic
equipment and all vending machines; all piping, tubing, plumbing equipment and
fixtures; all heating, refrigeration, air conditioning, cooling, ventilating,
sprinkling, water, power and communications equipment, systems and apparatus;
all fire prevention, alarm and extinguishing systems and apparatus; all lift,
elevator and escalator equipment and apparatus; all partitions, exterior and
interior signs, gas fixtures, stoves, ovens, refrigerators, garbage disposals
and compactors, dishwashers, cabinets, mirrors, mantles, floor coverings,
carpets, rugs, draperies and other furnishings and furniture installed or to be
installed or used or usable in any way in the operation of any Improvements or
appurtenant facilities erected or to be erected in or upon any of the Land; and
all sculpture, art and other artifacts; it being mutually intended, agreed and
declared by the parties hereto that all items of the foregoing property that now
are or hereafter become attached or affixed to any of the Land or the
Improvements in such a way as to constitute them "fixtures" under applicable law
(the "Fixtures"), shall, to the fullest extent permitted by law, be deemed to be
and form a part of the Land and Improvements and, for purposes of this Deed of
Trust, shall be deemed to be real estate subject to the lien created by this
Deed of Trust;
(iv) any and all additions and accessions to the foregoing, and
all proceeds thereof, including, without limitation, proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or
-3-
<PAGE> 10
liquidated claims, including, without limitation, all Awards (as defined in
Section 1.9 hereof) and other payments as a result of any Taking (as defined in
Section 1.9 hereof), all Insurance Proceeds (as defined in Section 1.8 hereof),
and all proceeds of the title insurance referred to in Section 1.3 hereof,
together with all amounts received by the Beneficiary or the Trustee or due and
payable to the Trustee or the Beneficiary pursuant to this Deed of Trust,
including, without limitation, any unearned premiums or refunds of premiums on
any insurance policies covering all or any part of the Land or Improvements and
the right to receive and apply the proceeds of any insurance, or of any
judgments or settlements made in lieu thereof for damage to or diminution of the
Land or Improvements, in accordance with the terms of this Deed of Trust;
(v) all real estate tax refunds and credits and all awards or
payments, including interest on any of them, and the right to receive the same,
which Grantor may have, which may be made with respect to any of the Land or any
Improvements whether from a Taking thereof or for any other injury to, decrease
in the value of, or other occurrence affecting any of the Land or any
Improvements, subject, in each case, to the rights of tenants under any leases
or subleases of the Property to the extent such leases are not subordinate to
the terms of this Deed of Trust;
(vi) all leases and other agreements affecting the use,
enjoyment or occupancy of the Land, the Buildings and the Improvements or any
portion thereof heretofore or hereafter entered into, whether before or after
the filing by or against Grantor of any petition for relief under 11 U.S.C.
Section 101 et seq., as the same may be amended from time to time (the
"Bankruptcy Code") (the "Leases"), and all right, title and interest of Grantor,
its successors and assigns therein and thereunder including, without limitation,
cash or securities deposited thereunder to secure the performance by the lessees
of their obligations thereunder and all Rents (as defined in the Loan
Agreements), additional rents, revenues, issues and profits (including all oil
and gas and other mineral royalties and bonuses, if any) from the Land, the
Buildings and the Improvements whether paid or payable under Leases or otherwise
and whether paid or accruing before of after the filing by or against Grantor of
any petition for relief under the Bankruptcy Code (the "Rents") and all proceeds
from the sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Obligations;
(vii) all present and future licenses, contracts or other
agreements relating to the ownership of the Land and/or the Improvements
(including all of Grantor's rights under any contracts for the sale of any
portion of the Land or the Improvements, and all revenues and royalties under
any oil, gas and mineral leases relating to the Land) (collectively, the
"Contracts") and revenues derived by the Grantor therefrom and otherwise from
the Land and Improvements;
(viii) all "general intangibles" (as defined the Uniform
Commercial Code in effect in the State of California and, to the extent a
broader definition is contained therein, in the State of New York) (the
"U.C.C.") relating to any of the Land or any of the Improvements, including,
without limitation, to the extent assignable, all rights relating to design,
development, operation, and use of the Land or Improvements, all certificates of
occupancy, zoning variances, building, use or other permits, approvals,
authorizations, licenses and consents obtained from any governmental agency in
connection with the development, use, operation or management of any of the Land
or any of the Improvements, all construction, service, engineering, consulting,
architectural and other similar contracts concerning the design, construction,
operation, occupancy and/or use of any of the Land or any of the Improvements,
all architectural drawings, plans, specifications, soil tests, appraisals,
engineering reports and similar materials relating to all or any portion of the
Land or Improvements, and all payment and performance bonds or warranties or
guarantees relating to any of the Land or any of the Improvements; all rights in
the Lockbox Account, the Cash Collateral Account, the TI Reserve Account,
Environmental Reserve Account, the Tax and Insurance Escrow Account and any
investments of Rents, rights of Grantor in the Management Agreement (as defined
in the Loan Agreement), the Contribution Agreement (as defined in the Loan
Agreement), Grantor's limited liability company agreement, and all rights under
the Leases, all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos,
other source and business identifiers, trademark registrations and applications
for registration used exclusively at or relating exclusively to any part of the
Property; all renewals, extensions and continuations-in-part of the items
referred to above; any written agreements granting to Grantor any right to use
any trademark or trademark registration at or in connection with any part of the
Property; and the right of Grantor to sue for past, present and future
infringements
-4-
<PAGE> 11
of the foregoing; and the right in the name and on behalf of Grantor to appear
in and defend any action or proceeding brought with respect to any part of the
Property and to commence any action or proceeding to protect the interest of the
Beneficiary in such Property;
(ix) all "accounts," "goods," "documents," "instruments," and
"chattel paper" (as those terms are defined in the U.C.C.), including, without
limitation, equipment, inventory, motor vehicles, all items of personal property
of the kind described in clause (iii) above, all stocks, bonds, interests in
mutual funds and other investments, all rights under equipment leases, all bills
of lading and warehouse receipts, and other assets of any kind;
(x) all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Property, hereafter acquired by or released to Grantor or constructed,
assembled, or placed by Grantor thereon, immediately upon such acquisition,
release, construction, assembling or placement, as the case may be, and in each
such case, without any further mortgage, conveyance, assignment or other act by
Grantor, any of such extensions, improvements, betterments, renewals,
substitutes and replacements shall become subject to the lien of this Deed of
Trust, and the security and other interests created hereby, as fully and
completely, and with the same effect, as though now owned by Grantor and
specifically described herein; and
(xi) all other proceeds (including, without limitation, as
defined in the U.C.C.), both cash and noncash, of the foregoing which may be
sold or otherwise disposed of.
TO HAVE AND TO HOLD the said Property unto the Trustee, in trust for the
benefit of Beneficiary, and its or their successors and assigns forever to
secure payment to Beneficiary of the full principal and interest on the Mortgage
Note and the performance by Grantor of the other Obligations thereunder, under
this Deed of Trust and under the other Loan Documents; provided, however, that,
except as otherwise provided in Schedule 5.11 to the Loan Agreement, unless and
until an Event of Default (as defined in Article II hereof) shall have occurred
and be continuing, Grantor shall have the right to possess and enjoy the
Property, and to receive the rents, issues, and profits therefrom, subject to
the terms of the Loan Agreement, the Mortgage Note, this Deed of Trust, and the
other Loan Documents; and provided, further, that if the Grantor shall pay and
satisfy in full the principal of and interest on the Mortgage Note and all other
monetary Obligations which this Deed of Trust by its terms secures, then the
lien of this Deed of Trust shall be released by the Trustee to Grantor upon the
written request and at the expense of Grantor; and provided, further, that
nothing herein contained shall be construed as constituting Beneficiary or the
Trustee as a mortgagee-in-possession unless and to the extent Beneficiary or the
Trustee shall have taken actual possession of the Land and Improvements;
provided, further, that nothing contained in this Deed of Trust shall be
construed as imposing on Beneficiary or the Trustee any of the obligations of
the lessor under any lease of the Land or the Improvements, or of any contract
party to any of the Leases or the Contracts, unless the Beneficiary or the
Trustee shall have foreclosed the lien of this Deed of Trust or expressly
assumed such obligations in writing; and provided, further, that all items of
the foregoing Property that may constitute collateral of the kind in which a
security interest may be created and perfected under the Uniform Commercial Code
as in effect in the State in which the Land is located shall be subject to the
grant of security interest made in Section 1.17 hereof, which Section 1.17 shall
be supplemental to, and shall not be deemed to limit, supersede or impair, these
Granting Clauses.
AND IT IS HEREBY COVENANTED AND AGREED by Grantor, for itself and its
heirs, legal representatives, successors, and assigns, that the Property is to
be held and applied subject to the terms herein set forth, and Grantor, for
itself and its heirs, legal representatives, successors, and assigns, hereby
covenants and agrees with Beneficiary (and the Trustee for the benefit of
Beneficiary, as applicable), as follows:
ARTICLE I
1. COVENANTS, REPRESENTATIONS AND WARRANTIES
1.1. Payment of Mortgage Note; Performance of Other Obligations
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<PAGE> 12
Grantor represents and warrants that it has duly authorized, executed,
issued and delivered the Mortgage Note, this Deed of Trust and the other Loan
Documents and covenants that it shall duly and punctually pay and perform all of
its Obligations as the same shall become due and payable, and shall otherwise
duly, fully and timely comply with all of the terms, covenants, conditions, and
agreements contained in (or incorporated into) this Deed of Trust, the Mortgage
Note and the other Loan Documents.
1.2. General Representations, Warranties and Covenants
Grantor hereby covenants, represents and warrants that:
1.2.1. Authority, Enforceability, Etc.
This Deed of Trust, the Mortgage Note and all of the other Loan
Documents executed by Grantor have been duly executed and delivered by Grantor
pursuant to authority legally adequate therefor, and Grantor has been and is
authorized and empowered by all necessary persons having the power of direction
over it to execute and deliver this Deed of Trust, the Mortgage Note and each
such other Loan Document and to carry out the transactions contemplated herein
and therein. Each of this Deed of Trust, the Mortgage Note and each such other
Loan Document is a legal, valid and binding obligation of Grantor, enforceable
against Grantor in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law); and
1.2.2. No Defaults
Grantor is not now in default in any material respect under any
instruments or obligations relating to all or any part of the Property, and no
party has asserted in writing any material claim of default against Grantor
relating to all or any part of the Property. The execution and delivery by
Grantor of this Deed of Trust, the Mortgage Note, the Loan Agreement or any
other Loan Document, and the consummation of the transactions contemplated
hereby or thereby, will not result in any breach of, or constitute a default
under, any mortgage, lease, loan agreement, credit agreement, trust indenture,
deed of trust, or other instrument, contract or agreement to which Grantor is a
party or by which it or the Property (or any part thereof) is bound or affected,
nor do any such instruments, contracts or agreements impose any obligations upon
Grantor that are inconsistent with the obligations imposed on Grantor hereunder
or under the Mortgage Note, the Loan Agreement or any other Loan Document; and
1.2.3. No Litigation
There are no actions, investigations, suits or proceedings (including,
without limitation, any condemnation or bankruptcy proceedings) pending or, to
Grantor's knowledge, threatened against or affecting any of the Property, which
may materially and adversely affect any of the Property or the validity or
enforceability of this Deed of Trust, the Mortgage Note, the Loan Agreement, or
any other Loan Document, at law or in equity, or before or by any governmental
authority, and Grantor is not in default with respect to any writ, injunction,
decree or demand of any court or any governmental authority affecting any of the
Property; and
1.2.4. Compliance with Law, Etc.
All of the Property and the use, operation and maintenance thereof
comply in all material respects with (and Grantor is in compliance in all
material respects with) all restrictive covenants, zoning and subdivision
regulations, and ordinances and building codes applicable to the Property, and
each Building and other Improvement complies in all material respects with the
requirements of the Americans with Disabilities Act of 1990, and all rules,
regulations and orders issued pursuant thereto, to the extent applicable
thereto; and
1.2.5. Good Title
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Grantor is well seized and possessed of, and is transferring to the
Trustee, good, valid and marketable fee simple title in and to the Land and
Improvements, and good and valid title to all of the other Property, in each
case, free and clear of any mortgage, deed of trust, lien, claim, option,
encumbrance, encroachment, reservation, right of way, easement, covenant, lease,
condition or restriction, pledge, security interest, hypothecation, assignment,
assigned deposit arrangement, charge or defect of any kind, or any preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including, without limitation, any conditional sale or other
title retention agreement (all of the foregoing being hereinafter referred to
each individually as a "Lien" and collectively as "Liens"), subject only to the
following (the "Permitted Liens and Encumbrances") (none of which Permitted
Liens and Encumbrances do or will materially or adversely interfere with (x) the
ability of Grantor to pay the Obligations in full or (y) the use, operation or
value of any of the Property as of the date hereof):
(i) Liens created by the Loan Documents in favor of the
Beneficiary (or the Trustee, as applicable);
(ii) Liens, if any, for taxes, assessments and other
charges that are not yet due or payable (or are due and payable but not yet
delinquent);
(iii) Applicable building and zoning laws and regulations
and other applicable laws and regulations affecting the use and occupancy of any
of the Property;
(iv) Liens of mechanics and materialmen currently
affecting the Property against which the Beneficiary has been adequately insured
by the applicable Title Insurance Policy described in Section 1.3 hereof and
future liens of mechanics or materialmen for work or services for which payment
is not yet due or the payment of which is being contested by appropriate
proceedings in accordance with Section 1.5.3 hereof and as to which Grantor has
deposited with the Beneficiary the amounts required by Section 6.2 of the Loan
Agreement;
(v) Matters set forth on Schedule B to the Title
Insurance Policies;
(vi) INTENTIONALLY DELETED
(vii) Easements, restrictions, covenants, reservations
and rights of way granted in the ordinary course of business for traffic
circulation, ingress, egress, parking, access, water and sewer lines, telephone
and telegraph lines, electric lines or other utilities or for other similar
purposes that are not encroached upon by the Improvements;
(viii) the Leases;
(ix) Liens securing purchase money financing or finance
leasing of the kind permitted by Section 1.5.2 hereof; and
(x) Matters described as "Permitted Liens" in the Loan
Agreement; and
1.2.6. Covenant of Title
Grantor, at its own expense, does hereby and shall forever warrant and
defend to the Trustee for the benefit of Beneficiary, and its or their
successors and assigns forever, title to the Property as described in Section
1.2.5 and the lien and interest of the Trustee created by this Deed of Trust on
and in the Property, and the first priority thereof, against all claims and
demands of any and all persons whomsoever, and shall maintain and preserve such
title and lien so long as the Mortgage Note, the Loan Agreement, this Deed of
Trust, or any other Loan Document is outstanding and until such time as all sums
secured hereby and thereby have been paid in full and all other Obligations have
been duly performed; and
1.2.7. Negative Pledge
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Except as set forth in Sections 1.5.2 and 1.23 hereof, during the term
of this Deed of Trust, Grantor shall not, directly or indirectly, assign,
transfer, pledge, convey, mortgage or encumber, or permit the assignment,
transfer, pledge, conveyance, mortgaging or encumbrance of, any or all of
Grantor's legal or equitable interest in the Property, other than Permitted
Liens and Encumbrances, without the prior written consent of the Beneficiary;
and
1.2.8. Necessary Permits
Grantor owns, or otherwise has the right to use or is in possession of,
all licenses, permits and government approvals or authorizations that are
required by applicable law to occupy and conduct its operations on or in the
Land and Improvements as currently conducted, except to the extent the lack of
any such license, permit, approval or authorization would not reasonably be
expected to materially adversely affect the occupancy of the Land or
Improvements or any portion thereof, the operation or value of the Improvements
or any portion thereof or the ability of Beneficiary or the Trustee as
applicable to exercise their rights or remedies hereunder; and
1.2.9. Flood Zone
No portion of the Improvements is located in an area identified by the
Secretary of Housing and Urban Development as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the Flood
Disaster Act of 1973, as amended, or any successor law, or, if located within
any such area, Grantor has obtained and will maintain the insurance prescribed
in Section 1.7.1(iv); and
1.2.10. Separate Tax Lot; Assessments
(a) Each Individual Property is assessed for real estate tax purposes
as one or more wholly independent tax lot or lots, separate from any adjoining
land or improvements not constituting a part of such lot or lots, and no other
land or improvements is assessed and taxed together with the Property or any
portion thereof; and
(b) To Grantor's knowledge, there are no pending or, proposed,
special or other assessments for public improvements or otherwise affecting any
of the Property, nor, to Grantor's knowledge, are there any contemplated
improvements to any of the Property that may cause or result in any special or
other assessments.
1.3. Title Insurance
The Grantor has delivered or caused to be delivered to the Beneficiary
one or more prepaid Mortgagee's policies of title insurance (each a "Title
Insurance Policy" and collectively, the "Title Insurance Policies") issued by
Commonwealth Land Title Insurance Company or another title insurance company
reasonably satisfactory to Beneficiary (singly or collectively, the "Title
Company"), insuring the interest of Beneficiary as holder of a valid
first-priority mortgage, deed of trust, or similar lien upon good and marketable
fee simple title to the Land and Improvements in a total amount equal in the
aggregate to the original principal amount of the Mortgage Note, subject only to
Permitted Liens and Encumbrances. All proceeds received by Beneficiary or the
Trustee for any loss under such title insurance policy, or under any title
insurance policies delivered to Beneficiary in substitution therefor or in
replacement thereof, shall be received by Beneficiary and distributed in the
manner set forth in Section 2.4.5 of the Loan Agreement.
1.4. Recordation; Preservation of Lien
Grantor, at its expense, shall at all times cause this Deed of Trust and
all amendments and supplements hereto, and such financing statements,
continuation statements, and other instruments as may be reasonably required by
Beneficiary or the Trustee, or applicable law to be recorded, registered, and
filed in such manner and in such places as may be required or advisable under
applicable law in the good faith judgment of Beneficiary or the Trustee to
establish, preserve, maintain, and protect the lien of this Deed of Trust on all
or substantially all of the Property (including, without limitation, any of the
Property acquired after the execution hereof), and to perfect and maintain the
security interest granted by this Deed of Trust or any other Loan Document with
respect to the
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Property referred to herein, and shall pay all recording, registration, filing,
and other taxes, fees, and charges relating thereto, and shall comply in all
material respects with all laws, rules, and regulations in connection therewith.
1.5. Taxes, Liens, and Permitted Encumbrances
1.5.1. Taxes
Subject to the right of contest described in Section 1.5.3 hereof,
Grantor shall pay all taxes, assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof), ground rents, water, sewer and other rents,
rates and charges, excises, levies, license fees, permit fees, inspection fees,
common area maintenance fees, dues and fees owing to property owners'
associations having jurisdiction over any of the Property and other
authorization fees and other charges (collectively, "Impositions"), in each case
whether general or special, ordinary or extraordinary, foreseen or unforeseen,
public or private, of every character (including all interest and penalties
thereon), which at any time from and after the date hereof may be assessed,
levied, confirmed or imposed on or in respect of, or be a lien upon (i) the
Property, or any part thereof or any rent therefrom or any estate, right, title
or interest therein, or (ii) any occupancy, use or possession of or activity
conducted on the Property or any part thereof. Such payments shall be made
before any fine, penalty, interest or cost may be added for nonpayment. At
Beneficiary's request, Grantor shall furnish to Beneficiary official receipts or
other satisfactory proof evidencing such payments. Upon default by Grantor in
the payment of any such tax, assessment or other charge, unless the same is
being properly contested in accordance with Section 1.5.3 hereof, Beneficiary
may (but shall have no obligation to) pay or cause to be paid the amount
thereof, together with any amount of interest or penalties that may be due with
respect thereto, and such amounts (together with any expenses incurred by
Beneficiary in connection therewith, including, without limitation, reasonable
attorneys' fees and charges) shall be secured by this Deed of Trust and shall be
repaid upon demand, together with interest thereon at the Default Interest Rate
specified in the Loan Agreement.
1.5.2. Liens; Permitted Encumbrances
The Grantor shall not effect any financing using the Property or any
part thereof as security, except for (i) the Loan and (ii) purchase money
financings or finance leasing of particular items of furniture, fixtures and
equipment to the extent permitted under the Loan Agreement, and shall not
directly or indirectly create or permit or suffer to be created or to remain,
and will discharge, or promptly cause to be discharged, any Lien on or with
respect to the Property or any part thereof, or Beneficiary's or the Trustee's,
as applicable, interest therein, other than (1) this Deed of Trust, and (2) the
Permitted Liens and Encumbrances.
1.5.3. Permitted Contests
Anything to the contrary contained herein notwithstanding, Grantor, at
its expense, may contest, by appropriate legal, administrative or other
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Impositions, including any
taxes, assessments, charges or other amounts required to be paid pursuant to the
provisions of this Section 1.5, or the application of any instrument of record
affecting the Property or any part thereof (other than the Loan Documents), or
any claims or judgments of mechanics, materialmen, suppliers, vendors or other
Persons or any Lien therefor, or any other charge or cost imposed on the Grantor
or all or any part of the Property and may withhold payment of the same pending
such proceedings if permitted by law; provided that (i) in the case of any
Impositions or liens therefor or any claims or judgments of mechanics,
materialmen, suppliers, vendors or other Persons or any liens therefor, such
proceedings shall suspend the collection thereof, (ii) neither the Property nor
any part thereof or interest therein would be in danger of being sold, forfeited
or lost during the pendency of such contest, and the Grantor will pay or satisfy
the underlying claim if the Grantor does not prevail in the contest or if
payment or satisfaction is required to avoid the sale, forfeiture or loss of the
Property (and, where required by Section 6.2 of the Loan Agreement and as
further security hereunder, deposit with the Beneficiary, or, following the
assignment contemplated by Section 5.12 hereof, the Servicer, such amounts in
connection with such contest as are required by Section 6.2 of the Loan
Agreement),
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(iii) in the case of an obligation with respect to the insurance requirements
set forth in Section 1.7 hereof, the failure of Grantor to comply therewith
shall not impair the validity of any insurance required to be maintained by
Grantor under Section 1.7 or the right to full payment of any claims thereunder,
(iv) in the case of taxes, if an amount can be contested without being paid, the
Grantor shall deposit (where required by Section 6.2 of the Loan Agreement) with
the Beneficiary, or, following the assignment contemplated by Section 5.12
hereof, the Servicer (to the extent not deposited with Beneficiary or the
Servicer, as applicable, pursuant to the foregoing subsection (ii)) in
accordance with Section 6.2 of the Loan Agreement one hundred twenty-five
percent (125%) of the amount being contested together with interest and
penalties reasonably expected to accrue thereon for so long as such amount is
due and payable and unpaid, (v) in the case of any utility service, any contest
or failure to pay will not result in a discontinuance of any such service, and
(vi) in the case of any instrument of record affecting the Property or any part
thereof, the contest or failure to perform under any such instrument shall not
result in the placing of any Lien on the Property or any part thereof unless
such Lien is bonded or otherwise discharged or enforcement thereof is stayed.
1.5.4. No Credit for Payment of Taxes or Impositions
Grantor shall not be entitled to any credit against the principal of or
interest, if any, payable on the Mortgage Note, and the Grantor shall not be
entitled to any credit against any other amounts which may become payable under
the terms thereof or hereof, by reason of the payment of any tax on the Property
or any part thereof or by reason of the payment of any other Imposition or other
amount required to be paid hereunder. No deduction shall be made or claimed from
the taxable value of the Property or any part thereof by reason of this Deed of
Trust.
1.6. Care of the Property
1.6.1. Condition of the Property
Grantor shall keep the Property in good and clean order and condition
and repair in accordance with the requirements of the Loan Agreement, shall not
commit or suffer waste thereto, and shall not do or suffer to be done anything
that will increase the risk of fire or other hazard to the Property or any
material part thereof and shall in accordance with the requirements of the Loan
Agreement keep all Property used or useful in its business in good repair,
working order and condition, and from time to time make all necessary or
appropriate repairs thereto and renewals and replacements thereof.
1.6.2. Alterations; Building Only
The Grantor shall not remove or demolish or materially alter the overall
design or structural character of the Improvements or impair the structural
integrity thereof or of any other part of the Property except in accordance with
Section 1.8 or Section 1.11 hereof, as applicable, and shall at all times use
the Property or cause the Property to be used only for the purpose of operating
the Land and Improvements in substantially the same manner as currently
operated; provided, however, that Grantor shall be permitted to make alterations
and repairs to the Property without restriction as reasonably necessary to
maintain the Property in as good condition as existed on the date hereof,
reasonable wear and tear excepted.
1.6.3. Right to Inspect
Beneficiary and the Trustee or their representatives or both are hereby
authorized to enter upon and inspect the Property at their own cost (or, upon
the occurrence and during the continuation of an Event of Default, at the
Grantor's cost) at any time upon reasonable notice and during normal business
hours; provided, however, that Beneficiary and the Trustee must at all times use
reasonable efforts to minimize any disruption to the operations on the Land.
1.6.4. Compliance with Laws and Covenants
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Grantor shall promptly comply with (a) all present and future Laws
affecting the Property or any part thereof, (b) all conditions, covenants,
restrictions, common area maintenance, reciprocal easement and similar
agreements affecting the Property or any part thereof and (c) all Laws necessary
for the operation and maintenance of the Improvements in the manner they are
currently operated and maintained. Grantor shall not initiate, join in,
acquiesce in, or consent to any change in any private restrictive covenant,
zoning law or other public or private restriction, limiting or defining the uses
which may be made of the Property or any part thereof; if under applicable
zoning provisions the use of all or any portion of the Property is or shall
become a nonconforming use, Grantor will not cause or permit the nonconforming
use to be discontinued or abandoned without the express written consent of
Beneficiary.
1.7. Insurance
1.7.1. Risks to Be Insured
Grantor (or its designee), at the Grantor's expense, will obtain and
maintain in full force and effect at all times until all Obligations have been
fully paid and performed, with Qualified Insurance Companies (as that term is
defined in Section 1.7.2), insurance against the following risks:
(i) Loss and damage by fire and all other casualties on
or to the Property as are included in the form of casualty insurance commonly
referred to as "extended coverage" (including, without limitation, windstorm,
explosion and such other risks as are typically insured against by owners of
like properties in the area in which the Buildings are located) in such amounts
as are reasonably satisfactory to Beneficiary, but in no event less than one
hundred percent (100%) of the full replacement cost of the Property (exclusive
of excavation and foundations and without deduction for physical depreciation)
and in no event less than the amount required to prevent Grantor from becoming a
co-insurer within the terms of the applicable policies and in no event less than
the outstanding amount of the Obligations; such insurance shall contain an
"Ordinance or Law Coverage" or "Enforcement" endorsement if any of the
Improvements or the use of the Property constitute legal, non-conforming
structures or uses;
(ii) Comprehensive public liability insurance on an
"occurrence basis" against claims for personal injury, including without
limitation, bodily injury, death or property damage occurring on, in or about
the Property with a combined single limit of not less than Three Million Dollars
($3,000,000) with respect to personal injury or death to one or more persons and
with "umbrella" liability coverage of not less than Twenty-Five Million Dollars
($25,000,000), or such greater amounts as may from time to time be required by
institutional lenders for similar loans;
(iii) Business interruption insurance for an amount not
less than the greater of (x) twenty-four (24) months gross income from the
Property and (y) estimated operating expenses (including debt service) for the
Property for a twenty-four (24) month period that commences on the effective
date of said insurance policy or each renewal thereof, as applicable (in either
case on an "actual loss sustained" basis) covering the same risks as are covered
by the policies described in Section 1.7.1(i);
(iv) If the Land is located in an area designated by the
U.S. Department of Housing and Urban Development as a flood hazard area,
insurance for the peril of flood as is available through the National Flood
Insurance Program;
(v) Broad form boiler and machinery insurance on a
"comprehensive" form in an amount adequate to provide protection against the
maximum amount of damage possible to building, improvements and contents
resulting from explosion or other occurrences relating to boilers, pressure
vessels, machinery and equipment on or about the Property;
(vi) Workers' compensation insurance in such forms and
in such amounts as may be required by the laws of each state in which any
Building is located;
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(vii) A blanket policy of insurance insuring the Property
against damage by earthquake in an aggregate insured amount not less than
Twenty-Four Million Seven Hundred Thousand Dollars ($24,700,000) and having a
deductible of not more than five percent (5%) per unit subject to a One Hundred
Thousand ($100,000) minimum or such other earthquake insurance as may be
required by Section 8.3 of the Loan Agreement (a unit being defined as each
Building on an Individual Property); and
(viii) Such other insurance as is generally available on
commercially reasonable terms and is generally required by institutional lenders
on loans secured by properties similar to any Individual Property.
1.7.2. Qualified Insurers
An insurer satisfying the applicable requirements of this Section 1.7.2
shall be deemed to be a "Qualified Insurance Company."
All primary insurers must be authorized to issue insurance in the State
of California. All primary insurance coverage required by Section 1.7.1 (other
than flood insurance and workers' compensation insurance) shall be provided by
one or more insurers having a rating for claims paying ability of at least "AA"
from S&P and an equal or equivalent rating from at least one other Rating
Agency. If permitted by the laws of the State of California, the insurance
required by clause (vi) of Section 1.7.1 may be provided by a state approved and
regulated employer's self-insurance fund.
1.7.3. Policy Provisions
All insurance policies required by Section 1.7.1 shall be on forms, with
endorsements and with deductible amounts reasonably satisfactory to Beneficiary
(but in no event shall a deductible amount exceed ten percent (10%) of the
policy limits above). All policies of insurance required by Sections 1.7.1(i),
(iii), (iv), (v) and (vii) shall contain suitable loss-payable and standard
noncontribution mortgagee clauses acceptable to and in favor of Beneficiary or
the Trustee and their assigns. If an Event of Default shall have occurred at the
time of receipt of any insurance proceeds, Beneficiary or the Trustee may, at
Beneficiary's option, apply the same to the repayment of the Obligations in
accordance with the Mortgage Note or other Loan Documents. In all other cases,
proceeds of such insurance shall be applied in the manner contemplated by
Section 1.8 hereof.
All policies of insurance maintained by Grantor pursuant to this
Section 1.7.2 shall:
(i) Name Beneficiary and the Trustee as additional
insureds or loss payees, as applicable, as their respective interests may
appear;
(ii) provide that Beneficiary shall be advised in
writing of any casualty insurance claims exceeding One Hundred Thousand Dollars
($100,000) before payment thereon is made and, except in the case of worker's
compensation and public liability insurance, that all proceeds for losses of One
Hundred Thousand Dollars ($100,000) or less, shall be paid to and adjusted by
Grantor, and all proceeds for losses of more than One Hundred Thousand Dollars
($100,000) shall be paid to Beneficiary or Grantor in accordance with Section
1.8.3 and adjusted by Grantor with approval of Beneficiary, pursuant to a
mortgagee endorsement acceptable to Beneficiary;
(iii) provide that the casualty insurance (or insurance
otherwise known as property insurance) shall not be impaired or invalidated by
virtue of (A) any act, failure to act, or neglect of Grantor, (B) the occupation
or use of the insured properties for purposes more hazardous than permitted by
the terms of the policy, (C) any foreclosure or other proceeding or notice of
sale relating to the insured properties, or (D) any change in the possession of
the insured properties without a change in the identity of the holder of actual
title to the Property (provided that with respect to items (C) and (D), any
notice requirements of the applicable policies are satisfied);
(iv) provide that no material changes or mid-term
cancellation shall be effective until at least thirty (30) days after receipt of
written notice thereof by Grantor and Beneficiary (and no termination for
non-payment of premium shall be effective until at least ten (10) days after
receipt of written notice thereof by
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Grantor and Beneficiary), with Beneficiary having the opportunity, but being
under no obligation, to pay all moneys or to do any act necessary to prevent
such alteration, cancellation, termination or expiration or to cause such
renewal, the cost thereof, together with interest thereon at the Default
Interest Rate provided for in the Loan Agreement, to be added to the
indebtedness of Grantor under the Mortgage Note and to be secured hereby;
(v) include effective waivers by the insurer of all
claims for insurance premiums against all loss payees and additional insureds
(other than Grantor) and, where applicable, all rights of subrogation against
any loss payee, additional insured or named insured;
(vi) permit Beneficiary to pay the premiums and continue
any insurance upon failure of Grantor to pay premiums when due, upon the
insolvency of Grantor, or through foreclosure or other transfer of title to the
Property or any portion thereof (it being understood that Grantor's rights to
coverage under such policies may not be assignable without the consent of the
provider); and
(vii) be reasonably satisfactory to Beneficiary in all
other respects.
The insurance required to be maintained by clauses (i), (ii), (iii),
(iv) and (v) of Section 1.7.1 may be provided by a blanket policy so long as the
blanket policy complies with the terms of this Section 1.7 and Beneficiary is
provided with reasonably satisfactory evidence that the policy limits required
hereunder are satisfied by such policy and that such coverage and limits will be
no less than those that would be provided under separate policies even if there
is a total loss of all properties covered by the blanket policy.
1.7.4. Delivery of Certificates
Prior to the execution of this Deed of Trust, and thereafter not less
than fifteen (15) days prior to the expiration date of any policy required
pursuant to this Section 1.7, Grantor will deliver to the Beneficiary original
certificates of the insurers for all policies of insurance required by this Deed
of Trust, which shall bear notations evidencing the payment of premiums then due
and payable and the date through which said coverage is made effective by the
evidenced payment. Grantor also shall deliver to Beneficiary from time to time,
at Beneficiary's request, (i) schedules setting forth all such insurance then in
effect and (ii) certified copies of all such policies.
1.7.5. No Separate Insurance
Grantor will not take out separate insurance of the kind described in
clauses (i), (iii), (iv), (v) or (vii) of Section 1.7.1 or other forms of
casualty insurance concurrent in form or contributing in the event of loss with
that required to be maintained pursuant to this Section 1.7 unless such
insurance complies with Sections 1.7.2 and 1.7.3.
1.8. Damage to or Destruction of Property
1.8.1. Notice
In case of any material damage to or destruction of the Property or any
part thereof (each, a "Casualty"), Grantor will, promptly upon becoming aware
thereof, give written notice thereof to Beneficiary describing the nature and
extent of such damage or destruction.
1.8.2. Restoration
In case of a Casualty to one or more of the Individual Properties (each,
a "Casualty Property"), Grantor, whether or not the insurance proceeds
(hereafter "Insurance Proceeds") on account of such Casualty shall be sufficient
for such purpose, at its expense, will promptly commence and complete the
restoration, replacement or rebuilding of the Casualty Property as nearly as
possible to its value, condition and character immediately prior to such
Casualty (such restoration, replacement, and rebuilding, together with any
temporary repairs and property protection pending completion of the work, being
herein referred to as the "Restoration"), provided, however, in the
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event that (i) the Restoration adversely affects the cash flow from the Casualty
Property in any material respect and cannot reasonably be expected to be
completed within a period of twelve (12) months after the date of the Casualty
(or, if shorter, by the date on which the proceeds of business interruption
insurance will no longer be available) or (ii) the extent of the damage makes it
impracticable in Grantor's good faith business judgment, to restore the Casualty
Property to substantially the same condition as existed prior to the Casualty or
the Casualty results in the permanent loss of access to the Casualty Property or
the Improvements thereon or (iii) the Casualty Property and the use thereof
after the Restoration would not be in material compliance with and permitted
under all applicable laws, or (iv) the Insurance Proceeds payable on account of
such Casualty equal or exceed the Allocated Loan Amount applicable to the
Casualty Property, then Restoration shall not be required or permitted and
instead the Insurance Proceeds shall be collected and paid over to Beneficiary
up to the amount of the Allocated Loan Amount for such Casualty Property (with
any excess to be paid to Grantor) and the amount thereof shall be held and
applied by Beneficiary (or the Servicer on its behalf in accordance with Section
5.12.3 hereof) (net of any amounts necessary to avoid or eliminate any hazardous
condition on the Casualty Property or to prevent imminent and substantial
physical deterioration of the Casualty Property), (a) (i) if applied prior to
the first day of the Defeasance Period, to prepayment of the outstanding
principal balance of the Mortgage Note, without the requirement of a Yield
Maintenance Payment, in accordance with Section 2.7 of the Loan Agreement, or
(ii) if applied during the Defeasance Period and after the Securitization has
occurred, to the purchase of U.S. Obligations in accordance with Section 2.5 and
Section 2.9 of the Loan Agreement, or (iii) if applied after the Defeasance
Period, to prepayment of the outstanding principal balance of the Mortgage Note,
in accordance with Section 2.10 of the Loan Agreement, without the requirement
of a Yield Maintenance Payment and (b) to the payment of all other indebtedness
which this Deed of Trust secures in such order as is contemplated under the Loan
Documents; provided, however, that such prepayment must be in an amount at least
equal the greater of (A) the Allocated Loan Amount for such Casualty Property
and (B) the Net Sales Proceeds received by Grantor from the sale of the Casualty
Property or the part thereof that remains following the Casualty (plus any
remaining Insurance Proceeds not previously applied to repayment of the Loan or
Restoration), but in no event more than the Release Price of such Casualty
Property, regardless of the amount of Insurance Proceeds, and shall be payable
by Grantor (and the amounts described in the immediately preceding parenthetical
phrase shall not be deducted from the Insurance Proceeds to the extent that the
same shall not be sufficient to pay the Allocated Loan Amount plus such
interest).
1.8.3. Application of Insurance Proceeds or Awards
All Insurance Proceeds received by any one or more of Grantor,
Beneficiary or Trustee, on account of any Casualty affecting the Property or any
part thereof (less the costs, fees and expenses reasonably incurred by
Beneficiary or Trustee, as applicable, in the collection thereof, including,
without limitation, all adjusters' fees and expenses and reasonable attorneys'
fees and charges, which shall be deemed to be incurred for the account of
Grantor) shall be delivered to and held by Grantor, if such Insurance Proceeds
total two and one-half percent (2.5%) of the Allocated Loan Amount applicable to
the Casualty Property, or less, in the aggregate for a single Casualty or, if
the amount of such Insurance Proceeds is more than two and one-half percent
(2.5%) of the Allocated Loan Amount applicable to the Casualty Property, to
Beneficiary to be held by Beneficiary (or the Servicer on its behalf in
accordance with Section 5.12.3 hereof) and applied in accordance with the terms
hereof. Except as provided in Section 1.8.2, all Insurance Proceeds shall be
used and applied in either case, so long as no Default or Event of Default shall
have occurred and be continuing, to reimburse Grantor for the cost of
Restoration from time to time as Restoration progresses, and advances of funds
held by Beneficiary shall be made within thirty (30) days after Grantor's
written request for reimbursement; provided, however, that if the cost of
Restoration as to which Insurance Proceeds have been paid or are payable in
connection with any single Casualty exceeds or is expected to exceed two and
one-half percent (2.5%) of the Allocated Loan Amount applicable to the Casualty
Property, Beneficiary shall have the right to approve the plans and
specifications for such Restoration before the Restoration work begins, to
appoint a Qualified Supervising Professional to oversee the Restoration, and to
require as a condition to the release of funds to pay the costs of such
Restoration (A) a certificate of the Qualified Supervising Professional
certifying (x) that the amount that Beneficiary is requested to advance is
necessary to pay invoices for work completed that have been submitted to Grantor
(and which have not previously been paid), (y) that the amount of Insurance
Proceeds and other funds of Grantor, if required by this Section, that
Beneficiary will hold following payment of the requested advance is expected to
be sufficient to complete the Restoration, and (z) that the Restoration work for
which such proceeds are requested has been completed in accordance with the
approved plans
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and specifications and with applicable law, (B) lien waivers from all
materialmen, laborers and contractors who are to be paid with such advances, (C)
an endorsement to the title policy described in Section 1.3 hereof relating to
the Casualty Property insuring against mechanic's liens that may arise out of
the Restoration, and (D) such other documents as Beneficiary or the Trustee may
request; and provided, further, that if the cost of Restoration as to which
Insurance Proceeds have been paid or are payable in respect of the applicable
Casualty is (or is expected to be) five percent (5%) of the Allocated Loan
Amount applicable to the Casualty Property or less, in lieu of the documentation
referred to in clauses (A) and (B) of the preceding proviso, Beneficiary will
accept a certificate of an officer of the Grantor certifying to the matters
described in subparts (x), (y) and (z) of said clause (A). The balance of the
Insurance Proceeds held by Beneficiary or the Trustee, or both, shall at no time
be reduced below the amount necessary to complete the Restoration (and any
Restoration costs that cannot be paid out of the remaining balance thereof as a
result of this proviso shall be deposited by Grantor with the Beneficiary, or
its agent, promptly after demand therefor, out of Grantor's own funds). Upon
receipt by Beneficiary or the Trustee of the documents required and the
subsequent payment in full of the costs of Restoration, the balance, if any, of
any Insurance Proceeds shall be applied first, to the Reserve Account to the
extent the amount or deposit in the Reserve Account is less than the Reserve
Requirement, then if the Securitization has been effected, to the Finance
Trustee and the Servicer under the Pooling and Servicing Agreement, if
applicable, and thereafter shall be paid to Grantor or any other Person entitled
thereto; provided, however, that all such proceeds which pursuant to this
Section 1.8.3 are payable to Grantor shall, if an Event of Default has occurred
and is continuing, be paid to Beneficiary to be held and distributed in
accordance with the provisions of Section 5.12.3 hereof.
1.9. Condemnation
1.9.1. Grantor to Give Notice, Etc.
In case of any taking during the term hereof of all or any part of the
Property, or the taking or transfer of any interest therein or right accruing
thereto, as the result of or in lieu or in anticipation of the exercise of the
right of condemnation or eminent domain by any governmental authority (each
hereinafter a "Taking"), Grantor will promptly give written notice thereof to
Beneficiary and Trustee describing the nature and extent of the Taking or any
potential Taking, or the nature of the proceedings and negotiations for such
Taking or potential Taking and the nature and extent of the Taking or potential
Taking which might result therefrom, as the case may be. Trustee or Beneficiary,
or both, may appear in any proceedings for a Taking or potential Taking or any
negotiations relating to a Taking or potential Taking. Grantor will promptly
give the Trustee and Beneficiary copies of all notices, pleadings,
determinations, and other papers related to any such Taking or potential Taking
proceeding. The Grantor will, in good faith and with due diligence, file and
prosecute its claims for any award or payment on account of any Taking
(hereinafter an "Award"), and will pay all costs and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and charges and
the reasonable expenses of the Trustee and of Beneficiary) in connection with
any such Taking, including expenses incurred in seeking and obtaining any Award.
Such costs and expenses, to the extent advanced or paid by Beneficiary or the
Trustee, shall be deemed paid on behalf of Grantor, shall constitute
indebtedness secured by this Deed of Trust, shall be repayable by Grantor upon
demand and shall bear interest at the Prime Rate (as defined in the Loan
Agreement) plus one percentage point (1%) from the date of demand until paid,
provided that Trustee and Beneficiary shall have no obligation to make such
advances or payments.
1.9.2. Total and Substantial Taking
In the case of (i) a Taking of the fee or leasehold of an entire
Individual Property, or (ii) a Taking resulting in the imposition of a perpetual
easement on an entire Individual Property that materially impairs the operation
of such Individual Property, or (iii) a Taking that adversely affects the cash
flow from an Individual Property in any material respect and as to which any
necessary Restoration cannot reasonably be expected to be completed within
twelve (12) months from the date of the Taking and Restoration as defined in
Section 1.8.2 is permitted under Section 1.8.2 then, in any such event, any
Award shall be collected and paid over to the Beneficiary to be held by
Beneficiary in accordance with the provisions of Section 1.8.3 and Section
5.12.3 hereof and the amount thereof (net of any amounts necessary to avoid or
eliminate any hazardous condition on the Individual Property and/or to
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prevent imminent and substantial physical deterioration of the Individual
Property), shall be applied by Beneficiary (a) (i) if applied prior to the first
day of the Defeasance Period, to prepayment of the outstanding principal balance
of the Mortgage Note without the requirement of a Yield Maintenance Payment, or
(ii) if applied during the Defeasance Period and after the Securitization has
occurred, to the purchase of U.S. Obligations in accordance with Section 2.5 of
the Loan Agreement, or (iii) if applied after the Defeasance Period, to
prepayment of the outstanding principal balance of the Mortgage Note in
accordance with Sections 2.6 and 2.7 of the Loan Agreement, without the
requirement of a Yield Maintenance Payment and (b) to the payment of all other
indebtedness which this Deed of Trust secures in such order as is contemplated
under the Loan Documents; provided, however, that such prepayment must be in an
amount at least equal to the greater of (A) the Allocated Loan Amount and (B)
the sum of the Net Sales Proceeds received by Grantor from the sale of the
affected Individual Property or the part thereof that remains following the
Taking (plus any remaining Award not previously applied to repayment of the Loan
or Restoration), but in no event more than the Release Price, regardless of the
amount of the Award and shall be payable by Grantor (and the amounts described
in the immediately preceding parenthetical phrase shall not be deducted from the
applicable Award to the extent that the same shall not be sufficient to pay the
Allocated Loan Amount plus such interest).
1.9.3. Partial and Temporary Taking
In the case of any Taking other than a Taking referred to in Section
1.9.2 hereof, and in case such Taking requires repairs to or Restoration of the
affected Individual Property in order to maintain the quality of the operations
of the Individual Property, any Award shall be paid over to Grantor or
Beneficiary, as applicable, to be used or to be held and distributed in
accordance with the provisions of Sections 1.8.3 and 5.12.3 hereof in the same
manner as if such Taking were a Casualty affecting such Individual Property and
as if such Award constituted Insurance Proceeds relating thereto, except that
any amount of the Award not used to pay for any necessary Restoration shall be
applied by Beneficiary to the prepayment of the Mortgage Note, and to the
payment of all other indebtedness which this Deed of Trust secures, all in the
manner contemplated by Section 2.4.3 of the Loan Agreement.
1.10. Notices Concerning the Property
Grantor shall deliver to Beneficiary promptly upon receipt of same,
copies of all notices, certificates, documents, and instruments received by it
which materially affect the Property as a whole, any Individual Property or
Beneficiary's rights hereunder.
1.11. Alterations
1.11.1. Alteration Conditions
Provided that no Event of Default shall have occurred and be continuing,
Grantor may, subject to the terms of this Section 1.11.1 undertake any
alteration, expansion, improvement, demolition or removal (each, an
"Alteration") of any Individual Property or any portion thereof so long as such
Alteration (i) is undertaken with Beneficiary's prior written consent where the
estimated cost of the Alteration exceeds five percent (5%) of the Allocated Loan
Amount applicable to such Individual Property, (ii) is undertaken in accordance
with the applicable provisions of this Deed of Trust and the other Loan
Documents, (iii) is paid for from reserves established by the Grantor or from
capital contributions by the members of Grantor that are deposited with
Beneficiary or the Servicer, as applicable, prior to the commencement of such
work, which amounts (including, in either case, additional deposits made from
time to time to prevent a deficiency between the amount then on deposit with
Beneficiary and the amount reasonably estimated at such time to complete the
Alteration) shall be held by Beneficiary (or Servicer on its behalf in
accordance with Section 5.12.3 hereof), and (iv) could not reasonably be
expected (A) to decrease the value of the Individual Property, (B) to impair the
utility and operation of the Individual Property in a manner consistent with its
current use and operation and as required by the Loan Documents, (C) upon
completion, to reduce the Net Operating Income from the Individual Property
below the level available immediately prior to commencement of such Alteration
(except in the case of tenant improvement work), (D) to result in any Lien being
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placed on the Individual Property (other than mechanics' liens filings for
amounts not yet due and payable that are not yet forecloseable under the
applicable Laws of the State of California) or (E) to adversely affect the
ability of the Grantor to pay and perform the Obligations or make principal and
interest payments with respect to the Mortgage Note as and when due. Any
Alteration which involves an estimated cost of more than five percent (5%) of
the Allocated Loan Amount applicable to the Individual Property shall be
conducted under the supervision of a Qualified Supervising Professional selected
by Beneficiary, to oversee such Alteration, and no such Alteration as to which
plans and specifications are required by any Laws and which involves an
estimated cost of more than five percent (5%) of the Allocated Loan Amount
applicable to the Individual Property shall be undertaken until detailed plans
and specifications and cost estimates therefor have been approved in writing by
Beneficiary and such Qualified Supervising Professional. Such plans and
specifications may be revised at any time and from time to time provided that
material revisions of such plans and specifications are approved by Beneficiary,
such approval not to be unreasonably withheld, together with the written
approval thereof by such Qualified Supervising Professional. All work done in
connection with any Alteration shall be performed with due diligence in a good
and workmanlike manner, all materials used in connection with any Alteration
shall not be less than the standard of quality of the material currently used at
the Individual Property, and all work performed and all materials used shall be
in accordance with all applicable Laws and insurance requirements. Grantor shall
be entitled to a disbursement from the Reserve Account (as defined in the Loan
Agreement) to pay for the cost of an Alteration only in the event such
Alteration constitutes an Approved Capital Expenditure (as defined in Section
5.2 of the Cash Management Procedures) and the other conditions to a
disbursement from the Reserve Account set forth in Section 5.2 of the Cash
Management Procedures have been satisfied.
1.11.2. Right to Inspect
Beneficiary and any Persons authorized by it at all reasonable times and
upon reasonable notice may enter and examine the Individual Property and may
inspect all work done, labor performed and materials furnished in respect of any
Alteration. Beneficiary shall not have any duty to make any such inspection and
shall not have any liability or obligation for making or not making any such
inspection.
1.11.3. Cooperation
Beneficiary will cooperate with Grantor and execute and deliver to
Grantor such instruments and agreements as are reasonably requested of it by
Grantor, at Grantor's expense, in order to consummate or facilitate any
Alteration permitted hereby (provided the same shall not subject Beneficiary to
any risk of liability or cost not paid for by Grantor).
1.12. Indemnification by the Grantor
Grantor shall protect, defend, and indemnify Beneficiary and the
Trustee, and each of Beneficiary's and the Trustee's officers, directors and
employees (collectively the "Indemnitees") from and against any and all losses,
liabilities, obligations, claims, damages, penalties, causes of action, fines,
judgments, penalties, charges, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and charges, whether
based on private agreements or in tort, contract, implied or express warranties,
statute, regulation, common law, or otherwise, imposed upon or incurred by or
asserted against such Indemnitee (each a "Claim" and collectively "Claims")
including Claims in connection with any investigative, administrative or
judicial proceedings, by reason of:
1.12.1. the Lien of this Deed of Trust on the Property or any
interest therein, or receipt of any rent or other sum from the Property;
1.12.2. any accident to, injury to or death of persons or loss of
or damage to property occurring on or about the Property or the adjoining
sidewalks, curbs, vaults or vault space, if any, streets or ways;
1.12.3. the ownership, leasing, use, non-use or condition of the
Property or the adjoining sidewalks, curbs, vaults or vault space, if any,
streets or ways;
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1.12.4. any failure on the part of Grantor to perform or comply
with any of the terms of this Deed of Trust, the Mortgage Note, the Loan
Agreement, any other Loan Document, or any agreement or document referred to
herein or therein; or
1.12.5. performance of any labor or services or the furnishing of
any materials or other property in respect of the Property or any part thereof
for construction or maintenance or otherwise.
The provisions of this Section 1.12 shall survive the termination of
this Deed of Trust; provided, however, that, notwithstanding anything contained
in this Section 1.12 to the contrary, the foregoing indemnity provisions in
favor of any Indemnitee shall not extend to claims arising out of the gross
negligence or willful misconduct of such Indemnitee. Any amounts payable to any
Indemnitee under this Section 1.12 which are not paid within ten (10) days after
written demand therefor shall bear interest at the lesser of (i) a rate per
annum equal to the Default Interest Rate or (ii) the maximum rate per annum then
permitted by law from the date of such demand and, to the fullest extent
permitted by law, shall be secured by this Deed of Trust. In the event any
action, suit or proceeding is brought against any Indemnitee by reason of any
such occurrence, notice thereof shall be given to Grantor promptly after such
Indemnitee becomes aware of any Claim or threat of Claim against which such
Indemnitee is indemnified hereunder. Grantor, upon the request of the
Indemnitees and at Grantor's expense, shall resist and defend such action, suit
or proceeding or cause the same to be resisted and defended by counsel
designated by Grantor and reasonably acceptable to the Indemnitees. The
Indemnitees will, insofar as is possible without risking material conflicts of
interests, coordinate their claims under this Section 1.12 and act through a
single counsel.
1.13. Expenses
Grantor, on demand, shall pay or reimburse (a) Beneficiary and the
Trustee for all reasonable costs and expenses, including, without limitation,
reasonable attorneys' fees and charges, incurred by Beneficiary or the Trustee
in any action, legal proceedings or dispute of any kind with respect to which
Beneficiary or the Trustee are made parties, or in which any appear as party
plaintiff or defendant, affecting the Property or any part thereof, this Deed of
Trust or the indebtedness secured hereby, including, without limitation, any
Taking involving any of the Property or any action to protect the security
hereof or thereof and (b) the Finance Trustee and the Servicer, if applicable,
for any amounts required to be paid pursuant to the Pooling and Servicing
Agreement and any amounts described in clauses (a) and (b) above that are paid
by Beneficiary or the Trustee and not reimbursed as aforesaid shall be added to
the Obligations secured by the Lien of this Deed of Trust.
1.14. Monthly Escrow Deposits
Without limiting its obligations under the Cash Management Procedures,
Grantor, upon request of Beneficiary, following an Event of Default, shall
deposit in escrow with Beneficiary monthly, commencing on the due date of the
next installment of principal and/or interest under the Mortgage Note, a sum
which, in the good faith estimation of Beneficiary shall be equal to one-twelfth
of the taxes, assessments, and hazard insurance premiums on the Property coming
due in the next succeeding twelve (12) months, and such escrow deposits shall be
held by the Beneficiary free of any liens or claims on the part of creditors,
and shall, except as otherwise provided in this Section 1.14, be used by
Beneficiary to pay taxes, assessments, and insurance premiums on the Property as
the same accrue and are payable. To the extent anything in this Section 1.14
conflicts with the requirements of the Cash Management Procedures, the
provisions of the Cash Management Procedures shall be controlling. If the amount
of such escrow deposits is insufficient to pay the taxes, assessments, and
insurance premiums in full as the same become payable, Grantor shall immediately
pay to Beneficiary such additional sums as are necessary in order for
Beneficiary to pay such taxes, assessments, and insurance premiums in full as
they become due. If the amount of such escrow deposits shall exceed payments
made by Beneficiary for such taxes, assessments, and insurance premiums, the
excess so deposited shall be credited to subsequent deposits to be made by
Grantor under this Section 1.14. Upon the occurrence and during the continuation
of any Event of Default, Beneficiary, may, at its option, apply any money in the
fund resulting from said escrow deposits to the payment of the Obligations in
the manner and in the order contemplated by Section 2.4.3 of the Loan Agreement.
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1.15. Further Assurances
At any time, and from time to time, upon request by Beneficiary or the
Trustee, as applicable, Grantor, at its expense, shall make, execute, deliver,
and record, or cause to be made, executed, delivered, and recorded, any and all
further instruments, certificates, and other documents, and shall take all such
further actions as may, in the reasonable opinion of Beneficiary or the Trustee
be necessary or desirable in order to effectuate, complete, perfect, continue,
and/or preserve the obligations of Grantor under this Deed of Trust, the lien
hereof, and all modifications, extensions, and other amendments hereof or
hereto.
1.16. Additions to Security
All right, title, and interest of Grantor in and to all extensions,
improvements, betterments, renewals, substitutes, and replacements of, and all
additions and appurtenances to the Property, hereafter acquired by or released
to the Grantor or constructed, assembled or placed by Grantor on the Property,
and all conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further pledge, grant of
security interest, conveyance, assignment or other act by Grantor of any kind,
shall, to the fullest extent permitted by law, become subject to the lien of
this Deed of Trust as fully and completely, and with the same effect, as though
now owned by Grantor and specifically described in the granting clauses hereof,
but at any and all times Grantor shall execute and deliver to Beneficiary or the
Trustee, as applicable, any and all such further assurances, deeds of trust,
conveyances or assignments thereof as Beneficiary or the Trustee, as applicable,
may reasonably require for the purpose of expressly and specifically subjecting
the same to the lien of this Deed of Trust.
1.17. U.C.C. Security Agreement and Fixture Filing
1.17.1. Grant of Security
This Deed of Trust is intended to be, among other things, a security
agreement within the meaning of the Uniform Commercial Code as in effect in each
of the State of New York and the State of California with respect to all
Property in which a security interest may be created and perfected under the
Uniform Commercial Code (the "U.C.C. Collateral"). Grantor hereby grants to
Beneficiary a security interest in and to all of Grantor's right, title, and
interest in all such U.C.C. Collateral to secure the Obligations. Grantor hereby
agrees that it will not change the location of its principal place of business
or the place where its books and records are kept from the location described in
Section 5.5 of the Loan Agreement without first giving Beneficiary at least
thirty (30) days advance written notice thereof. Any completely executed
counterpart of this instrument may be filed as a mortgage on real property or
fixtures, as a security agreement or financing statement on personal property,
or as both.
1.17.2. Financing Statements
Grantor shall cause financing and continuation statements and other
instruments with respect to the U.C.C. Collateral at all times to be kept
recorded, filed or registered in such manner and in such places as may be
required by law as fully as possible to evidence, perfect and secure the
interests of Beneficiary in all of the U.C.C. Collateral, and shall pay all
filing fees in connection therewith.
1.17.3. Multiple Remedies
If an Event of Default shall have occurred and be continuing,
Beneficiary shall have the option of proceeding, to the extent permitted under
applicable law, as to both real and personal property in accordance with its
rights and remedies in respect of the real property as an alternative to
proceeding in accordance with the provisions of the U.C.C., and Beneficiary may
exercise any and all of the other rights of a secured party under the U.C.C. All
of Beneficiary's rights and remedies hereunder, under any other Loan Document,
at law, under statute or otherwise shall be deemed cumulative and not exclusive
or exhaustive, and the exercise of any one remedy shall not impair Beneficiary's
right simultaneously or at any time or in any order to exercise any other remedy
nor shall the exercise
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of any remedy in one case impair or otherwise affect Beneficiary's right or
ability to exercise such remedy contemporaneously or again in the same case or
in any other case.
1.17.4. Waiver of Rights
To the extent permitted under applicable law, Grantor waives all rights
of redemption after foreclosure and all other rights and remedies of a debtor
under the Uniform Commercial Code or other applicable law, and all formalities
prescribed by law relative to the sale or disposition of the U.C.C. Collateral
(other than notice of sale) after the occurrence and during the continuation of
an Event of Default and all other rights and remedies of Grantor with respect
thereto. In exercising its right to take possession of the U.C.C. Collateral
upon the occurrence and during the continuation of an Event of Default
hereunder, Beneficiary, personally or by its agents or attorneys, and subject to
the rights of any Tenant (as hereinafter defined), may enter upon any part of
the Land without being guilty of trespass or any wrongdoing, and without
liability for damages thereby occasioned, except damages arising from
Beneficiary's gross negligence or willful misconduct. In the event Beneficiary
elects to proceed with respect to the U.C.C. Collateral, separately from the
real property, Beneficiary shall give at least ten (10) days notice of the sale
of the U.C.C. Collateral, which shall for all purposes be deemed to be
commercially reasonable.
1.17.5. Expenses of Disposition of the Properties
Grantor shall reimburse the Beneficiary, on demand, for all reasonable
expenses of retaking, holding, preparing for sale, lease or other use or
disposition, selling, leasing or otherwise using or disposing of the U.C.C.
Collateral which are incurred, including all reasonable attorneys' fees and
expenses, and all such expenses shall be added to Grantor's Obligations secured
hereby.
1.17.6. Fixture Filing
To the fullest extent permitted by law, this instrument, upon recording
or registration in the real estate records of the proper office of each City or
County in which a Building is located, shall constitute a "fixture-filing"
within the meaning of Sections 9-313 and 9-402 of the U.C.C. (or the local
state-law equivalents of such sections). The address of the Grantor, which is
the "Debtor" for purposes of the U.C.C. and this Section 1.17, and Beneficiary,
which is the "Secured Party" for purposes of the U.C.C. and this Section 1.17,
from whom information regarding the U.C.C. Collateral may be obtained, are as
stated in Section 5.1 of this Deed of Trust. Grantor agrees to sign any separate
"fixture filing" financing statements or similar instruments as Beneficiary may
request to confirm and perfect the security interest in fixtures intended to be
created by this Section 1.17.6.
1.18. INTENTIONALLY DELETED
1.19. Compliance with Access Laws
Grantor shall cause the Buildings and the other Improvements and the
Land to comply in all material respects with the requirements of the Americans
with Disabilities Act of 1990, all state and local laws and ordinances related
to access by the handicapped or disabled and all rules, regulations, and orders
issued pursuant thereto including, without limitation, the Americans with
Disabilities Act Accessibility Guidelines for Buildings and Facilities
(collectively, the "Access Laws"), to the extent such Access Laws are applicable
to the Buildings and the other Improvements, and give prompt notice to
Beneficiary of the receipt by Grantor of any complaints related to violation at
the Buildings or the other Improvements of any Access Laws and of the
commencement of any proceedings or investigations which relate to compliance at
the Buildings and the other Improvements with applicable Access Laws and will
use diligent efforts promptly to resolve the issues set forth in any such
complaint, proceedings or investigation.
1.20. Assignment of Rents and Grantor's Interest in Leases;
Lease Covenants
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1.20.1. Assignment and License
The assignment by Grantor in Granting Clause (vi) of this Deed of Trust
of all of Grantor's right, title and interest, if any, in and to all present and
future Leases by Grantor, as landlord, to any other Person, as tenant (each a
"Tenant"), shall also be deemed to be an assignment of any and all
modifications, renewals, extensions or replacements thereof, and of any
guaranties of the Tenant's obligations under any Lease (each, a "Guaranty") and
shall be deemed to be, and is, a present, absolute, effective, irrevocable and
complete assignment by Grantor to Beneficiary of the Leases and Guaranties and
the right to collect all Rents and all other sums payable to Grantor thereunder
and apply the same against the Obligations in accordance with the terms of this
Deed of Trust, which assignment is not conditioned upon Beneficiary being in
possession of the Property. However, so long as no Event of Default shall have
occurred and be continuing, Grantor shall have a license, to collect, receive
and retain from the Tenants under the Leases rent and all other sums payable
under the Leases, to enforce the obligations of Tenants under the Leases and to
exercise all the rights and remedies of the landlord under the Leases (except as
otherwise provided Schedule 5.11 to the Loan Agreement), subject, however, to
compliance with the provisions of this Deed of Trust. The portion of all sums
received by Grantor under the license granted hereby equal to the Obligations
then due and owing, shall be held in trust for the benefit of Beneficiary and
used, as necessary, to pay the Obligations then due and owing.
1.20.2. Rights and Powers Assigned
The assignment referred to in Section 1.20.1 shall include, without
limitation, an assignment of
(i) the immediate and continuing right to receive and
collect all amounts payable by all Tenants, subtenants or other parties pursuant
to the Leases and any Guaranty;
(ii) all claims, rights, powers, privileges and remedies
of the Grantor, whether provided for in any Lease or Guaranty or arising by
statute or at law or in equity or otherwise, upon any failure on the part of any
Tenant to perform or comply with any term of any Lease;
(iii) all right to take all action upon the happening of
a default under any Lease or Guaranty as shall be permitted by any Lease or by
law, including, without limitation, the commencement, conduct and consummation
of proceedings at law or in equity; and
(iv) the full power and authority, in the name of
Grantor or otherwise, to enforce, collect, receive and make receipt for any and
all of the foregoing and to do any and all other acts and things whatsoever that
Grantor is or may be entitled to do under any Lease or Guaranty.
1.20.3. No Set-Off
Grantor hereby waives any and all right to assert any setoff or
counterclaim of any nature whatsoever with respect to the Obligations in any
action or proceeding by Beneficiary to collect any such Rents or other sums, or
to enforce and realize upon the lien and security interest created by this
Section 1.20 or any other Loan Documents, provided, however, that Grantor
expressly reserves the right to assert any such claim in a separate proceeding
and provided further that Grantor expressly reserves the right to assert any
claim in the same action commenced by Beneficiary if such claim is of a
mandatory or compulsory nature or would be barred or materially impaired if not
asserted in the action commenced by Beneficiary.
1.20.4. Termination of License
If any Event of Default shall have occurred and be continuing, the
license granted in Section 1.20.1 hereof shall immediately cease and terminate,
without waiver of such Event of Default, with or without notice, any action or
proceeding, or the intervention of a receiver appointed by a court, and
Beneficiary or an agent or receiver appointed by Beneficiary (including, without
limitation, Trustee) may, without regard for the adequacy of the security for
the indebtedness secured hereby, the commission of waste or the solvency of
Grantor, and subject to
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applicable statutory requirements, if any, do any or all of the following:
(i) exercise any of Grantor's rights under the Leases
and Guaranties, including notifying Tenants to pay rent to an account or
location selected by Beneficiary or the Trustee;
(ii) enforce the Leases and Guaranties;
(iii) demand, collect, sue for, attach, levy, recover,
receive, compromise and adjust, and make, execute and deliver receipts and
releases for all rents or other payments that may then be or may thereafter
become due, owing or payable with respect to the Leases and Guaranties;
(iv) demand that any sums held by Grantor with respect
to any Lease or Guaranty (including, but not limited to, any security deposits,
other deposits or prepayments) be immediately remitted to Beneficiary or the
Trustee, to the extent permitted by applicable law; and
(v) generally, do, execute and perform any other act,
deed, matter or thing whatsoever that ought to be done, executed and performed
in and about or with respect to the Leases and Guaranties.
1.20.5. Right to Collect Upon Event of Default
Grantor hereby irrevocably authorizes and directs each Tenant under a
Lease and each other party under a Guaranty, upon receipt of notice from
Beneficiary that an Event of Default has occurred and is continuing, to pay
directly to, or as directed by, Beneficiary all rents, issues and profits
accruing or due under such Lease or Guaranty from and after the receipt of such
notice. Grantor agrees that any Tenant under a Lease or any party to a Guaranty
shall have the right to rely upon the notice from Beneficiary, and shall pay
such rents, issues and profits to or as directed by Beneficiary without any
obligation to inquire into the actual existence of any Event of Default claimed
by Beneficiary, and notwithstanding any notice from or contrary claim by
Grantor, and Grantor shall have no right or claim for any rents, issues or
profits so paid to Beneficiary.
1.20.6. Leases Unaffected
Grantor at its expense will prudently enforce in all material respects
each of the Leases and Guaranties in accordance with their terms to the extent
any failure so to enforce would reasonably be expected to have a material
adverse effect on the operation of any of the Buildings or other Improvements,
the value thereof, or the ability of Beneficiary or the Trustee, as applicable,
to exercise their rights and remedies hereunder. Neither the execution and
delivery of this Deed of Trust or any other Security Document nor any action or
inaction on the part of Beneficiary shall release (i) any Tenant from its Lease,
(ii) any guarantor from any Guaranty or (iii) Grantor from any of its
obligations under the Leases or constitute an assumption of any such obligation
under the Leases on the part of Beneficiary. No action or failure to act on the
part of Grantor shall, to the fullest extent permitted by applicable law,
adversely affect or limit the rights of Beneficiary under this Deed of Trust or,
through this Deed of Trust, under the Leases and Guaranties.
1.20.7. Inconsistent Actions Void
During the term hereof, all rights, powers and privileges of Beneficiary
herein set forth are coupled with an interest and are irrevocable, subject to
the terms and conditions hereof, and Grantor will not take any action under the
Leases or Guaranties or otherwise which is inconsistent with this Deed of Trust
or any of the terms hereof or thereof, and any such action inconsistent herewith
or therewith shall, to the fullest extent permitted by law, be void. Any further
assignment of any rents, issues, or profits from the Property shall to the
fullest extent permitted by law be void except as permitted by the terms hereof.
To the fullest extent permitted by applicable law, Grantor hereby waives any
requirement that Beneficiary commence any foreclosure proceeding with respect to
any or all of the Mortgaged Properties prior to enforcement of any remedies
pursuant to this Section 1.20, including the right to commence and prosecute an
action to appoint a receiver for rents and all other amounts due under any
Leases.
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Grantor will, from time to time, upon request of Beneficiary, at Grantor's sole
cost and expense, execute on a non-recourse basis all instruments and further
assurances and all supplemental instruments and take all such actions as
Beneficiary from time to time may reasonably request in order to perfect,
preserve and protect the interests intended to be assigned to Beneficiary by
this Section 1.20.
1.20.8. Satisfaction and Release
Upon satisfaction of the requirements of Section 1.22 hereof providing
for a release of the lien of this Deed of Trust, the assignment made in this
Section 1.20 and all rights hereunder assigned to Beneficiary shall cease and
terminate and shall revert to Grantor.
1.20.9. No Obligations
This Section 1.20 shall not be construed to bind Beneficiary or the
Trustee to the performance of any of the covenants, conditions or provisions
contained in any Lease or Guaranty or otherwise impose any obligation upon
Beneficiary or the Trustee. Neither Beneficiary nor the Trustee shall be liable
for any loss sustained by Grantor resulting from any act or omission of
Beneficiary or the Trustee in managing the Property after an Event of Default.
This Section 1.20 shall not operate to place any obligation or liability for the
control, care, management or repair of any part of the Property upon Beneficiary
or the Trustee, nor for the carrying out of any of the terms and conditions of
the Leases or any Guaranty; nor shall it operate to make Beneficiary or the
Trustee responsible or liable for any waste committed on the Land, including,
without limitation, the presence of any Hazardous Materials, or for any
negligence by any person (other than Beneficiary or the Trustee) in the
management, upkeep, repair or control of the Property resulting in loss or
injury or death to any tenant, licensee, employee or stranger. Nothing in this
Section 1.20 shall be construed as constituting Beneficiary or the Trustee a
"mortgagee in possession" in the absence of the taking of actual possession of
the Property by Beneficiary.
1.20.10. Rights in Litigation and Bankruptcy
(i) If an Event of Default shall have occurred and be
continuing, Beneficiary shall have the right to proceed in its own name or in
the name of Grantor in respect of any claim, suit, action or proceeding relating
to the rejection of any Lease by or on behalf of any lessee thereunder,
including, without limitation, the right to file and prosecute, to the exclusion
of Grantor, any proofs of claim, complaints, motions, applications, notices and
other documents, in any case in respect of the lessee under such Lease under the
Bankruptcy Code.
(ii) If there shall be filed by or against Grantor a
petition under the Bankruptcy Code, and Grantor, as lessor under any Lease,
shall determine to reject such Lease pursuant to Section 365(a) of the
Bankruptcy Code, then Grantor shall give Beneficiary not less than fifteen (15)
days prior notice of the date on which Grantor shall apply to the bankruptcy
court for authority to reject such Lease. Beneficiary shall have the right, but
not the obligation, to serve upon Grantor within such fifteen (15) day period a
notice stating that (a) Beneficiary demands that Grantor assume and assign such
Lease to Beneficiary pursuant to Section 365 of the Bankruptcy Code and (b)
Beneficiary covenants to cure or provide adequate assurance of future
performance under such Lease. If Beneficiary serves upon Grantor the notice
described in the preceding sentence, Grantor shall not seek to reject such Lease
and shall comply with the demand provided for in clause (a) of the preceding
sentence within thirty (30) days after the notice shall have been given, subject
to the performance by Beneficiary of the covenant provided for in clause (b) of
the preceding sentence.
1.20.11. Additional Lease Provisions
1.20.11.1.
Grantor covenants and agrees (i) to perform punctually all
obligations and agreements to be performed by it as lessor or party thereto
under any Lease, such that there will be no material and adverse impairment of
the value of the Property or Beneficiary's interest under this Deed of Trust,
and (ii) to do all things
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necessary or appropriate to compel performance by each Tenant of such Tenant's
obligations and agreements under the Lease to which such Tenant is a party.
Except as otherwise permitted hereunder, Grantor shall not give any notice,
approval or consent or exercise any rights under or in respect of any Lease or
any of such other instruments, which action, omission, notice, approval, consent
or exercise of rights would release any Tenant or other party from, or reduce
any Tenant's or any other party's obligations or liabilities under, or would
result in the termination, surrender or assignment of, or the amendment or
modification of in any material adverse respect, or would impair the validity
of, any Lease or any of such other instruments, if any of the foregoing would
affect any Individual Property in any material adverse respect, without the
prior written consent of Beneficiary, and any attempt to do any of the foregoing
without such consent shall be of no force and effect.
1.20.11.2.
Grantor will promptly deliver to Beneficiary a copy of any
notice from any Tenant under any Material Lease (defined below), in any such
case claiming that Grantor is materially in default in the performance or
observance of any of the terms, covenants or conditions thereof to be performed
or observed by Grantor and Grantor will provide in each Material Lease at the
Property executed after the date hereof to which Grantor is a party that any
tenant delivering any such notice shall send a copy of such notice directly to
Beneficiary. The term "Material Lease" as used herein shall mean (i) any Lease
covering seven and one-half percent (7.5%) or more of gross leaseable area of
any individual Building on any Individual Property or gross leaseable area of
any individual Building on any Individual Property in an amount of at least
eight thousand (8,000) rentable square feet and (ii) any Lease which represents
greater than five percent (5%) of income from Rents derived from any Individual
Property.
1.20.11.3.
Grantor may, without the consent of Beneficiary, enter
into any Lease after the date hereof or renew or extend any existing Lease on
the following terms and conditions: (i) the Lease is written on Grantor's
standard form of Lease that has been approved by Beneficiary (as revised from
time to time, the "Approved Form") without any material changes to the
provisions of the Approved Form relating to lender protections (including
subordination, non-disturbance and attornment), defaults and remedies, (ii) the
annual base rental income payable under the Lease would not exceed ten percent
(10%) of the annual base rental income from the Individual Property to which
such Lease relates, (iii) the Lease covers less than the greater of (A) ten
percent (10%) of the total rentable square footage in the Individual Property to
which such Lease relates or (B) eight thousand (8,000) rentable square feet,
(iv) the Lease is for a term of not more than fifteen (15) years; provided that
if the lease term extends beyond ten (10) years by virtue of renewal options
such renewal options must be at a rental rate not less than ninety-five percent
(95%) of the fair market value as of the commencement of the renewal term, (v)
the Lease shall be entered into in an arms length transaction and the tenant
thereunder shall be a bona fide third party tenant that is not an Affiliate of
Grantor, and (vi) such Lease shall not have a material adverse effect on the
value of the Individual Property to which such Lease relates or the ability of
Grantor to perform the Obligations. Any other Lease may be entered into or
renewed or extended only with the consent of Beneficiary, which consent shall
not be unreasonably withheld and which consent shall be deemed granted unless
Beneficiary notifies Grantor within ten (10) Business Days of any request for
such consent that it is withholding such consent.
1.20.11.4.
Grantor may, without the consent of the Beneficiary,
amend, modify or waive the provisions of any Lease, provided that such action
does not have a material adverse effect upon the value of any Individual
Property, and provided further that such Lease, as amended, modified or waived,
is otherwise in compliance with the requirements of this Deed of Trust
(including the requirements of Section 1.20.11.3 hereof) and a duplicate
original or certified copy of the amendment, modification or waiver is delivered
to the Beneficiary.
1.20.11.5.
Grantor may, without the consent of Beneficiary, terminate
or permit the early
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termination of any Lease (other than a Material Lease) of space or accept
surrender of all or any portion of the space demised under the Lease or acquire
any Lease (other than a Material Lease) or reduce the rentals reserved under or
shorten the term of any Lease (other than a Material Lease) so long as such
action (taking into account the planned alternative uses of the space) does not
materially adversely affect the value of any of the Property (it being agreed
that termination of the Lease of a Tenant that is in default, after any
applicable notice and cure periods, shall be considered to be for the benefit of
any of the Property) or the ability of Grantor to perform the Obligations.
1.20.11.6.
Grantor shall not enter into any Lease with an Affiliate
of Grantor at any of the Property, unless (i) the space is for the use and
occupancy of one or more of such Affiliates, and (ii) the material terms of such
Lease comply with the requirements set forth in Section 1.20.11.3 hereof;
provided, however, that a reasonable amount of office space not in excess of two
thousand five hundred (2500) net leaseable square feet in each Building can be
provided to Beneficiary for the purpose of management of such Building and the
Individual Property associated therewith at less than fair market rental or at
no rental, at the Grantor's discretion. Grantor shall have the right, subject to
the provisions of this Deed of Trust, to acquire Leases by way of assignment,
surrender, acquisition or further sublease.
1.20.11.7.
Upon receipt by Beneficiary of a written request from
Grantor therefor, Beneficiary shall execute and deliver to the tenant under any
Lease (other than a Lease to an Affiliate of Grantor) existing on the date
hereof or made in accordance with the provisions of this Section 1.20.11, a
non-disturbance and attornment agreement in a form reasonably satisfactory to
Beneficiary.
1.20.11.8.
Grantor shall not receive or collect, or permit the
receipt or collection of, any rental or other payments under any Lease more than
one (1) month in advance of the respective period in respect of which they are
to accrue, except that (i) in connection with the execution and delivery of any
Lease or of any amendment to any Lease, rental payments thereunder may be
collected and received in advance in an amount not in excess of one (1) month's
rent and a security deposit (including advance rents as or in lieu of a security
deposit) may be required thereunder (provided that such deposits are maintained
in accordance with applicable Laws and in accordance with the terms of this Deed
of Trust and the Assignment of Leases and Rents executed in connection
herewith), (ii) Grantor may receive and collect escalation, percentage rent and
other charges in accordance with the terms of each Lease and (iii) Grantor may
receive and collect more than one (1) month's rent in connection with a Tenant
terminating its Lease if the termination of the Lease is permitted under this
Deed of Trust.
1.20.11.9.
Grantor shall at all times hold monies representing
security deposits under the Leases in the manner required by applicable Laws.
1.20.12. Assignment to Beneficiary Controlling
The rights of Trustee in the Leases and the Rents created under
Granting Clause (vi) of this Deed of Trust shall be subject to (i) the rights of
Beneficiary in the Leases and the Rents created under this Section 1.20, and
(ii) the rights of Beneficiary in the Leases and the Rents created under the
Assignment of Rents and Leases executed in connection herewith.
1.21. Environmental Covenants and Representations
Except as described in any report listed on Schedule 3.21 to the Loan
Agreement, Grantor represents and
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covenants that:
1.21.1.
The operations of Grantor at the Land and Improvements, and the
Land and Improvements themselves, substantially comply with all applicable
Environmental Laws;
1.21.2.
Grantor will hereafter comply with and cause the Land and
Improvements to comply with and use diligent efforts to cause its employees,
agents and contractors on the Land or the Improvements to comply with all
applicable Environmental Laws;
1.21.3.
Grantor has obtained, and will hereafter maintain, all permits required
by applicable Environmental Laws for the operations of Grantor at the Land and
Improvements;
1.21.4.
Neither the Land and Improvements nor the Grantor's operations
thereat or thereon is subject to any order from or agreement with any
governmental authority or private party with respect to the release or
threatened release of Hazardous Materials from the Land and Improvements into
the environment;
1.21.5.
There are no pending or, to the best knowledge of the Grantor,
threatened judicial or administrative proceedings alleging a violation of any
Environmental Law with respect to the Land and Improvements or the Grantor's
operations thereon;
1.21.6.
None of the Grantor's operations at the Land and Improvements is
the subject of any investigation by any governmental authority evaluating
whether any remedial action is needed to respond to a release or threatened
release of Hazardous Materials from the Land and Improvements into the
environment;
1.21.7.
Grantor has not filed any notice under any statute, regulation,
or other governmental requirement with respect to the Land and Improvements
indicating present treatment, storage or disposal of Hazardous Materials
thereon; and
1.21.8.
Grantor has not filed any notice under any applicable statute,
regulation or other governmental requirement with respect to the Land and
Improvements reporting a release of any Hazardous Materials from the Land and
Improvements into the environment.
1.22. Release
1.22.1. Satisfaction of Obligations
If Grantor shall pay the principal of and interest on the Mortgage Note
in full at maturity or earlier as
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permitted in accordance with the terms of the Loan Agreement and this Deed of
Trust and shall pay all other Obligations payable to Beneficiary by Grantor
hereunder and under the other Loan Documents, then this Deed of Trust and all
the other Loan Documents shall be discharged and satisfied or, to the extent not
prohibited by law, assigned to Grantor or to any other Person at the Grantor's
direction, at the Grantor's option, without representation, recourse or
warranty, other than for the acts of the Beneficiary, at the expense of Grantor
upon its written request, except that the indemnifications of Grantor in favor
of Beneficiary set forth in Section 1.12 hereof and in the Environmental
Indemnity Agreement shall survive as set forth therein. Concurrently with such
release and satisfaction or assignment of this Deed of Trust and all the other
Loan Documents, Beneficiary will return to Grantor the Mortgage Note and all
title and other insurance policies relating to the Property and, on the written
request and at the expense of the Grantor, will execute and deliver such proper
instruments of release (including, without limitation, appropriate U.C.C.
termination statements) as may reasonably be requested by Grantor to evidence
such release and satisfaction or assignment, and any such instrument, when duly
executed by Beneficiary and duly recorded in the places where this Deed of Trust
and each other Security Document is recorded, shall conclusively evidence the
release and satisfaction or assignment of this Deed of Trust and the other Loan
Documents. Any release of this Deed of Trust with respect to the Property
pursuant to Section 1.22.2 shall be effected in accordance with the same
procedures specified in the immediately preceding two sentences to the extent
applicable to such release.
1.22.2. Release of Building; Partial Releases
Grantor shall further be entitled to partial release of the Lien hereof
in the circumstances and on the conditions specified in Section 2.8, Section
2.9, Section 2.10 and Section 11 of the Loan Agreement as it relates to a
particular Individual Property and to a release of the Lien hereof in the
circumstances and on the conditions specified in Section 2.7 of the Loan
Agreement. Beneficiary shall also grant partial releases of the Lien hereof on
certain Property to be sold under Section 1.23 of this Deed of Trust,
contemporaneously with such sales, provided the conditions set forth in said
Section 1.23 are satisfied.
1.23. Transfers, Indebtedness and Subordinate Liens
1.23.1. Transfers
(i) Unless such action is permitted by the provisions
of this Section 1.23, Grantor will not (1) sell, assign, convey, transfer or
otherwise dispose of or encumber the Property or any of the Grantor's right,
title or interest therein, (2) mortgage, hypothecate or otherwise encumber or
grant a security interest in all or any part of the Property, (3) file a
declaration of condominium with respect to any of the Property or (4) permit the
transfer or assignment of any interest in the Grantor.
(ii) Notwithstanding the provisions of Section
1.23.1(i), Grantor may transfer or dispose of Fixtures that are either being
replaced or that are no longer necessary in connection with the operation of the
Property free from the interest of Beneficiary under this Deed of Trust,
provided that such transfer or disposal will not adversely affect the value of
any of the Property, and will not materially impair the utility of any of the
Property, in either case as a result thereof, and provided that any new Fixtures
acquired by Grantor (and not so disposed of) shall be subject to the interest of
Beneficiary under this Deed of Trust (unless leased to the Grantor, in which
case the Grantor's interest in such lease shall be collaterally assigned to the
Beneficiary). Beneficiary shall, from time to time, upon receipt of a
certificate of an officer of the Grantor requesting the same and confirming
satisfaction of the conditions set forth above, execute a written instrument in
form reasonably satisfactory to it to confirm that such Fixtures which are to
be, or have been, sold or disposed of are free from the interest of Beneficiary
under this Deed of Trust.
1.23.2. Indebtedness
Grantor shall not incur, create or assume any Indebtedness other than
Permitted Debt (as defined in the Loan Agreement).
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1.23.3. Additional Permitted Transfers
Notwithstanding the foregoing provisions of this Section 1.23.1, Grantor
without the consent of Beneficiary may (i) make transfers of portions of the
Property (by sale, ground lease, subordination of fee interest to a leasehold
mortgage, sublease or other conveyance of any interest) to any federal, state or
local government or any political subdivision thereof in connection with (and in
lieu of) Takings of any portion of the Property for dedication or public use
(and proceeds of any such transfer shall be deemed to be an Award subject to the
provisions of Section 1.9 hereof), and (ii) dedicate portions of the Property or
grant easements, restrictions, covenants, reservations and rights of way in the
ordinary course of business for traffic circulation, ingress, egress, parking,
access, water and sewer lines, telephone and telegraph lines, electric lines or
other utilities or for other similar limited purposes benefiting the Property,
provided, that no transfer, conveyance or other encumbrance set forth in the
foregoing clauses (i) and (ii) shall impair the utility and operation of any
Individual Property, adversely affect the value of any Individual Property, or
cause any Individual Property to be in violation of any applicable laws in each
case taken as a whole. Beneficiary hereby agrees to execute and deliver any
instrument reasonably necessary or appropriate to evidence any desired consent
to said action and, in the case of any transfers of fee interests referred to in
clauses (i) or (ii) of the first sentence of this Section 1.23.3, to release the
portion of the Land affected by such Taking or such transfer from the Lien of
this Deed of Trust upon receipt by Beneficiary of:
(1) a copy of the instrument of transfer;
(2) a certificate of an officer of the Grantor stating
(x) with respect to any Taking, the consideration, if any, being
paid for the transfer and (y) that such transfer does not
materially impair the utility and operation of the Land, reduce
its value or cause any Individual Property to be in violation of
any applicable laws, including laws relating to the number of
parking spaces at the applicable Building; and
(3) as to any Taking or transfers under clauses (i) or
(ii), an endorsement to Beneficiary's title insurance policy
insuring that the priority of the Lien of this Deed of Trust is
unaffected by reason of the fact that a portion of the Land has
been released from the Lien of this Deed of Trust, the cost of
any such endorsement to be paid for by the Grantor.
All proceeds from any Takings shall be applied in accordance with the
provisions of Section 1.9 hereof.
1.23.4. Delivery of Documents to the Beneficiary
No more than fifteen (15) days after the completion of any transaction
subject to this Section 1.23, Grantor shall provide Beneficiary with copies of
executed deeds, mortgages and such other similar closing documents as may be
reasonably requested by Beneficiary.
1.24. Utility Services
Grantor will pay or cause to be paid when due all charges for all public
or private utility services, all public or private highway services, all public
or private communication services and all sprinkler systems and protective
services at any time rendered to or in connection with the Property or any part
thereof and which are incurred by or on behalf of Grantor.
ARTICLE II
2. EVENTS OF DEFAULT
Grantor hereby agrees that the occurrence of any one or more of the
following shall constitute an Event of Default ("Event of Default") under this
Deed of Trust, entitling the Beneficiary, its successors and assigns, to
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exercise the remedies set forth in Article III hereof, and any other remedies
available at law, in equity, or under the other Security Documents:
2.1. Payment Default
(a) Failure by Grantor to make any payment of principal,
interest, Defeasance Deposit or Yield Maintenance Payment due on the Mortgage
Note when the same shall become due and payable (whether at maturity, on a date
fixed for any payment or prepayment thereof, upon acceleration or otherwise) or
(b) failure by Grantor to make any other payment required under the Mortgage
Note, this Deed of Trust, or any other Loan Document when due; or
2.2. Material Breach of Representation and Warranty
Any representation or warranty made by Grantor in this Deed of Trust or
any other Loan Document shall fail to have been true in any material and adverse
respect when made, which failure remains uncured for a period of thirty (30)
days after receipt of written notice of such failure; provided, however, that it
shall not be an Event of Default if such failure is curable but is not
reasonably capable of being cured within such thirty (30) day period but Grantor
shall have promptly commenced to cure within such thirty (30) day period and
thereafter diligently pursues such cure to completion (but in no event later
than one hundred eighty (180) days after receipt of such written notice); or
2.3. Material Breach of Covenant
Grantor shall fail to perform or comply in any material and adverse
respect with any non-monetary term, covenant or condition imposed in this Deed
of Trust or any other Loan Document, (a) which failure remains uncured for a
period of thirty (30) days after the Grantor's receipt of written notice of such
failure, or (b) in the case of any failure or breach of covenant relating to the
payment of taxes or maintenance of insurance as provided herein, which failure
remains uncured for a period of ten (10) days after receipt of written notice by
Grantor of such failure; provided, however, that, in the case of clause (a), it
shall not be an Event of Default if such failure is curable but is not
reasonably susceptible of being cured within such thirty (30) day period but
Grantor promptly commences to cure within such thirty (30) day period and
thereafter diligently pursues such cure to completion (but in no event later
than one hundred eighty (180) days after receipt of such written notice); or
2.4. Event of Default Under Loan Agreement
The occurrence of an "Event of Default" under the Loan Agreement.
ARTICLE III
3. REMEDIES
3.1. Legal Proceedings; Cost of Enforcement
3.1.1. Legal Proceedings
If an Event of Default shall have occurred and be continuing,
Beneficiary or the Trustee may institute proceedings for the complete or partial
foreclosure of this Deed of Trust or take such steps to protect and enforce its
rights whether by action, suit or proceeding in equity or at law for the
specific performance of any covenant, condition or agreement in the Mortgage
Note or in this Deed of Trust (without being required to foreclose this Deed
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of Trust), or in aid of the execution of any power herein granted, or for any
foreclosure hereunder, or for the enforcement of any other appropriate legal or
equitable remedy or otherwise as Beneficiary shall elect.
3.1.2. Cost of Enforcement
Grantor shall pay within ten (10) days after written demand therefor all
costs and expenses (including, without limitation, attorneys' fees and charges)
incurred by or on behalf of Beneficiary or the Trustee in enforcing or
sustaining the lien of this Deed of Trust or the priority thereof, the Mortgage
Note, or any and all other Loan Documents, or occasioned by any Event of
Default. Such costs and expenses shall constitute Obligations secured by this
Deed of Trust, payable on demand and shall bear interest at the Default Interest
Rate from the time of demand until paid.
3.2. Acceleration
If an Event of Default shall have occurred and be continuing, regardless
of the pendency of any proceeding which has or might have the effect of
preventing Grantor from complying with the terms of this Deed of Trust, the
Mortgage Note, or any other Loan Document, then, in any such event, the entire
unpaid amount of the indebtedness evidenced by the Mortgage Note, this Deed of
Trust or any other Loan Documents, and any other unpaid sum secured by this Deed
of Trust, shall, at the option of Beneficiary become immediately due and payable
in full without presentment, demand, protest or notice, all of which are hereby
waived by Grantor (except to the extent notice is expressly required herein) and
shall thereafter bear interest at the Default Interest Rate.
3.3. Right to Perform Grantor's Covenants, Etc.
If Grantor shall fail to make any payment or perform any act required to
be made or performed under this Deed of Trust, the Mortgage Note, or any other
Loan Document, within ten (10) days after written notice thereof (or such
shorter notice as shall be required to avoid a material impairment in the value
of the Property or in the Beneficiary's security, and without notice where
required to avoid such impairment), Beneficiary (or the Trustee at the request
of the Beneficiary, as applicable), without waiving or releasing any obligation
or Event of Default, may (but shall be under no obligation to) make such payment
or perform such act for the account, and at the expense, of Grantor and may
enter upon the Property or any part thereof for such purpose and take all such
actions thereon as, in the reasonable opinion of the Beneficiary, may be
necessary or appropriate therefor. All sums so paid by Beneficiary or the
Trustee and all costs and expenses (including, without limitation, reasonable
attorneys' fees and charges) so incurred, shall constitute part of the
Obligations secured by this Deed of Trust and shall be paid by Grantor to
Beneficiary or the Trustee upon demand and, if not so paid within ten (10) days
after demand, shall thereafter bear interest at the Default Interest Rate.
3.4. Possession Upon Default
3.4.1. Surrender or Taking of Possession
If an Event of Default shall have occurred and be continuing, the
Grantor, upon demand of the Beneficiary, shall forthwith surrender to
Beneficiary or to the Trustee, as applicable, the actual possession of the
Property or any part thereof from time to time (without limit as to the number
of times) as may be designated by Beneficiary or the Trustee and, to the extent
permitted by law, Beneficiary or the Trustee may enter and take possession of
all or any such part of the Property and may exclude Grantor and the Grantor's
agents and invitees wholly therefrom. If Grantor shall fail to surrender to
Beneficiary or to the Trustee, as applicable, the actual possession of such
Property upon demand, then Beneficiary or the Trustee, to the extent permitted
under applicable law, without further notice, may (1) enter upon and take
possession of the Property or any part thereof by force, summary proceedings,
ejectment or otherwise; (2) remove Grantor and all other persons from the
Property; and (3) remove from the Property any and all property owned by third
parties (so long as reasonable measures for the safekeeping of such third party
property are taken).
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3.4.2. Entering into Possession
Upon every such entering and taking of possession, Beneficiary or the
Trustee, as applicable, may hold, store, use, operate, manage, control, and
maintain the Property and conduct the business thereof, which right shall
include, without limitation, the right to (1) make all necessary and proper
repairs, renewals, replacements, additions, betterments and improvements thereto
and thereon and purchase and otherwise acquire additional fixtures, personalty,
and other property as may be necessary to preserve, maintain or restore the
value thereof to the condition required herein or in any other Loan Document;
(2) insure the Property or keep the Property insured; (3) manage and operate the
Property and exercise all the rights and powers of the Grantor, in its name or
otherwise, with respect to the Property; and (4) enter into any agreements with
respect to the exercise by others of any of the powers herein granted to
Beneficiary or the Trustee, all as Beneficiary or the Trustee may from time to
time determine to be necessary or desirable. Beneficiary or the Trustee also may
collect and receive all of the earnings, income, rents, profits, issues and
revenues of the Property or any part thereof, including those past due as well
as those accruing thereafter; provided, however, that any amount so received by
Beneficiary or the Trustee shall be applied as provided in Section 3.12 hereof.
Beneficiary or the Trustee shall not be liable for or by reason of any such
entry, taking of possession or removal, or holding, operation or management,
except for liability arising out of the gross negligence or willful misconduct
of the Beneficiary, the Trustee, or the agents, officers, directors or employees
of Beneficiary or the Trustee. All sums expended by Beneficiary or the Trustee
pursuant to this Section 3.4.2, including any such amount in excess of the
principal amount of the Mortgage Note, shall be deemed to have been advanced to
Grantor by the Beneficiary, shall be secured by this Deed of Trust and shall be
paid by Grantor to Beneficiary upon demand therefor and, if not so paid within
ten (10) days after written demand, shall thereafter bear interest at the
Default Interest Rate.
3.4.3. Satisfaction of Default
Whenever all Events of Default have been cured and satisfied,
Beneficiary may, in its sole and absolute discretion, upon receipt of a written
request therefor from Grantor, surrender possession or direct the Trustee, to
surrender possession of the Property to Grantor, provided that the right of
Beneficiary or the Trustee, as applicable, to take possession of the Property
from time to time pursuant to Section 3.4.1 shall continue to exist unimpaired
and undiminished if any subsequent Event of Default shall occur and be
continuing.
3.5. Sale of Property
Beneficiary or the Trustee may cause the Property and all estate,
right, title and interest, claim and demand therein, or any part thereof to be
sold as follows:
3.5.1.
Beneficiary may proceed as if all of the Property were real
property, in accordance with Section 3.5.4 below, or Beneficiary may elect to
treat any of the Property which consists of a right in action or which is
property that can be severed from the premises without causing structural damage
thereto as if the same were personal property, and dispose of the same in
accordance with Section 3.5.3 below, separate and apart from the sale of real
property, with the remainder of the Property being treated as real property.
3.5.2.
Beneficiary may cause any such sale or other disposition to be
conducted immediately following the expiration of any grace period, if any,
herein provided (or required by law) or Beneficiary may delay any such sale or
other disposition for such period of time as Beneficiary deems to be in its best
interest. Should Beneficiary desire that more than one such sale or other
disposition be conducted, Beneficiary may, at its option, cause the same to be
conducted simultaneously, or successively on the same day, or at such different
days or times and in such order as Beneficiary may deem to be in its best
interest.
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3.5.3.
Should Beneficiary elect to cause any of the Property to be
disposed of as personal property as permitted by Section 3.5.1 above, it may
dispose of any part thereof in any manner now or hereafter permitted by Division
9 of the U.C.C. or in accordance with any other remedy provided by law. Both
Grantor and Beneficiary shall be eligible to purchase any part of all of such
property at any such disposition. Any such disposition may be either public or
private as Beneficiary may so elect, subject to the provisions of the UCC.
Beneficiary shall give Grantor at least five (5) days prior written notice of
the time and place of any public sale or other disposition of such property or
of the time at or after which any private sale or any other intended disposition
is to be made, and if such notice is sent to Grantor it shall constitute
reasonable notice to Grantor.
3.5.4.
Should Beneficiary elect to sell the Property which is real
property or which Beneficiary has elected to treat as real property, upon such
election Beneficiary or the Trustee shall give such Notice of Default and
Election to Sell (a "Notice of Sale") as may then be required by law.
Thereafter, upon the expiration of such time and the giving of such Notice of
Sale as may then be required by law, the Trustee, at the time and place
specified in the Notice of Sale, shall sell such Property, or any portion
thereof specified by Beneficiary, at public auction to the highest bidder for
cash in lawful money or the United States, subject, however, to the provisions
of Section 3.5.5 below. Beneficiary may, from time to time, postpone the sale by
public announcement thereof at the time and place noticed therefor. If the
Property consists of several lots or parcels, Beneficiary may designate the
order in which such lots or parcels may be offered for sale or sold, and may
direct that such property be sold in one parcel, as an entirety, or in such
parcels as Beneficiary, in its sole discretion, may elect. Grantor expressly
waives any right which it may have to direct the order in which any of the
Property shall be sold, and its rights, if any, to require that the Property be
sold as separate tracts, lots, units or parcels. Any person, including Grantor,
the Trustee or Beneficiary, may purchase at the sale. Upon any sale, the Trustee
shall execute and deliver to the purchaser or purchasers a deed or deeds
conveying the property so sold, but without any covenant or warranty whatsoever,
express or implied, whereupon such purchaser or purchasers shall be let into
immediate possession.
3.5.5.
Upon any sale of the Property, whether made under a power of sale
herein granted or pursuant to judicial proceedings, if the holder of the
Mortgage Note is a purchaser at such sale, it shall be entitled to use and apply
all or any portion of the indebtedness then secured hereby for or in settlement
or payment of all or any portion of the purchase price of the property
purchased.
3.5.6.
In the event of a sale or other disposition of any such Property
or any part thereof, and the execution of a deed or other conveyance pursuant
thereto, the recitals in the deed or deeds of facts (such as of a default, the
giving of notice of default and notice of sale, demand that such sale should be
made, postponement of sale, terms of sale, sale, purchaser, payment of purchase
money, and any other fact affecting the regularity or validity of such sale or
disposition) shall be conclusive proof of the truth of such facts; and any such
deed or conveyance shall be conclusive against all persons as to such facts
recited therein.
3.6. Appointment of Receiver
Beneficiary shall be entitled, as a matter of strict right, without
notice and upon ex parte application, and without regard to the value or
occupancy of the security, or the solvency of Grantor, or the adequacy of the
Property or other collateral as security for the Mortgage Note, to have a
receiver appointed to enter upon and take possession of the Property, collect
the Rents and apply the same as the court may direct, such receiver to have all
the rights and powers permitted under the laws of the jurisdiction in which the
Property is located. Grantor hereby waives any
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requirements on the receiver or Beneficiary to post any surety or other bond.
Beneficiary or the receiver may also take possession of, and for these purposes
use, any and all personalty which is a part of the Property and used by Grantor
in the rental or leasing thereof or any part thereof. The expense (including the
receiver's fees, counsel fees, costs and agent's compensation) incurred pursuant
to the powers herein contained shall be secured by this Indenture. To the extent
not prohibited by applicable law, Beneficiary shall (after payment of all costs
and expenses incurred) apply such Rents received by it in the order set forth in
Section 3.12 of this Deed of Trust. The right to enter and take possession of
the Property, to manage and operate the same, and to collect the Rents, whether
by receiver or otherwise, shall be cumulative to any other right or remedy
hereunder or afforded by law, and many be exercised concurrently therewith or
independently thereof. Beneficiary shall be liable to account only for such
Rents actually received by Beneficiary.
3.7. Trustees Authorized to Execute Deeds, Etc.
Grantor irrevocably appoints the Trustee its true and lawful
attorneys-in-fact, with full power of substitution, in its name and stead and on
its behalf, for the purpose of effectuating any sale, assignment, transfer or
delivery for the enforcement of this Deed of Trust pursuant to foreclosure or
power of sale or otherwise, to execute and deliver all such certificates, deeds,
bills of sale, assignments, and other instruments as the Trustee may reasonably
consider necessary or appropriate. Grantor hereby ratifies and confirms all that
such attorneys-in-fact or any substitute therefor shall lawfully do by virtue
hereof. Nevertheless, if so requested by the Trustee or any purchaser, Grantor
shall ratify and confirm any such sale, assignment, transfer or delivery by
executing and delivering to the Trustee or such purchaser all proper
certificates, deeds, bills of sale, assignments, releases, and other instruments
as may reasonably be designated in any such request.
3.8. Purchase of the Property by the Beneficiary
Beneficiary may be a purchaser of the Property or of any part thereof or
of any interest therein at any sale thereof, whether pursuant to foreclosure or
power of sale or otherwise hereunder (subject to applicable provisions of the
U.C.C.), and may apply upon the purchase price the indebtedness secured hereby
owing to the Beneficiary. Beneficiary shall, upon any such purchase, acquire
good title to the properties so purchased, free of the lien of this Deed of
Trust and, to the fullest extent permitted by applicable law, free of all rights
of redemption in Grantor and free of all liens and encumbrances subordinate to
this Deed of Trust.
3.9. Foreclosure of Personalty
Upon the occurrence and during the continuation of an Event of Default,
should Beneficiary or the Trustee, as applicable, elect to cause any of the
Property to be disposed of as personal property because the same consists of a
right of action or property that can be severed from the Land or the
Improvements without causing material damage thereto, Beneficiary, or the
Trustee, as applicable, may dispose of all or any part thereof in any manner now
or hereafter permitted under the U.C.C. or in accordance with any other remedy
provided by law. Any such disposition may be conducted by an employee or agent
of Beneficiary or the Trustee. Beneficiary or the Trustee shall be entitled to
purchase any part or all of such property at such disposition. Any such
disposition may be by public or private sale as Beneficiary or the Trustee may
so elect, subject to the provisions of the U.C.C. Beneficiary shall have all the
rights and remedies of a secured party under the U.C.C. Expenses of retaking,
holding, preparing for sale, selling or the like shall include Beneficiary's and
the Trustee's attorneys' and accountants' fees and charges. Upon the occurrence
and during the continuation of any Event of Default, the Grantor, upon demand of
Beneficiary or the Trustee shall assemble such personal property and make it
available to Beneficiary and the Trustee at any of the Land, or at a place which
is deemed to be reasonably convenient to Beneficiary or the Trustee. It is
agreed that ten (10) days prior written notice to Grantor of the time and place
of any public sale or other disposition of such property or the time at or after
which any private sale or any other intended disposition is to be made shall
constitute commercially reasonable notice.
3.10. Receipt a Sufficient Discharge to Purchaser
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Upon any sale of the Property or any part thereof or any interest
therein, whether pursuant to foreclosure or power of sale or otherwise
hereunder, the receipt of the officer making the sale under judicial proceedings
or of the Trustee or auctioneer in the event of a private sale shall be
sufficient discharge to the purchaser for the purchase money, and such purchaser
shall not be obligated to see to the application thereof.
3.11. Sale Shall be a Bar Against Grantor
The sale of all or any portion of the Property in connection with the
exercise of remedies under this Deed of Trust after the Mortgage Note becomes
due and payable, whether at maturity, by declaration of acceleration or by
automatic acceleration after an Event of Default or otherwise, shall, upon the
expiration of any applicable redemption period, to the full extent legally
permitted, forever be a perpetual bar against Grantor asserting any claim to
title to such portion of the Property so sold.
3.12. Application of Proceeds of Sale and Other Monies
The proceeds of any sale of the Property or of any interest therein,
whether pursuant to foreclosure or power of sale or otherwise hereunder,
together with any other monies at any time held by Beneficiary or the Trustee,
as applicable, pursuant to this Deed of Trust, the Mortgage Note, or any Loan
Document, shall, unless otherwise elected by Beneficiary in its sole discretion
or unless otherwise required by applicable law, be applied in the manner and in
the order set forth in Section 2.4.3 of the Loan Agreement.
3.13. Remedies Cumulative
Each of the rights, powers, and remedies provided herein are intended
and are hereby deemed to be cumulative, concurrent and in addition to, and not
in limitation of, those rights, powers, and remedies provided elsewhere
hereunder or in any other Loan Document or now or hereafter existing at law or
in equity or by statute or otherwise. If the Obligations are secured by more
than one property, lot, or parcel pursuant to this Deed of Trust, or any other
Deed of Trust or Security Document, and if this Deed of Trust or any other
Security Document is foreclosed upon, or if Beneficiary or the Trustee shall
exercise the power of sale or any other remedy granted herein, execution may be
made upon, or Beneficiary or the Trustee may exercise their power of sale
against, any one or more of the properties, lots or parcels and not upon the
others, or upon all of such properties or parcels, either together or
separately, and at different times or at the same, and sales or sales by
advertisement may likewise be conducted separately or concurrently, in each case
at the Beneficiary's or the Trustee's election. In the event of a foreclosure of
this Deed of Trust or any other Security Document, the obligations then due
shall not be merged into any decree of foreclosure entered by the court, and
Beneficiary or the Trustee may concurrently or subsequently seek to foreclose
one or more other Security Document which also secure said Obligations listed
hereby or thereby.
3.14. No Waiver, Etc.
No failure by Beneficiary or the Trustee to insist upon the strict
performance of any term hereof or to exercise any right, remedy, power or
privilege provided herein or by statute or at law or in equity or otherwise, nor
delay therein, shall constitute a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The waiver of any Event of Default hereunder shall not
impair the rights of Beneficiary or the Trustee to enforce any concurrent or
future Event of Default, whether similar or dissimilar to the Event of Default
waived, or otherwise affect or alter this Deed of Trust, which shall continue in
full force and effect.
3.15. Cross-Collateralization; Waiver of Marshalling, Appraisal,
Valuation
Grantor acknowledges that the Obligations are secured by this Deed of
Trust, an Assignment of Leases and Rents and various other documents or
instruments securing or evidencing the Loan. Upon the occurrence of an
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Event of Default, Beneficiary shall have the right to institute a proceeding or
proceedings for the total or partial foreclosure of this Deed of Trust and any
or all of the other Security Documents, whether by court action, power of sale
or otherwise, under any applicable provisions of law, for all of the
indebtedness secured by the Security Documents or the portion of such
indebtedness allocated to the Property, and the liens and the security interests
created by the Security Documents shall continue in full force and effect as to
the Buildings (and the property related thereto) not foreclosed, without loss of
priority securing that portion of the indebtedness then due and payable and
still outstanding. Grantor acknowledges that the Buildings are located in three
(3) different counties in the State of California and agrees that, subject to
Section 3.5 of this Deed of Trust, upon the occurrence and during the
continuation of an Event of Default hereunder Beneficiary shall be entitled to
enforce payment of the indebtedness secured by the Security Documents and the
performance of any term, covenant or condition of the Security Documents and
exercise any and all rights and remedies under the Security Documents or as
provided by law or at equity, by one or more proceedings, whether
contemporaneous, consecutive or both, to be determined by Beneficiary in its
sole discretion, in any one or more counties in which the Buildings are located.
Neither the acceptance of this Deed of Trust or the other Security Documents nor
the enforcement thereof in any one state, whether by court action, foreclosure,
power of sale or otherwise, shall prejudice or in any way limit or preclude
enforcement by court action, foreclosure, power of sale or otherwise, of the
Mortgage Note, this Deed of Trust or the other Security Documents through one or
more additional proceedings in that state or in any other state. Any and all
sums received by Beneficiary under the Mortgage Note, this Deed of Trust or the
other Security Documents shall be applied toward the repayment of the
Obligations in such order and priority as Beneficiary shall determine,
consistent with the requirements of the Security Documents, but otherwise
without regard to the Allocated Loan Amount applicable to each Individual
Property or the appraised value of any of the Individual Properties. Grantor
hereby waives all rights, legal and equitable, it may now or hereafter have to
require marshalling of assets or to require, upon foreclosure, sales of assets
in a particular order. Each successor and assign of the Grantor, including a
holder of a Lien subordinate to the Lien created hereby (without implying that
Grantor has, except as expressly provided herein, a right to grant an interest
in, or a subordinate Lien on, any of the Property), by acceptance of its
interest or Lien agrees that it shall be bound by the above waiver, to the same
extent as if such holder gave the waiver itself. Grantor also hereby waives, to
the full extent it may lawfully do so, the benefit of all laws providing for
rights of appraisal, valuation, stay or extension or of redemption after
foreclosure now or hereafter in force.
GRANTOR HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER
CALIFORNIA LAW TO REPAY THE MORTGAGE NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY,
UPON ACCELERATION OF THE MORTGAGE NOTE, AND (ii) AGREES THAT IF, FOR ANY REASON,
A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE MORTGAGE NOTE
IS MADE INCLUDING WITHOUT LIMITATION UPON OR FOLLOWING ANY ACCELERATION OF THE
MORTGAGE NOTE BY BENEFICIARY ON ACCOUNT OF ANY DEFAULT BY GRANTOR INCLUDING,
WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE PROHIBITED
OR RESTRICTED BY THIS DEED OF TRUST, THEN GRANTOR HEREBY DECLARES THAT (1) EACH
OF THE FACTUAL MATTERS SET FORTH IN THIS PARAGRAPH IS TRUE AND CORRECT, (2)
BENEFICIARY'S AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE MORTGAGE NOTE
CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND AGREEMENT, AND HAS BEEN
GIVEN INDIVIDUAL WEIGHT BY GRANTOR AND BENEFICIARY, (3) GRANTOR IS A
SOPHISTICATED AND KNOWLEDGEABLE REAL ESTATE INVESTOR WITH COMPETENT AND
INDEPENDENT LEGAL COUNSEL AND (4) GRANTOR FULLY UNDERSTANDS THE EFFECT OF THIS
WAIVER AND AGREEMENT.
--------------------
GRANTOR INITIALS
ARTICLE IV
4. CONCERNING TRUSTEES
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4.1. Acts of One Trustee Valid
In the event at any time there is more than one Trustee hereunder, any
Trustee may act without the joining of any other Trustee under any provision of
this Deed of Trust with the same effect as if all Trustees under this Deed of
Trust acted jointly, and the act of any Trustee acting separately shall be
binding and conclusive upon all Trustees and all other parties in interest.
4.2. Removal and Substitution of Trustees
In the event at any time there is more than one Trustee hereunder, any
Trustee or any successor Trustee hereunder may at any time resign as a Trustee
or successor Trustees under this Deed of Trust upon the delivery of written
notice of such resignation to the Beneficiary. Beneficiary shall have, and is
hereby granted by Grantor, with warranty of further assurances, the irrevocable
power to remove the Trustees or any of them, without cause and without
specifying the reason therefor, by delivering a written instrument or
instruments to such effect to the Trustees and, if required by law, to Grantor,
and to appoint a successor Trustee or Trustees by delivering a written
instrument or instruments to such effect to such successor Trustee or Trustees
and by filing a substitution of trustee for recordation in the office where this
Deed of Trust is recorded. Such power of removal and appointment may be
exercised as often and whenever Beneficiary deems it advisable, and the exercise
of such power, no matter how often exercised, shall not be an exhaustion
thereof. Upon the recordation of such deed or deeds of appointment, the Trustee
or Trustees so appointed shall thereupon, without any further act or deed or
conveyance, be fully vested with identically the same title and estate in and to
the Property and with all of the rights, powers, trusts and duties of their, his
or its predecessors in the trust hereunder, with like effect as if originally
named as the Trustee or one of the Trustees hereunder. After the recordation of
such deed or deeds of appointment, the Trustee or Trustees who have been removed
shall, at the expense of the Grantor, duly assign, transfer, and deliver to such
successor Trustee or Trustees all monies at the time held hereunder by such
Trustee or Trustees who have been removed, and shall execute and deliver such
proper instruments as reasonably may be requested by Beneficiary or the
successor Trustee or Trustees to evidence such assignment, transfer, and
delivery. Whenever in this Deed of Trust reference is made to the Trustees or a
Trustee, it shall be construed to mean the Trustees or the Trustee for the time
being, whether original or successor or successors in trust and, as the context
may require, to any one of such Trustees acting alone.
4.3. Trustee's Compensation, Expenses, Etc.
Trustee shall be entitled to reasonable compensation for all services
rendered or expenses incurred in the administration or execution of the trust
hereby created in an amount not to exceed the maximum amount permitted by law
and Grantor hereby agrees to pay same.
ARTICLE V
5. MISCELLANEOUS
5.1. Notices
All notices, requests and demands to or upon the respective parties
hereto shall be in writing (except as is otherwise specifically provided in this
Deed of Trust) and shall be deemed to have been duly given or made when received
(or when delivery thereof is refused by the intended recipient) if mailed by
first-class registered or certified mail, return receipt requested, postage
prepaid, sent by facsimile transmission with confirmation of receipt or
delivery, sent by nationally recognized overnight courier, or delivered by hand,
addressed or directed as follows (or to such other address or facsimile
transmission number as may be hereafter designated in writing by the respective
parties hereto):
if to Grantor: Arden Realty Finance IV, L.L.C.
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11601 Wilshire Boulevard
Suite 402
Los Angeles, California 90025
Attention: Diana M. Laing
if to Beneficiary: Lehman Brothers Realty Corporation
Three World Financial Center
New York, New York 10285
Attention: Commercial Mortgage Loan
Surveillance
Fax: (212) 528-6659
if to Trustee: Commonwealth Land Title Company
55 South Lake Avenue
Suite 600
Pasadena, California 91101
Attention: William F. Hunter, Esq.
Fax: (626) 449-9957
The Grantor, Beneficiary or the Trustee may from time to time, by
notice in writing served upon the others as described above, designate a
different mailing address to which all such notices or demands or communications
are thereafter to be addressed and delivered.
Grantor hereby requests that a copy of any notice of default and
every notice of sale hereunder be mailed to it as provided by law at Grantor's
address set forth in this Section 5.1.
5.2. Invalidity of Any Provision; Entire Agreement
All rights, powers and remedies provided herein may be exercised only to
the extent the exercise thereof does not violate any applicable law, and are
intended to be limited to the extent necessary so that they will not render this
Deed of Trust invalid, unenforceable or not entitled to be recorded, registered
or filed under any applicable law. The invalidity of any one or more phrases,
sentences, clauses, paragraphs or Sections hereof shall not affect the remaining
portions of this Deed of Trust or any part thereof. In the event that one or
more of the phrases, sentences, clauses, paragraphs or Sections contained herein
shall be invalid, or would operate to render this Deed of Trust invalid, this
Deed of Trust shall be construed as if such invalid phrase or phrases, sentence
or sentences, clause or clauses, paragraph or paragraphs or Section or Sections
had not been inserted. This Deed of Trust including the Exhibits hereto, and the
other documents and instruments referred to herein or delivered pursuant hereto,
contains the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior or written agreements, commitments or
understandings with respect to such matters.
5.3. Amendment
This Deed of Trust shall not be amended, altered, modified, waived,
discharged or terminated except by an instrument in writing signed by the party
against which enforcement of such amendment, alteration, modification, waiver,
discharge or termination is sought.
5.4. Parties Bound and Benefited
This Deed of Trust shall be binding upon and be enforceable against
Grantor and Beneficiary and their respective successors and assigns, and shall
be enforceable by and inure to the benefit of Beneficiary and its successors and
assigns, and Grantor and its successors and permitted assigns.
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5.5. Effect of Renewal, Amendment, Waiver, Etc.
The Beneficiary, at its option, may at any time renew or extend this
Deed of Trust or the Mortgage Note or any other obligation secured hereby or,
with the consent of the Grantor, alter or modify the same in any way, and may
waive any of the covenants and conditions of the Mortgage Note or this Deed of
Trust imposing obligations on the Grantor, in whole or in part, either at the
request of Grantor or any other person then having an interest in the Property
or in any way liable on the indebtedness secured hereby, and may take other
security for said indebtedness or release any portion of the Property covered
hereby, or release any party primarily or secondarily liable on the Mortgage
Note or hereunder or on any such other security, and may grant extensions or
indulgences in relation to the Mortgage Note and this Deed of Trust and the
payment thereof, or may apply to the principal or interest of the indebtedness
or other sums secured hereby any part or all of the proceeds obtained by sale or
otherwise as herein provided, without resort or regard to any other security,
all without in any way releasing Grantor from any of the covenants, agreements
or conditions of the Mortgage Note, this Deed of Trust or any other Loan
Document or affecting the lien hereof or thereof on the Property or impairing
Beneficiary's or the Trustee's ability to proceed against the Grantor's
interests in the Property in such manner and at such times as Beneficiary may
see fit, upon the occurrence and during the continuation of an Event of Default.
5.6. Estoppel Certificates
(a) If requested by Beneficiary or the Trustee Grantor will
furnish Beneficiary or the Trustee within fifteen (15) days after written demand
therefor, an estoppel certificate or a written statement which shall set forth
the amount due under the Mortgage Note (whether of principal, interest or any
other amount) and shall indicate whether any offsets or defenses exist against
the payment of the indebtedness secured hereby and, if any offsets or defenses
are alleged to exist, a detailed description of such alleged offsets or defenses
and the amount or amounts thereof.
(b) Grantor shall use its best efforts to deliver to the
Beneficiary, promptly upon request, duly executed estoppel certificates from any
one or more Tenants as required by Beneficiary attesting to such facts regarding
the Leases as Beneficiary may require, including but not limited to attestations
that each Lease covered thereby is in full force and effect with no defaults
thereunder on the part of any party, that none of the Rents have been paid more
than one (1) month in advance, and that the lessee claims no defense or offset
against the full and timely performance of its obligations under the Lease.
5.7. Headings
Article, Section and subsection headings contained in this Deed of Trust
are inserted for convenience of reference only, shall not be deemed to be a part
of this Deed of Trust for any purpose, and shall not in any way define or affect
the meaning, construction or scope of any of the provisions hereof.
5.8. Pronouns
All pronouns and other words and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity or the context may require.
5.9. Governing Law; Service of Process
(a) This Deed of Trust, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of New York, except
that, for purposes of determining the creation, validity, priority and
enforcement of the Lien created hereby and the exercise of remedies hereunder in
connection with such Lien, the law of the State in which the Land is located
shall govern.
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(b) Grantor will maintain a place of business or an agent for
service of process in New York, New York and give prompt notice to Beneficiary
of the address of such place of business and of the name and address of any new
agent appointed by it, as appropriate. Grantor further agrees that the failure
of its agent for service of process to give it notice of any service of process
will not impair or affect the validity of such service or of any judgment based
thereon. If, despite the foregoing, there is for any reason no agent for service
of process of Grantor available to be served, and if it at that time has no
place of business in New York, New York, then Grantor irrevocably consents to
service of process by registered or certified mail, postage prepaid, to it at
its address given in or pursuant to the first paragraph hereof.
(c) Grantor initially and irrevocably designates CT
Corporation System with offices on the date hereof at 1633 Broadway, New York,
New York 10019, to receive for and on behalf of Grantor service of process in
New York, New York with respect to this Deed of Trust.
5.10. Waiver of Jury Trial
THE PARTIES HERETO WAIVE ANY RIGHT THEY MAY HAVE TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER,
UNDER THE MORTGAGE NOTE, OR UNDER ANY LOAN DOCUMENT RELATING TO ANY OF THE
FOREGOING.
5.11. Limitation of Liability
Notwithstanding any contrary provision in any of the Loan Documents, it
is hereby expressly agreed that, except as otherwise provided in this Section
5.11 or in any Section of any Loan Document that is substantially similar to
this Section 5.11, there shall be no recourse to the assets of Grantor (other
than against the Property and any other property given as security for payment
of the Mortgage Note) for (i) the payment of principal, interest, Defeasance
Deposits, Yield Maintenance Payments or other charges hereunder or under the
Mortgage Note or for any other amount that is or may become due and owing to
Beneficiary by Grantor under this Deed of Trust or any of the other Loan
Documents or (ii) the performance or discharge of any covenant or undertaking
hereunder or under the other Loan Documents, and in the event of any Event of
Default hereunder or thereunder, Beneficiary agrees to proceed solely against
the Property and any other property given as security for payment of the
Mortgage Note, and Beneficiary shall not seek or claim recourse against Grantor
or any Member (other than against the Property and any other property given as
security for payment of the Mortgage Note) for any deficiency or for any
personal judgment after a foreclosure of the lien of this Deed of Trust or other
Security Documents or for the performance or discharge of any covenants or
undertakings of Grantor hereunder or under any of the other Loan Documents
(except that Grantor may be made a party to a proceeding to the extent legally
necessary for the conduct of a foreclosure or the exercise of other similar
remedies under this Deed of Trust or other Security Documents). Notwithstanding
the foregoing, nothing contained in this Section 5.11 shall relieve Grantor or
any Member of any personal liability for any loss, cost, expense, damage or
liability arising or resulting from (A) any breach of any representation or
warranty made by Grantor in this Deed of Trust that was materially incorrect
when made and that was made with fraudulent intent, (B) any amount paid or
distributed to the Members, Arden OP, the Manager or any Affiliate of any of
them in violation of the provisions of the Loan Documents, (C) fraud or breach
of trust including misapplication of Loan proceeds or Awards or other sums that
are part of the Property that may come into the possession or control of Grantor
or a Member or any Affiliate of any of them, (D) liability of such person under
the Environmental Indemnity Agreement or (E) following the occurrence of a
Lockbox Event, the willful failure of Grantor to instruct tenants of the
Mortgaged Properties to make payments of Rents into the Lockbox Account or the
failure of Grantor or the Manager to deposit payments of Rents received by
Grantor or the Manager into the Lockbox Account promptly upon receipt thereof.
It is hereby expressly agreed that no director, officer, shareholder, partner,
member or employee of Grantor or a Member, nor the legal or personal
representative, successor or assign of any of the foregoing, nor any other
principal of Grantor or a Member, whether disclosed or undisclosed, shall have
any personal liability under this Deed of Trust or any of the other Loan
Documents, except as personal liability may be specifically imposed upon a
signatory to any Loan Document. It is the intention of the parties hereto that
this Section 5.11 shall govern every other provision of the Loan Documents and
that the absence of explicit
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reference to this Section 5.11 in any provision of the Loan Documents or the
absence of any Section similar to this Section 5.11 in any Loan Document shall
not be construed to deny the application of this Section 5.11 to such provision,
notwithstanding the presence of explicit reference to this Section 5.11 in other
provisions of the Loan Documents.
5.12. Assignment to Finance Trustee
5.12.1. Anticipated Assignment
Grantor acknowledges and agrees that, without limiting Beneficiary's
rights otherwise to assign this Deed of Trust and all other Loan Documents, this
Deed of Trust may be assigned together with all other Loan Documents, and along
with mortgage loans made to other borrowers, to the Finance Trustee, as trustee
under the Pooling and Servicing Agreement, and, pursuant to the Pooling and
Servicing Agreement, the Servicer will be appointed to service this Deed of
Trust and the other Loan Documents as provided therein. Upon such assignment,
the Finance Trustee shall for all purposes be the sole Beneficiary hereunder
(and all references herein to Beneficiary shall be deemed to refer to the
Finance Trustee) and the Finance Trustee, or the Servicer on behalf of the
Finance Trustee shall, among other things, (i) have the sole and exclusive
benefit of and the right and power to exercise, or to direct the exercise of,
all the rights and remedies of Beneficiary hereunder and under the other
Security Documents, including the right to inspect the Property, to receive
notices and financial information, to grant or withhold consents or approvals,
to benefit from indemnities, to receive, hold and apply proceeds or any other
amount or property provided by Grantor hereunder, and, upon the occurrence and
during the continuation of an Event of Default, to take any action required or
permitted of Beneficiary, all in the Finance Trustee's or Servicer's own name,
and to exercise all other rights and remedies of Beneficiary hereunder, (ii) be
bound by all the terms hereof which apply to Beneficiary, and (iii) except to
the extent otherwise specified or required herein or in the Pooling and
Servicing Agreement, if applicable, including any action or inaction required to
maintain the status of a portion of any trust fund of which the Mortgage Note
and other Loan Documents are a part as a qualified real estate mortgage
investment conduit under U.S. tax law or any action or inaction at the direction
of the Holders or as a result of the failure of the Holders to so direct, act in
a commercially reasonable manner in making any determination called for of it
under this Deed of Trust or the other Loan Documents or in granting or
withholding any approval or consent called for under or requested pursuant to
this Deed of Trust.
5.12.2. Recognition of Finance Trustee as Beneficiary
Grantor hereby acknowledges the foregoing and agrees to be bound to the
Finance Trustee, upon such assignment, recognizing the Finance Trustee as
Beneficiary hereunder as if the Finance Trustee were named in this Deed of Trust
as the Beneficiary, recognizing that the Servicer is entitled to act on behalf
of the Finance Trustee and the Holders under and as provided in the Pooling and
Servicing Agreement and is entitled to and shall receive all notices, financial
and other information, agreements and other documents to be delivered to
Beneficiary hereunder or under any of the other Loan Documents. Upon the
assignment contemplated by Section 5.12.1 hereof, Grantor's obligations to
Beneficiary specified in this Deed of Trust shall be satisfied by tendering full
and timely payment or performance thereof to the Finance Trustee or, if directed
by the Finance Trustee, the Servicer. With respect to delivery by Beneficiary of
documents and other written material, Beneficiary shall have only the
obligations expressly required of Beneficiary herein or in the other Loan
Documents or in the Pooling and Servicing Agreement. All rights and remedies of
the Finance Trustee as Beneficiary hereunder, including all indemnities running
to Beneficiary, shall also operate for the benefit of the Servicer and the
Holders and shall be exercised by the Finance Trustee and the Servicer in
accordance with and subject to the terms and conditions set forth in the Pooling
and Servicing Agreement. Grantor acknowledges and agrees that, until Grantor has
received notice to the contrary from the Finance Trustee, all deliveries and
notifications to be made by Grantor to the Finance Trustee pursuant to this Deed
of Trust or any other Loan Document, shall be made to the Servicer only and not
to the Finance Trustee.
5.12.3. Delivery of Amounts to Servicer
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Following the assignment contemplated by Section 5.12.3 hereof, any
amounts to be delivered to Beneficiary pursuant to Sections 1.8, 1.9 or 1.11
hereof shall be delivered to the Servicer and shall be held by the Servicer in
segregated subaccounts of the Cash Collateral Account (as defined in the Loan
Agreement) for application in accordance with said Sections and in accordance
with the Cash Management Procedures.
ARTICLE VI
6. DEFINITIONS
6.1. Certain Defined Terms
Wherever used in this Deed of Trust the capitalized terms set forth
below shall have the meanings ascribed to them below (or in the Sections of this
Deed of Trust or any other Loan Document referred to below) such definitions to
be equally applicable to the singular and plural forms of the terms defined
below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Loan Agreement.
"Access Laws" has the meaning set forth in Section 1.19 hereof.
"Affiliate" has the meaning set forth in the Loan Agreement.
"Allocated Loan Amount" has the meaning set forth in the Loan Agreement.
"Alteration" has the meaning set forth in Section 1.11.1 hereof.
"Assignment" has the meaning set forth in the Loan Agreement.
"Award(s)" has the meaning set forth in Section 1.9.1 hereof.
"Bankruptcy Code" has the meaning set forth in Granting Clause (vi)
hereof.
"Beneficiary" has the meaning set forth in the first paragraph of this
Deed of Trust.
"Building" has the meaning set forth in Paragraph B of the Recitals
hereof.
"Buildings" has the meaning set forth in Paragraph B of the Recitals
hereof.
"Cash Management Procedures" means has the meaning set forth in the Loan
Agreement.
"Casualty" has the meaning set forth in Section 1.8.1 hereof.
"Casualty Property" has the meaning set forth in Section 1.8.2 hereof.
"Certificates" has the meaning set forth in Paragraph E of the Recitals
hereof.
"Claim(s)" has the meaning set forth in Section 1.12 hereof.
"Collateral Assignment of Management Agreement" means that certain
Collateral Assignment of Management Agreement and Subordination Agreement dated
as of the date hereof by and among Grantor, the Manager and Beneficiary.
"Contracts" has the meaning set forth in Granting Clause (vii) hereof.
"Debtor" has the meaning set forth in Section 1.17.6 hereof.
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<PAGE> 48
"Deed of Trust" has the meaning set forth in the first paragraph of this
document.
"Default Interest Rate" has the meaning set forth in the Loan Agreement.
"Defeasance Deposit" has the meaning set forth in the Loan Agreement.
"Defeasance Period" has the meaning set forth in the Loan Agreement.
"Due Date" has the meaning set forth in the Loan Agreement.
"ERISA" has the meaning set forth in the Loan Agreement.
"Environmental Laws" has the meaning set forth in the Loan Agreement.
"Environmental Reserve Account" has the meaning set forth in the Loan
Agreement.
"Event of Default" has the meaning set forth in Article II hereof.
"Finance Trustee" has the meaning set forth in Paragraph E of the
Recitals hereof, being the same meaning ascribed to "Trustee" in the Loan
Agreement.
"Fixtures" has the meaning set forth in Granting Clause (iii) hereof.
"Grantor" has the meaning set forth in the first paragraph of this Deed
of Trust.
"Guaranty" has the meaning set forth in Section 1.20 hereof.
"Hazardous Material(s)" has the meaning set forth in the Loan Agreement.
"Holders" has the meaning set forth in the Loan Agreement.
"Impositions" has the meaning set forth in Section 1.5.1 hereof.
"Improvements" has the meaning set forth in Paragraph C of the Recitals
hereof.
"Indebtedness" has the meaning set forth in the Loan Agreement.
"Indemnitees" has the meaning set forth in Section 1.12 hereof.
"Individual Property" means any one of the parcels of Land set forth on
Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4, Exhibit A-5, Exhibit A-6,
Exhibit A-7, Exhibit A-8, Exhibit A-9, Exhibit A-10, Exhibit A-11 or Exhibit
A-12, and the Building and other Improvements on said parcel and all other
Property relating to said parcel, Building and other Improvements.
"Insurance Proceeds" has the meaning set forth in Section 1.8.2 hereof.
"Land" has the meaning set forth in Paragraph B of the Recitals hereof.
"Laws" has the meaning set forth in the Loan Agreement.
"Leases" has the meaning set forth in Granting Clause (vi) hereof.
"Lien(s)" has the meaning set forth in Section 1.2.5 hereof.
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<PAGE> 49
"Loan" has the meaning set forth in Paragraph A of the Recitals hereof.
"Loan Agreement" has the meaning set forth in Paragraph A of the
Recitals hereof.
"Loan Documents" has the meaning set forth in the Loan Agreement.
"Material Lease" has the meaning set forth in Section 1.20.11.2 hereof.
"Members" has the meaning set forth in the Loan Agreement.
"Mortgage Note" has the meaning set forth in Paragraph A of the Recitals
hereof.
"Mortgaged Properties" has the meaning set forth in the Loan Agreement.
"Net Sales Proceeds" has the meaning set forth in the Loan Agreement.
"Noteholder" has the meaning set forth in Paragraph A of the Recitals
hereof.
"Notice of Sale" has the meaning set forth in Section 3.5.4 hereof.
"Obligations" has the meaning set forth in the paragraph beginning with
the words "NOW, THEREFORE . . . " on page 1 hereof.
"Permitted Debt" has the meaning set forth in the Loan Agreement.
"Permitted Liens" has the meaning set forth in the Loan Agreement.
"Permitted Liens and Encumbrances" has the meaning set forth in Section
1.2.5 hereof.
"Person" has the meaning ascribed to such term in the Loan Agreement.
"Pooling and Servicing Agreement" has the meaning set forth in the Loan
Agreement.
"Property" has the meaning set forth in the first full paragraph
following the heading "GRANTING CLAUSES," on page 2 hereof.
"Qualified Insurance Company" has the meaning set forth in Section 1.7.2
hereof and "Qualified Insurance Companies" means any two or more insurers
constituting a Qualified Insurance Company.
"Qualified Supervising Professional" means a supervising engineer or
architect that is licensed to do business in the State in which the Property is
located and has at least five (5) years experience in the supervision of
commercial construction projects similar to the work to be supervised.
"Rating Agencies" has the meaning set forth in the Loan Agreement.
"Real Property Rights" has the meaning set forth in Granting Clause (ii)
hereof.
"Release Price" has the meaning set forth in the Loan Agreement.
"Renewal Lease" has the meaning set forth in Section 1.20.11.3 hereof.
"Rents" has the meaning set forth in Granting Clause (vi) hereof.
"Restoration" has the meanings set forth in Section 1.8.2 and Section
1.9.3 hereof.
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<PAGE> 50
"S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc.
"Secured Party" has the meaning set forth in Section 1.17.6 hereof.
"Securitization" has the meaning set forth in the Loan Agreement.
"Security Deposits" has the meaning set forth in Section 1.20.11.10
hereof.
"Security Documents" has the meaning set forth in the Loan Agreement.
"Servicer" has the meaning ascribed to it in Paragraph E of the Recitals
hereof.
"SPE Member" has the meaning set forth in the Loan Agreement.
"Taking" has the meaning set forth in Section 1.9.1 hereof.
"Tenant" has the meaning set forth in Section 1.20.1 hereof.
"TI Reserve Account" has the meaning set forth in the Loan Agreement.
"Title Company" has the meaning set forth in Section 1.3 hereof.
"Title Insurance Policy" has the meaning set forth in Section 1.3
hereof.
"Trustee" means Commonwealth Land Insurance Company, and its successors
and assigns as trustee hereunder.
"U.C.C." has the meaning set forth in Granting Clause (viii) hereof.
"U.C.C. Collateral" has the meaning set forth in Section 1.17.1 hereof.
"Yield Maintenance Payment" has the meaning set forth in the Loan
Agreement.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the undersigned has caused this Deed of
Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing to
be duly executed and delivered as of the date first set forth hereinabove.
GRANTOR:
ARDEN REALTY FINANCE IV, L.L.C.,
a Delaware limited liability company
By:
Name:
Its:
This instrument prepared by:
Lee E. Berner, Esq.
Hogan & Hartson L.L.P.
8300 Greensboro Drive
McLean, Virginia 22102
<PAGE> 52
STATE OF CALIFORNIA )
ss
COUNTY OF LOS ANGELES )
On June 8, 1998, before me ____________________ a notary public,
personally appeared _________________________________, personally known to be
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(Seal)
<PAGE> 53
EXHIBIT A
Description Of Land
<PAGE> 54
Recording Requested By:
Commonwealth Land Title Insurance
Company
When recorded mail document to:
Hogan & Hartson L.L.P.
Suite 1100
8300 Greensboro Drive
McLean, Virginia 22102
Attention: Lee E. Berner, Esq.
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE RESERVED FOR
RECORDER'S USE
TITLE(S)
- --------------------------------------------------------------------------------
DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 19
Prepared by:
Lee E. Berner, Esq.
Hogan & Hartson L.L.P.
8300 Greensboro Drive
McLean, VA 22102
After recording return to:
Lee E. Berner, Esq.
Hogan & Hartson L.L.P.
8300 Greensboro Drive
McLean, VA 22102
ASSIGNMENT OF LEASES AND RENTS
THIS ASSIGNMENT OF LEASES AND RENTS (this "ASSIGNMENT") is made as of
the 8th day of June, 1998, by ARDEN REALTY FINANCE IV, L.L.C., a Delaware
limited liability company having an office at 11601 Wilshire Boulevard, Suite
402, Los Angeles, California 90025 ("ASSIGNOR"), to LEHMAN BROTHERS REALTY
CORPORATION, a Delaware corporation having an office at Three World Financial
Center, 200 Vesey Street, New York, New York 10285, its successors and assigns
("ASSIGNEE").
WITNESSETH THAT:
In consideration of Ten Dollars ($10.00), in hand paid, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Assignor hereby grants, transfers, pledges, and assigns to
Assignee, its successors and assigns, (i) all leases, subleases, licenses,
concessions and other occupancy agreements which now or may hereafter affect all
those certain lots or pieces of land, more particularly described in EXHIBIT A-1
THROUGH EXHIBIT A-12 attached hereto and made a part hereof, or any of the
improvements now or hereafter located thereon (said land and improvements
hereinafter collectively shall be referred to as the "PROPERTY") or any part
thereof and all guarantees, modifications, renewals and extensions thereof
(collectively, the "LEASES") and all documents and instruments made or hereafter
made in respect of the Leases, together with (ii) all of the rents, additional
rents, income, revenue, issues and profits, due or to become due or to which
Assignor is now or may hereafter become entitled, arising out of the Leases
(exclusive of any security deposits given under any Lease that have not been
applied in accordance with the provisions of the applicable Lease), or the
Property or any part or parts thereof (collectively, the "RENTS").
THIS ASSIGNMENT is made in connection with that certain Mortgage Note
made by Assignor to the order of Assignee dated as of the date hereof, in the
principal amount of One Hundred Million Six Hundred Thousand and No/100 Dollars
($100,600,000.00) (the "Mortgage Note") pursuant to that certain Loan Agreement
dated as of the date hereof by and between Assignor and Assignee (the "Loan
Agreement"). Unless otherwise defined herein,
<PAGE> 2
capitalized terms used in this Assignment shall have the meanings ascribed to
them in the Loan Agreement. The principal, interest, and all other sums that may
now or hereafter be due and payable under the Mortgage Note and the other Loan
Documents are collectively referred to as the "OBLIGATIONS."
ASSIGNOR REPRESENTS AND WARRANTS that (i) none of the Leases and Rents
has been assigned or otherwise pledged or hypothecated to any other Person or
party whatsoever; (ii) Assignor has full power and authority to execute and
deliver this Assignment; and (iii) the execution and delivery of this Assignment
has been duly authorized by all necessary corporate or partnership actions by
Assignor and does not conflict with or constitute a default under any law,
judicial order or other agreement affecting Assignor or the Property.
ASSIGNOR COVENANTS with Assignee that Assignor (a) shall not execute any
other assignment of its interest as lessor or owner in the Leases and Rents to
any other Person or party whatsoever and (b) shall execute and deliver at the
request of Assignee all such further assurances, confirmations and assignments
in connection with the Property, the Leases and Rents or this Assignment as
Assignee shall from time to time reasonably require.
THIS ASSIGNMENT is made on the following terms, covenants and
conditions:
1. Present Assignment. Assignor does hereby absolutely and
unconditionally assign to Assignee Assignor's right, title and interest in all
current and future Leases and Rents, it being intended by Assignor that this
Assignment constitutes a present, absolute assignment and not an assignment for
additional security only. Such assignment to Assignee shall not be construed to
bind Assignee to the performance of any of the covenants, conditions or
provisions contained in any agreement relating to the Leases and Rents or
otherwise impose any obligation upon Assignee. Assignee hereby grants to
Assignor a revocable license to collect and receive the Rents as they become due
and payable until such time as an Event of Default (as defined in the Loan
Agreement) shall have occurred and be continuing; provided that the existence of
such license shall not operate to subordinate this Assignment to any subsequent
assignment of the Leases and Rents, in whole or in part, by Assignor, and any
such subsequent assignment shall be subject to the rights of Assignee hereunder.
Unless and until an Event of Default shall have occurred and be continuing,
Assignor shall have the right to possess and enjoy the Property, and to receive
the Rents, subject to the terms of the Mortgage Note and the other Loan
Documents (including, without limitation, SCHEDULE 5.11 of the Loan Agreement);
and provided, further, that if Assignor shall pay in full the principal of and
interest on the Mortgage Note and all other Obligations which this Assignment by
its terms secures, then this Assignment shall be released and reassigned upon
the written request, and at the expense, of Assignor.
2. Remedies of Assignee. Upon or at any time after an Event of
Default, Assignee may exercise any and all remedies available to it at law or
under any of the Loan Documents and may in addition, at its option, without
waiving such Event of Default, revoke the license granted to Assignor to collect
Rents, and then thereafter, without notice and without regard to the adequacy of
the security for the Obligations, either in person or by agent, with or without
bringing any action or proceeding, or, to the fullest extent permitted by
applicable law,
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<PAGE> 3
by a receiver appointed by a court, either with or without taking possession of
the Property, in its own name, demand, sue for or otherwise collect and receive
all Rents, including, without limitation, those past due, and Assignee may apply
the Rents to the payment of the Obligations in such order and proportion,
consistent with the Loan Documents, as Assignee, in its sole discretion, may
determine. The exercise by Assignee of the option granted it in this Section 2
and the collection of the Rents and the application thereof as herein provided
shall not be considered a waiver of any default or Event of Default by Assignor
under the Mortgage Note or any other Loan Documents.
3. No Liability of Assignee. Assignee shall not be liable for any
loss sustained by Assignor resulting from Assignee's failure to let the Property
after an Event of Default or from any other act or omission of Assignee in
managing the Property after default. Assignee shall not be obligated to perform
or discharge any obligation, duty or liability under any Leases or under or by
reason of this Assignment, and Assignor shall, and hereby agrees to, indemnify
Assignee for, and to hold Assignee harmless from, any and all liability, loss or
damage which may or might be incurred thereunder or hereunder or by reason of
this Assignment and from any and all claims and demands whatsoever, including
the defense of any such claims or demands which may be asserted against Assignee
by reason of any alleged obligations and undertakings on its part in respect
thereof. Should Assignee incur any such liability, the amount thereof, including
costs, expenses and reasonable attorneys' fees, shall be secured by this
Assignment and by the other Loan Documents and shall accrue interest at the
Default Interest Rate until paid from the tenth (10th) day after the later of
(i) demand (which may be made prior to Assignee's expenditure) or (ii)
Assignee's expenditure, and Assignor shall reimburse Assignee therefor within
ten (10) days after demand. Assignee shall not be responsible or liable for any
waste committed on the Property by the tenants or any other parties, or for any
dangerous or defective condition of the Property arising on or after the date
hereof, or for any negligence in the management, upkeep, repair or control of
the Property resulting in loss or injury or death to any tenant, licensee,
employee or stranger on or after the date hereof.
4. Notice to Obligors. Assignor hereby authorizes and directs all
persons (including, without limitation, the Manager under the Management
Agreement) obligated to pay any Rents, upon receipt from Assignee of written
notice that an Event of Default has occurred and is continuing or otherwise upon
notice from Assignee, to pay over to Assignee all Rents and to continue so to do
until otherwise notified by Assignee.
5. Other Security. Assignee may take or release other security for
the payment of the Obligations, may release any party primarily or secondarily
liable therefor and may apply any other security held by it to the reduction or
satisfaction of the Obligations, in such order and manner as Assignee shall see
fit, without prejudice to any of its rights under this Assignment.
6. Other Remedies. Nothing contained in this Assignment and no act
done or omitted by Assignee pursuant to the power and rights granted to Assignee
hereunder shall be deemed to be a waiver by Assignee of its rights and remedies
under the Mortgage Note, or any other Loan Documents, and this Assignment is
made and accepted without prejudice to any of
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<PAGE> 4
the rights and remedies possessed by Assignee under the terms thereof. The right
of Assignee to collect the Obligations and to enforce any other security
therefor held by it may be exercised by Assignee either prior to, simultaneously
with, or subsequent to any action taken by it hereunder or under any other Loan
Document.
7. No Mortgagee in Possession. Nothing herein contained shall be
construed as constituting Assignee a "mortgagee in possession" in the absence of
entry upon and the taking of actual possession of the Property by Assignee. In
the exercise of the powers herein granted Assignee, no liability shall be
asserted or enforced against Assignee, all such liability being expressly waived
and released by Assignor.
8. Assignee as Attorney in Fact. Assignor does hereby irrevocably
constitute and appoint Assignee, while this Assignment remains in force and
effect, and in each instance, to the fullest extent permitted by applicable law,
its true and lawful attorney in fact, coupled with an interest and with full
power of substitution, delegation and revocation, for Assignor and in its name,
place and stead, to enter and take possession of the Property by actual physical
possession without the commencement of any action to foreclose the Mortgage or
to exercise any power of sale Assignee may have thereunder and to do and perform
such actions with respect to the Property as Assignee may deem appropriate, as
fully as Assignor could do if personally present, Assignor hereby ratifying and
confirming all that Assignee, as attorney or its substitute, shall lawfully do
or cause to be done by virtue hereof; provided, however, that Assignee shall not
do or perform such actions until an Event of Default shall have occurred and be
continuing.
9. Conflict of Terms. In case of any conflict between the terms of
this Assignment and the terms of any other Loan Document, the terms of such Loan
Document shall prevail.
10. No Oral Change. This Assignment and any provisions hereof may
not be modified, amended, waived, extended, changed, discharged or terminated
orally, or by any act or failure to act on the part of Assignor or Assignee, but
only by an agreement in writing signed by the party against whom the enforcement
of any modification, amendment, waiver, extension, change, discharge or
termination is sought.
11. Non-Waiver. The failure of Assignee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Assignment. Assignor shall not be relieved of Assignor's obligations
hereunder by reason of (i) failure of Assignee to comply with any request of
Assignor or any other party to take any action to enforce any of the provisions
hereof or of the Mortgage, the Mortgage Note or any of the other Loan Documents
or, (ii) any agreement or stipulation by Assignee extending the time of payment
or otherwise modifying or supplementing the terms of this Assignment, the
Mortgage Note, the Mortgage or any of the other Loan Documents. Assignee may
resort for the payment of the Obligations to any other security held by Assignee
in such order and manner as Assignee, in its discretion, may elect. Assignee may
take any action to recover the Obligations, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Assignee
thereafter to enforce its rights under this Assignment. The rights of Assignee
under this Assignment shall be separate,
- 4 -
<PAGE> 5
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Assignee shall be construed as an election to proceed under
any one provision herein to the exclusion of any other provision.
12. Inapplicable Provisions. If any term, covenant or condition of
this Assignment is held to be invalid, illegal or unenforceable in any respect,
this Assignment shall be construed without such provision.
13. Counterpart Originals. This Assignment may be executed in any
number of duplicate originals and each such duplicate original shall be deemed
to be an original.
14. Governing Law. This Assignment, the rights and obligations of
the parties hereto and any claims or disputes relating thereto, shall be
governed by and in accordance with the laws of the State of New York, except
that, for purposes of determining the creation, validity, priority and
enforcement of the assignment herein and the exercise of remedies hereunder, the
law of the State in which the Property is located shall govern.
15. Binding Effect. This assignment, together with the covenants and
warranties herein contained, shall inure to the benefit of Assignee and any
subsequent holder of the indebtedness secured by the Loan Documents and shall be
binding upon Assignor, its successors and assigns.
[SIGNATURE PAGE TO FOLLOW]
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, Assignor has executed this Assignment of Leases and
Rents under seal the day and year first above written.
ASSIGNOR:
ARDEN REALTY FINANCE III, L.L.C.,
a Delaware limited liability company
By: _____________________________
Name:________________________
Title:_________________________
STATE OF ________________ )
ss
COUNTY OF ______________ )
On June ___, 1998, before me ____________________ a notary public,
personally appeared _________________________________, personally known to be
(or proved to me on the basis of satisfactory evidence) to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(Seal)
- 6 -
<PAGE> 7
EXHIBIT A
Description of Land
<PAGE> 8
Recording Requested By:
Commonwealth Land Title
Insurance Company
When recorded mail document to:
Hogan & Hartson L.L.P.
Suite 1100
8300 Greensboro Drive
McLean, Virginia 22102
Attention: Lee E. Berner, Esq.
- --------------------------------------------------------------------------------
SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE
TITLE(S)
- --------------------------------------------------------------------------------
ASSIGNMENT OF LEASES AND RENTS
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.20
COLLATERAL ASSIGNMENT OF MANAGEMENT
AGREEMENT AND SUBORDINATION AGREEMENT
This COLLATERAL ASSIGNMENT OF MANAGEMENT AGREEMENT AND
SUBORDINATION AGREEMENT (the "Agreement") dated as of June 8, 1998 among ARDEN
REALTY FINANCE IV, L.L.C., a Delaware limited liability company having its
principal place of business at 11601 Wilshire Boulevard, Suite 402, Los Angeles,
California 90025 ("BORROWER"), LEHMAN BROTHERS REALTY CORPORATION, a Delaware
corporation, having an address of Three World Financial Center, New York, New
York 10285 ("LENDER"), and ARDEN REALTY LIMITED PARTNERSHIP, a Maryland limited
partnership having its principal place of business at 11601 Wilshire Boulevard,
Fourth Floor, Los Angeles, California 90025 ("MANAGER").
W I T N E S S E T H:
WHEREAS, Lender is concurrently herewith making a loan to
Borrower in the original principal amount of One Hundred Million Six Hundred
Thousand and No/100 Dollars ($100,600,000.00) (the "LOAN"), pursuant to that
certain Loan Agreement dated as of June 8, 1998 (the "LOAN AGREEMENT") and the
other Loan Documents (as defined in the Loan Agreement); the repayment of the
Loan is secured by, among other things, twelve (12) parcels of land (the "LAND")
owned by Borrower and the improvements thereon consisting of office and
industrial buildings, parking structures and related assets (the "IMPROVEMENTS";
the Land and the Improvements collectively shall be known as the "PROPERTIES").
WHEREAS, the Loan is evidenced by a certain Mortgage Note
dated the date hereof made by Borrower in favor of Lender (the "NOTE") and
secured by, among other things, a certain Deed of Trust, Assignment of Rents and
Leases, Security Agreement and Fixture Filing dated as of the date hereof and
encumbering the Properties (the "MORTGAGE");
WHEREAS, Borrower and Manager have entered into, and are bound
by the terms of, a certain Management Agreement dated as of June 8, 1998
providing for the management of the Properties (the "MANAGEMENT AGREEMENT");
WHEREAS, it is a condition precedent to the Lender's
obligation to make the Loan to Borrower that Borrower assign to Lender, as
further security for the Loan, Borrower's interest in the Management Agreement
and that Manager agree, among other things, to (i) subordinate its right to
receive payments under the Management Agreement to the payment by Borrower of
obligations under the Loan Agreement and other Senior Obligations (as defined
below) and (ii) make certain other agreements for the benefit of Lender;
WHEREAS, it is contemplated that, in connection with an
anticipated securitization of the Loan (the "SECURITIZATION"), all of Lender's
rights under the Loan Agreement and all other Loan Documents (as defined in the
Loan Agreement), including, without limitation, the Mortgage Note, the Mortgage
and this Agreement, may be assigned by Lender, along with mortgage loans made to
other borrowers, to, among others, an institutional trustee (the "TRUSTEE"), as
trustee for the benefit of the holders from time to time of certain commercial
mortgage-backed certificates (the "CERTIFICATES") pursuant to Section 9 of the
Loan Agreement and may be serviced by a professional loan servicing company
selected by Lender (the "SERVICER") on behalf of the Trustee; and
WHEREAS, upon the assignment of the Loan Documents to the
Trustee, the term "Lender" as used herein will mean the Trustee and the Servicer
(on behalf of the Trustee), as applicable.
NOW, THEREFORE, in consideration of the making of the Loan and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereby covenant, agree, represent and warrant as follows:
<PAGE> 2
1. CERTAIN DEFINED TERMS. The following terms shall be defined
as follows:
(a) "SENIOR OBLIGATIONS" has the meaning ascribed to such term
in Section 2 hereof.
(b) "SUBORDINATED OBLIGATIONS" means the obligations of
Borrower, whether now existing or hereafter from time to time accruing or
arising, to pay any and all fees under or provided for in the Management
Agreement.
All capitalized terms not otherwise defined herein shall have
the meanings ascribed to such terms in the Loan Agreement.
2. COLLATERAL ASSIGNMENT. Borrower hereby grants to the Lender
a security interest in, and collaterally assigns to Lender, all of Borrower's
right, title and interest in, to and under the Management Agreement as further
security for the payment, when due, of all amounts to be paid by Borrower in
connection with the Loan, including, without limitation, all principal, interest
and other charges due from time to time in connection with the Loan, any balloon
payment that may be due at maturity of the Loan, whether by agreement of the
parties, by acceleration of the Mortgage Note following an Event of Default, or
otherwise, and any and all other payments, including Defeasance Deposits,
Accrued Interest, Default Interest, Late Payment Fees, Yield Maintenance
Payments or other prepayment premiums, if any, which must now or hereafter be
paid under, pursuant to, or in connection with any of the Loan Documents and the
performance of all other covenants, agreements and obligations of Borrower under
the Loan Documents (collectively, the "SENIOR OBLIGATIONS").
3. REPRESENTATIONS REGARDING MANAGEMENT AGREEMENT.
3.1 Borrower represents to Lender that: (i) attached
hereto as EXHIBIT A is a true and complete copy of the Management Agreement,
(ii) the Management Agreement has not been amended since the date of the last
amendment attached hereto, (iii) the Management Agreement is in full force and
effect, (iv) no notice of default under the Management Agreement has been given
or received by Borrower and neither Borrower nor, to the best knowledge of
Borrower, Manager is in default with respect to any obligation under the
Management Agreement, (v) Borrower does not have any defense, counterclaim or
right of offset with respect to any of its obligations under the Management
Agreement and (vi) the term of the Management Agreement, exclusive of renewal
rights, ends on April 16, 2008.
3.2 Manager represents to Lender that: (i) attached
hereto as EXHIBIT A is a true and complete copy of the Management Agreement,
together with all amendments thereto, (ii) the Management Agreement has not been
amended since the date of the last amendment attached hereto, (iii) the
Management Agreement is in full force and effect, (iv) no notice of default
under the Management Agreement has been given or received by Manager and neither
the Manager nor, to the best knowledge of Manager, Borrower is in default with
respect to any obligation under the Management Agreement, (v) Manager does not
have any defense, counterclaim or right of offset with respect to any of its
obligations under the Management Agreement, (vi) the term of the Management
Agreement, exclusive of renewal rights, ends on April 16, 2008.
4. COVENANTS OF MANAGER. Until such time as all of the Senior
Obligations shall have been fully paid, discharged and satisfied:
(a) Manager will (i) promptly perform and observe in all
respects all of the covenants and agreements to be performed and observed by it
under the Management Agreement in accordance with the terms thereof, and (ii)
promptly notify Lender of any material default under the Management Agreement of
which it becomes aware;
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<PAGE> 3
(b) Manager will not (i) reduce or permit the reduction of the
term of the Management Agreement, (ii) increase or permit the increase of the
amount of any fees payable under the Management Agreement, or (iii) otherwise
modify any portion of the Management Agreement, orally or by a writing, in such
a manner as to materially reduce or limit Manager's obligations thereunder; and
(c) Manager shall, within twenty (20) days after demand by
Lender, deliver to Lender a written statement certifying any condition or state
of facts in connection with the Management Agreement which is reasonably
requested by Lender.
5. CONSENT. Manager hereby consents to the assignment to
Lender of Borrower's rights under the Management Agreement as security for
Borrower's obligations in respect of the Loan. Lender shall be entitled to
exercise any and all rights of Borrower under the Management Agreement in
accordance with the terms thereof, and Manager shall permit and comply in all
respects with such exercise. Lender may cure any Borrower's default under the
Management Agreement, and may perform any act, duty or obligation required to be
performed by Borrower under the Management Agreement; provided, however, that
nothing herein shall require Lender to cure any such default or to perform any
such act, duty or obligation.
6. SUBORDINATION. (a) Borrower and Manager agree that the
Subordinated Obligations shall, to the extent herein provided, be subject and
subordinate to the prior payment, discharge and satisfaction in full of the
Senior Obligations. Notwithstanding the foregoing, if and for so long as no
Default (as such term is defined in the Loan Agreement) shall have occurred and
be continuing, Borrower may pay, and Manager may receive and retain payment of,
all fees due and payable under the Management Agreement and all other amounts
due and payable to Manager under the Management Agreement.
(b) Except as expressly permitted hereby, Manager will not
request, demand, sue for, take, accept or receive from Borrower, by set-off or
otherwise, and Borrower will not pay to Manager, any monies including, without
limitation, fees and any other amounts due and payable to Manager under the Loan
Agreement under or provided for in the Management Agreement now or hereafter
payable by Borrower to Manager in respect of the Subordinated Obligations or any
security therefor, until the final payment, discharge and satisfaction in full
of the Senior Obligations.
(c) Upon any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the assets of Borrower or the proceeds thereof, to creditors of
Borrower, or upon any indebtedness of Borrower, by reason of the liquidation,
dissolution or other winding up of Borrower or Borrower's business, or any sale,
receivership, insolvency or bankruptcy proceeding, or assignment for the benefit
of creditors, or any proceeding by or against Borrower for any relief under any
bankruptcy or insolvency law or laws relating to the relief of debtors,
readjustment of indebtedness, reorganizations, compositions or extensions, then
and in any such event any payment or distribution of any kind or character,
whether in cash, securities or other property, which would otherwise be payable
or deliverable by Borrower to Manager in respect of any of the Subordinated
Obligations (including, without limitation, interest thereon) shall be paid and
delivered directly to Lender for application to the Senior Obligations, whether
or not then due, until the Senior Obligations shall have first been fully paid,
discharged and satisfied. Manager irrevocably authorizes and empowers Lender to
demand, sue for, collect and receive every such payment or distribution and give
acquittance therefor and to file claims and take such other actions, in Lender's
own name or in the name of Manager or otherwise, as Lender may deem necessary or
desirable for the enforcement of this Agreement. For the purposes set forth in
the foregoing sentence, Manager appoints Lender its attorney in fact, which
appointment is coupled with an interest and irrevocable. Manager will execute
and deliver to Lender any such additional documentation to evidence the
foregoing, including, without limitation, powers of attorney, assignments or
other instruments as may be reasonably requested by Lender in order to enable
Lender to enforce any and all claims upon or with respect to any of the
Subordinated Obligations, and to collect and receive any
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<PAGE> 4
and all payments or distributions which may be payable or deliverable with
respect to such Subordinated Obligations.
(d) Manager shall forthwith deliver to Lender, in precisely
the form received (endorsed or assigned by Manager as appropriate), any and all
payments, distributions and security, and the proceeds thereof, paid to and
received by Manager with respect to the Subordinated Obligations in violation of
the foregoing provisions, for application to the Senior Obligations. Until so
delivered, all such payments, distributions and security and the proceeds
thereof shall be held by Manager, in trust, as the property of Lender. In the
event of Manager's failure to endorse or assign any such payments,
distributions, security or proceeds, Lender is hereby irrevocably authorized to
do so on Manager's behalf.
(e) For so long as any of the Senior Obligations remain
outstanding, Manager will not assign or transfer to any third party any claim
which it has or may hereafter have against Borrower in respect of any of the
Subordinated Obligations, unless such assignment or transfer is made expressly
subject to the terms and conditions hereof in an instrument in form and
substance satisfactory to Lender.
(f) At any time and from time to time, Lender may enter into
such agreements with Borrower as it deems appropriate extending the time of
payment of, or renewing or otherwise altering the terms of, all or any of the
Senior Obligations, without notice to Manager and without in any way impairing
or affecting the obligations of Manager hereunder.
(g) Lender's right to enforce this Agreement in respect of the
Subordinated Obligations shall not be prejudiced by any act or failure to act on
the part of Borrower or anyone in custody of Borrower's assets or property.
7. RIGHT TO TERMINATE. (a) Upon the occurrence of an Event of
Default (as defined in the Loan Agreement), Lender may terminate the Management
Agreement upon forty-five (45) days notice to Manager. Upon such termination,
unless expressly assumed by Lender, Lender shall not have any liability to
Manager for any unpaid fees or expenses of any kind including, without
limitation, any termination fees or expenses of any kind including, without
limitation, any termination fees or penalties under the Management Agreement.
(b) Within thirty (30) days after acquiring title to any or
all of the Properties, through foreclosure, deed in lieu of foreclosure or the
exercise of any other remedy under the Mortgage or the other Security Documents,
Lender may terminate the Management Agreement as to the Properties acquired by
Lender without cause by written notice to Manager. Upon such termination, unless
expressly assumed by Lender, Lender shall not have any liability to Manager for
any unpaid fees or expenses of any kind including, without limitation, any
termination fees or penalties under the Management Agreement.
(c) At any time after acquiring title to the Properties,
through foreclosure, deed in lieu of foreclosure or the exercise of any other
remedy, Lender may exercise all rights of Borrower under the Management
Agreement to terminate the Management Agreement, in accordance with the terms
thereof.
8. ATTORNMENT. At any time after Lender has acquired title to
the Properties, through foreclosure, deed in lieu of foreclosure or the exercise
of any other remedy under the Mortgage or the other Security Documents, Manager
shall attorn to Lender and be bound by all of the terms, covenants and
conditions of the Management Agreement for so long as the Management Agreement
shall be in effect, including through the term of any extensions or renewals
thereof, with the same force and effect as if Lender were a party to the
Management Agreement. Such attornment shall be effective and self-operative as
an agreement between Manager and Lender without the execution of any further
instruments on the part of any party; provided, however, that at Lender's
request, Manager shall execute an instrument confirming such attornment.
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<PAGE> 5
9. DEFAULTS; RIGHT TO CURE. (a) Manager shall give Lender
prior written notice of any default by Borrower with respect to which Manager
intends to take any action (including, without limitation, any action to
terminate the Management Agreement and/or to withhold any payments thereunder).
Manager shall not take any action with respect to such default until the
expiration of sixty (60) days after Lender's receipt of such notice; provided,
however, that if, under the Management Agreement, Borrower is entitled to more
than sixty (60) days in which to cure such default, then Lender shall similarly
be entitled to such longer cure period. If such default has not been cured by
the expiration of the cure period provided herein, regardless of whether a
default has occurred and is continuing under the Loan Documents, or whether
Lender has exercised any rights or remedies with respect thereto, Manager shall
have all the rights otherwise available to it under the Management Agreement and
at law (including, without limitation, the right to terminate the Management
Agreement).
(b) If the Management Agreement is rejected by a trustee or
debtor-in-possession in any bankruptcy or insolvency proceeding involving
Borrower, and if within ninety (90) days after such rejection (or such shorter
period within which Manager may be required to cease its activities pursuant to
such a proceeding, but in no event later than ten (10) days prior to any such
required cessation of activities), Lender shall certify in writing to Manager
that it intends to perform the obligations of Borrower as and to the extent
required under the Management Agreement and, upon Lender's request Manager will
execute and deliver to Lender a new Management Agreement. Manager and Lender
shall agree under such new Management Agreement to perform the obligations
contemplated to be performed by Manager and Borrower, respectively, under the
original Management Agreement, and such new Management Agreement shall be for a
term equal to the remaining term under the original Management Agreement before
giving effect to such rejection. Such new Management Agreement shall contain the
same conditions, agreements, terms, provisions and limitations as the original
Management Agreement (except for any requirements which were fulfilled by
Borrower prior to such rejection).
10. SECURITY AGREEMENT. (a) This Assignment shall also
constitute a security agreement as that term is used in the Uniform Commercial
Code in effect from time to time in the State of New York (the "UCC"). Lender
shall have, in addition to all other rights and remedies provided herein or in
any other Loan Document, at law, in equity or otherwise, all rights and remedies
of a secured party under the UCC. Lender shall give Borrower ten (10) days
written notice of the time and place of any public sale of any collateral in
which Lender has a security interest hereunder or the time after which any
private sale or any other intended disposition is to be made. After deducting
all expenses incurred in connection with the enforcement of its rights
hereunder, Lender shall cause the proceeds of the collateral in which Lender has
a security interest hereunder to be applied to the payment of the Secured
Obligations in such order as Lender may determine or otherwise as may be
provided under the Loan Documents.
(b) Concurrently with the execution and delivery of this
Agreement, Borrower shall file such financing statements and other documents in
such offices as Lender may request to perfect the security interests granted by
this Agreement.
11. TERMINATION OF MANAGEMENT AGREEMENT. Except as permitted
by the Loan Agreement, Borrower and Manager shall not (a) cancel, release,
terminate, or surrender, (b) amend, modify or supplement or (c) assign the
Management Agreement without the prior written consent of Lender, and, if the
Securitization has occurred, receipt of a Rating Comfort Letter from each Rating
Agency with respect thereto.
12. LIABILITY OF LENDER. Manager acknowledges that upon
succeeding to the interest of Borrower under the Management Agreement, Lender
shall not be:
(a) liable for any omission or default of Borrower under the
Management Agreement;
(b) subject to any offsets or defenses which Manager might
have had against
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<PAGE> 6
Borrower;
(c) liable for any fees or commissions due to Manager for any
period prior to the date when Lender succeeded to such interest;
(d) bound by any sums or deposits which Manager may have paid
to Borrower unless such sums were actually paid and delivered to Lender; or
(e) bound by any amendment or supplement of the Management
Agreement made without Lender's prior written consent.
13. ATTORNEY-IN-FACT. Lender is hereby appointed Borrower's
attorney-in-fact (which appointment is coupled with an interest and is
irrevocable) for the purpose of carrying out the provisions of this Agreement
and taking any action and executing any instruments which Lender may deem
necessary or desirable to effect the intents and purposes hereof including,
without limitation, the right to sign and file any financing statement (or
amendment or extension thereof) deemed necessary by Lender in connection
herewith.
14. FURTHER ASSURANCES. Borrower shall, from time to time upon
Lender's written request, promptly execute and deliver such further documents
and take such further action as Lender may request in order to create, preserve,
perfect, protect or confirm the assignment granted hereby or to enable Lender to
exercise and enforce its rights and remedies hereunder; provided, no such
documents or actions shall materially increase Borrower's obligations hereunder.
All of the foregoing shall be undertaken at Borrower's expense, including,
without limitation: (a) all filing, registration and recording fees, if any; and
(b) all stamp taxes and other taxes, charges and similar impositions in
connection therewith.
15. NO WAIVER. No failure to exercise, and no delay in
exercising, and no course of dealing with respect to, any power, remedy or right
under this Agreement by Lender shall operate as a waiver thereof, nor shall any
single or partial exercise thereof by Lender preclude any other or further
exercise thereof or the exercise of any other power, remedy or right. The
remedies provided herein are cumulative and not exclusive of any remedies
available at law or under the Loan Documents.
16. NOTICE. Any notice, demand, statement, request or consent
made hereunder shall be in writing and shall be deemed given on the next
business day if sent by Federal Express or other reputable overnight courier and
designated for next business day delivery, or on the third day following the day
such notice is deposited with the United States postal service first class
certified mail, return receipt requested, addressed to the address, as set forth
above, of the party to whom such notice is to be given, or to such other address
or additional party as Borrower, Lender or Manager, as the case may be, shall in
like manner designate in writing. Notice may also be given in accordance with
the provisions of the Loan Agreement.
17. AMENDMENTS, WAIVERS IN WRITING. This Agreement cannot be
amended except by an agreement in writing, signed by Lender, Borrower and
Manager, and no provision hereof may be waived except by an instrument in
writing signed by Lender.
18. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York (but not
including the choice of law rules thereof).
19. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
illegal, invalid and/or unenforceable, the remainder of this Agreement or the
application of such provision to persons or circumstances other than those as to
which it is illegal, invalid and/or unenforceable, as the case may be, shall not
be affected, and each provision of
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<PAGE> 7
this Agreement shall be legal, valid and enforceable to the extent permitted by
law. The illegality, invalidity and/or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the legality, validity and/or
enforceability thereof in any other jurisdiction.
20. EXPENSES. If any suit or other proceeding is instituted by
Lender to enforce this Agreement (or any portion hereof), Borrower shall pay,
upon demand, all of the reasonable out-of-pocket costs and expenses (including,
without limitation, attorneys' fees and disbursements) incurred by Lender in
connection therewith. The obligations of Borrower under this Section shall
survive the expiration or termination of this Agreement.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Notwithstanding the foregoing, neither Borrower nor
Manager may assign its rights or obligations hereunder.
22. SECTION HEADINGS. The Section headings used in this
Agreement are for convenience of reference only and do not constitute part of
this Agreement for any purpose, and shall not be deemed to limit or expand the
express terms hereof.
23. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING BROUGHT BY ANY PARTY, DIRECTLY OR INDIRECTLY INVOLVING ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT.
24. COUNTERPARTS. This Agreement may be executed in separate
counterparts, none of which need contain the signatures of all parties, each of
which shall be deemed to be an original, and all of which taken together shall
constitute one and the same instrument. It shall not be necessary in making
proof of this Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto. In the event the parties hereto exchange signature pages of
this Agreement by facsimile, they agree to send the original executed
counterparts of this Agreement to one another by overnight delivery service, but
the facsimile signatures shall in any event be binding.
25. REINSTATEMENT. This Assignment and the security interest
created hereunder shall automatically be reinstated if and to the extent that
for any reason any payment by or on behalf of Borrower in respect of the Senior
Obligations is rescinded or must otherwise be restored by any holder of the
Senior Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise. Borrower hereby indemnifies Lender for all
reasonable costs and expenses (including, without limitation, reasonable
attorney's fees and disbursements) incurred by Lender in connection with such
rescission or reinstatement.
[SIGNATURE PAGE FOLLOWS]
-7-
<PAGE> 8
IN WITNESS WHEREOF, Borrower, Lender and Manager have caused
this Collateral Assignment of Management Agreement and Subordination Agreement
to be executed as of the day and year first above written.
BORROWER:
ARDEN REALTY FINANCE IV, L.L.C.,
a Delaware limited liability company
By:
Name:
Title:
LENDER:
LEHMAN BROTHERS REALTY CORPORATION,
a Delaware corporation
By:
Name:
Title:
MANAGER:
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Arden Realty, Inc., General Partner
By:
Name:
Title:
<PAGE> 1
EXHIBIT 10.21
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered
into as of June 8, 1998 by and between ARDEN REALTY FINANCE IV, L.L.C., a
Delaware limited liability company with its principal office at 11601 Wilshire
Boulevard, Suite 402, Los Angeles, California 90025 ("DEBTOR"), and LEHMAN
BROTHERS REALTY CORPORATION, a Delaware corporation with an office at Three
World Financial Center, 200 Vesey Street, New York, New York 10285 ("SECURED
PARTY").
W I T N E S S E T H
WHEREAS, Secured Party and Debtor have entered into a certain
Loan Agreement of even date herewith (the "LOAN AGREEMENT"), providing for a
loan (the "LOAN") from Secured Party to Debtor in the principal amount of One
Hundred Million Six Hundred Thousand and No/100 Dollars ($100,600,000.00);
WHEREAS, in connection with the advance of the Loan, Debtor has
made and delivered to Secured Party a certain Mortgage Note of even date
herewith in the principal amount of One Hundred Million Six Hundred Thousand and
No/100 Dollars ($100,600,000.00) (the "MORTGAGE NOTE");
WHEREAS, the Loan is to be secured by, among other things, first
priority liens on Debtor's assets consisting primarily of twelve (12) parcels of
land and the improvements thereon (which improvements consist primarily of one
or more office or industrial buildings on each parcel of land) (each parcel of
land and the improvements thereon individually shall be known as a "PROPERTY"
and collectively, the "PROPERTIES") and related assets, which Properties are
described on EXHIBIT A-1 THROUGH EXHIBIT A-12 hereto; and
WHEREAS, in order to further secure the full and timely payment
by Debtor of the Loan and all amounts due under or in connection with the Loan
Agreement, the Mortgage Note, and the other Loan Documents (as defined in the
Loan Agreement), Debtor has agreed to grant to Secured Party, among other
things, a security interest in the Collateral (as defined herein).
NOW, THEREFORE, for and in consideration of the foregoing and of
the mutual covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending legally to be bound, agree as
follows (and all capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in, or the meanings incorporated by
reference to other documents in, SECTION 7 hereof):
1. SECURITY INTEREST
<PAGE> 2
1.1 COLLATERAL
As security for the due and punctual payment and performance by
Debtor of each and every obligation, agreement, and covenant of Debtor to
Secured Party, including, without limitation, the payment when due of the full
amount of the Loan, together with interest thereon, the payment of all other
amounts from time to time owing under the Loan Documents, and the full
performance of all obligations of Debtor under the Loan Agreement, the Mortgage
Note, the Mortgage and all other Loan Documents (collectively the "SECURED
OBLIGATIONS"), Debtor hereby assigns and pledges to Secured Party, and grants to
Secured Party a security interest in and lien on, in addition to and together
with the interests granted under the Mortgage and other Security Documents, all
of Debtor's right, title and interest in and to the following, whether now owned
or hereafter acquired (collectively, the "COLLATERAL"):
(1) All personal property of whatever kind or nature whatsoever
used in the operation of the Properties or any of them, or in any way related to
the Land, the Improvements or any other improvements on the Land, whether
located on, affixed to, or attached to the Land or Improvements or any of said
Land or Improvements or otherwise related thereto or arising therefrom, and
whether tangible or intangible, direct or indirect, fully matured or contingent,
and all extensions, additions, Improvements, betterments, renewals,
substitutions, and replacements to or of any of the foregoing, including,
without limitation, all oil and gas rights, water rights, minerals and mineral
rights and other rights of every kind or nature, all machinery, all equipment,
all screens, window shades, blinds, storm doors and windows, floor coverings,
awnings, cabinets, chairs, desks, tables, lamps, vases and other items of
furniture and furnishings, all supplies and inventory, all art work, plants and
adornments, all bathroom and other fixtures and appliances, and all telephones,
televisions, radios, remote control units, cable boxes, and other electronic
equipment and all vending and ice machines, and including, without limitation,
all of the foregoing property that now are or hereafter become attached or
affixed to the Land or the Improvements in such a way as to constitute them
"fixtures" under applicable law (the "FIXTURES");
(2) Any and all additions and accessions to the foregoing, and
all proceeds thereof, including, without limitation, proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or liquidated
claims, including, without limitation, all Awards and other payments as a result
of any Taking, all Insurance Proceeds, and all proceeds of the Title Insurance
Policies, together with all amounts received by Secured Party or by the Mortgage
Trustee, as applicable, or due and payable to the Mortgage Trustee or Secured
Party, as applicable, pursuant to the Mortgage or other Loan Documents,
including, without limitation, any unearned premiums or refunds of premiums on
any insurance policies covering all or any part of the Collateral and the right
to receive and apply the proceeds of any insurance, or of any judgments or
settlements made in lieu thereof for damage to or diminution of the Collateral,
in accordance with the terms of the Mortgage;
(3) All real estate tax refunds and credits and all awards or
payments, including interest on any of them, and the right to receive the same,
which Debtor may have, which may be made with respect to any Collateral, whether
from a Taking thereof or for any
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other injury to, decrease in the value of, or other occurrence affecting any
Collateral, subject to the rights of tenants under any leases or subleases of
the Collateral to the extent such leases are not subordinate to the terms of
this Security Agreement;
(4) All "accounts" (as defined in the U.C.C.), all accounts
receivable, and all Rents (as defined in the Loan Agreement), issues, profits,
revenues, royalties, bonuses, rights and benefits due, payable, accruing or
arising out of, or with respect to any Collateral, including, without
limitation, all vending machine receipts, all telephone revenues, all other
revenues derived from or generated at the Properties or any of them and all
deposits of money as advance rent, for security or as earnest money or as a down
payment or deposit for the purchase of all or any part of any Collateral
(collectively, the "RENTS AND REVENUES"), and Debtor does hereby transfer and
assign to Secured Party all present and future leases, subleases, underlettings,
management agreements, concession agreements, licenses, contracts or other
agreements relating to the ownership of any Collateral or to the occupancy or
use of all or any portion of any Property (including all of Debtor's rights
under any contracts for the sale of any portion of any Collateral, and all
revenues and royalties under any oil, gas and mineral leases relating to the
Land on which any of the Properties are located) (collectively, the "LEASES AND
CONTRACTS") and all Rents and Revenues derived by Debtor therefrom and otherwise
from any Collateral and the right to apply such Rents and Revenues to the
payment of the Mortgage Note and the other Secured Obligations, together with
the security deposits or other payments or instruments delivered as security
under such Leases and Contracts (the grant of such security deposits and other
security being subject to application in accordance with the express
requirements of such Leases and Contracts and any other agreements applicable
thereto); provided, however, that, subject to the provisions of the Loan
Agreement (including SCHEDULE 5.11 thereof) and the other Loan Documents,
Secured Party hereby grants to Debtor the right to collect and receive the Rents
and Revenues as they become due and payable under the Leases and Contracts until
such time as an Event of Default (as hereinafter defined) shall have occurred;
and provided further, that the existence of such right to collect and receive
Rents and Revenues shall not operate to subordinate this assignment to any
subsequent assignment, in whole or in part, by Debtor, and any such subsequent
assignment shall be subject to the rights of Secured Party hereunder and of
Secured Party or the Mortgage Trustee, as applicable, under the Mortgage and
other Security Documents;
(5) All "general intangibles" (as defined in the U.C.C.) relating
to any Property, including, without limitation, to the extent assignable, all
rights relating to design, development, operation, and use of any Property, all
certificates of occupancy, zoning variances, building, use or other permits,
approvals, authorizations, licenses and consents obtained from any governmental
agency in connection with the development, use, operation or management of any
Property, all construction, service, engineering, consulting, architectural and
other similar contracts concerning the design, construction, operation,
occupancy and/or use of any Property, all architectural drawings, plans,
specifications, soil tests, appraisals, engineering reports and similar
materials relating to all or any portion of any Property, and all payment and
performance bonds or warranties or guarantees relating to any Property; all
rights in deposit accounts, bank accounts and any investments of Rents and
Revenues, the Cash Collateral Account, the Lockbox Account, the TI Reserve
Account, the Environmental Reserve Account, all rights of Debtor in, to and
under the Management Agreement, Debtor's operating agreement, the Contribution
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Agreement, and all rights under the Leases and Contracts, all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, other source and business
identifiers, trademark registrations and applications for registration used
exclusively at or relating exclusively to any part of any Property; all
renewals, extensions and continuations-in-part of the items referred to above;
any written agreements granting to Debtor any right to use any trademark or
trademark registration at or in connection with any part of the Property; and
the right of Debtor to sue for past, present and future infringements of the
foregoing; and the right in the name and on behalf of Debtor to appear in and
defend any action or proceeding brought with respect to any part of Debtor's
real or personal property and to commence any action or proceeding to protect
the interest of Debtor in such Collateral;
(6) All equipment, inventory, motor vehicles, all items of
personal property described in clause (1) of this SECTION 1.1, all stocks,
bonds, interests in mutual funds and other investments, all rights under
equipment leases and all bills of lading and warehouse receipts and all
securities, security entitlements and other investment property held or for the
Cash Collateral Account, the Lockbox Account, the TI Reserve Account or the
Environmental Reserve Account, any and all related securities accounts in or
through which any such security entitlement is carried, all certificates and
other evidences of ownership of or other interests in securities or other
investment property, and all proceeds of or other distributions on or with
respect to securities, security entitlements or other investment property,
including, without limitation, all dividends, interest, principal payments,
cash, options, warrants, rights, instruments, subscriptions and other property
or proceeds from time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any securities, security
entitlements or other investment property;
(7) To the extent not otherwise included in any of the classes or
categories enumerated above, all equipment, inventory, documents, instruments,
and chattel paper (as each of such terms is defined in the U.C.C.);
(8) All extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, all or
any portion of the foregoing or of any other Property, and any Property
hereafter acquired or assembled by or released to Debtor or constructed,
assembled or placed by Debtor on any Property, immediately upon such
acquisition, assembling, release, construction or placement, as the case may be,
and in each such case, without any further mortgage, conveyance, assignment or
other act by Debtor, and any and all such extensions, improvements, betterments,
renewals, substitutes and replacements shall become to the fullest extent
permitted by law subject to the lien of this Security Agreement, and the
security and other interests created hereby, as fully and completely, and with
the same effect, as though now owned by Debtor and specifically described
herein; and
(9) To the extent not otherwise included in any of the foregoing
classes or categories of personal property, all proceeds (including, without
limitation, all proceeds as defined in the U.C.C. and all cash and non-cash
proceeds as referred to in Section 552 of the United States Bankruptcy Code),
products, offspring and profits of or from any of the foregoing.
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1.2 FINANCING STATEMENTS
Debtor shall execute all financing statements, continuation
statements, assignments, certificates, and other documents and instruments with
respect to the Collateral pursuant to the U.C.C. and otherwise as may be
necessary or reasonably requested by Secured Party to perfect or from time to
time to publish notice of, continue or renew the security interests granted
hereby (including, without limitation, such financing statements, continuation
statements, certificates, and other documents as may be necessary or reasonably
requested to perfect a security interest in any additional property or rights
hereafter acquired by Debtor or in any replacements, products or proceeds
thereof), in each case in form satisfactory to Secured Party, and Debtor will
pay the cost of filing the same in all public offices where filing is necessary
or reasonably requested by Secured Party and will pay any and all recording,
transfer or filing taxes that may be due in connection with any such filing.
Debtor grants Secured Party the right, at any time and at Secured Party's
option, and at Debtor's expense, to file any or all such financing statements,
continuation statements, and other documents pursuant to the U.C.C. and
otherwise as Secured Party reasonably may deem necessary or desirable.
1.3 INJURY TO COLLATERAL
No injury to, or loss or destruction of the Collateral or any
part thereof shall relieve Debtor of any of the Secured Obligations.
2. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants to Secured Party that:
2.1 TITLE TO COLLATERAL
Debtor is the sole owner of, and has good, valid, and marketable
title to, the Collateral, free from all mortgages, pledges, liens, security
interests, hypothecations, assignments, charges, rights, restrictions or
encumbrances (individually an "ENCUMBRANCE" and collectively the "ENCUMBRANCES")
in favor of any person other than Secured Party, except Encumbrances as are
permitted by and in accordance with the Loan Documents (collectively the
"PERMITTED ENCUMBRANCES"), and Debtor has full right and power to grant Secured
Party a lien thereon and a security interest therein.
2.2 PERFECTED SECURITY INTEREST
This Security Agreement creates a good and valid lien on and
security interest in the Collateral. Debtor will take all actions necessary to
ensure that such lien will be perfected as a first priority lien on the
Collateral.
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2.3 BANKRUPTCY MATTERS
Debtor has not made a general assignment for the benefit of
creditors, filed any voluntary petition in bankruptcy or suffered the filing of
an involuntary petition by its creditors, suffered the appointment of a receiver
to take possession of all or substantially all of its assets, suffered the
attachment or other judicial seizure of all or substantially all of its assets,
admitted its inability to pay its debts as they come due, or made an offer of
settlement, extension or composition to its creditors generally. Debtor is not
insolvent and will not be rendered insolvent by the consummation of the
transactions contemplated hereby or by the Loan Documents.
2.4 REPRESENTATIONS AND WARRANTIES UNDER THE LOAN AGREEMENT
The representations and warranties of the Borrower contained in
the Loan Agreement and each of the other Loan Documents are true and correct as
of the date hereof to the same extent as if set forth in full herein.
3. COVENANTS OF DEBTOR
3.1 GENERAL COVENANTS RELATING TO COLLATERAL
Until all of the Secured Obligations have been paid and performed
in full, Debtor hereby covenants that, unless Secured Party otherwise consents
in advance in writing:
3.1.1 COLLATERAL.
Debtor shall (a) execute and deliver any and all documents, or
cause the execution and delivery of any and all documents, necessary or, in
Secured Party's reasonable judgment, desirable to create, perfect, preserve,
validate or otherwise protect Secured Party's lien on and security interest in
the Collateral and the priority thereof, (b) maintain, or cause to be
maintained, at all times Secured Party's lien on and security interest in the
Collateral and the priority thereof, (c) promptly upon learning thereof, report
to Secured Party any matters that might materially and adversely affect the
value or enforceability or collectibility of any of the Collateral, (d) defend
the Collateral and Secured Party's interests therein against all claims and
demands of all persons at any time claiming the same or any interest therein
adverse to Secured Party and pay all costs and expenses (including, without
limitation, reasonable attorneys' fees and charges) incurred in connection with
such defense, (e) at Debtor's sole cost and expense, settle any and all such
claims and disputes and indemnify and protect Secured Party against any
liability, loss, cost or expense (including, without limitation, reasonable
attorneys' fees and charges), arising therefrom or out of any matter affecting
any of the Collateral (provided, however, if Secured Party shall so elect after
the occurrence and during the continuation of an Event of Default hereunder,
Secured Party shall have the right at all times to settle, compromise, adjust or
liquidate all claims or disputes directly with any debtor or other obligor of
Debtor upon such terms and conditions as
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Secured Party reasonably deems advisable, and to charge all costs and expenses
thereof (including, without limitation, reasonable attorneys' fees and charges)
to Debtor's account and to add them to the Secured Obligations, whereupon such
costs and expenses shall be and become part of the Secured Obligations).
3.1.2 NO CHANGE IN PLACES OF BUSINESS OR COLLATERAL.
Debtor shall (a) maintain its places of business and its
principal office only in the locations set forth in EXHIBIT B attached hereto,
and in such other places as Debtor may select, provided that Debtor shall
provide to Secured Party at least thirty (30) days prior written notice of any
changes in or additions to the locations of Debtor's places of business or of
Debtor's principal office and shall make all filings in the applicable
jurisdictions necessary to maintain Secured Party's lien on and security
interest in the Collateral and the priority thereof in connection with any such
changes or additions, (b) keep, store and maintain the Collateral only at the
foregoing locations, and (c) keep and maintain the records and books of account
relating to the Collateral only at Debtor's principal office or at the Property
to which they relate.
3.1.3 NO IMPAIRMENT.
Debtor shall not take or permit to be taken any action in
connection with the Collateral which would impair in any material respect the
value of the interests or rights of Debtor therein or which would impair the
interests or rights of Secured Party therein or with respect thereto.
3.2 AFFIRMATIVE COVENANTS
Until all Secured Obligations have been paid and performed in
full, Debtor hereby covenants and agrees that it shall, unless Secured Party
otherwise consents in advance in writing:
3.2.1 INSURANCE.
Maintain and keep in full force and effect with Qualified
Insurance Companies, insurance in such amounts and covering such risks as is
required under the Loan Agreement and the Mortgage. Secured Party shall be named
as an additional insured or loss payee, as applicable, with Debtor on all
policies insuring the Collateral or any part thereof, as its interests may
appear, and Debtor hereby assigns to Secured Party all monies payable under such
insurance after the occurrence and during the continuation of an Event of
Default. Debtor directs all insurers of the Collateral to make payment directly
to Secured Party if an Event of Default has occurred and is continuing.
3.2.2 PERFORMANCE OF CONTRACTUAL OBLIGATIONS.
Perform in accordance with its terms and conditions, and comply
with all provisions of, each security issued by Debtor and each indenture, note,
lease, commitment, or other agreement, contract, instrument or undertaking to
which Debtor is a party or by which it or
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any of its property is bound (including, without limitation, the Mortgage, the
Mortgage Note, and all other agreements or documents referred to herein or
therein or contemplated hereby or thereby).
3.3 NEGATIVE COVENANTS
Until all Secured Obligations have been paid and/or performed in
full, Debtor hereby covenants and agrees that it shall not, unless Secured Party
otherwise consents in advance in writing:
3.3.1 ENCUMBRANCES.
Create, incur, assume or suffer to exist any Encumbrance upon any
of its properties, assets or revenues, whether now owned or hereafter acquired,
except: (i) Encumbrances for taxes not yet due and payable or taxes which are
being contested in good faith and by proper proceedings if adequate reserves
with respect thereto are maintained on the books of Debtor in accordance with
generally accepted accounting principles and in accordance with the terms of the
Loan Agreement and the Mortgage; (ii) Encumbrances created under this Security
Agreement; and (iii) Permitted Encumbrances.
3.3.2 SALE OF ASSETS.
Sell, lease, assign, pledge, transfer or otherwise dispose of any
of its assets, whether now owned or hereafter acquired, except as permitted by
the Loan Documents, the Mortgage and SECTION 6.5 hereof.
3.3.3 OTHER AGREEMENTS.
Enter into any commitment, agreement, or undertaking containing
any provision which would be violated or breached by Debtor's performance of any
of its obligations hereunder or any related agreement.
4. EVENTS OF DEFAULT
For purposes of this Security Agreement, the term "EVENT OF DEFAULT" shall mean
the occurrence of any one or more of the following events:
4.1 REPRESENTATIONS AND WARRANTIES
Any representation or warranty made by or on behalf of Debtor in
this Security Agreement shall prove to have been incorrect or breached in any
material respect on or as of any date made or deemed made, which failure remains
uncured for a period of thirty (30) days after the receipt of written notice of
such failure; provided, however, that it shall not be an Event of Default if
such failure is curable but is not reasonably susceptible of being cured within
such
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thirty (30) day period but Debtor promptly commences attempts to cure
within such thirty (30) day period and thereafter diligently pursues such cure
to completion (but in no event later than one hundred eighty (180) days after
receipt of such written notice); or
4.2 MATERIAL BREACH OF COVENANT
Failure by Debtor to perform or comply in any material respect
with any non-monetary term, covenant or condition imposed in this Security
Agreement, (a) which failure remains uncured for a period of thirty (30) days
after receipt of written notice of such failure, or (b) in the case of any
failure or breach of covenant relating to the maintenance of insurance as
provided herein, which failure remains uncured for a period of ten (10) days
after receipt of written notice of such failure; provided, however, that, in the
case of clause (a), it shall not be an Event of Default if such failure is
curable but it is not reasonably susceptible of being cured within such thirty
(30) day period but Debtor promptly commences to cure within such thirty (30)
day period and thereafter diligently pursues such cure to completion (but in no
event later than one hundred eighty (180) days after receipt of such written
notice); or
4.3 EVENT OF DEFAULT UNDER THE LOAN AGREEMENT OR OTHER LOAN DOCUMENTS
An Event of Default under the Loan Agreement, the Mortgage, or
any other Loan Document shall occur.
5. RIGHTS AND REMEDIES OF SECURED PARTY
5.1 MISCELLANEOUS RIGHTS OF SECURED PARTY
Upon the occurrence and during the continuation of any Event of
Default hereunder, Secured Party shall have the right (a) to declare all of the
monetary Secured Obligations including, without limitation, the obligations of
Debtor under the Mortgage Note, to be immediately due and payable, whereupon all
such Secured Obligations shall become immediately due and payable without
presentment, demand, notice of dishonor, protest or further notice of any kind,
all of which are hereby expressly waived by Debtor, anything contained herein to
the contrary notwithstanding; (b) to exercise any one or more of the rights and
remedies exercisable by Secured Party under any other provisions of this
Security Agreement, or any other related agreement or exercisable by a secured
party under the U.C.C. or under any other applicable law; and (c) to exercise,
in the name of Debtor or in the name of Secured Party, such rights and powers
with respect to the Collateral as Debtor might exercise, including, without
limitation, the right to:
(i) enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for, the Collateral or any part
thereof;
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(ii) insure, process, and preserve the Collateral;
(iii) transfer the Collateral or any part thereof to the name of
Secured Party or to the name of Secured Party's nominee;
(iv) receive, open, and dispose of mail addressed to Debtor
relating to the Collateral or any part thereof;
(v) collect and endorse, receive, and give receipts for all
dividends, interest, rent, payments, proceeds, and other sums and property now
or hereafter payable on or on account of the Collateral or any part thereof or
on account of its sale or lease;
(vi) initiate, pursue, compromise, settle or withdraw any claims,
suits or proceedings pertaining to the Collateral or any part thereof or to any
dividend, interest, rent or other payment on or on account of the Collateral or
any part thereof or on account of its sale or lease;
(vii) take possession of and endorse in the name of Debtor or in
the name of Secured Party, for the account of Debtor, any bills of exchange,
checks, drafts, money orders, notes or any other chattel paper, documents or
instruments constituting all or any part of the Collateral or received as a
dividend, interest, rent or other payment on or on account of the Collateral or
any part thereof or on account of its sale or lease;
(viii) appoint another (who may be an employee, officer or other
representative of Secured Party) to do any of the foregoing on behalf of Secured
Party; and
(ix) take any other action which Secured Party deems necessary or
desirable to protect or realize upon its security interest in the Collateral or
any part thereof, and Debtor hereby irrevocably appoints Secured Party as
Debtor's attorney-in-fact to take any such action, including, without
limitation, the execution and delivery of any and all documents or instruments
related to the Collateral or any part thereof in Debtor's name, and said
appointment shall create in Secured Party a power coupled with an interest which
shall be irrevocable.
provided, that, Secured Party shall have the option of proceeding, to the extent
permitted under applicable law, as to both real and personal property in
accordance with its rights and remedies in respect of the real property under
the Mortgage as an alternative to proceeding in accordance with the provisions
of the U.C.C.
5.2 RIGHT OF SECURED PARTY TO TAKE POSSESSION AND FORECLOSE
Upon the occurrence and during the continuation of any Event of
Default, Secured Party shall have the right and power to take possession of the
Collateral and of any and all books of account and records of Debtor relating to
any of the Collateral, the right to place Secured Party's representatives upon
any premises on which the Collateral or any part thereof or any such
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<PAGE> 11
books of account or records may be situated with full power to remove the same
therefrom, and the right to exclude Debtor and all persons claiming under Debtor
from any access to the Collateral or to any part thereof, and Secured Party and
such representatives are hereby granted the irrevocable license to enter upon
such premises (including, without limitation, the Properties and all parts
thereof) for such purpose. Secured Party may require Debtor to assemble the
Collateral or any part thereof and to make the same (to the extent the same is
moveable) available to Secured Party at a place to be designated by Secured
Party which is reasonably convenient to Debtor and Secured Party. Secured Party
may render the Collateral or any part thereof unusable without removing the same
from the premises on which it may be situated, and may sell the same on the
premises of Debtor if such Collateral or part thereof is situated thereon.
Secured Party may make formal application for the transfer of all of Debtor's
permits, licenses, approvals, agreements, and the like relating to the
Collateral or to Debtor's business to Secured Party or to any assignee of
Secured Party or to any purchaser of any of the Collateral. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Secured Party will give Debtor at
least ten (10) days prior written notice of the time and place of any public
sale thereof or of the time after which any private sale or any other intended
disposition thereof is to be made, which notice shall constitute reasonable
notice (and which notice may be made in conjunction with the notice of any
actions taken or to be taken under the Mortgage). In addition to exercising the
foregoing rights, Secured Party may, to the extent permitted by law, arrange for
and conduct the sale of the Collateral at a public or private sale, as Secured
Party may elect, which sale may be conducted by an employee or representative of
Secured Party and which sale may, at Secured Party's election, be made
contemporaneously with and as part of any foreclosure or other sale of the
Properties or any portion thereof at which such Collateral is located, pursuant
to the Mortgage, and any such sale shall be considered or deemed to be a sale
made in a commercially reasonable manner. Secured Party may release, temporarily
or otherwise, to Debtor any item of Collateral of which Secured Party has taken
possession pursuant to any right granted to Secured Party by this Security
Agreement without waiving any rights granted to Secured Party under this
Security Agreement, the Loan Agreement, the Mortgage Note, any other Loan
Document or any other agreement related hereto or thereto. Debtor, in dealing
with or disposing of the Collateral or any part thereof, hereby waives all
rights, legal and equitable, it may now or hereafter have to require marshaling
of assets or to require, upon foreclosure, sales of assets in a particular
order. Each successor and assign of Debtor, including a holder of a lien
subordinate to the lien created hereby (without implying that Debtor has, except
as expressly provided herein, a right to grant an interest in, or a subordinate
lien on, any of the Property), by acceptance of its interest or lien agrees that
it shall be bound by the above waiver, to the same extent as if such holder gave
the waiver itself. Debtor also hereby waives, to the full extent it may lawfully
do so, the benefit of all laws providing for rights of appraisal, valuation,
stay or extension or of redemption after foreclosure now or hereafter in force.
5.3 RIGHT OF SECURED PARTY TO COLLECT AND SERVICE ACCOUNTS
Upon the occurrence and during the continuation of any Event of
Default, Secured Party may notify or may require Debtor to notify any person or
entity obligated to Debtor under any account forming all or any part of the
Collateral, whether now existing or hereafter acquired,
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that the same has been assigned to Secured Party and that such obligor should
make payment or performance of its obligations under such account directly to
Secured Party, and Secured Party may take possession of and exercise control
over all proceeds of any such account in Debtor's possession or otherwise, and
may take any other action which Secured Party deems necessary or desirable to
collect any such account or the proceeds thereof. To evidence Secured Party's
rights hereunder, Debtor shall, at Debtor's expense, execute such assignments or
endorsements of any such account, or of the proceeds thereof, as Secured Party
may request.
5.4 RIGHT OF SECURED PARTY TO USE AND OPERATE COLLATERAL
Upon Secured Party's taking possession of all or any part of the
Collateral, pursuant to any right granted Secured Party by this Security
Agreement or otherwise, Secured Party shall have the right to hold, store,
and/or use, operate, manage, and control the same. Upon any such taking of
possession, Secured Party may (but shall not be obligated to), from time to
time, at the expense of Debtor, make all such repairs, replacements,
alterations, additions, and improvements to and of all or any of the Collateral
as Secured Party may deem proper. In any such case Secured Party shall have the
right to exercise all rights and powers of Debtor in respect of the Collateral
or any part thereof as Secured Party shall deem proper, including the right to
enter into any and all such agreements with respect to the leasing and/or
operation of the Collateral or any part thereof as Secured Party may see fit;
and Secured Party shall be entitled to collect and receive all rents, issues,
profits, fees, revenues, and other income of the same and every part thereof.
5.5 APPLICATION OF PROCEEDS
All dividends, interest, rents, issues, profits, fees, revenues,
income, and other proceeds from collecting, holding, managing, renting, selling
or otherwise disposing of the Collateral by Secured Party or any part thereof
shall be applied by Secured Party in the order described in SECTION 2.4.5 of the
Loan Agreement.
5.6 RIGHT OF SECURED PARTY TO APPOINT RECEIVER
Upon the occurrence and during the continuation of any Event of
Default, Secured Party shall, as a matter of right and without any requirement
of notice, to the extent permitted under applicable law, be entitled to appoint
a receiver for all of any part of the Property, whether such receivership be
incidental to a proposed sale of the Property or otherwise. All disbursements
made by the receiver under this SECTION 5.6 and the expenses of receivership
shall be added to and be a part of the Secured Obligations, and, whether or not
said principal sum, including such disbursements and expenses, exceeds the
indebtedness originally intended to be secured hereby, the entire amount of said
sum, including such disbursements and expenses, shall be secured by this
Security Agreement and shall be due and payable upon demand therefor and
thereafter shall bear interest at the Default Interest Rate.
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5.7 REMEDIES CUMULATIVE
The rights and remedies of Secured Party under the Mortgage, the
Loan Agreement, this Security Agreement, or any other related agreement are
cumulative and shall in no way affect, or deprive Secured Party of, or be deemed
to constitute a waiver by Secured Party of, any other rights or remedies allowed
to the party at law or in equity. No notice to or demand on Debtor in any case
shall entitle Debtor to any other notice or demand in similar or other
circumstances and the exercise of any one remedy shall not impair Secured
Party's right simultaneously or at any time or in any order to exercise any
other remedy nor shall the exercise of any remedy in one case impair or
otherwise affect Secured Party's right or ability to exercise such remedy
contemporaneously or again in the same case or in any other case.
5.8 WAIVER OF RIGHTS
To the extent permitted under applicable law, Debtor waives all
rights and remedies of a debtor under the U.C.C. or other applicable law, and
all formalities prescribed by law relative to the sale or disposition of the
Collateral (other than notice of sale) after the occurrence and during the
continuation of an Event of Default and all other rights and remedies of Debtor
with respect thereto. In exercising its right to take possession of the
Collateral upon the occurrence and during the continuation of an Event of
Default hereunder, Secured Party, personally or by its agents or attorneys, and
subject to the rights of any tenant under any lease or sublease of the Property,
to the fullest extent permitted by law, may enter upon any part of the Land
without being guilty of trespass or any wrongdoing, and without liability for
damages thereby occasioned. In the event Secured Party elects to proceed with
respect to the Collateral, separately from the real property, Secured Party
shall give at least ten (10) days notice of the sale of the Collateral, which
shall for all purposes be deemed to be commercially reasonable.
6. MISCELLANEOUS PROVISIONS
6.1 ADDITIONAL ACTIONS AND DOCUMENTS
Debtor hereby agrees to take or cause to be taken such further
actions, to execute, deliver, and file or cause to be executed, delivered, and
filed such further documents and instruments, and to obtain such consents, as
may be necessary or as may be reasonably requested in order to fully effectuate
the purposes, terms, and conditions of, and the remedies set forth in, this
Security Agreement, whether before, at, or after the occurrence of an Event of
Default hereunder.
6.2 EXPENSES
Debtor agrees to reimburse and save Secured Party harmless
against liability for the payment of all out-of-pocket expenses arising in
connection with the administration or
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enforcement of, or the preservation or exercise of, any rights (including the
right to collect and dispose of the Collateral) under, this Security Agreement,
including, without limitation, the reasonable fees and other charges of counsel
to Secured Party arising in such connection, and all such fees and other charges
shall be added to Debtor's obligations secured hereby.
6.3 NOTICES
All notices, demands, requests, or other communications which may
be or are required to be given, served or sent by any party to any other party
pursuant to this Security Agreement shall be in writing and shall be deemed to
have been given when received by the addressee or upon refusal of the addressee
to accept delivery or upon failure of delivery due to change of address or
telecopy number other than in accordance with this SECTION 6.3. All such
notices, demands, requests, or other communications shall be delivered by hand
or by telecopy or mailed or delivered by registered or certified mail, return
receipt requested, postage prepaid, or by reputable, nationally-recognized
overnight courier, delivery charges prepaid, and addressed or directed as
follows:
IF TO SECURED PARTY:
Lehman Brothers Realty Corporation
Three World Financial Center
200 Vesey Street
New York, New York 10285
Attn.: Commercial Loan Surveillance
Telecopy: (212) 528-6659
IF TO DEBTOR:
Arden Realty Finance IV, L.L.C.
11601 Wilshire Boulevard
Suite 402
Los Angeles, California 90025
Attn.: Diana M. Laing
6.4 WAIVER OF RIGHT TO JUDICIAL HEARING; JURY
DEBTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A JUDICIAL HEARING
PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED TO SECURED PARTY UNDER
THIS SECURITY AGREEMENT, AND WAIVES ITS RIGHTS, IF ANY, TO SET ASIDE OR
INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE FOREGOING PROVISIONS
HEREOF ON THE GROUNDS (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED
WITHOUT A PRIOR JUDICIAL HEARING. DEBTOR HEREBY COVENANTS AND AGREES NOT TO
ELECT
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<PAGE> 15
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHTS TO
TRIAL BY JURY TO THE FULL EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST. DEBTOR'S WAIVERS, COVENANTS AND AGREEMENTS UNDER THIS SECTION 6.4 HAVE
BEEN MADE VOLUNTARILY AND KNOWINGLY AND AFTER DEBTOR HAS BEEN APPRISED AND
COUNSELED BY ITS ATTORNEYS AS TO THE NATURE OF SUCH RIGHTS AND AS TO DEBTOR'S
POSSIBLE ALTERNATIVE RIGHTS.
6.5 TRANSFER OF COLLATERAL
(1) Debtor hereby agrees that it will not sell, lease, assign,
transfer or otherwise dispose of any of the Collateral except as permitted under
the Loan Agreement. Debtor shall have the right, at any time and from time to
time, to sell, lease, assign, transfer or otherwise dispose of any Collateral as
and to the extent that such sale, lease, assignment, transfer or other
disposition is permitted by the Loan Agreement.
(2) No formal release by Secured Party shall be required in
connection with the disposition of any Collateral in accordance with this
SECTION 6.5. Nevertheless, if any purchaser of such Collateral or Debtor should
desire a release or other quitclaim from Secured Party in order to clear the
record title of such Collateral, Secured Party shall, at Debtor's expense and
promptly after receiving a written request from Debtor, execute an appropriate
release or such other instruments as may be reasonably required to evidence that
this Security Agreement does not constitute a lien on such Collateral.
(3) No release by any party of the Collateral pursuant to this
SECTION 6.5 shall in any way alter, vary or diminish the security of the
Collateral.
6.6 RELEASE AND SATISFACTION
Upon the termination of this Security Agreement and the payment
and performance in full of the Secured Obligations, (i) the security interest
created hereby shall terminate, (ii) upon written request of Debtor, Secured
Party shall execute and deliver to Debtor, at Debtor's expense, releases and
satisfactions of all financing statements, mortgages, notices of assignment and
other registrations of security, and Debtor shall deliver to Secured Party a
general release of all of Secured Party's liabilities and obligations under all
Loan Documents and an acknowledgment that the same have been terminated.
6.7 BENEFIT
This Security Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors, legal
representatives and assigns.
6.8 ASSIGNMENT TO TRUST
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<PAGE> 16
Debtor acknowledges and agrees that in connection with the
Securitization contemplated by SECTION 9 of the Loan Agreement, this Security
Agreement, together with the other Loan Documents, may be assigned, along with
mortgage loans made to other borrowers, to, among others, an institutional
trustee (the "TRUSTEE"), as trustee under a pooling and servicing agreement (the
"POOLING AND SERVICING AGREEMENT"), and, pursuant to the Pooling and Servicing
Agreement, a professional loan servicer of recognized standing (the "SERVICER")
would be appointed to service the Loan, this Security Agreement and the Loan
Documents as provided therein. Upon such assignment, the Trustee shall for all
purposes be Secured Party hereunder (and all references herein to the Secured
Party shall be deemed to refer to the Trustee). The Trustee, together with the
Servicer, shall, among other things, (i) have the sole and exclusive benefit of
and the right and power to exercise, or to direct the exercise of, all the
rights and remedies of Secured Party hereunder, including, without limitation,
the right to inspect the Collateral, to receive notices and financial
information, to grant or withhold consents or approvals, to benefit from
indemnities, to receive, hold and apply proceeds or any other amount or property
provided by Debtor hereunder, and, upon the occurrence and during the
continuation of an Event of Default, to take any action required or permitted of
Secured Party, all in the Trustee's own name, and to exercise all other rights
and remedies of Secured Party hereunder and under the Security Documents and
(ii) be bound by all the terms hereof which apply to Secured Party. Debtor
hereby acknowledges the foregoing and agrees to be bound to the Trustee, upon
such assignment, recognizing the Trustee as Secured Party hereunder as if the
Trustee were named in this Security Agreement as Secured Party, recognizing that
the Servicer shall be entitled to act on behalf of the Trustee and the Holders
under and as provided in the Pooling and Servicing Agreement and shall be
entitled to and shall receive all notices, financial and other information,
agreements and other documents to be delivered to Secured Party or the Trustee
hereunder and accepting and agreeing to all of the terms set forth in the
Pooling and Servicing Agreement and the exhibits thereto, all of which shall be
secured under the Security Documents. Upon such assignment, Debtor's obligations
to the Secured Party specified in this Security Agreement shall be satisfied by
Debtor's tendering full and timely payment or performance thereof to the Trustee
or, if directed by the Trustee, to the Servicer. With respect to the delivery of
documents and other written material, the Trustee and the Servicer shall have
only the obligations expressly required of Secured Party herein or in the other
Loan Documents or of the Trustee or the Servicer in the Pooling and Servicing
Agreement. All rights and remedies of the Trustee as Secured Party hereunder,
including all indemnities running to Secured Party, shall also operate for the
benefit of the Servicer and the Holders as provided in the Pooling and Servicing
Agreement and shall be exercised by the Trustee and the Servicer in accordance
with and subject to the terms and conditions set forth in the Pooling and
Servicing Agreement. The Debtor acknowledges and agrees that, until the Debtor
has received notice to the contrary from the Trustee, all deliveries and
notifications to be made by the Debtor to the Trustee pursuant to this Security
Agreement or any other Loan Document, shall be made to the Servicer only and not
to the Trustee.
6.9 MODIFICATION; DISCHARGE; AND WAIVER
No amendment, modification or discharge of this Security
Agreement or waiver
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<PAGE> 17
hereunder shall be valid or binding unless set forth in writing and duly
executed by the party against whom enforcement of the amendment, modification,
discharge or waiver is sought.
6.10 PRONOUNS
All pronouns and any variations thereof in this Security
Agreement shall be deemed to refer to the masculine, feminine, neuter, singular,
or plural, as the identity of the person or entity may require.
6.11 HEADINGS
Section and subsection headings contained in this Security
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Security Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
6.12 GOVERNING LAW
This Security Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of New York (but not
including the choice of law rules thereof).
6.13 FILING
A photographic or other copy of this Security Agreement may be
filed in lieu of a financing statement.
6.14 COUNTERPARTS
This Security Agreement may be executed in separate counterparts,
none of which need contain the signatures of all parties, each of which shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument. It shall not be necessary in making proof of this
Security Agreement to produce or account for more than the number of
counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto. In the event the parties hereto exchange signature pages of
this Security Agreement by facsimile, they agree to send the original executed
counterparts of this Security Agreement to one another by overnight delivery
service.
7. DEFINITIONS
7.1 DEFINED TERMS
The following terms, as used herein, shall have the following
respective meanings
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(and capitalized terms used herein but not defined herein shall have the
meanings ascribed to them in the Loan Agreement):
"AWARDS" shall have the meaning ascribed to it in the Mortgage.
"CASH COLLATERAL ACCOUNT" shall have the meaning ascribed to it
in the Loan Agreement.
"COLLATERAL" shall have the meaning set forth in SECTION 1.1
hereof.
"CONTRIBUTION AGREEMENT" shall have the meaning ascribed to it in
the Loan Agreement.
"DEFAULT INTEREST RATE" shall have the meaning ascribed to it in
the Loan Agreement.
"DEFEASED NOTE" shall have the meaning ascribed to it in SECTION
2.5(a)(v) of the Loan Agreement.
"ENCUMBRANCE" shall have the meaning set forth in SECTION 2.1
hereof.
"ENVIRONMENTAL RESERVE ACCOUNT" shall have the meaning ascribed
to it in the Loan Agreement.
"EVENT OF DEFAULT" shall have the meaning set forth in ARTICLE 5
hereof.
"FIXTURES" shall have the meaning set forth in SECTION 1.1(1)
hereof.
"IMPROVEMENTS" shall have the meaning ascribed to it in the Loan
Agreement.
"INSURANCE PROCEEDS" shall have the meaning ascribed to it in the
Mortgage.
"LAND" shall have the meaning ascribed to it in the Loan
Agreement.
"LEASES AND CONTRACTS" shall have the meaning set forth in
SECTION 1.1(4) hereof.
"LOAN AGREEMENT" shall have the meaning ascribed to it in the
recitals to this Agreement.
"LOAN DOCUMENTS" shall have the meaning ascribed to it in the
Loan Agreement.
"LOCKBOX ACCOUNT" shall have the meaning ascribed to such term in
the Loan Agreement.
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<PAGE> 19
"MANAGEMENT AGREEMENT" shall have the meaning ascribed to it in
the Loan Agreement.
"MORTGAGE" shall have the meaning ascribed to it in the Loan
Agreement.
"MORTGAGE NOTE" shall have the meaning ascribed to it in the
recitals to this Agreement; provided, however that if the principal amount of
such promissory note shall be divided at any time into one or more Defeased
Notes and one or more Undefeased Notes pursuant to SECTION 2.5(a)(v) of the Loan
Agreement, "Mortgage Note" shall mean, collectively, all such Undefeased Note(s)
and Defeased Note(s).
"MORTGAGE TRUSTEE" means the "Trustee" as defined in the
Mortgage.
"PERMITTED ENCUMBRANCES" shall have the meaning set forth in
SECTION 2.1 hereof.
"PERMITTED INVESTMENTS" shall have the meaning ascribed to it in
the Loan Agreement.
"POOLING AND SERVICING AGREEMENT" shall have the meaning set
forth in SECTION 6.8 hereof.
"PROPERTY" and "PROPERTIES" shall have the meaning ascribed to it
in the recitals to this Agreement.
"QUALIFIED INSURANCE COMPANIES" shall have the meaning ascribed
to it in the Loan Agreement.
"RENTS AND REVENUES" shall have the meaning set forth in SECTION
1.1(4) hereof.
"SECURED OBLIGATIONS" shall have the meaning set forth in SECTION
1.1 hereof.
"SECURITIZATION" shall have the meaning ascribed to it in the
Loan Agreement.
"SECURITY DOCUMENTS" shall have the meaning ascribed to it in the
Loan Agreement.
"SERVICER" shall have the meaning set forth in SECTION 6.8
hereof.
"TAKING" shall have the meaning ascribed to it in the Mortgage.
"TI RESERVE ACCOUNT" shall have the meaning ascribed to it in the
Loan Agreement.
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<PAGE> 20
"TITLE INSURANCE POLICIES" shall have the meaning ascribed to it
in the Loan Agreement.
"TRUSTEE" shall have the meaning set forth in SECTION 6.8 hereof.
"U.C.C." means (i) the Uniform Commercial Code as in effect in
the State of New York and (ii) "Revised Article 8" as such term is defined in 31
CFR Section 357.2, as adopted in any state as to which the United States
Department of the Treasury has published in the Federal Register a notice
indicating that it has concluded that 31 CFR Sections 357.10(c) and 357.11(d)
are no longer applicable.
"UNDEFEASED NOTE" shall have the meaning ascribed to it in
SECTION 2.5(a)(v) of the Loan Agreement.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Security Agreement to be duly executed and delivered in its name and on its
behalf, all as of the day and year first above written.
DEBTOR:
ARDEN REALTY FINANCE IV, L.L.C.
By:
Name:
Title:
SECURED PARTY:
LEHMAN BROTHERS REALTY CORPORATION
By:
Name:
Title:
<PAGE> 22
EXHIBIT B TO
SECURITY AGREEMENT
OFFICES
Debtor's principal place of business is located at:
11601 Wilshire Boulevard
Fourth Floor
Los Angeles, California 90025
Debtor also maintains offices or does business at the following locations:
See Exhibit B-1 attached hereto
Debtor keeps and maintains the Collateral only at the above locations or at the
following locations (if none, indicate "None"):
NONE
<PAGE> 1
EXHIBIT 10.22
ENVIRONMENTAL INDEMNITY AGREEMENT
This ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT") is
made and entered into as of this 8th day of June, 1998 by ARDEN REALTY FINANCE
IV, L.L.C., a Delaware limited liability company ("INDEMNITOR"), in favor of
LEHMAN BROTHERS REALTY CORPORATION, a Delaware corporation ("LENDER").
WHEREAS, Lender has made to Indemnitor a loan (the "LOAN") in
the original principal amount of One Hundred Million Six Hundred Thousand and
No/100 Dollars ($100,600,000.00) pursuant to that certain Loan Agreement of even
date herewith between Indemnitor and Lender (the "LOAN AGREEMENT");
WHEREAS, the Loan is evidenced by that certain Mortgage Note
of even date herewith, in the aggregate original principal amount of One Hundred
Million Six Hundred Thousand and No/100 Dollars ($100,600,000.00) made payable
by Indemnitor to the order of Lender (the "MORTGAGE NOTE");
WHEREAS, the Mortgage Note is secured by, among other things,
the Mortgage (as defined in the Loan Agreement), granting to Lender a lien on,
among other things, the twelve (12) properties described on EXHIBIT A-1 THROUGH
EXHIBIT A-12 attached hereto and the improvements thereon (collectively, the
"MORTGAGED PROPERTY");
WHEREAS, all of Lender's rights under this Agreement, the Loan
Agreement and the other Loan Documents (as defined in the Loan Agreement),
including, without limitation, the Mortgage (as defined in the Loan Agreement),
may be assigned by Lender, along with mortgage loans made to other borrowers,
to, among others, an institutional trustee (the "TRUSTEE"), as trustee for the
benefit of the holders from time to time of certain mortgage-backed certificates
(the "CERTIFICATES") pursuant to SECTION 9 of the Loan Agreement, and may be
serviced by a professional loan servicing company selected by Lender (the
"SERVICER") on behalf of the Trustee. Upon assignment of the Loan Documents to
the Trustee, the term "Lender" as used herein will mean the Trustee and the
Servicer (on behalf of the Trustee), as applicable;
WHEREAS, as a condition to making the Loan, Lender has
required Indemnitor to indemnify and hold harmless Lender from any Environmental
Claim, any requirements of Environmental Law, or the violation of any
Environmental Permit (as such terms are defined below), attributable to
Hazardous Substances (as defined below) and related to the Mortgaged Property,
or any portion thereof; and
WHEREAS, Lender would not make the Loan without this
Agreement, and Indemnitor acknowledges and understands that this Agreement is a
material inducement for Lender's agreement to make the Loan.
NOW THEREFORE, in order to induce Lender to make the Loan and
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Indemnitor hereby covenants and agrees with Lender as
follows:
<PAGE> 2
1. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "ENVIRONMENTAL CLAIM" shall mean any claim,
demand, action, suit, loss, cost, damage, fine, penalty, expense, liability,
judgment, proceeding, or injury, whether threatened, sought, brought, or
imposed, that seeks to impose costs, expenses, obligations or liabilities on any
Indemnitee (as hereinafter defined) for any of the following: (i) pollution or
contamination of the environment or handling, treatment, storage, disposal, or
transportation of Hazardous Substances, to the extent arising out of, or
relating to Indemnitor or the Mortgaged Property or any portion thereof; (ii)
exposure to Hazardous Substances for which Indemnitor or the operator of the
Mortgaged Property is responsible; (iii) the manufacture, processing,
distribution in commerce, use, or storage of Hazardous Substances by the
Indemnitor on or relating to the Mortgaged Property or any portion thereof; (iv)
injury to or death of any person or persons directly or indirectly connected
with Hazardous Substances on, under, over, or transported or released to or from
the Mortgaged Property or any portion thereof; (v) contamination of any property
caused by Hazardous Substances on, under, over, or transported or released to or
from the Mortgaged Property or any portion thereof; or (vi) any asserted or
actual breach or violation by Indemnitor or the Mortgaged Property of any
requirements of Environmental Law, or any event, occurrence, or condition
affecting the Mortgaged Property or any portion thereof or respecting any
Hazardous Substance on, under, over, or transported or released to or from the
Mortgaged Property or any portion thereof, as a consequence of which, pursuant
to any requirements of Environmental Law, (a) Indemnitor or any Indemnitee shall
be liable or suffer any disability, (b) the Mortgaged Property, or any portion
thereof, shall be subject to any restriction on use, ownership or
transferability, or (c) any remedial work shall be required. The term
"ENVIRONMENTAL CLAIM" also includes (i) the costs of removal of any and all
Hazardous Substances from all or any portion of the Mortgaged Property, (ii)
costs required to take necessary precautions to protect against the release of
Hazardous Substances on, in, under, or affecting the Mortgaged Property, or any
portion thereof, and (iii) costs incurred to comply, in connection with all or
any portion of the Mortgaged Property or any surrounding areas affected by
Hazardous Substances on, under, over, or transported or released to or from the
Mortgaged Property or any portion thereof, with all applicable Environmental
Laws; but shall not include losses suffered by an Indemnitee that consist solely
of a reduction in the fair market value of a Mortgaged Property due to any of
the foregoing Environmental Claims.
(b) "ENVIRONMENTAL LAWS" means any federal, state or
local statutes, regulations, ordinances, or rules of common law and all
requirements imposed by any law, rule, order, or regulation of any federal,
state or local executive, legislative, judicial, regulatory, or administrative
agency, board, or authority, in any way relating to the protection of the
environment (including air, surface water, groundwater or land) or of human
health and safety, exposure to Hazardous Substances or otherwise relating to the
manufacture, processing, distribution, use, generation, treatment, storage,
disposal, transportation, or handling of Hazardous Substances now or hereinafter
in effect, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act ("HMTA") (49 U.S.C. App.
Section 1801 et seq.), the Resource Conservation and Recovery Act ("RCRA") (42
U.S.C. Section 6901 et
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<PAGE> 3
seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act
(42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.), and the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.), and the regulations promulgated pursuant thereto.
(c) "ENVIRONMENTAL PERMIT" means any permit, license,
approval, or other authorization with respect to any activities, operations, or
businesses conducted on or in relation to the Mortgaged Property, or any portion
thereof, required under any applicable Environmental Laws.
(d) "HAZARDOUS SUBSTANCES" shall mean any material,
substance or waste, whether solid, liquid or gas:
(i) which is defined as "hazardous wastes,"
"solid wastes," "hazardous substances," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import under any applicable
Environmental Law, and in the regulations promulgated pursuant to said laws;
(ii) which is known to cause cancer or
reproductive toxicity, as published pursuant to the Safe Drinking Water and
Toxic Enforcement Act of 1986, or pursuant to any applicable Environmental Law;
(iii) which is listed in the United States
Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by
the Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
(iv) which is (A) petroleum or any fraction
thereof or a petroleum
byproduct, (B) asbestos or asbestos-containing material, (C) polychlorinated
biphenyls, (D) designated as a "hazardous substance" pursuant to Section 311 of
the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321) or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317);
(E) a flammable explosive; or (F) a radioactive material; or
(v) which is or becomes regulated as
hazardous or toxic under applicable state or federal law or which is classified
as hazardous or toxic under federal or state laws or regulations.
(e) "INDEMNITEE" has the meaning set forth in SECTION
2 of this Agreement.
(f) "PERMITTED HAZARDOUS SUBSTANCES" means
prepackaged office supplies, cleaning materials, personal grooming items and
other items sold for consumer use or typically used in the operation,
maintenance and repair of properties and other commercial operations on or in
the vicinity of the Mortgaged Property or in the ordinary course of any
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<PAGE> 4
business operations on the Mortgaged Property and heating oil for the Mortgaged
Property which are generated, stored, handled, transported and disposed of in
compliance with applicable requirements of Environmental Law.
(g) "RELEASE" has the same meaning as given to that
term in the Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended (42 U.S.C. Section 9601, et seq.) and the regulations
promulgated thereunder.
2. Indemnification.
(a) Indemnitor shall protect, defend, indemnify, and
hold harmless Lender and its respective successors and assigns (including,
without limitation, the Trustee, following the Securitization (as defined in
SECTION 9 of the Loan Agreement)), and the officers, directors, shareholders,
and employees of each of them, in each case in their capacities as such (all
such persons and entities being referred to herein individually as an
"INDEMNITEE" and collectively as "INDEMNITEES") from and against all
liabilities, losses, costs, damages, expenses or claims, including, but not
limited to, remedial, removal, response, abatement, cleanup, legal,
investigative, and monitoring costs and other related costs, expenses, losses,
damages, penalties, fines, liabilities, obligations, defenses, judgments, suits,
proceedings, and disbursements (including, without limitation, reasonable
attorneys' and experts' fees and disbursements but excluding consequential
damages and losses consisting of a reduction in the fair market value of a
Mortgaged Property due to an Environmental Claim) which may at any time be
imposed upon or incurred by any Indemnitee to the extent arising out of or
relating to (directly or indirectly): (i) violation or breach by Indemnitor or
any of the Mortgaged Property of, or obligations imposed on Indemnitor or any of
the Mortgaged Property under, any Environmental Law; (ii) Environmental Claims
(other than Environmental Claims arising subsequent to the transfer of the
Mortgaged Properties as a result of Lender's exercise of remedies under the Loan
Documents); (iii) failure by Indemnitor, or any other party directly or
indirectly connected with any of the Mortgaged Property, or any portion thereof,
to obtain, maintain, or comply with any Environmental Permit; (iv) otherwise
from the presence or existence of Hazardous Substances on, under, over, or
released or transported from any of the Mortgaged Property, or any portion
thereof, and/or (v) any breach of any of the covenants set forth in SECTION 3
hereof.
(b) In the event that any investigation, site
monitoring, containment, cleanup, removal, restoration, closure or remedial work
of any kind or nature (the "REMEDIAL WORK") is (x) required under any applicable
Environmental Law, any judicial order, or by any governmental or
non-governmental entity or person enforcing any Environmental Law, or (y)
reasonably necessary in order to prevent a material adverse effect on any of the
Mortgaged Property, the operations of the improvements located thereon, or the
value or priority of Lender's lien thereon (each, a "MATERIAL ADVERSE EFFECT")
in either case because of, or in connection with, the current or future
presence, suspected presence, Release or suspected or threatened Release of a
Hazardous Substance in or on, about, under or within the Mortgaged Property (or
any portion thereof), Indemnitor shall, jointly and severally, within fifteen
(15) days after written demand for performance thereof by Indemnitees (or such
shorter period of time as may be required under any applicable law, regulation,
order or agreement, or such longer period as may
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<PAGE> 5
be approved by Lender, in Lender's good faith discretion), commence to perform
(or cause performance to be commenced), and thereafter diligently complete, all
such Remedial Work. All Remedial Work shall be performed by one or more
qualified contractors, approved in advance in writing by Lender, which approval
shall not be unreasonably withheld, conditioned or delayed, unless obtaining
such approval shall be impracticable due to the need for prompt action, and
shall be performed under the supervision of a consulting engineer approved in
advance in writing by Lender. All costs and expenses of such Remedial Work shall
be paid by Indemnitor including, without limitation, the charges of such
contractor(s) and/or the consulting engineer, and the attorneys' fees and costs
reasonably incurred by Indemnitees in connection with monitoring or review of
such Remedial Work. In the event Indemnitor shall fail to timely commence, or
cause to be commenced, or fail to diligently prosecute to completion, such
Remedial Work, Lender may, but shall not be required to, cause such Remedial
Work to be performed and all costs and expenses thereof, or incurred in
connection therewith, shall become an Environmental Claim hereunder. Any amounts
payable to Lender by reason of the application of this Section shall be
immediately due and payable, shall be added to the Debt (as defined in the Loan
Agreement), secured by the Mortgage and shall bear interest at the Default
Interest Rate (as defined in the Loan Agreement) from the date loss or damage is
sustained by Lender until paid.
(c) This Agreement is solely intended to protect the
Indemnitees from the matters set forth in this Agreement and is not intended to
secure payment of the Mortgage Note or amounts due under the Mortgage or other
Loan Documents.
(d) This Agreement, and all rights and obligations
hereunder, shall survive performance and repayment of the obligations evidenced
by and arising under the Loan Documents, surrender of the Mortgage Note,
reconveyance or release of the Mortgage, or foreclosure or exercise of other
remedies under the Mortgage and/or any of the other Loan Documents (whether by
deed or other assignment in lieu of foreclosure, or otherwise), acquisition of
the Mortgaged Property, or any portion thereof, by Lender, and transfer of all
of Lender's rights in the Loan, the Loan Documents, and the Mortgaged Property
or any portion thereof.
(e) Nothing contained in this Agreement shall prevent
or in any way diminish or interfere with any rights and remedies, including,
without limitation, the right to contribution, which Lender may have against
Indemnitor or any other party under CERCLA, as it may be amended from time to
time, or any other applicable Federal or state laws.
(f) Anything herein to the contrary notwithstanding,
Lender's rights under this Agreement shall be in addition to all rights of
Lender under the Loan Documents, and any payments by Indemnitor under this
Agreement shall not reduce Indemnitor's obligations and liabilities under any of
the Loan Documents.
3. Covenants of Indemnitor. Indemnitor covenants and agrees
with Lender as follows:
(a) Indemnitor will keep, and will require all
operators, tenants,
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<PAGE> 6
subtenants, licensees and occupants of the Mortgaged Property or any portion
thereof to keep, the Mortgaged Property free of all Hazardous Substances, except
for Permitted Hazardous Substances, and shall not cause or permit the Mortgaged
Property, or any portion thereof, to be used for the storage, treatment,
generation, transportation, processing, handling, production or disposal of any
Hazardous Substances (other than the storage and handling of Permitted Hazardous
Substances in compliance with all requirements of Environmental Laws).
(b) Indemnitor will comply with, and shall require
all operators, tenants, subtenants, licensees and occupants of the Mortgaged
Property or any portion thereof to comply with all applicable Environmental Laws
and shall obtain and comply with, and shall require all operators, tenants,
subtenants, licensees and occupants of the Mortgaged Property to obtain and
comply with, all Environmental Permits.
(c) Indemnitor will not cause or permit any change to
be made in the present or intended use of the Mortgaged Property or any portion
thereof which would (i) involve the storage, treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Substances other than Permitted Hazardous Substances or the use of the Mortgaged
Property or any portion thereof as a waste disposal site or for military,
manufacturing or industrial purposes or for the storage of petroleum or
petroleum based products (other than Permitted Hazardous Substances in
compliance with requirements of Environmental Law), (ii) violate any applicable
Environmental Law, (iii) constitute noncompliance with any Environmental Permit,
or (iv) increase materially the risk of a Release of any Hazardous Substances.
(d) To the extent required by Environmental Laws,
Indemnitor will undertake and complete all investigations, studies, sampling and
testing and all removal and other remedial actions necessary to contain,
mitigate, remove and clean up all Hazardous Substances that are determined to be
present at the Mortgaged Property or any portion thereof to the extent required
by any applicable Environmental Law or Environmental Permit or necessary to
prevent a Material Adverse Effect.
(e) Indemnitor will at all reasonable times allow
Lender and its officers, employees, agents, representatives, contractors and
subcontractors reasonable access to the Mortgaged Property and each portion
thereof for the purposes of ascertaining site conditions, including, but not
limited to, subsurface conditions. Lender shall give Indemnitor reasonable
notice of its desire for access to the Mortgaged Property or any portion
thereof, unless the need for prompt action makes such notice impracticable and
will cooperate with Indemnitor in good faith so as to minimize the disruptive
effect of such access.
(f) If Lender obtains reliable evidence or
information that a material environmental problem exists or may exist on, at or
under the Mortgaged Property or any portion thereof, Lender may, after
consultation with Indemnitor, require that a full or supplemental environmental
inspection and audit report with respect to the Mortgaged Property, of a scope
and level of detail reasonably satisfactory to Lender, be prepared by an
environmental engineer or other qualified person selected by Lender, at the sole
cost and expense of Indemnitor. If Lender
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<PAGE> 7
requires, such inspection will include a records search and, if said
environmental engineer or other person recommends the same as a matter which a
prudent owner of property under the circumstances should perform, subsurface
testing for the presence of Hazardous Substances in the soil, subsoil, bedrock,
surface water and/or ground water under the Mortgaged Property. Any so-called
"INTRUSIVE ACTIVITIES" (i.e., activities which require physical change to the
Mortgaged Property) shall be performed by contractors selected by Indemnitor and
reasonably acceptable to Lender. If said report indicates that a Release of any
Hazardous Substances has occurred and/or is occurring on, at, under or from the
Mortgaged Property, other than as permitted by any Environmental Permit,
Indemnitor will promptly undertake and diligently complete all investigative,
containment, removal, clean up and other remedial actions, which are either (x)
required by law, rule, regulation or court order, or (y) reasonably necessary in
order to prevent a Material Adverse Effect, in either case using methods
recommended by or acceptable to the engineer or other person who prepared said
audit report and acceptable to the appropriate federal, state and local agencies
or authorities having jurisdiction over the Mortgaged Property, or any portion
thereof.
4. Notice of Actions.
(a) Indemnitor shall give immediate written notice to
Lender of: (i) any proceeding, inquiry, notice, or other communication by or
from any governmental authority, including, without limitation, the United
States Environmental Protection Agency and any applicable state or local
agencies, regarding the presence or existence of any Hazardous Substances on,
under, or about any of the Mortgaged Property or any migration thereof from or
to any of the Mortgaged Property or any actual or alleged violation of
Environmental Law; (ii) all Environmental Claims and any other claims made or
threatened against Indemnitor or the Mortgaged Property relating to any loss or
injury resulting from or pertaining to any Hazardous Substances or any alleged
breach or violation of any Environmental Law; (iii) Indemnitor's discovery of
any occurrence or condition on any real property adjoining or in the vicinity of
any of the Mortgaged Property that reasonably may cause the Mortgaged Property,
or any portion thereof, to be subject to any restrictions on ownership,
occupancy, transferability, or use, or subject the owner or any person having
any interest in the Mortgaged Property, or any portion thereof, to any
liability, penalty, or disability under any Environmental Law; and (iv)
Indemnitor's receipt of any notice or discovery of any information regarding any
actual, alleged, or potential use, production, storage, spillage, seepage,
release, discharge, disposal or any other presence or existence of any Hazardous
Substances on, under, or about any of the Mortgaged Property (other than
Permitted Hazardous Substances) or any alleged breach or violation of any
Environmental Law pertaining to Indemnitor or the Mortgaged Property, or any
portion thereof.
(b) Immediately upon receipt of the same, Indemnitor
shall deliver to Lender copies of any and all Environmental Claims, and any and
all orders, notices, permits, applications, reports, and other communications
(other than privileged communications with legal counsel), documents, and
instruments pertaining to the actual, alleged, or potential presence or
existence of any Hazardous Substances (other than Permitted Hazardous
Substances) on, under, or about any of the Mortgaged Property.
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<PAGE> 8
(c) Lender shall have the right to join and
participate in, as a party if it so elects, any legal proceedings or actions in
connection with the Mortgaged Property involving any Environmental Claim, any
Hazardous Substances or any requirements of Environmental Law, and Indemnitor
shall reimburse Lender upon demand for all of Lender's costs and expenses
reasonably incurred in connection therewith, including reasonable attorneys'
fees.
(d) Promptly upon Lender's reasonable request,
Indemnitor will execute and deliver such instruments as Lender reasonably may
deem useful or necessary to permit Lender to take any action referred to in
SECTION 4(C) above.
5. Procedures Relating to Indemnification.
(a) Indemnitor shall at its own cost, expense, and
risk: (i) defend all suits, actions, or other legal or administrative
proceedings that may be brought or instituted against an Indemnitee or
Indemnitees, as the case may be, on account of any matter or matters arising
under or within SECTION 2 above; (ii) pay in or satisfy any judgment or decree
that may be recorded against an Indemnitee or Indemnitees, as the case may be,
in any such suit, action, or other legal or administrative proceedings; (iii)
reimburse Indemnitee or Indemnitees, as the case may be, for the cost of, or any
payment made by any of them for, any reasonable expenses incurred in connection
with Hazardous Substances undertaken as a result of any demands, causes of
actions, lawsuits, proceedings, or any other claims threatened, made, or brought
against any Indemnitee or Indemnitees, as the case may be, arising out of the
obligations of Indemnitor under this Agreement; and (iv) reimburse Indemnitee or
Indemnitees, as the case may be, for any and all expenses, including, but not
limited to, all reasonable legal expenses arising out of or attributable to, the
above acts or in connection with enforcing the rights of Indemnitees under this
Agreement or in monitoring and participating in any action, proceeding, or
litigation, subject to the provisions of SECTION 5(B) below.
(b) Counsel selected by Indemnitor pursuant to
SECTION 5(A) above shall be subject to the approval of the Indemnitee or
Indemnitees, as the case may be, asserting a claim hereunder; provided, however,
that Indemnitee or Indemnitees, in good faith, as the case may be, may elect to
defend any such claim, lawsuit, action or legal or administrative proceeding,
if, in the judgment of the Indemnitee or Indemnitees, as the case may be, (i)
the defense is not proceeding or being conducted in a satisfactory manner, or
(ii) there is a conflict of interest between any of the parties to such lawsuit,
action, legal, or administrative proceeding. In the event the Indemnitee or
Indemnitees elect to defend any such claim, lawsuit, action or legal or
administrative proceeding pursuant to the preceding sentence, Indemnitor shall
be responsible for the costs and expenses of the legal counsel engaged by
Indemnitee or Indemnitees. Notwithstanding anything in this subsection, Lender
may, at any time and at its own expense, employ its own legal counsel and
consultants to prosecute, negotiate, or defend any such claim, action, or cause
of action, and Lender shall have the right at Lender's own expense to settle or
compromise any action, suit, proceeding, or claim as Lender may determine.
6. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of Indemnitor and Indemnitees and their respective heirs,
personal representatives,
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<PAGE> 9
successors and assigns, including as to Lender, without limitation, any holder
of the Mortgage Note and any affiliate of Lender which acquires all or part of
the Mortgaged Property by any sale, assignment or foreclosure under the
Mortgage, by deed or other assignment in lieu of foreclosure, or otherwise.
7. Limitation of Liability of Indemnitees. Notwithstanding any
ownership by any Indemnitee at any time of all or any portion of the Mortgaged
Property, in no event shall any Indemnitee (including any successor or assign as
holder of the Mortgage Note) be bound by any obligations or liabilities of any
of the Indemnitor.
8. Liability of Indemnitor. The liability of Indemnitor under
this Agreement shall in no way be limited or impaired by, any amendment or
modification of the provisions of the Loan Documents to or with Lender by
Indemnitor or any person who succeeds Indemnitor as owner of the Mortgaged
Property, or any portion thereof. In addition, the liability of Indemnitor under
this Agreement shall in no way be limited or impaired by (i) any extensions of
time for performance required by any of the Loan Documents; (ii) any sale,
assignment, or foreclosure of the Mortgage Note or the Mortgage or any sale or
transfer of all or part of the Mortgaged Property; (iii) any exculpatory
provision in any of the Loan Documents limiting Lender's recourse to property
encumbered by the Mortgage or to any other security, or limiting Lender's rights
to a deficiency judgment against Indemnitor or any other party, including
without limitation, any provision of the Loan Documents entitled "LIMITATIONS ON
LIABILITY;" (iv) the accuracy or inaccuracy of the representations and
warranties made by Indemnitor under any of the Loan Documents; (v) the release
of Indemnitor or any other person or entity from performance or observance of
any of the agreements, covenants, terms, or conditions contained in any of the
Loan Documents by operation of law, Lender's voluntary act, or otherwise; (vi)
the release or substitution in whole or in part of any security for the Mortgage
Note; or (vii) Lender's failure to perfect, protect, secure, or insure any
security interest or lien given as security for the Mortgage Note; and, in any
such case, whether with or without notice to Indemnitor and with or without
consideration.
9. Delay. No delay on Lender's part in exercising any right,
power, or privilege under any of the Loan Documents shall operate as a waiver of
any such privilege, power, or right.
10. Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
11. Notices. All notices, requests and demands to or upon the
respective parties hereto shall be in writing (except as is otherwise
specifically provided in this Agreement) and shall be deemed to have been duly
given or made when received (or when delivery thereof is refused by the intended
recipient) if mailed by first-class registered or certified mail, return receipt
requested, postage prepaid, sent by facsimile transmission with confirmation of
receipt or delivery, sent by nationally recognized overnight courier, or
delivered by hand, addressed or directed as follows (or to such other address or
facsimile transmission number as may be hereafter designated in writing by the
respective parties hereto):
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<PAGE> 10
IF TO INDEMNITOR: Arden Realty Finance IV, L.L.C.
11601 Wilshire Boulevard
Suite 402
Los Angeles, CA 90025
Attention: Diana M. Laing
IF TO LENDER: Lehman Brothers Realty Corporation
Three World Financial Center
New York, New York 10285
Attention: Commercial Loan Surveillance
Fax: (212) 528-6659
12. Attorneys' Fees. In the event that any Indemnitor or
Indemnitee brings any suit or other proceeding with respect to the subject
matter or enforcement of this Agreement and is the prevailing party (as
determined by the court, agency or other authority before which such suit or
proceeding is commenced) the prevailing party shall, in addition to such other
relief as may be awarded, be entitled to recover reasonable attorneys' fees and
expenses (at all trial, appellate or other levels) and costs of investigation,
costs incurred in establishing the right to indemnification, or in any action or
participation in, or in connection with, any case or proceeding under Chapter 7,
11 or 13 of the Bankruptcy Code, 11 United States Code Sections 101 et seq., or
any successor statutes.
13. Successive Actions. A separate right of action hereunder
shall arise each time Lender acquires knowledge of any matter described in
SECTIONS 2 or 4 hereof. Separate and successive actions may be brought hereunder
to enforce any of the provisions hereof at any time and from time to time. No
action hereunder shall preclude any subsequent action, and Indemnitor hereby
waives and covenants not to assert any defense in the nature of splitting of
causes of action or merger of judgments.
14. Partial Invalidity. If any provision of this Agreement
shall be determined to be unenforceable in any circumstances by any court of
competent jurisdiction, then the balance of this Agreement nevertheless shall be
enforceable, and the subject provision shall be enforceable in all other
circumstances.
15. Interest on Unpaid Amounts. All amounts required to be
paid or reimbursed to any Indemnitee hereunder shall bear interest from the date
of expenditure by such Indemnitee or the date of written demand to any
Indemnitor hereunder, whichever is earlier, until paid to Indemnitee(s) at the
Default Interest Rate (as defined in the Loan Agreement).
16. Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of New York
(but not including the choice of law rules thereof).
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<PAGE> 11
17. Waiver of Trial By Jury. Indemnitor hereby knowingly,
voluntarily, and intentionally waives the right to a trial by jury in respect of
any litigation based hereon, arising out or, under or in connection with this
Agreement or any other Loan Documents contemplated to be executed in conjunction
herewith, or any course of conduct, course of dealings, statements (whether
verbal or written) or actions of any party or any exercise by any party of their
respective rights under the Loan Documents or in any way relating to the Loan
(including, without limitation, any action to rescind or cancel this Agreement,
and any claims or defenses asserting that this Agreement was fraudulently
induced or is otherwise void or voidable); this waiver being a material
inducement for Lender to accept this Agreement.
18. Consent to Jurisdiction. By execution and delivery of this
Agreement, Indemnitor accepts, generally and unconditionally, the jurisdiction
of any state or federal court in the State of New York and irrevocably agree to
be bound by any final judgment rendered thereby in connection with this
Agreement or any transaction contemplated hereby from which no appeal has been
taken or is available.
[SIGNATURE PAGE TO FOLLOW]
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<PAGE> 12
IN WITNESS WHEREOF, Indemnitor has executed this Agreement as
of the date first set forth above.
ARDEN REALTY FINANCE IV, L.L.C., a Delaware
limited liability company
By: ____________________________________
Name:_______________________________
Title:______________________________
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<PAGE> 1
EXHIBIT 10.23
LEHMAN BROTHERS REALTY CORPORATION
3 World Financial Center
200 Vesey Street
New York, NY 10285
June 8, 1998
Arden Realty Finance IV, L.L.C.
11601 Wilshire Boulevard
Suite 402
Los Angeles, California 90025
Attention: Diana Laing
Arden Realty Limited Partnership
Arden Realty, Inc.
11601 Wilshire Boulevard
Fourth Floor
Los Angeles, California 90025
Attention: Diana Laing
Ladies and Gentlemen:
Reference is hereby made to that certain mortgage loan being made by
Lehman Brothers Realty Corporation, or an affiliate thereof ("Lender") on the
date hereof in the aggregate principal amount of $100,600,000.00 (the "Loan")
pursuant to that certain Loan Agreement dated as of the date hereof between
Lender and Arden Realty Finance IV, L.L.C. ("Borrower") (the "Loan Agreement").
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Loan Agreement.
This letter agreement is between Lender, Borrower, Arden Realty, Inc.
(the "REIT") and Arden Realty Limited Partnership (the "Operating Partnership";
the REIT and the Operating Partnership hereinafter are collectively referred to
as the "Companies"). To induce Lender to make the Loan and in consideration of
Lender's making the Loan, the sufficiency of such consideration being hereby
acknowledged, the parties hereto agree as follows:
1. Cooperation in Securitization.
<PAGE> 2
At the request of Lender, Borrower, the Companies and their
respective affiliates shall use reasonable efforts to satisfy the market
standards to which Lender customarily adheres or which may be reasonably
required in the marketplace or by the Rating Agencies in connection with the
sale of the Loan or participation therein or the securitization (such sale
and/or securitization, the "Securitization") of the Loan and/or the issuance of
rated single or multi-class securities (the "Securities"), including, but not
limited to:
(a) at Borrower's expense, (i) provide such financial and
other information with respect to each Mortgaged Property,
Borrower, the Companies and the manager of any Mortgaged
Property, and (ii) provide budgets relating to each
Mortgaged Property (the "Provided Information"), together,
if customary, with appropriate consents with respect to
and/or verification of the Provided Information through
letters of auditors or opinions of counsel of independent
attorneys reasonably acceptable to Lender and the Rating
Agencies:
(b) at Borrower's expense, assist in preparing descriptive
materials for presentations to any or all of the Rating
Agencies in connection with the Securitization (all
matters of form and content in respect of such materials
shall be subject to approval by Borrower, the Companies
and their respective affiliates, which shall be
responsible for the accuracy and completeness of such
materials);
(c) work with, and if requested, supervise, third-party
service providers engaged by Borrower, the Companies and
their respective affiliates, to obtain, collect, and
deliver information required by the Rating Agencies in
connection with the Securitization;
(d) if requested by Lender, execute such amendments to the
Loan Documents and required ancillary documents to
reallocate the Allocated Loan Amounts among the Mortgaged
Properties, provided that no such reallocation shall
result in the imposition of any additional mortgage
recording, intangibles or documentary stamp taxes, or
title insurance premiums or charges, and provided further
that no Allocated Loan Amount for any one Mortgaged
Property shall be increased or decreased by more than ten
percent (10%);
(e) if required by the Rating Agencies, and at Borrower's
expense, deliver revised opinions of counsel as to
non-consolidation, due execution and enforceability with
respect to the Mortgaged Properties, Borrower, the
Companies and their respective affiliates, and the Loan
Documents, which counsel and opinions shall be reasonably
satisfactory to Lender and the
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<PAGE> 3
Rating Agencies;
(f) if required by the Rating Agencies, and at Borrower's
expense, deliver such additional tenant estoppel letters
or other estoppels from parties to agreements that affect
the Mortgaged Properties, which estoppel letters shall be
reasonably satisfactory to Lender and the Rating Agencies;
(g) make such representations and warranties as of the closing
date of the Securitization with respect to the Mortgaged
Properties, Borrower, the Companies and the Loan Documents
as are customarily provided in securitization transactions
and as may be reasonably requested by Lender or the Rating
Agencies and consistent with the facts covered by such
representations and warranties as they exist on the date
thereof, in form and substance similar to the
representations and warranties made in the Loan Documents;
(h) execute such amendments to the Loan Documents as may be
requested by Lender or the Rating Agencies or otherwise to
effect the Securitization; provided, however, that
Borrower shall not be required to modify or amend any Loan
Documents if such modification or amendment would (i)
change the interest rate, the stated maturity or the
amortization of principal set forth in the Mortgage Note,
or (ii) materially modify or amend any other material or
economic term of the Loan except as permitted or required
pursuant to subparagraph 1(d) above;
(i) cooperate with Lender in the preparation of a private
placement memorandum, prospectus, including any amendment
or supplement to either thereof, or other disclosure
document (each, a "Disclosure Document") to be used by
Lender or any affiliate in connection with the sale or
securitization of the Loan or any securities representing
an interest in the Loan and providing indemnification
against securities liability with respect to information
provided by Borrower, the Companies or their respective
affiliates or disclosure about Borrower, the Companies,
their affiliates, the Loan and each Mortgaged Property;
(j) notwithstanding anything to the contrary contained in
subparagraph (h) above, upon Lender's request, the Loan
Documents shall be modified to provide for the delivery of
financial statements to Lender as may be required by the
Securities and Exchange Commission or the Rating Agencies;
and
(k) provide such other information and take such other action
in connection
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<PAGE> 4
with the Securitization as may be reasonably requested by Lender
or the Rating Agencies.
2. Costs and Expenses.
All third-party costs and expenses and out-of-pocket expenses incurred
by Lender in connection with the Borrower's complying with requests made
hereunder shall be paid by Lender except for (i) the costs of third-party
service providers that prepared reports with respect to the Mortgaged Properties
in connection with the closing of the Loan, (ii) the fees and expenses of
counsel to Borrower or the Companies and any travel costs incurred by Borrower
or the Companies and (iii) any other costs or expenses expressly stated herein
to be borne by Borrower. Costs and expenses to be paid by Lender shall include,
but not be limited to, reasonable fees and disbursements of legal counsel,
accountants, and other professionals retained by Lender and fees and expenses
incurred for producing any offering documents or any other materials (including
travel by Lender and its agents, design, printing, photograph and document
production costs).
3. Indemnification.
(a) Borrower, the Companies and their affiliates understand
that certain of the Provided Information ("Disclosure Information") may be
included in a disclosure document (the "Disclosure Document") in connection with
the Securitization and may also be included in filings with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), or provided or made available to investors or prospective
investors in the Securities, the Rating Agencies, and service providers relating
to the Securitization. In the event that the Disclosure Document is required to
be revised prior to the sale of all Securities, Borrower, the Companies and
their respective affiliates will cooperate with Lender in updating the
Disclosure Document by providing all current information pertaining to Borrower,
the Companies and the Mortgaged Properties as is necessary to keep the
Disclosure Document accurate and complete in all material respects.
(b) Borrower and the Companies agree to provide in connection
with each Disclosure Document an indemnification certificate (A) certifying that
Borrower and the Companies have carefully examined such memorandum or
prospectus, as applicable, including without limitation, the section entitled
"Description of the Mortgage Loans and Mortgaged Properties," and such section
(and any other sections reasonably requested ) does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in light of the circumstances under which they were
made, not misleading pertaining to Borrower, the Companies or the Mortgaged
Properties, (B) indemnifying Lender (and for purposes of this paragraph, Lender
shall include its officers, directors and employees), any affiliate of Lender to
whom the Loan may be assigned prior to or in connection with the Securitization
and the officers, directors and employees of such affiliate, the affiliate of
Lender
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<PAGE> 5
that has filed its registration statement relating to the Securitization (the
"Registration Statement"), each of its directors, each of its officers who have
signed the Registration Statement and each person or entity who controls the
affiliate within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act (collectively, the "Lehman Group"), and Lender, each of its
directors and each person who controls Lender within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act (collectively, the
"Underwriter Group") for any losses, claims, damages or liabilities (the
"Liabilities") to which Lender, the Lehman Group or the Underwriter Group may
become subject insofar as the Liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact pertaining to
Borrower, the Companies and/or the Mortgaged Properties contained in such
sections or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated in such sections pertaining
to Borrower, the Companies and/or the Mortgaged Properties or necessary in order
to make the statements in such sections pertaining to Borrower, the Companies
and/or the Mortgaged Properties in light of the circumstances under which they
were made, not misleading and (C) agreeing to reimburse Lender, the Lehman Group
and the Underwriter Group for any legal or other expenses reasonably incurred by
any of them in connection with investigating or defending the Liabilities;
provided, however, that Borrower and the Companies will be liable in any such
case under clauses (B) or (C) above only to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or omission made therein in reliance upon and in conformity with the
Provided Information furnished to Lender by or on behalf of Borrower and the
Companies in connection with the preparation of the memorandum or prospectus or
in connection with the underwriting of the debt, including, without limitation,
financial statements of Borrower and the Companies, operating statements, rent
rolls, environmental site assessment reports and property condition reports with
respect to the Mortgaged Properties. The indemnity provided in any such
indemnification certificate shall be in addition to any liability which Borrower
and the Companies, may otherwise have.
(c) In connection with subsequent filings under the Exchange
Act in connection with the Securitization, Borrower, the Companies and their
affiliates agree to indemnify (i) Lender, the Lehman Group and the Underwriter
Group for Liabilities to which the Lender, the Lehman Group or the Underwriter
Group may become subject insofar as the Liabilities arise out of or are based
upon the omission or alleged omission to state in the Disclosure Information a
material fact required to be stated in the Disclosure Information in order to
make the statements in the Disclosure Information or securities filings of
Borrower or either of the Companies, in light of the circumstances under which
they were made, not misleading and (ii) reimburse Lender, the Lehman Group or
the Underwriter Group for any legal or other expenses reasonably incurred by
Lender, the Lehman Group or the Underwriter Group in connection with defending
or investigating the Liabilities; provided none of Borrower or either of the
Companies shall have any obligation to review or examine such subsequent filings
or provide any additional information or take other actions subsequent to the
closing of the
-5-
<PAGE> 6
Securitization other than as required by the Loan Documents.
(d) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing of the commencement thereof, but the
omission to so notify the indemnifying party will not relieve the indemnifying
party from any liability which the indemnifying party may have to any
indemnified party hereunder except to the extent that failure to notify causes
prejudice to the indemnifying party. In the event that any action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled, jointly with any
other indemnifying party, to participate therein and, to the extent that it (or
they) may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party hereunder, the
indemnifying party shall be responsible for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnifying party shall have reasonably concluded
that there are legal defenses available to it and/or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, the indemnified party or parties may participate in the defense of such
action on behalf of such indemnified party or parties. The indemnifying party
shall not be liable for the expenses of more than one separate counsel unless an
indemnified party shall have reasonably concluded that there may be legal
defenses available to it that are different from or in addition to those
available to another indemnified party.
(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for hereunder is for any
reason held to be unenforceable by an indemnified party in respect of any
losses, claims, damages or liabilities (or action in respect thereof) referred
to therein which would otherwise be indemnifiable hereunder, the indemnifying
party shall contribute to the amount paid or payable by the indemnified party as
a result of such losses claims, damages or liabilities (or action in respect
thereof); provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. In determining the amount of contribution to which
the respective parties are entitled, the following factors shall be considered:
(i) the proportion as is appropriate to reflect the relative benefits to
Borrower and the Companies on the one hand, and Lender on the other in
connection with the transactions to which such indemnification or reimbursement
relates; or (ii) if the allocation provided by clause (i) is judicially
determined not to be permitted, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) but also the relative
faults of Borrower and the Companies on the one
-6-
<PAGE> 7
hand, and Lender on the other, as well as any equitable considerations. Lender
and Borrower and the Companies herein agree that it would not be equitable if
the amount of such contribution were determined by pro rata or per capita
allocation.
(f) The liabilities and obligations of Borrower, the Companies
and their respective affiliates hereunder shall survive the termination of the
Loan Agreement and the satisfaction and discharge of the Debt.
4. Miscellaneous.
The terms and conditions of this letter shall survive, and
continue in full force and effect after, the Loan closing, if any, and all
references herein to the Loan Agreement and the Loan Documents shall refer to
the actual Loan Agreement and Loan Documents executed and delivered upon the
closing of the Loan.
The failure of Borrower, the Companies and their
respective affiliates to pay any sums when due under this letter or to comply
with any of the covenants or obligations contained in this letter shall be an
Event of Default under the Loan Agreement.
This letter may not be amended by any provision hereof
waived or modified except by an agreement in writing signed by each of the
parties hereto. This letter shall be governed by, and construed in accordance
with, the laws of the State of New York (but not including the choice of law
rules thereof).
[SIGNATURE PAGES TO FOLLOW]
-7-
<PAGE> 8
ACCEPTANCE
If the foregoing correctly sets forth Lender's understanding with
Borrower and the Companies, Borrower and the Companies should indicate their
acceptance of the terms hereof by signing in the appropriate space below and
returning to Lender the enclosed duplicate original of this letter, whereupon
this letter shall become a binding agreement among Lender, the Borrower and the
Companies.
LEHMAN BROTHERS REALTY CORPORATION,
a Delaware corporation
By:
Name:
Title:
AGREED to on the 8th day of June, 1998
ARDEN REALTY FINANCE IV, L.L.C.,
a Delaware limited liability company
By:
Name:
Title:
ARDEN REALTY, INC.,
a Maryland corporation
By:
Name:
Title:
<PAGE> 9
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: Arden Realty, Inc., General Partner
By:
Name:
Title:
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<FISCAL-YEAR-END> DEC-31-1998
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