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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) March 10, 1999
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THE PEREGRINE REAL ESTATE TRUST
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(Exact Name of Registrant as Specified in Charter)
California 0-9097 94-2255677
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification Number)
1300 Ethan Way, Suite 200, Sacramento, California 95825
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (916) 929-8244
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THE PEREGRINE REAL ESTATE TRUST
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 12, 1999, The Peregrine Real Estate Trust, d.b.a. WinShip
Properties, a California real estate trust (the "Trust") sold (i) an improved
parcel of real property and the building thereon used as a mini storage facility
located at 1435 Sebastopol, Santa Rosa, California to James Ledwith, an
individual, for a gross sales price of $3,625,000 and (ii) an improved parcel of
real property and the building thereon used as a single tenant office facility
located at 3900 Lennane Drive, Sacramento, California to the Parsons Family
Partnership for a gross sales price of $4,800,000. The gross sales price for
each separate sale of property described above was paid to the Trust in cash and
each such price was determined pursuant to arms-length negotiations between the
Trust and each purchaser. Proceeds from the sale of the properties were used to
pay down borrowings outstanding on the New Credit Facility, as described below.
ITEM 5. OTHER EVENTS
On March 10, 1999, the Trust entered into a Loan and Security
Agreement with Fremont Investment & Loan (dated as of February 15, 1999) that
provides the Trust up to $44,000,000 in borrowing capacity under a revolving
line of credit (the "New Credit Facility"). The maximum amount that may be
borrowed under the New Credit Facility is based upon the appraised value of
certain parcels of real estate owned by the Trust. Borrowings under the New
Credit Facility become due and payable on April 1, 2001, but such date may be
extended until April 2, 2003 with the consent of Fremont Investment & Loan.
Principal amounts borrowed under the New Credit Facility bear interest at
8.6% for the first year, then at an interest rate ranging from the six-month
LIBOR plus 350 basis points to LIBOR plus 400 basis points. In connection
with the execution of the New Credit Facility, the Trust entered into a Fifth
Amendment to Second Amended and Restated Note Agreement to permit the Trust
to enter into the New Credit Facility, to release collateral that had
previously secured the Trust's obligations under the Trust's outstanding
senior notes (the "Senior Notes") and to allow interest on the outstanding
Senior Notes to be paid-in-kind rather than in cash if the Trust does not
achieve positive net cash flow in specified periods. The Trust applied
approximately $27,500,000 of borrowings incurred under the New Credit
Facility to repay all amounts outstanding under the Loan and Security
Agreement dated as of December 4, 1997, between the Trust and Fleet Capital
Corporation and $10,000,000 to repay a portion of the amounts outstanding on
the Senior Notes, which are held by entities that are also significant
shareholders of the Trust. Subsequent borrowings under the New Credit
Facility may be applied only to i) capital improvements to certain properties
and improvements securing the New Credit Facility, ii) costs incurred in the
ordinary course in connection with the Trust's acquisition of
income-producing commercial properties for its own account, or iii) certain
payments to the Trust's equity holders. Borrowings under the New Credit
Facility may not be applied for general corporate or working capital
purposes. The New Credit Facility prohibits the Trust from incurring debt
other than specified mortgage indebtedness and permitted refinancing,
indebtedness and restricts the ability of the Trust to incur liens,
distribute assets, and make payments on junior debt, and contains certain
requirements as to compliance with laws by the Trust, inspection of
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properties by the lender, leasing of space, environmental matters, insurance,
notices and information required to be given to the Lender under the New
Credit Facility, asbestos operations and maintenance, lead-based paint and
hotel renovations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) Exhibit 10.1.5 Fifth Amendment to Second Amended and Restated
Note Agreement and Consent dated February 15, 1999, by and
among The Peregrine Real Estate Trust, d.b.a. WinShip
Properties, the Noteholders named therein and The Prudential
Insurance Company of America, as Agent for the Noteholders.
Exhibit 10.14 Loan and Security Agreement dated February 15,
1999, by and among The Peregrine Real Estate Trust, d.b.a.
WinShip Properties, and Fremont Investment & Loan.
Exhibit 10.15 Secured Promissory Note dated February 15, 1999,
by and among The Peregrine Real Estate Trust, d.b.a. WinShip
Properties, and Fremont Investment & Loan.
Exhibit 99.1 Press Release dated March 15, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE PEREGRINE REAL ESTATE TRUST
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(Registrant)
Date: March 19, 1999 /s/ Larry Knorr
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(Signature)
Larry Knorr
Vice President, Chief Accounting
Officer and Assistant Secretary
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INDEX TO EXHIBITS
Exhibit Number Description
10.1.5 Fifth Amendment to Second Amended and Restated Note Agreement
and Consent dated February 15, 1999, by and among The
Peregrine Real Estate Trust, d.b.a. WinShip Properties, the
Noteholders named therein, and the Prudential Insurance
Company of America, as Agent for the Noteholders.
10.14 Loan and Security Agreement dated February 15, 1999, by and
among The Peregrine Real Estate Trust, d.b.a. WinShip
Properties, and Fremont Investment & Loan.
10.15 Secured Promissory Note dated February 15, 1999, by and among
The Peregrine Real Estate Trust, d.b.a. WinShip Properties,
and Fremont Investment & Loan.
99.1 Press Release dated March 15, 1999.
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FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED
NOTE AGREEMENT AND CONSENT
THIS FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED NOTE
AGREEMENT AND CONSENT (this "AMENDMENT"), dated as of February 15, 1999, is
made by and among The Peregrine Real Estate Trust, formerly known as
Commonwealth Equity Trust and d.b.a. WinShip Properties (the "COMPANY"); each
of the noteholders party to the Senior Credit Agreement (as defined below)
(individually, a "NOTEHOLDER" and, collectively, the "NOTEHOLDERS"); and The
Prudential Insurance Company of America, as Agent for the Noteholders (in
such capacity, together with its successors in such capacity, the "AGENT").
R E C I T A L S
WHEREAS, the Company, the Agent and the Noteholders are parties
to the Second Amended and Restated Note Agreement dated as of September 27,
1994 (as amended by that certain First Amendment dated as of February 16,
1995, Second Amendment dated as of December 4, 1997, Third Amendment dated as
of May 1, 1998 and Fourth Amendment dated as of June 30, 1998, the "SENIOR
CREDIT AGREEMENT");
WHEREAS, the Company and Fleet Capital Corporation ("FLEET")
are parties to the Loan and Security Agreement dated as of December 4, 1997
which constitutes the current "New Credit Line" under the Senior Credit
Agreement (the "FLEET FACILITY");
WHEREAS, concurrently herewith the Company is entering into a
new $44,000,000 credit facility with Fremont Investment & Loan (the "FREMONT
CREDIT FACILITY") and applying a portion of the borrowings under such
facility to payment in full of all amounts outstanding under the Fleet
Facility and to a portion of the principal amount outstanding under the
Senior Credit Agreement, as described more fully herein;
WHEREAS, the Company has requested that the Agent and the
Noteholders release all of their right, title, claim and interest in and to
any and all Collateral as set forth in the Senior Credit Agreement and the
other Documents, and that the Senior Credit Agreement be amended to provide
that (i) the Net Cash Proceeds from the refinancing of existing debt or sale
of certain property of the Company will not be applied to mandatorily prepay
the Notes until such time as an aggregate of $10.0 million of such Net Cash
Proceeds has been applied to the Fremont Credit Facility, which amounts so
applied may be reborrowed under the Fremont Credit Facility, and (ii) that
interest payments on the Notes will be made in kind by the Company if the
Company does not achieve positive Net Cash Flow (as hereinafter defined) in
applicable periods;
WHEREAS, concurrently herewith the Agent has executed and
delivered to the Company termination agreements with respect to all documents
granting the Agent and Noteholders a security interest in any property of the
Company and reconveyance agreements with respect to the various deeds of
trust and other security agreements and financing statements
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evidencing the liens in favor of the Agent and Noteholders on the Company's
property to release such liens; and
WHEREAS, in consideration for the Agent's and the Noteholders'
agreement to the foregoing, concurrently herewith the Company has made an
optional pre-payment to the Noteholders in the aggregate amount of
$10,000,000 to be applied to the Notes pursuant to the terms set forth in
SECTION 2.7 of the Senior Credit Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, the
Agent and the Noteholders agree as follows:
1. DEFINED TERMS. Capitalized terms used but not defined
in this Amendment shall have the meanings assigned to such terms in the
Senior Credit Agreement.
2. WAIVER, CONSENT AND RELEASE OF COLLATERAL. The Agent
and the Noteholders hereby release and terminate any and all of their right,
title, claim and interest in and to any and all Collateral securing the Notes
and consent to the execution and delivery by the Company of the Fremont
Credit Facility and the terms thereof, including without limitation the
provisions of SECTION 7.12 thereof (provided, however, that such consent is
not a waiver by the Agent and the Noteholders of their right to make demand
for payment in full of the Obligations on the Maturity Date, exercise any of
their rights and remedies with respect thereto, or receive payment of the
obligations on the Maturity Date) and the grant of security interests, making
of liens and incurrence of indebtedness by the Company pursuant to the terms
of the Fremont Credit Facility.
3. AMENDMENT TO ARTICLE I OF THE SENIOR CREDIT AGREEMENT.
(a) Article I of the Senior Credit Agreement is hereby amended
by adding the following defined terms in the appropriate alphabetical
order:
"Fremont Credit Facility" means the $44,000,000 credit
facility provided to the Company by Fremont Investment & Loan
pursuant to the Loan and Security Agreement dated as of
February 15, 1999.
"Mandatory Prepayments" shall have the meaning set forth in
SECTION 2.4(b)(i).
"Net Cash Flow" means, for any three (3) consecutive month
period, all actual revenues received by Company from the operation
of the Projects on a gross basis less the actual expenses incurred
by Company in the ordinary course of business and approved by the
Lender (as defined in the Fremont Credit Facility), connection
with the operation of the Projects, including, without limitation,
interest payments on the New Credit Facility, other debt
(excluding the Notes) and adequate reserves for future payments
for each Project acceptable to the Lender (as defined in the
Fremont Credit Facility).
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"Notes Receivable" means all of Company's interest in any
notes, instruments, and documents and all receivables and rights
to payment evidenced thereby, together with all leases, master
leases, trust deeds, mortgages, rent assignments, guarantees and
contingent obligations to which Company may look for payment
therefor, and other collateral or security for any of the
foregoing.
"Project" and "Projects" shall have the meanings ascribed
thereto in the Loan and Security Agreement dated as of
February 15, 1999, by and between Company and Fremont Investment &
Loan, as in effect on the date hereof.
"Property" means any and all real or personal property now
owned or hereafter acquired by the Company.
"Property Sales" shall have the meaning set forth in
SECTION 2.4(b)(i).
"Senior Permitted Liens" shall mean any Lien securing the
New Credit Line and the Senior Mortgage Liens."
(b) SECTION 1.56 of the Senior Credit Agreement is hereby
amended to read in its entirety as follows:
"1.56 "Net Cash Proceeds" means, (a) with respect to
the sale or refinancing of any asset, all cash payable to
Company as a result of such sale or refinancing after payment
of (i) all reasonable and customary closing costs not payable
to Company or any Affiliate or insider of Company, including,
brokerage commissions, appraisal fees, recording fees,
attorneys' fees, title insurance premiums, inspection report
charges, prepayment penalties payable to senior lienholders,
escrow credits in favor of the purchaser or financier,
customary prorations, transfer taxes, escrow fees, points and
other loan fees, (ii) amounts required to be paid pursuant to
the terms of any indebtedness secured by Senior Permitted Liens
on such asset, (iii) Allowed Secured Real Property Tax Claims
on such asset, (iv) permitted deposits into the Tax Reserve
Account, (v) any and all fees incurred by Agent, Collateral
Agent and Noteholders in connection with such sale or
refinancing and (vi) in connection with a refinancing, any and
all hard and soft costs of the construction of improvements
located on the real property securing such refinancing
indebtedness which improvements are financed by such
refinancing indebtedness, and (b) with respect to the grant by
Company of an option to purchase real property at the time such
funds are not refundable by CET, all cash payable to Company as
a result of such grant after payment of all reasonable and
customary closing costs not payable to Company or any Affiliate
or insider of Company."
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(c) SECTION 1.60 of the Senior Credit Agreement is hereby
amended to read in its entirety as follows:
"1.60 "New Credit Line" means the line of credit provided to the
Company pursuant to the Loan and Security Agreement dated as of
February 15, 1999 between the Company and Fremont Investment &
Loan, as the same may be amended, modified, renewed, refunded,
replaced or refinanced from time to time, in whole or in part, so
long as none of the foregoing results in an increase in the Loan
Amount (as defined in the Fremont Credit Facility)."
4. AMENDMENT TO SECTION 2.3(b) OF THE SENIOR CREDIT
AGREEMENT. SECTION 2.3(b) of the Senior Credit Agreement is hereby amended to
read in its entirety as follows:
"(b) Payment of Interest; Interest Deferral Notes.
Interest on the Notes is payable quarterly commencing October 1,
1994. Interest shall be computed on the basis of a 360 day
year/actual days elapsed. If (i) Company does not achieve
positive Net Cash Flow for the most recent three month consecutive
period of the Company for which financial statements are available
preceding the applicable interest payment date or (ii) the Company
is otherwise prohibited from making an interest payment on the
Notes pursuant to the provisions of SECTION 7.12 of the New Credit
Line as in effect on the date hereof, Company shall, in lieu of
paying interest on the Notes in cash, execute and deliver to each
Noteholder on or before any interest payment date, one or more
promissory notes in the form of the promissory note attached
hereto as EXHIBIT C (each of which shall be an "Interest Deferral
Note") in a principal amount equal to the sum of interest due to
such Noteholder on such interest payment date and maturing on the
Maturity Date. Each Interest Deferral Note shall bear interest at
a rate of 8.5% per annum and, on overdue payments, at the Default
Rate as provided in SECTION 2.3(d). If, upon occurrence of the
events set forth in this SECTION 2.3(b), Company delivers Interest
Deferral Notes to any Noteholder, Company shall deliver Interest
Deferral Notes to all Noteholders and shall not pay cash interest
to any Noteholder."
5. AMENDMENT TO SECTION 2.4(b) OF THE SENIOR CREDIT
AGREEMENT. SECTION 2.4(b) of the Senior Credit Agreement is hereby amended to
read in its entirety as follows:
"2.4(b) MANDATORY PREPAYMENTS.
(i) Except as provided in SECTION
2.4(b)(ii) or SECTION 2.4(b)(iii) on the Release Dates (as
defined below), Company shall pay to the Noteholders on a pro
rata basis (i) eighty percent (80%) of the Net Cash Proceeds of
(A) any sale of Property under and as permitted by SECTION 6.6,
(B) any grant of an option to purchase Property under and as
permitted by SECTION 6.7, (C) any Refinancing Indebtedness
incurred under and as permitted by SECTION 6.8, (D) any new
financing or refinancing secured by a lien on the Property
(other than the
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New Credit Line), and (E) any principal payment or prepayment
on account of any Note Receivable (such sales, the "PROPERTY
SALES" and, such payments, the "MANDATORY PREPAYMENTS");
provided, that Company shall retain a portion of Net Cash
Proceeds sufficient, in Company's reasonable business judgment,
to satisfy any federal, state, or local tax liability of
Company arising from any such asset disposition. Any excess of
such retained funds remaining after payment of all such tax
liabilities shall be deemed Net Cash Proceeds, eighty percent
(80%) of which shall be paid to Noteholders as provided herein.
The payments required by this SECTION 2.4(b) shall be made on
the following dates (the "RELEASE DATES"): (i) those dates on
which the aggregate Net Cash Proceeds that have been received
from the transactions or events described in this SECTION
2.4(b) and have not been paid to Agent in accordance with this
SECTION 2.4(b) exceeds $100,000, and (ii) those dates 30 days
after the end of each fiscal quarter, if any Net Cash Proceeds
have been received during such fiscal quarter and have not been
paid to Agent in accordance with this SECTION 2.4(b). Prior to
the Release Dates, Company may retain such Net Cash Proceeds
but may not withdraw or otherwise use such proceeds for any
purpose other than prepayments in accordance with this SECTION
2.4(b).
(ii) Notwithstanding the requirements of SECTION
2.4(b)(i), Company shall not be required to make any Mandatory
Prepayment to Agent on behalf of Noteholders from the first
$10,000,000 of Net Cash Proceeds from any sale or refinancing of
any asset, so long as such Net Cash Proceeds are applied to repay
and reduce amounts outstanding under the New Credit Line which
amounts once applied may be reborrowed in accordance with the
terms of the New Credit Line. Following such application of the
first $10,000,000 of Net Cash Proceeds from property sales, Net
Cash Proceeds shall be distributed as set forth in SECTION
2.4(b)(i).
(iii) Notwithstanding the requirements of SECTION
2.4(b)(i), the Company shall not be required to make any Mandatory
Prepayment to Agent on behalf of the Noteholders if on the
applicable Release Date the Company is prohibited from making such
payment pursuant to the provisions of SECTION 7.12 of the New
Credit Line as in effect on the date hereof, provided that the
Company shall be required to make such payment promptly at such
time as such payment is permitted pursuant to SECTION 7.12 of the
New Credit Line as in effect on the date hereof."
6. AMENDMENT TO SECTION 2.4(d) OF THE SENIOR CREDIT
AGREEMENT. SECTION 2.4(d) of the Senior Credit Agreement is hereby amended to
read in its entirety as follows:
"(d) Payment Obligations Not Excused. Company's use of
Net Cash Proceeds from the sale or refinancing of any Property or
Note Receivable shall not excuse, defer or delay Company's
obligations to make any payments required under this Agreement,
the Notes or the other Documents."
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7. DELETION OF CERTAIN SECTIONS OF THE SENIOR CREDIT
AGREEMENT. Each of SECTIONS 2.8, 2.9, 2.10, 5.13, 7.1(o), 7.1(p), 7.1(q) AND
8.3(b)(v) of the Senior Credit Agreement is hereby amended to read in its
entirety as follows:
"Reserved."
8. AMENDMENT TO SECTION 5.12 OF THE SENIOR CREDIT AGREEMENT.
SECTION 5.12 of the Senior Credit Agreement is hereby amended to read in its
entirety as follows:
"Leases. Company shall comply in all material respects
with all of its obligations under all leases existing on the Effective Date
of Plan or thereafter entered into by it with respect to real property.
Company shall provide Agent and Noteholders with a copy of each notice of
default or termination received by Company under any lease which represents
more than 20% of the net rentable square footage of any real property with
respect to which Company is the lessor, immediately upon receiving any such
notice, and deliver to Agent and Noteholders a copy of each notice of default
or termination sent by Company under any lease simultaneously with its
delivery of such notice under such lease, and shall notify Agent, not later
than thirty (30) days prior to the date of the expiration of the term of any
lease, of Company's intention either to renew or not renew any such lease,
and, if Company shall intend to renew such lease, the terms and conditions of
renewal of any such lease. Upon Agent's or any Noteholder's request, Company
shall use its best efforts to obtain and deliver to Agent for the benefit of
Noteholders, an estoppel certificate, in form and substance satisfactory to
Noteholders, executed by such tenants as Noteholders may specify, certifying,
among other things, that Company is not in default under such lease, the
amount of rent payable under such lease, the term of such lease, and disclose
any extra-contractual rent adjustments or discounts, and any purchase,
extension or termination options."
9. AMENDMENT TO ADD SECTION 5.14 TO THE SENIOR CREDIT
AGREEMENT. A new SECTION 5.14 is hereby added to the Senior Credit Agreement,
which section shall read as follows:
"Section 5.14 NOTICES AND ACTIONS REGARDING FREMONT CREDIT
FACILITY. Company shall promptly provide the Noteholders with
notice of the occurrence of any Potential Default or Event of
Default under the Fremont Credit Facility (as each such term is
defined in the Fremont Credit Facility. In addition, in seeking
any waiver of any such Event of Default under the Fremont Credit
Facility, Company shall use reasonable efforts to obtain a waiver
of the provisions of Section 7.12 of the Fremont Credit Facility
with respect to such Event of Default."
10. AMENDMENT TO SECTION 6.4(b) OF THE SENIOR CREDIT
AGREEMENT. SECTION 6.4(b) of the Senior Credit Agreement is hereby amended to
read in its entirety as follows:
"(b) Company has paid in cash the entire principal amount
of all Interest Deferral Notes delivered to Noteholders and all
accrued interest thereon; and"
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11. AMENDMENT TO SECTION 6.5(f) OF THE SENIOR CREDIT
AGREEMENT. SECTION 6.5(f) of the Senior Credit Agreement is hereby amended to
read in its entirety as follows:
"(f) Indebtedness incurred under the New Credit Line,"
12. AMENDMENT TO SECTIONS 6.6 AND 6.7 OF THE SENIOR CREDIT
AGREEMENT. SECTIONS 6.6 and 6.7 of the Senior Credit Agreement are hereby
amended to read in their entirety as follows:
"6.6 SALES OF PROPERTY. So long as no Event of Default
has occurred and is continuing, Company may sell Property,
provided:
(a) Eighty percent (80%) of all Net Cash Proceeds from any sale
of Property is paid to Noteholders pursuant to SECTION 2.4(b); and
(b) Without limiting SECTION 6.6(a), with respect to sales of
any asset, whether or not it is Property, in which Company provides
seller financing, (i) the assets or Property are sold to a financially
responsible purchaser (as determined by Board of Directors of Company in
accordance with commercially reasonable standards), (ii) the note,
security documents and other collateral are in form and substance
satisfactory to Noteholders and (iii) such sale is for a purchase price
no less than the fair market value of such Property as determined by an
independent appraisal satisfactory to Board of Directors of Company or
such other method satisfactory to Noteholders.
6.7 PURCHASE OPTIONS. So long as no Event of Default
has occurred and is continuing, Company may grant options to
purchase Company's real property, provided eighty percent (80%) of
all Net Cash Proceeds from any grant of an option to purchase real
property that is Property is paid to Noteholders pursuant to
SECTION 2.4."
13. AMENDMENT TO SECTION 7.3 OF THE SENIOR CREDIT AGREEMENT.
SECTION 7.3 of the Senior Credit Agreement is hereby amended to read in its
entirety as follows:
"7.3 OTHER REMEDIES. Upon the occurrence of any Event of
Default in addition to the remedies listed in SECTION 7.1 upon the
earlier of a Notice of Acceleration or acceleration of the
Obligations: (a) Agent and/or Noteholders may file an action
against Company in any court having jurisdiction, in their own
names or in the name of Agent and Noteholders; and/or (b) Agent
and Noteholders shall have all rights, powers and remedies
available under each of the Documents and applicable law,
including, exercising any or all of the rights of a beneficiary
pursuant to applicable law. All rights, powers and remedies of
Agent or Noteholders in connection with each of the Documents may
be exercised at any time or from time to time, are cumulative and
not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity."
14. AMENDMENT TO SECTION 8.3(b)(vi) OF THE SENIOR CREDIT
AGREEMENT. SECTION 8.3(b)(vi) of the Senior Credit Agreement is hereby amended
to read in its entirety as follows:
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" (vi) Upon the request of Majority Noteholders after the
occurrence of an Event of Default, Agent shall exercise other
remedies under the Documents, including commencement of or actions
in court proceedings."
15. FORM OF INTEREST DEFERRAL NOTE. The Form of Interest
Deferral Note attached to the Senior Credit Agreement as Exhibit C shall be
amended to read in its entirety as set forth in Annex A attached hereto.
16. REPRESENTATIONS AND WARRANTIES. Each of the parties hereto
represents and warrants that (a) the execution, delivery and performance of this
Amendment have been duly authorized by all necessary corporate action on behalf
of such party and (b) this Amendment constitutes the legal, valid and binding
obligation of such party. The Company represents and warrants to the Agent and
the Noteholders that prior to and after giving effect to this Amendment, no
Default or Event of Default has or shall have occurred and be continuing.
17. EFFECT OF AMENDMENT. The Senior Credit Agreement is
modified only by the express provisions of this Amendment, and shall otherwise
remain in full force and effect and is hereby ratified and confirmed by the
Company in all respects.
18. WAIVER OF SHAREHOLDER AND TRUSTEE LIABILITY. This
Amendment is made by the undersigned, not individually, but in his capacity
as Chief Executive Officer of the Company and Trustee under that certain
Restated Declaration of Trust of the Company, and is hereby made a part
hereof, and is enforceable only against, and is payable out of, the Company
property held thereunder, and any and all personal liability of the Trustees,
their duly authorized agents, and the shareholders of the Company is
expressly waived.
19. ENTIRE AGREEMENT. This Amendment constitutes the complete
agreement of the parties with respect to the subject matters referred to in this
Amendment and supersedes all prior or contemporaneous negotiations, promises,
covenants, agreements or representations of every nature whatsoever with respect
to such subject matters, all of which become merged and finally integrated into
this Amendment.
20. ADDITIONAL ASSURANCES. The parties agree that they shall
take such actions and execute and deliver such documents as are reasonably
required to effectuate the purposes of this Amendment, including, without
limitation, executing and delivering such reconveyance and termination
documentation as is required to release any and all liens securing the
obligations under the Senior Credit Agreement.
21. SUCCESSORS AND ASSIGNS. This Amendment shall be binding
upon and inure to the benefit of the parties to this Amendment and their
respective successors and permitted assigns.
22. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AMENDMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA. EACH OF THE PARTIES TO THIS AMENDMENT HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL
DISTRICT OF CALIFORNIA
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AND OF ANY CALIFORNIA STATE COURT SITTING IN LOS ANGELES, CALIFORNIA, FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AMENDMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AMENDMENT. EACH OF THE
PARTIES TO THIS AMENDMENT IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY
CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
23. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS
AMENDMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AMENDMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
24. COUNTERPARTS. This Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties to this Amendment may execute this
Amendment by signing any such counterpart.
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IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
COMPANY
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THE PEREGRINE REAL ESTATE TRUST,
(aka Commonwealth Equity Trust, and d.b.a.
WinShip Properties)
By: /s/ Larry P. Knorr
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Name: Larry P. Knorr
Title: CAO
AGENT
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THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
By: /s/ Joseph Y. Alouf
-------------------------------------
Name: Joseph Y. Alouf
Title: Vice President
NOTEHOLDERS
-----------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Joseph Y. Alouf
------------------------------------
Name: Joseph Y. Alouf
Title: Vice President
GATEWAY RECOVERY TRUST
By: The Prudential Insurance Company of
America, Asset Manager
By: /s/ Joseph Y. Alouf
-------------------------------------
Name: Joseph Y. Alouf
Title: Vice President
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<PAGE>
WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST
By: TCW Special Credits,
Its Investment Manager
By: TCW Asset Management Company,
Its Managing General Partner
By: /s/ Richard Masson
----------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
---------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
TCW SPECIAL CREDITS FUND IV
By: TCW Special Credits,
Its General Partner
By: TCW Asset Management Company,
its Managing General Partner
By: /s/ Richard Masson
---------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
---------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
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<PAGE>
TCW SPECIAL CREDITS PLUS FUND
By: TCW Special Credits,
Its General Partner
By: TCW Asset Management Company, its
Managing General Partner
By: /s/ Richard Masson
------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
TCW SPECIAL CREDITS TRUST IV
By: Trust Company of the West, Trustee
By: /s/ Richard Masson
-----------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
-----------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
TCW SPECIAL CREDITS TRUST IVA
By: Trust Company of the West, Trustee
By: /s/ Richard Masson
-----------------------------------
Name: Richard Masson
Title: Authorized Signatory
By: /s/ Kenneth Liang
-----------------------------------
Name: Kenneth Liang
Title: Authorized Signatory
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<PAGE>
OCM REAL ESTATE OPPORTUNITIES FUND A, L.P.
By: Oaktree Capital Management, LLC,
Its General Partner
By: /s/ Richard Masson
------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
OCM REAL ESTATE OPPORTUNITIES FUND B, L.P.
By: Oaktree Capital Management, LLC,
Its General Partner
By: /s/ Richard Masson
------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
WEYERHAEUSER REAL ESTATE OPPORTUNITIES
SEPARATE ACCOUNT
By: Oaktree Capital Management, LLC,
Its Investment Manager
By: /s/ Richard Masson
------------------------------------
Name: Richard Masson
Title: Principal
By: /s/ Kenneth Liang
------------------------------------
Name: Kenneth Liang
Title: Managing Director & General
Counsel
-13-
<PAGE>
Item No. _____________________
ANNEX A
[FORM OF]
INTEREST DEFERRAL NOTE
$__________________________ Sacramento, California
Dated as of __________, 19___
FOR VALUE RECEIVED, the undersigned, The Peregrine Real Estate
Trust, formerly known as Commonwealth Equity Trust and d.b.a. WinShip
Properties, a California Real Estate Investment Trust ("Maker"), promises to
pay to the order of_________________or its successors and assigns ("Holder")
at its offices at____________________, or at such other place as the Holder
hereof may designate, the principal sum of _________________ DOLLARS ($
_____________), in lawful money of the United States of America and in
immediately available funds, with interest thereon prior to default at the
rate of eight and one-half percent (8.5%) per annum (computed on the basis of
a 360 day year, actual days elapsed).
For the period commencing on the date hereof and ending on the
Maturity Date (the "PIK Period"), interest accruing hereunder shall be paid
quarterly, in arrears, on the last day of each calendar quarter (the "Payment
Date"). Unless an Event of Default has occurred and is continuing during the
PIK Period, if (i) Maker does not achieve positive Net Cash Flow for the
Maker's most recent fiscal quarter for which financial statements are
available preceding the applicable interest Payment Date or (ii) Maker is
otherwise prohibited from making an interest payment on this Interest
Deferral Note (this "Note") pursuant to the provisions of SECTION 7.12 of the
New Credit Line as in effect on March __, 1999, Maker shall, in lieu of
paying interest accrued hereunder in cash, execute and deliver to Holder, on
or before such Payment Date, an Interest Deferral Note in the principal
amount equal to the sum of the interest and other monies then due and payable
to Holder on such Payment Date and maturing on the Maturity Date (as defined
hereinafter).
Notwithstanding any provision contained herein or any other
agreement between Maker and Holder to the contrary, the entire balance due
hereunder, including principal, accrued interest, and any other sums owing
hereunder, shall be due and payable, in full on the earlier of the following
dates (the "Maturity Date"): (a) October 1, 2000 and (b) the first Payment
Date following a fiscal quarter of Maker in which Maker would have achieved
positive Net Cash Flow after giving pro forma effect to the payment of this
Note and on which Maker is not otherwise prohibited from making such payment
pursuant to the provisions of SECTION 7.12 of the New
<PAGE>
Item No. _____________________
Credit Line as in effect on March __, 1999. Payments of principal made by
Maker to Holder on account of this Note may not be reborrowed.
This Note may be prepaid, in whole or in part, as provided in
that certain Second Amended and Restated Note Agreement, as amended (the
"Note Agreement"). Any prepayment shall be applied against principal and
interest installments hereunder in the manner set forth in the Note Agreement.
Maker, for itself and its legal representatives, successors and
assigns, and all endorsers, guarantors, or any others who may at any time
become liable for payment hereunder, hereby waives presentment, demand,
protest, notice of dishonor, notice of non-payment, notice of maturity,
presentment for the purposes of accelerating maturity, and diligence in
collection.
Maker agrees to pay all fees and costs of expenses incurred by
or on behalf of the Holder hereof in the collection or enforcement of this
Note as provided in SECTION 8.2 of the Note Agreement.
This Note is made pursuant to and in connection with the Note
Agreement, and is subject to all of the terms thereof. All capitalized terms
that are not defined herein shall have the meanings as set forth in the Note
Agreement.
Maker's failure to make timely payment of any installment of
principal or other sums due hereunder, or the occurrence of any Event of
Default under the Note Agreement shall constitute a default under this Note.
Upon the occurrence of a default hereunder, regardless of the cause therefor,
Holder may immediately declare the entire balance of this Note to be
immediately due and payable and exercise any and all of the rights and
remedies available under the Note Agreement and applicable law. From and
after the occurrence of a Default hereunder or an Event of Default under the
Note Agreement, the unpaid principal balance hereunder shall, at Holder's
option, bear interest at the Default Rate specified in the Note Agreement.
Any installment or principal or interest that is not paid when due hereunder
shall be added to the principal balance hereof and shall thereafter bear
interest, at Holder's option, at the Default Rate until paid.
In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder and charged or collected by Holder or
any holder hereof exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that Holder has
charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the
maximum rate permitted by applicable law and Holder shall apply all interest
paid in excess of the maximum lawful rate to the principal balance of this
Note. It is the intent of the parties hereto that Maker not pay or contract
to pay, and that Holder not receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by Maker to Holder under applicable law.
This Note shall be governed by and construed in accordance with
the laws of the State of California, except to the extent Holder has greater
rights or remedies under federal law,
A-2
<PAGE>
Item No. _____________________
in which case such choice of California law shall not be deemed to deprive
Holder of such rights and remedies as may be available under federal law.
If any provision of this Note or the application hereof to any
person or circumstance shall, for any reason or to any extent, be invalid or
unenforceable, neither the remainder of this Note nor the application of such
provision to any other person or circumstance shall be affected thereby, but
rather the same shall be enforced to the greatest extent permitted by law,
except that if such provision relates to the payment of any monetary sum,
then Holder may, at its option, declare the entire indebtedness evidenced
hereby immediately due and payable.
IN WITNESS WHEREOF, the undersigned Maker has executed this
Note as of the day and year set forth on the first page hereof.
THE PEREGRINE REAL ESTATE TRUST,
Formerly known as Commonwealth Equity
Trust and d.b.a. WinShip Properties, a
California Real Estate Investment Trust
By: ____________________________________
Its:
A-3
<PAGE>
Loan No. 950113436
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") is made as
of February 15, 1999 by and between FREMONT INVESTMENT & LOAN, a California
industrial loan association ("LENDER"), and THE PEREGRINE REAL ESTATE TRUST,
an unincorporated California real estate investment trust, dba WinShip
Properties ("BORROWER"), with respect to the following Recitals:
R E C I T A L S
A. Borrower is the owner of that certain real property
described on EXHIBITS A-1 through A-8 and A-10 through A-14 attached hereto,
together with the improvements now or hereafter located thereon (the "FEE
IMPROVEMENTS"), and the ground lessee pursuant to the Ground Lease (as
hereinafter defined) of that certain real property described on EXHIBIT A-9
attached hereto (the "GROUND LEASE PARCEL"), together with the improvements
now or hereafter located thereon (the "GROUND LEASE PARCEL IMPROVEMENTS")
(all of which real property, together with any real property hereafter
encumbered by the Loan Documents pursuant to SECTION 2.6, shall be referred
to individually as a "PROPERTY" and one or more as the "PROPERTIES"). The
Fee Improvements, the Ground Lease Parcel Improvements and the improvements
now or hereafter located on any Property hereafter encumbered by the Loan
Documents pursuant to SECTION 2.6 are hereinafter collectively referred to as
the "IMPROVEMENTS".
B. Borrower desires to borrow from Lender, and Lender is
willing to make a revolving loan to Borrower, the maximum principal amount of
Forty-Four Million Dollars ($44,000,000) for the purposes and upon the terms
set forth herein.
NOW THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
GENERAL DEFINITIONS
When used herein, the following initially-capitalized terms
shall have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person which
controls, is controlled by, or is under common control with the Person in
question. For the purposes of the foregoing definition, "controls" (and its
correlative terms "controlled by" and "under common control with") means
possession by the applicable Person of the power to direct or cause the
direction of the management and policies thereof, whether through the
ownership of voting securities, by contract, or otherwise.
"AGREEMENT" means this Loan and Security Agreement, together with all
supplements, amendments and modifications hereto and all extensions and
renewals hereof.
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<PAGE>
"ANNUAL FEE" means a fee payable to Lender in an amount equal to
one-quarter of one percent (0.25%) of the average monthly portion of the Loan
Amount which is not outstanding, as calculated by Lender.
"APPLICATION INFORMATION" means all financial information and
statements and other information submitted to Lender in connection with the
application for the Loan, including, without limitation, information relating
to the Ground Lease, tenants, leases and rent payment history and the
information set forth on the Borrower Questionnaire delivered to Lender.
"APPRAISED VALUE" means the appraised value of the applicable Project,
determined by Lender in its sole discretion as provided in SECTION 2.9.
"ASSIGNMENT OF FRANCHISE AGREEMENT" means one or more, any or all as
the context may require, Assignments of Franchise Agreement of even date
herewith executed by Borrower, as assignor, in favor of Lender, as assignee,
together with any Assignment of Franchise Agreement delivered by Borrower
pursuant to SECTION 2.6.
"ASSIGNMENT OF RENTS" means one or more, any or all as the context may
require, Assignments of Rents and Leases of even date herewith executed by
Borrower, as assignor, in favor of Lender, as assignee, together with any
Assignments of Rents and Leases delivered by Borrower pursuant to SECTION 2.6,
to be recorded in the Official Records of the Counties in which the Projects
are situated.
"ATTORNEYS' FEES," "ATTORNEYS' FEES AND COSTS," "attorneys' fees" and
"attorneys' fees and costs" mean the reasonable fees and expenses of counsel
to the applicable parties to the Loan Documents, which may include printing,
photostating, duplicating, facsimiling, messengering, filing and other
expenses, air freight charges, and fees billed for law clerks, paralegals,
librarians and others not admitted to the bar but performing services under
the supervision of an attorney. The terms "ATTORNEYS' FEES" or "ATTORNEYS'
FEES AND COSTS" shall also include, without limitation, all such fees and
expenses incurred with respect to appeals, arbitrations, bankruptcy
proceedings and any post-judgment proceedings to collect any judgment, and
whether or not any action or proceeding is brought with respect to the matter
for which such fees and expenses were incurred. The recovery of
post-judgment fees, costs and expenses is separate and several and shall
survive the merger of the applicable Loan Documents into any judgment.
"AVERAGE LOSS" is defined in SECTION 7.6(F).
"BANKRUPTCY CODE" means Title 11 of the U.S. Code, as applicable, or
any similar federal or state laws for the relief of debtors, each as
hereafter amended.
"BORROWING BASE AMOUNT" means, as of the date of determination, an
amount equal to the sum of (a) seventy percent (70%) of the Appraised Value
of the Borrowing Base Projects which are operated or to be operated as
self-storage, multi-family residential, office, industrial or retail
properties, plus (b) sixty percent (60%) of the Appraised Value of the
Borrowing Base Projects which are operated or to be operated as hotels or
motels, restaurants which are not leased to and operated by national, credit
tenants as determined by Lender, or other "special purpose" properties as
determined by Lender, plus (c) sixty-five percent (65%) of the Appraised
Value of the Borrowing Base Projects which are operated or to be operated as
restaurants and are leased to and operated by national, credit tenants as
determined by Lender. Any Project released from the Lien of the Loan
Documents shall not be considered in determining the Borrowing Base Amount.
In the event of a
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<PAGE>
multi-use Project, either the predominant use, as determined by Lender, shall
be used to determine the Borrowing Base Amount or, at Lender's election, the
Appraised Value for each use at such Project may be calculated by Lender and
the foregoing applicable percentages applied to the allocated Appraised Value
for each use.
"BORROWING BASE PROJECT" means any of the Borrowing Base Projects.
"BORROWING BASE PROJECTS" means the Projects encumbered by the Deed of
Trust from time to time. The initial Borrowing Base Projects are described
on EXHIBIT A-1 through A-14 attached hereto. Thereafter, "Borrowing Base
Projects" shall include any Project which becomes a Borrowing Base Project as
provided in SECTION 2.6, but shall not include any Project released from the
lien of the Deed of Trust as provided in SECTION 2.8.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, a legal
holiday under the laws of the State of California or a day on which
commercial banks in such state are authorized or required by law or other
governmental action to be closed.
"CLOSING DATE" means the date of the closing of the Loan and the
issuance of the Title Policy insuring the liens of the Deed of Trust with
respect to each of the Projects, but in no event later than the Termination
Date.
"COMMITMENT LETTER" means the Commitment Letter dated January 27, 1999
issued by Lender in connection with the Loan.
"CONTRACTUAL OBLIGATION" as applied to any Person means any provision
of any instrument, document or security issued by that Person or of any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which any of its properties
is bound or to which it or any of its properties is subject.
"CONTROL" (with correlative meanings as to the terms "CONTROLLING" and
"UNDER COMMON CONTROL WITH") shall mean the ability to direct the management
and policies of the entity in question, whether by voting control, contract
or otherwise. For the purposes of any of the Oaktree Entities, the "management
and policies" of the entity in question shall mean the investment, management
and operational decisions related to the real and personal property owned by
such entity.
"DEBT COVERAGE RATIO" means, for each applicable mortgage loan, the
ratio, as determined by Lender in its sole and absolute discretion, of (a) the
Net Operating Income projected by Lender for the term of the applicable
mortgage loan, to (b) the payments of interest and principal due with respect
to such mortgage loan for such period.
"DEED OF TRUST" means one or more, any or all as the context may
require, Deeds of Trust and Fixture Filing of even date herewith executed by
Borrower, as trustor, to Investors Bancor, as trustee, and naming Lender, as
beneficiary, together with any Deed of Trust and Fixture Filing delivered by
Borrower pursuant to SECTION 2.6, to be recorded in the Official Records of
the Counties in which the Projects are situated.
"DEFAULT INTEREST RATE" is defined in the Note.
"ENVIRONMENTAL INDEMNITY" means one or more, any or all as the context
may require, Environmental Indemnities of even date herewith executed by
Borrower, together with any Environmental Indemnity delivered by Borrower
pursuant to SECTION 2.6.
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<PAGE>
"ENVIRONMENTAL LAWS" means any and all present and future federal,
state and local laws, ordinances, regulations, policies and any other
requirements of any Governmental Agency relating to health, safety, the
environment or to any Hazardous Substances, including without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA), the Resource Conservation Recovery Act (RCRA), the Hazardous
Materials Transportation Act, the Toxic Substance Control Act, the Endangered
Species Act, the Clean Water Act, the Occupational Safety and Health Act, the
California Environmental Quality Act and the applicable provisions of the
California Health and Safety Code, California Labor Code and the California
Water Code, each as hereafter amended from time to time, and the present and
future rules, regulations and guidance documents promulgated under any of the
foregoing.
"EVENT OF DEFAULT" means any of the events specified in SECTION 8.1.
"EXISTING PROJECT FINANCING" means the secured loans encumbering
Borrower's Regency Plaza, Sunrise Hills, University Village, Hurley I and
Hurley II properties as of the Closing Date.
"FORMATION DOCUMENTS" means (a) as to any corporation, its articles of
incorporation and bylaws, (b) as to any limited partnership, its Certificate
of Limited Partnership and partnership agreement, (c) as to any general
partnership or joint venture, its Statement of Partnership and partnership
agreement, (d) as to any limited liability company, its articles or
certificate of organization and operating agreement, and (e) as to any trust,
its trust agreement and a certification of the current trustees thereof, each
of the foregoing together with all supplements, amendments and modifications.
"GENERAL PARTNER" or "general partner" means the general partners of
the partnership in question, together with any constituent general partners
of such general partners.
"GOVERNMENTAL AGENCY" means any federal, state, municipal or other
governmental or quasi-governmental court, agency, authority or district.
"GROUND LEASE" means that certain ground lease for Lease Area
No. FLA 80-19 entered into on January 25, 1980, between The State of
California Department of Transportation and Borrower's predecessor-in-interest,
a Short Form Memorandum of which was executed on October 29, 1981 and
recorded on October 30, 1981 as Instrument No. 169901 in the Official Records
of Sacramento County, California, as amended by (i) that certain Amendment to
Lease dated October 31, 1980, that certain Amendment to Lease dated January 7,
1981, that certain Assignment of Lease dated January 30, 1981, that certain
Third Amendment to Lease dated October 20, 1981, and that certain Fourth
Amendment to Lease dated September 22, 1985, pursuant to the terms of which
Borrower leases the Ground Lease Parcel.
"GROUND LEASED PROJECT" means (a) the Project ground leased by
Borrower pursuant to the Ground Lease, and (b) any other Project ground
leased by Borrower.
"GROUND LEASE ESTOPPEL" means a ground lease estoppel and agreement,
duly executed and acknowledged by Borrower and the fee owner of the Ground
Lease Parcel, covering such matters as may be required by Lender and in form
and substance acceptable to Lender.
"HAZARDOUS SUBSTANCES" means (a) any chemical, compound, material,
mixture or substance that is now or hereafter defined or listed in, or
otherwise classified pursuant to, any Environmental Laws as a "hazardous
substance", "hazardous material", "hazardous waste",
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<PAGE>
"extremely hazardous waste", "acutely hazardous waste", "radioactive waste",
"infectious waste", "biohazardous waste", "toxic substance", "pollutant",
"toxic pollutant", "contaminant" as well as any formulation not mentioned
herein intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "EP toxicity", or "TCLP
toxicity"; (b) petroleum, natural gas, natural gas liquids, liquefied natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and such
synthetic gas) and ash produced by a resource recovery facility utilizing a
municipal solid waste stream, and drilling fluids, produced waters and other
wastes associated with the exploration, development or production of crude
oil, natural gas, or geothermal resources; (c) "hazardous substance" as
defined in Section 25281(f) of the California Health and Safety Code;
(d) "waste" as defined in Section 13050(d) of the California Water Code;
(e) asbestos in any form; (f) urea formaldehyde foam insulation;
(g) polychlorinated biphenyls (PCBs); (h) radon; and (i) any other chemical,
material, or substance exposure to which is limited or regulated by any
Governmental Agency because of its quantity, concentration, or physical or
chemical characteristics, or which poses a significant present or potential
hazard to human health or safety or to the environment if released into the
workplace or the environment. "Hazardous Substances" shall not include
ordinary office supplies and repair, maintenance and cleaning supplies
maintained in reasonable and necessary quantities and used in accordance with
all Environmental Laws.
"HOTEL," "MOTEL," hotel," and or "motel" means a hotel, motel or other
transient lodging facility.
"INDEBTEDNESS" means (a) all indebtedness for borrowed money, (b) that
portion of obligations with respect to capital leases which is properly
classified as a liability on a balance sheet in conformity with generally
accepted accounting principals, (c) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (d) any obligation owed for all or any part of the deferred
purchase price of property or services which purchase price is due more than
ninety (90) days from the date of incurrence of the obligation in respect
thereof or evidenced by a note or similar written instrument, and (e) all
similar indebtedness secured by any Lien existing on any property or asset
owned or held by Borrower regardless of whether the indebtedness secured
thereby shall have been assumed by Borrower or is nonrecourse to the credit
of Borrower.
"INDEMNITEES" means, collectively and individually, Lender, its
Affiliates and its and their directors, officers, agents, employees,
successors and assigns.
"JUNIOR LENDER" means The Prudential Insurance Company of America,
Gateway Recovery Trust, Weyerhauser Company Master Retirement Trust, TCW
Special Credits Fund IV, TCW Special Credits Plus Fund, TCW Special Credits
Trust IV, TCW Special Credits Trust IVA, OCM Real Estate Opportunities
Fund A, L.P., OCM Real Estate Opportunities Fund B, L.P., Weyerhauser Real
Estate Opportunities Separate Account, The Prudential Insurance Company of
America in its capacity as agent, and U.S. Trust Company of California, N.A.
in its capacity as collateral agent.
"JUNIOR LOAN DOCUMENTS" means, collectively, that certain Second
Amended and Restated Note Agreement dated September 27, 1994 in the original
principal amount of Forty Million Dollars ($40,000,000), as subsequently
amended prior to or contemporaneously with the Closing Date.
"LAWS" means all federal, state, county, municipal and other
governmental and quasi-governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions affecting any of
the Projects or the occupancy, operation, ownership, lease or use thereof,
whether now or hereafter enacted and in force including, without limitation,
the Americans
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<PAGE>
With Disabilities Act, 42 U.S.C. Sections 12101-12213 (1991) and all
Environmental Laws, any zoning or other land use entitlements and any
requirements which may require repairs, modifications or alterations in or to
any of the Projects, all Permits and all covenants, agreements, restrictions
and encumbrances running in favor of any Person, contained in any instruments,
either of record or known to Borrower, at any time in force affecting any of
the Projects or the occupancy, operation, ownership, lease or use thereof.
"LEASES" is defined in the Assignment of Rents.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien, charge or claim of any kind (including, without limitation,
any agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any lease in the nature thereof, and/or the filing
of or agreement to give any financing statement under the Uniform Commercial
Code of any jurisdiction) with respect to the Project or the Personal
Property or any portion thereof or interest therein, but excluding the title
exceptions set forth on the applicable Title Policy, liens for taxes and
assessments not yet due and payable, mechanics' liens being contested in
accordance with the terms of the Loan Documents and the Leases.
"LOAN" means the revolving loan to Borrower as more particularly
described in SECTION 2.1.
"LOAN AMOUNT" means Forty-Four Million Dollars ($44,000,000), as the
same may be reduced by Lender as provided in SECTION 2.1.
"LOAN DOCUMENTS" means the documents described in SECTION 3.1, and all
other documents now or hereafter securing, or executed in connection with,
the Loan (including, without limitation, all documents delivered under
SECTION 2.6 other than any environmental indemnity delivered under SECTION 2.6
and the Assignment of Franchise Agreement), together with all renewals,
substitutions, extensions, modifications or replacements thereof, but
excluding the Environmental Indemnity and any environmental indemnity
delivered under SECTION 2.6.
"LOAN FEE" means a fee in the amount of one percent (1%) of the Loan
Amount.
"LOAN-TO-VALUE RATIO" means for each applicable mortgage loan, the
quotient, expressed as a fraction, where the numerator is the maximum
outstanding principal balance of the mortgage loan in question, and the
denominator is the value or the real property securing such mortgage loan, as
determined by Lender in its sole and absolute discretion.
"LOAN YEAR" shall mean the twelve (12) month period commencing on the
first day of the month following the Closing Date and each twelve (12) months
thereafter.
"MAJOR LEASE" means a Lease of ten percent (10%) or more of the net
rentable square feet of space in any Project.
"MATERIAL LEASE PROVISIONS" is defined in SECTION 7.4(E).
"MATURITY DATE" means the date set forth in the Note upon which the
entire principal amount of the Loan, together with all other amounts owing to
Lender under the Loan Documents, shall be due and payable.
"MINIMUM OUTSTANDING BALANCE" means the amount of Eleven Million
Dollars ($11,000,000).
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<PAGE>
"MINIMUM RENT LOSS COVERAGE" means, with respect to each Project, the
amount set forth on EXHIBIT C attached hereto, and with respect to any
Project which becomes a Borrowing Base Project as provided in SECTION 2.6,
the minimum rent loss coverage amount designated by Lender at the time such
Project becomes a Borrowing Base Project.
"NET CASH FLOW" means, for any three (3) consecutive month period, all
actual revenues received by Borrower from the operation of the Projects in
the ordinary course of business, less the actual expenses incurred by
Borrower in the ordinary course of business, and approved by Lender, in
connection with the operation of the Projects, including, without limitation,
interest payments on the Loan and, subject to the terms of the Loan
Documents, other debt (excluding the Junior Loan) and adequate reserves for
future payments for each Project acceptable to Lender.
"NET OPERATING INCOME" means all actual revenues to be received by
Borrower from the operation of the real property securing the applicable
mortgage loan in the ordinary course (and excluding extraordinary income or
receipts), less (a) all Project expenses to be incurred by Borrower in
connection therewith in the ordinary course, each as determined by Lender in
its sole discretion.
"NET RENTABLE SQUARE FEET" and "net rentable square feet" shall be
calculated in accordance with the method of measuring net rentable area as
described in the Standard Method for Measuring Floor Area in Office
Buildings, ANSI Z65.1-1996, as promulgated by the Building Owners and
Managers Association (BOMA) International.
"NOTE" means that certain Secured Promissory Note of even date
herewith in the principal amount of Forty-Four Million Dollars ($44,000,000)
executed by Borrower, as maker, in favor of Lender, as holder, and any and
all modifications, extensions, renewals and replacements thereof.
"OAKTREE ENTITIES" means (a) Weyerhauser Company Master Retirement
Trust, TCW Special Credits Fund IV, TCW Special Credits Plus Fund, TCW
Special Credits Trust IV, TCW Special Credits Trust IVA, OCM Real Estate
Opportunities Fund A, L.P., OCM Real Estate Opportunities Fund B, L.P., and
Weyerhauser Real Estate Opportunities Separate Account, (b) Oaktree Capital
Management, and (c) the Oaktree Funds.
"OAKTREE FUNDS" means discretionary investment trusts, accounts or
funds for which, and only so long as, Oaktree Capital Management is the
investment advisor, manager or agent for such trusts, accounts or funds and
retains Control of such trusts, accounts or funds.
"PERMITTED MORTGAGE FINANCING" means mortgage loans secured by real
property owned by Borrower (other than any of the Projects) meeting the
following criteria for each such mortgage loan: (a) the proceeds of such
mortgage loan shall be used by Borrower for the payment of (i) the normal,
customary and reasonable direct costs incurred in the ordinary course in
connection with Borrower's acquisition of income-producing commercial
properties for Borrower's own account, (ii) the normal, customary and
reasonable costs of refinancing mortgage debt encumbering the applicable
property, or (iii) the normal, customary and reasonable hard and soft costs
of the construction of improvements located on the real property securing
such mortgage loan, (b) except for Permitted Recourse Financing, the mortgage
loan must be non-recourse to the credit of Borrower, except for non-recourse
carve-outs approved in advance in writing by Lender, (c) the Loan-to-Value
Ratio as determined by Lender for such mortgage loan shall not exceed
seventy-five percent (75%), and (d) Lender shall have determined that the
real property securing such mortgage loan produces sufficient net operating
income, as determined by Lender, to generate a Debt Coverage Ratio of not
less than 1.25:1.
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"PERMITTED RECOURSE FINANCING" means mortgage loans secured by real
property owned by Borrower (other than the Projects) meeting the following
criteria for each such mortgage loan: (a) the proceeds of such mortgage loan
shall be used by Borrower for the payment of the normal, customary and
reasonable hard and soft costs of the construction of improvements located on
the property securing such mortgage loan, (b) the maximum principal balance
of such mortgage loan shall not exceed eighty percent (80%) of the hard and
soft costs of the construction of such improvements, (c) the Loan-to-Value
Ratio as determined by Lender for such mortgage loan shall not exceed
seventy-five percent (75%), and (d) Lender shall have determined that the
real property securing such mortgage loan produces sufficient net operating
income, as determined by Lender, to generate a Debt Coverage Ratio of not
less than 1.25:1.
"PERMITS" means all permits, licenses, franchises, approvals,
variances and land use entitlements necessary for the occupancy, operation,
ownership, lease and use of any or all of the Projects as the context may
require.
"PERSON" means and includes natural persons, corporations, limited
liability companies, limited liability partnerships, limited partnerships,
general partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts, real
estate investment trusts or other organizations, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"PERSONAL PROPERTY" means all personal property in which Borrower now
or hereafter owns or acquires any interest or right and which is now or
hereafter located on or used or useful in the development, operation,
ownership, lease, occupancy, use, maintenance, repair or restoration of the
Projects or any portion thereof, together with all present and future
attachments, accessions, replacements, substitutions and additions thereto or
therefor, and together with all insurance proceeds from any policy of
insurance covering any of the foregoing property now or hereafter acquired by
Borrower. "Personal Property" shall include, without limitation, the
personal property described in EXHIBITS B-1 through B-3 attached hereto and
any leased personal property.
"POTENTIAL DEFAULT" means a condition or event (a) which, with the
passage of time, would constitute an Event of Default under any of the Loan
Documents and (b) of which Lender has provided Borrower with written notice;
provided that such written notice shall not be necessary with respect to a
condition or event which would constitute an Event of Default under
SECTIONS 8.1(D), (E), (F), (G), (H) or (M) of this Agreement.
"PRINCIPALS" means individually and collectively Borrower and its
major shareholders, as applicable, and each of such parties' constituent
general partners, managing members and major shareholders, as applicable.
"PROBABLE MAXIMUM LOSS" is defined in SECTION 7.6(F).
"PROJECT" means any of the Projects.
"PROJECTS" means the Properties and Improvements encumbered by the
Deed of Trust from time to time. The initial Properties are described on
EXHIBIT A-1 through A-14 attached hereto. Thereafter, "Projects" shall
include any Property and Improvements which is encumbered by the Deed of
Trust as provided in SECTION 2.6, but shall not include any Project released
from the lien of the Deed of Trust as provided in SECTION 2.8.
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"PROJECT DOCUMENTS" means (a) all agreements now or hereafter in
effect with any contractor, architect or engineer, including, without
limitation, any design architect, landscape architect, civil engineer,
electrical engineer, environmental engineer, soils engineer or mechanical
engineer, in connection with the Projects; (b) all other agreements now or
hereafter in effect with any property manager or broker with respect to the
management, leasing, or operation of the Projects; (c) all as-built plans and
specifications and surveys for the Projects; (d) all Permits; and (e) all
renewals, substitutions, extensions, modifications or replacements of any of
the foregoing.
"PRUDENTIAL ENTITIES" means The Prudential Insurance Company of America
and Gateway Recovery Trust.
"PROJECT VALUE" is defined in SECTION 7.6(F).
"PUBLIC SHAREHOLDERS" means the shareholders of Borrower as of the
Closing Date other than the Prudential Entities and the Oaktree Entities and
their successors and assigns (other than the Prudential Entities or the
Oaktree Entities).
"RELATED PARTIES" means Borrower, Principals, any Affiliate of Borrower
or Principals, any partnership of which Borrower or any Principal is a general
partner, and any limited liability company of which Borrower or any Principal
is a manager or managing member.
"SECURED OBLIGATIONS" is defined in the Deed of Trust.
"SEISMIC PRINCIPAL PAYMENT" is defined in SECTION 7.6(F).
"SEISMIC REVIEW" is defined in SECTION 7.6(F).
"TAX IDENTIFICATION NUMBER" means Borrower's employer identification
number or social security number, which is 94-2255677.
"TERMINATION DATE" means March, 31, 1999.
"TITLE COMPANY" means the title insurance company selected by Borrower
and approved by Lender in Lender's sole discretion to provide the Title
Policy.
"TITLE POLICY" means one or more American Land Title Association
Extended Coverage Policies of Title Insurance (1970 version, amended 10/17/70
only), insuring Lender that Borrower owns (i) fee simple title to the
Projects (other than the Ground Lease Parcel and any other ground leased
parcel which becomes a Borrowing Base Project pursuant to SECTION 2.6) and
all improvements located thereon, and (ii) a leasehold interest in the Ground
Lease Parcel and any other ground leased parcel which becomes a Borrowing
Base Project pursuant to SECTION 2.6 and fee simple title to all Improvements
located thereon, and that the Deed of Trust is a valid first lien on the
Projects in the Loan Amount. The Title Policy shall contain such endorsements
as Lender reasonably requires and shall be subject only to such exceptions to
coverage as approved by Lender in writing prior to the Closing Date or the
date the Project is encumbered by the Loan Documents pursuant to SECTION 2.6,
as applicable.
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ARTICLE 2
LOAN TERMS
2.1 LOAN AND DISBURSEMENTS OF LOAN PROCEEDS AND MINIMUM OUTSTANDING
BALANCE.
Subject to the terms and conditions of this Agreement, and in
reliance upon the representations and warranties of Borrower set forth in the
Loan Documents, Lender agrees to make to Borrower, and Borrower agrees to
accept from Lender, a revolving loan (the "LOAN") in the maximum principal
amount of the Loan Amount. Within the limit of the Loan Amount, Borrower may
repay all or any portion of the Loan, and reborrow such amount, on the terms
and conditions set forth herein and in SECTION 2.6 of the Note. Without
limiting Lender's rights and remedies under the Loan Documents (including,
without limitation Lender's right to make protective advances), in no event
shall the outstanding principal balance of the Loan at any time exceed the
Borrowing Base Amount and, notwithstanding the provisions of SECTION 2.4 of
the Note, in no event shall the outstanding principal balance be less than
the Minimum Outstanding Balance. If at any time Lender determines that the
outstanding principal balance of the Loan exceeds the Borrowing Base Amount
for any reason, Borrower shall, within five (5) days after written demand
from Lender either (a) repay the outstanding principal balance of the Loan in
an amount sufficient to cause the outstanding principal balance of the Loan
to not exceed the Borrowing Base Amount, or (b) satisfy all of the conditions
set forth in SECTION 2.6 with respect to additional collateral which
increases the Borrower Base Amount to an amount not less than the outstanding
principal balance of the Loan. Without limiting the provisions of this
SECTION 2.1, if Borrower requests a Subsequent Advance (as defined in the
Note) which will cause the outstanding principal balance of the Loan to
exceed the Borrowing Base Amount, Borrower shall as a condition precedent to
the funding of such Subsequent Advance, satisfy all of the conditions set
forth in SECTION 2.6 with respect to additional collateral which increases
the Borrowing Base Amount to an amount not less than the outstanding
principal balance of the Loan after the funding of such Subsequent Advance.
If at any time the outstanding principal balance of the Loan is less than the
Minimum Outstanding Balance, Lender shall have the right, in its sole and
absolute discretion, without any right of Borrower to increase the
outstanding principal balance of the Loan, and without any obligation by
Lender, to either (a) as an absolute right, at its option, without
presentment, demand, protest or other notice of any kind, to declare the Loan
and all amounts owing to Lender under the Loan Documents due and payable on
the date which is ninety (90) days after written notice from Lender to
Borrower, or (b) reduce the Loan Amount for the remaining term of the Loan to
an amount elected by Lender in its sole, absolute and arbitrary discretion
(which reduced Loan Amount may, at Lender's election, be less than the then
outstanding principal balance of the Loan). Any such election by Lender to
reduce the Loan Amount shall be effective upon written notice from Lender to
Borrower of the so reduced Loan Amount and, in the event the then outstanding
principal balance of the Loan is in excess of the so reduced Loan Amount,
Borrower shall concurrently therewith repay to Lender the portion of the
outstanding principal balance of the Loan necessary to reduce the outstanding
principal balance of the Loan to an amount no greater than the reduced Loan
Amount elected by Lender.
2.2 EVIDENCE OF INDEBTEDNESS AND MATURITY.
Borrower shall execute and deliver to Lender, on or before the
Closing Date, the Note evidencing the Loan. Borrower agrees to repay the
indebtedness evidenced by the Note in accordance with the terms thereof and the
terms hereof. The outstanding principal balance of the Loan, together with
accrued and unpaid interest thereon and all other amounts payable by Borrower
under the Loan Documents shall be due and payable on the Maturity Date, subject
to the provisions of this Agreement and the Note.
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2.3 INTEREST RATE.
The Loan shall bear interest at the rate per annum specified in
the Note.
2.4 LOAN FEE AND PAYMENT OF EXPENSES.
Borrower acknowledges and agrees that any unpaid portion of the
Loan Fee has been fully earned by Lender and is due and payable upon the
Closing of the Loan. The Loan Fee shall be nonrefundable except as set forth
in the Commitment Letter. Borrower hereby authorizes Lender to disburse
proceeds of the Loan to Lender or to any other party to pay the Loan Fee,
interest for any partial calendar month in which the Closing Date occurs, and
the fees and expenses of Lender's appraisers, engineers, consultants, legal
counsel and other third parties retained by Lender in connection with the
Loan (including, without limitation, pursuant to SECTION 2.6),
notwithstanding that Borrower may not have requested a disbursement of such
amounts. Borrower covenants to pay all such amounts within ten (10) days
after demand by Lender, if and to the extent not disbursed by Lender from
proceeds of the Loan. Borrower's payment of the Loan Fee is in addition to
Borrower's obligation to pay closing costs, brokers' commissions and any and
all other sums due hereunder, under the Commitment Letter or under any of the
Loan Documents.
2.5 LIMITATION ON RECOURSE.
The provisions of SECTION 4.11 of the Note, regarding the
limitations on Lender's recourse under the Loan Documents, are hereby
incorporated herein as if set forth in full herein.
2.6 ADDITIONAL PROJECTS.
Additional real property and the Improvements located thereon
owned by Borrower in fee simple or ground leased by Borrower pursuant to a
ground lease which Lender, in its sole and absolute discretion, deems to be
financeable (in either case, an "OFFERED PROJECT") may at the request of
Borrower be encumbered by the Loan Documents and constitute additional
collateral for the Loan on the terms and conditions set forth in SECTION 2.6.
Any Offered Project to be added as additional collateral for the Loan as
provided in this Agreement shall satisfy, in Lender's sole and absolute
discretion, Lender's then current underwriting criteria for similar loans and
properties, including, without limitation, Lender's requirements relating to
current and projected loan-to-value ratios, net operating income, occupancy
levels, debt service coverage and condition of the Offered Project. Lender's
then current underwriting criteria and each of the following conditions
precedent to the encumbrance of any Offered Project must be satisfied before
the Appraised Value of the applicable Project will be added to the Borrowing
Base Amount and the Offered Project will be considered a "Project" and
"Borrowing Base Project" for the purposes of this Agreement and the Note.
Lender shall have not less than thirty (30) days to complete its underwriting
of any Offered Project. The conditions precedent set forth below shall be
without limitation of, and shall be in addition to, any conditions precedent
imposed in connection with Lender's then current underwriting criteria.
A. ADDITIONAL COLLATERAL DOCUMENTS. Borrower shall have
executed delivered to Lender the following documents, all of which shall be
in form and substance acceptable to Lender (the "ADDITIONAL COLLATERAL
DOCUMENTS"):
(i) DEED OF TRUST. A deed of trust in form
acceptable to Lender, creating in favor of Lender a valid and perfected first
priority security interest in such Offered Project subject only to those
matters as are expressly approved by Lender in writing;
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(ii) ASSIGNMENT OF RENTS. An assignment of rents and
leases in form acceptable to Lender, conveying to Lender an absolute
assignment of all of Borrower's right, title and interest in any Leases and
rents with respect to such Offered Project;
(iii) ASSIGNMENT OF FRANCHISE AGREEMENT. With respect
to any Offered Project operated or to be operated as a hotel, an assignment
of franchise agreement assigning to Lender all of Borrower's right, title and
interest in any franchise agreement for such hotel;
(iv) SECURITY AGREEMENT. An amendment to this
Agreement expressly extending the provisions of ARTICLE 5 of this Agreement
to such Offered Project or a separate security agreement in form acceptable
to Lender, granting to Lender a valid first priority security interest in all
Project Documents and other Personal Property pertaining to such Offered
Project;
(v) FINANCING STATEMENTS AND ADDITIONAL DOCUMENTS.
Such financing statements and additional documents relating to the Offered
Project as may be reasonably required by Lender, including, without
limitation, an estoppel certificate and agreement from the ground lessor if
the Offered Project is ground leased, and an assignment of franchise
agreement, license agreement and/or management agreement if such Offered
Project is operated as a hotel or motel; and
(vi) ENVIRONMENTAL INDEMNITY. An environmental
indemnity relating to the Offered Project in form acceptable to Lender.
B. APPRAISAL. Lender shall have received and approved in
its sole discretion an appraisal for such Offered Project (which shall
establish the initial Borrowing Base Amount for such Offered Project once all
of the conditions set forth in this SECTION 2.6 have been satisfied).
C. TITLE POLICY. Lender shall have received a Title
Policy insuring the Deed of Trust encumbering such Offered Project, in form
and substance satisfactory to Lender.
D. INSURANCE. Borrower shall have delivered to Lender
satisfactory certificates of insurance evidencing insurance satisfying all of
the requirements set forth in SECTION 7.6 hereof with respect to such Offered
Project.
E. OTHER CONDITIONS PRECEDENT. Each of the following
additional conditions shall be satisfied in Lender's sole discretion:
(i) Lender shall have received and approved evidence
satisfactory to Lender that any Permits required to construct, use, manage
and operate such Offered Project have been obtained and are in full force and
effect.
(ii) Lender shall have received and approved evidence
satisfactory to Lender that such Offered Project complies with all applicable
Laws.
(iii) Lender shall have received and approved a
preliminary title report covering such Offered Project, together with legible
copies of all recorded documents referenced therein and a color-coded map
plotting all easements.
(iv) Lender shall have received and approved copies of
all Leases for such Offered Project. Lender shall have received duly
executed estoppel certificates and
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nondisturbance and attornment agreements in form satisfactory to Lender from
such tenants in such Offered Project as Lender may require.
(v) Lender shall have received and approved copies of
all contracts and other agreements relating to the ownership, occupancy,
operation or use of such Offered Project or any portion thereof.
(vi) Lender shall have received and approved
environmental reports satisfactory to Lender relating to such Offered Project.
(vii) Lender shall have received a structural report
satisfactory to Lender relating to such Offered Project.
(viii) Lender shall have received an opinion letter
covering the Additional Collateral Documents from Borrower's counsel and in
form and substance satisfactory to Lender.
(ix) Lender shall have received and approved such
other items as Lender reasonably requires in connection with the encumbrance
of the Offered Project as additional collateral for the Loan.
Upon the satisfaction of all of the foregoing conditions precedent
with respect to an Offered Project, and without further action by Borrower
and Lender, (a) all of the Additional Collateral Documents with respect to
such Offered Project shall constitute "Loan Documents" for the purposes of
this Agreement and each of the other Loan Documents, (b) the obligations
under each of the Loan Documents shall be secured by the Additional
Collateral Documents, (c) the obligations under each of the Additional
Collateral Documents shall be secured by the Loan Documents, and (d) such
Offered Project shall constitute a "Project" and "Borrowing Base Project" for
the purposes of this Agreement and the Note and, subject to the provisions of
SECTION 2.8, be included in determining the Borrowing Base Amount. Without
limiting the foregoing, Borrower shall execute and deliver to Lender such
additional documents as may be reasonably required by Lender to confirm the
foregoing. Borrower shall pay (a) all fees, costs and expenses (including,
without limitation, attorney's fees and costs, appraisal and consultants
fees, and fees for the Title Policy) in connection with the satisfaction of
the conditions set forth in this SECTION 2.6, plus (b) for each Offered
Project, whether or not all of the conditions set forth in this SECTION 2.6
are satisfied with resect thereto, a nonrefundable processing fee to Lender
of Two Thousand Dollars ($2,000).
2.7 PERMITTED TRANSFER.
Notwithstanding any provision of the Loan Documents to the contrary,
including without limitation, the provisions of Section 1.10 of the Deed of
Trust, "transfer" for the purposes of Section 1.10 of the Deed of Trust shall
not include (a) transfers of the shares of stock in Borrower so long as after
giving effect to such transfer, the Oaktree Entities own and retain control
(including, without limitation, all voting and approval rights) of not less
than fifty-one percent (51%) of the shares of stock in Borrower and the
Oaktree Entities Control Borrower, (b) the transfer of shares of stock in
Borrower to the Prudential Entities or the Oaktree Entities by any of the
Public Shareholders. For the purposes of Section 1.10 of the Deed of Trust,
and notwithstanding the foregoing, "transfer" shall include (x) any transfer
of the shares of stock in Borrower which results in a change in Control of
Borrower, and/or (y) any failure of Oaktree Capital Management to be the
investment advisor, manager or agent for, and retain Control of, any of the
Oaktree Entities (other than Oaktree Capital Management).
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Notwithstanding any provision of the Loan Document to the contrary,
including without limitation Section 1.10 of the Deed of Trust, so long as no
Event of Default has occurred, and no monetary Potential Default or material
nonmonetary Potential Default has occurred and is continuing under the Loan
Documents, Borrower may be merged into WinShip Properties, Inc., a Delaware
corporation, and WinShip shall assume the Loan and the obligations under the
Loan Documents and the Environmental Indemnity, on the following terms and
conditions:
(i) Lender shall have received reimbursement of all
reasonable costs incurred by Lender in connection with the request for such
assumption, including, without limitation, reasonable credit reporting fees,
attorneys' fees and costs, appraisal fees, environmental inspection fees,
building inspection fees, seismic report fees, and all other costs and
expenses which are reasonably necessary in connection with such assumption;
(ii) Borrower shall have delivered to Lender evidence
of the consent of the ground lessor under the Ground Lease to such
transaction, together with consent of any other ground lessor for any other
Ground Leased Project to such transaction, each in form acceptable to Lender;
(iii) The parties shall execute and deliver all
documents and agreements required by Lender in connection with the
assumption, including, without limitation, an express assumption of the Loan
and the obligations under the Loan Documents and the Environmental Indemnity,
all of which shall be in form and substance acceptable to Lender; and
(iv) Lender shall receive, at Borrower's expense, such
endorsements to the Title Policy insuring the Deed of Trust as are reasonably
requested by Lender in connection with such assignment.
2.8 PARTIAL RECONVEYANCE.
Notwithstanding anything to the contrary contained in the Loan
Documents, Lender will partially release its interest under the Deed of Trust
with respect to a Project in connection with Borrower's bona fide sale of
such Project to a third party, upon the satisfaction of all of the following
conditions with respect to the release of each Project:
(a) There shall be no Event of Default or Potential Default
hereunder or under any of the other Loan Documents and no Event of Default
shall have occurred under any of the Loan Documents;
(b) Borrower shall give Lender at least thirty (30) days
prior written notice of Borrower's request for the release of any Project;
(c) Lender shall have determined that the outstanding
principal balance of the Loan, after the release of the applicable Project,
will not exceed, or shall be reduced with the proceeds of such sale to an
amount which does not exceed, the Borrowing Base Amount (calculated excluding
the Project which Borrower is requesting be released);
(d) The Title Company shall issue appropriate endorsements
to the Title Policy insuring the remaining Deed of Trust which provide that,
(i) notwithstanding the release of the Deed of Trust for the Project in
question, the lien of the Deed of Trust on the remaining Projects will
continue to be a first lien, subject to no exceptions to title other than
those shown on the Title Policy;
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(e) Borrower shall pay all reasonable costs associated with
the release of Lender's interest in the applicable Project, including,
without limitation, the costs of Lender's title policy endorsements referred
to above, escrow costs, and Lender's reasonable legal fees and costs incurred
in connection therewith; and
(f) Lender shall have received payment, in immediately
available funds of a non-refundable processing fee in the amount of Two
Thousand Dollars ($2,000), which amount shall be nonrefundable and fully
earned by Lender upon Borrower's request for the release of the applicable
Project and shall be in addition to all other amounts required to be paid by
Borrower under the Loan Documents.
2.9 DETERMINATION OF APPRAISED VALUE.
The Appraised Value of each Project shall be determined by Lender in
its sole and absolute discretion. The Appraised Value of the Borrowing Base
Projects shall be redetermined by Lender, the Borrowing Base Amount adjusted,
and, to the extent the outstanding principal balance of the Loan exceeds the
Borrowing Base Amount, the outstanding principal balance of the Loan shall be
reduced by Borrower in accordance with this Agreement, upon the following:
(a) the date which is eighteen (18) months after the Closing Date, (b) the
extension of the Maturity Date in accordance with the terms of the Note, (c)
upon Borrower's written request made not more frequently than twice per
calendar year, and (d) at Lender's election made not more frequently than
once per calendar year, excluding the first calendar year after the Closing
Date. Borrower shall pay all reasonable fees and costs in connection with
Lender's determination of the Appraised Value as provided herein, including,
without limitation, all appraisal fees and costs. Without limiting the
foregoing, if the Appraised Values are redetermined at Borrower's request as
provided in clause (c), Borrower shall in addition pay to Lender for each
such request, concurrently with such request, a nonrefundable administrative
fee in the amount of Ten Thousand Dollars ($10,000), which administrative fee
shall be in addition to all other amounts required to be paid by Borrower
under the Loan Documents.
2.10 ANNUAL FEE.
In addition to all other amounts and fees payable by Borrower under
the Loan Documents, for each Loan Year, or applicable portion thereof, during
which any portion of the Loan is outstanding, Borrower shall pay to Lender
the Annual Fee for such Loan Year or portion thereof. The Annual Fee shall
be due within fifteen (15) days after written notice from Lender and shall be
nonrefundable.
2.11 CAPITAL IMPROVEMENTS.
Prior to the Closing Date, Borrower has disclosed to Lender various
alterations and capital improvements to the Projects which Borrower is in the
process of completing (the "DISCLOSED IMPROVEMENTS"). Lender hereby consents
to the Disclosed Improvements for the purposes of, and as required by,
Section 1.3 of the Deed of Trust. The foregoing consent relates solely to
the requirements of Section 1.3 of the Deed of Trust and by this consent
Lender assumes no responsibility or liability for any of the Disclosed
Improvements. All of the Disclosed Improvements shall be completed in
accordance with the terms and conditions of the Loan Documents.
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ARTICLE 3
CONDITIONS TO LOAN
3.1 CONDITION PRECEDENT TO CLOSING OF LOAN.
As a condition precedent to Lender's obligation to close the
Loan and disburse any Loan proceeds, on or before the Closing Date Borrower
must satisfy and fulfill each of the following conditions precedent to
closing, to the satisfaction of Lender:
A. LOAN DOCUMENTS AND ENVIRONMENTAL INDEMNITY. Borrower
shall deliver to Lender the following documents, each duly executed and
acknowledged by a notary public where necessary, and in form and substance
satisfactory to Lender:
(i) This Agreement;
(ii) The Note;
(iii) The Deed of Trust;
(iv) The Assignment of Rents;
(v) A California UCC-1 Financing Statements relating
to the Personal Property, to be filed with the California Secretary of State,
together with UCC-1 Financing Statements for such other States as are
required by Lender;
(vi) The Environmental Indemnity; and
(vii) The Ground Lease Estoppel.
B. COMMITMENT LETTER CONDITIONS. Borrower shall have
satisfied all of the conditions set forth in the Commitment Letter, together
with any additional conditions imposed by Lender in connection with its final
approval of the Loan.
C. TRUTH OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on the
Closing Date.
D. NO DEFAULT. As of the Closing Date, no event shall have
occurred or would result from the funding of the Loan that would constitute
an Event of Default, a Potential Default, or a default, or event which, with
the giving of notice or the passage of time would constitute a default, under
the Ground Lease.
3.2 TERMINATION OF AGREEMENT.
Lender's obligation to make the Loan and perform any of its
other obligations under the Loan Documents shall terminate unless all of the
conditions precedent set forth in SECTION 3.1 have been satisfied, and the
Closing Date has occurred, on or before the Termination Date.
ARTICLE 4
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ASSIGNMENT OF PROJECT DOCUMENTS
4.1 ASSIGNMENT OF DOCUMENTS.
A. As security for the payment and performance of the
Secured Obligations, Borrower hereby grants, conveys, assigns and transfers
to Lender the Project Documents, and all rights of Borrower thereunder,
together with the immediate and continuing right to collect and receive all
sums which are now or hereafter due to Borrower thereunder or in connection
therewith, and all of Borrower's rights to receive the proceeds of any
insurance, indemnity, warranty or guaranty with respect to any of the Project
Documents. The parties expressly acknowledge and agree that Lender does not
hereby assume any of Borrower's obligations with respect to any of the
Project Documents, including, without limitation, any obligation to pay for
any work done pursuant thereto, unless Lender expressly assumes such
obligations in accordance with SECTION 4.1(B). At Lender's request from time
to time, Borrower shall deliver copies of the Project Documents to Lender.
B. Lender shall not exercise its rights under this SECTION
4.1 until the occurrence of an Event of Default. Upon the occurrence of an
Event of Default under any of the Loan Documents, Lender may, at its option
in its sole discretion and without any obligation, exercise any or all of its
rights and remedies under SECTION 8.4 and/or upon written notice to Borrower
and the other parties to any or all of the Project Documents, exercise or
enforce any or all of the rights and remedies granted to Borrower under such
Project Documents as if Lender had been a party to or recipient of such
Project Documents (and Borrower hereby irrevocably constitutes and appoints
Lender as its attorney-in-fact, which power is coupled with an interest, to
do so). Upon giving such notice Lender may elect to assume all of the
obligations of Borrower thereafter accruing under any or all of the Project
Documents; provided that in no event shall Lender be responsible for any
default by Borrower or any other party occurring prior to any election by
Lender to assume such obligations.
C. The acceptance by Lender of the security assignment
contained in this SECTION 4.1 and the rights granted to Lender hereunder and
under SECTION 8.4 shall not, prior to Lender's assumption of the obligations
under the Project Documents as provided in SECTION 4.1(B), obligate Lender to
assume any obligations or liability under the Project Documents, to expend
any money or incur any expense in connection with the Project Documents or to
perform any obligation under any of the Project Documents.
4.2 PERFORMANCE UNDER PROJECT DOCUMENTS.
Borrower shall at all times perform and discharge each of its
obligations under the Project Documents, diligently enforce its rights under
the Project Documents unless otherwise agreed by Lender, and, at Borrower's
sole cost and expense, appear in and defend Lender in any action or
proceeding in any way related to any of the Project Documents. Borrower
shall, within ten (10) days after demand by Lender, pay all reasonable costs
and expenses incurred by Lender in connection with any such action or
proceeding, including, without limitation, reasonable attorneys' fees and
costs.
4.3 INDEMNIFICATION.
Borrower hereby indemnifies and agrees to defend and hold the
Indemnitees harmless from all expenses, loss, claims, damage or liability
which the Indemnitees may or might incur under any of the Project Documents
or under or by reason of the security assignment set forth in SECTION 4.1
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or by reason of any alleged obligation or undertaking on Lender's part to
perform or discharge any covenants or agreements contained in any of the
Project Documents; provided that such indemnity shall not extend to expenses,
loss, claims, damage or liability arising from an Indemnitee's gross
negligence or wilful misconduct or arising after the date, if ever, that
Lender assumes the obligations under the Project Documents as provided in
SECTION 4.1(B).
ARTICLE 5
SECURITY AGREEMENT
5.1 GRANT OF SECURITY INTEREST.
As security for the payment and performance of the Secured
Obligations, Borrower hereby assigns, transfers and grants to Lender, and
there is hereby created in favor of Lender, a security interest under the
California Commercial Code in and to the Personal Property (including,
without limitation, the Project Documents), whether now owned or hereafter
acquired, and in all proceeds thereof (and proceeds of proceeds) in whatever
form. This Agreement shall constitute a security agreement pursuant to the
California Commercial Code with respect to the Personal Property and proceeds
thereof, with Borrower the "Debtor" and Lender the "Secured Party" as such
terms are used in the California Commercial Code.
5.2 REPRESENTATIONS, AGREEMENTS AND COVENANTS REGARDING PERSONAL
PROPERTY.
In order to induce Lender to enter into this Agreement and make
the Loan, Borrower represents, warrants and covenants as follows:
A. Except for the security interests in favor of Lender,
Borrower is, and as to any of the Personal Property acquired after the date
hereof will be, the sole owner of the Personal Property, free from any
adverse Lien; provided that Borrower may lease Personal Property in the
ordinary course of Borrower's business. Borrower will notify Lender of and
will defend the Personal Property against all Liens other than the Liens
under the Loan Documents.
B. Borrower will keep the Personal Property in good
condition and repair, and will not misuse, abuse, allow to deteriorate, waste
or destroy the Personal Property or any part thereof, except for ordinary
wear and tear resulting from normal and expected use in the ordinary course
of Borrower's business, which damaged or destroyed Personal Property shall be
promptly replaced by Borrower with property of similar nature and of equal or
greater value unless obsolete or unnecessary for the operation of the
applicable Project.
C. Borrower will not, without the prior written consent of
Lender, sell, offer to sell or otherwise transfer, exchange or dispose of the
Personal Property or any interest therein, unless in the normal course of
business the Personal Property is being replaced by collateral of similar
nature and of equal or greater value unless obsolete or unnecessary for the
operation of the applicable Project. If the Personal Property or any part
thereof is sold, transferred, exchanged, or otherwise disposed of (either
with or without the written consent of Lender), the security interest of
Lender shall extend to the proceeds of such sale, transfer, exchange or other
disposition and Borrower will hold such proceeds in a separate account for
Lender's benefit and will, at Lender's request, transfer such proceeds to
Lender.
D. The tangible Personal Property will be kept on or at the
Project and Borrower will not, without the prior written consent of Lender,
remove the Personal Property therefrom
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except such portions or items of Personal Property which are consumed or worn
out in ordinary usage, all of which shall be promptly replaced by Borrower as
provided in SECTION 5.2(B).
E. Borrower will immediately notify Lender in writing of
any change in its place of business or the adoption or change of any trade
name or fictitious business name, and will, within ten (10) days after
Lender's request, execute any additional financing statements or other
certificates reasonably requested by Lender to reflect such change.
F. The Personal Property is not and will not be used or
bought for personal, family or household purposes.
G. Borrower shall immediately notify Lender of any material
claim against the Personal Property adverse to the interest of Borrower or
Lender therein.
H. Lender may examine and inspect the Personal Property at
any reasonable time, wherever located upon reasonable prior notice to
Borrower (except in the event of an emergency, in which event prior notice
shall not be required).
5.3 AFFIXED COLLATERAL.
The inclusion in SECTION 5.1 of any Personal Property which may
now be or hereafter become affixed or in any manner attached to any Project
shall be without prejudice to any claim at any time made by Lender that such
Personal Property is or has become a part of or an accession to such Project.
5.4 FURTHER SECURITY AGREEMENTS.
Borrower agrees to take such actions and, within ten (10) days
after Lender's request, to execute, deliver and file and/or record such
documents, agreements and financing statements as may be reasonably necessary
to evidence the security interest set forth in SECTION 5.1, to establish the
priority thereof and to carry out the intent and purpose of this ARTICLE 5.
ARTICLE 6
BORROWER'S REPRESENTATIONS AND WARRANTIES
As an inducement to Lender to execute this Agreement and make the
Loan, Borrower represents and warrants to Lender the truth and accuracy of
the matters set forth in this ARTICLE 6.
6.1 ORGANIZATION, POWER, GOOD STANDING, AND BUSINESS.
Borrower is an unincorporated real estate investment trust duly
formed, validly existing and in good standing under the Laws of the State of
California. Borrower has the full power and authority to own and operate its
properties, to carry on its business as now conducted, to enter into each
Loan Document and the Environmental Indemnity, and to carry out the
transactions contemplated hereby and thereby. Borrower does not do business
under any trade name or fictitious business name other than WinShip
Properties. Borrower has delivered to Lender true, correct and complete
copies of its Formation Documents and such Formation Documents have not been
amended or modified except pursuant to agreements delivered to Lender prior
to the date hereof.
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6.2 AUTHORIZATION OF BORROWING, ETC.
A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of the Loan Documents and the Environmental Indemnity and the
issuance, delivery and payment of the Note have been duly authorized by all
necessary action of Borrower.
B. NO CONFLICT. The execution, delivery and performance by
Borrower of each applicable Loan Document and the Environmental Indemnity do
not and will not (i) violate any Law applicable to any such Person, the
Formation Documents of any such Person, or any order, judgment or decree of
any court or other Governmental Agency binding on any such Person; (ii)
conflict with, result in a breach of or constitute (with the giving of notice
or the passage of time or both) a default under any Contractual Obligation of
any such Person; (iii) result in or require the creation or imposition of any
Lien of any nature on Borrower's properties or assets other than the Liens in
favor of Lender under the Loan Documents; or (iv) require any approval or
consent of any Person under any Contractual Obligation of Borrower.
C. GOVERNMENTAL CONSENTS. The execution, delivery and
performance by Borrower of each applicable Loan Document and the
Environmental Indemnity does not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by, any
Governmental Agency or other Person.
D. BINDING OBLIGATION. The Note, the other Loan Documents
and the Environmental Indemnity are the legally valid and binding obligations
of Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally.
6.3 ACTIONS.
There is no action, suit, proceeding or arbitration, before or
by any Governmental Agency or other Person, pending or, to Borrower's best
knowledge, threatened against or affecting Borrower, any of the Principals or
any properties or rights of Borrower or any of the Principals, which might
adversely affect Lender's rights or remedies under the Loan Documents or the
Environmental Indemnity, the business, assets, operations or financial
condition of any such party or its ability to perform its obligations under
the Loan Documents or the Environmental Indemnity. As of the date hereof,
there are no outstanding judgments against the Related Parties or their
property in excess of Two Hundred Fifty Thousand Dollars ($250,000) as to any
individual judgment or Five Hundred Thousand Dollars ($500,000) in the
aggregate.
6.4 FINANCIAL POSITION.
A. FINANCIAL INFORMATION. The Application Information and
all financial statements and financial data delivered to Lender in connection
with the Loan and/or relating to Borrower, the Principals and the Ground
Lease are true, correct and complete in all material respects and accurately
present the financial position of such parties as of the date thereof. No
material adverse change has occurred in the financial position disclosed by
the Application Information or in any other financial statements or financial
data delivered to Lender.
B. BANKRUPTCY AND INSOLVENCY. Except as disclosed to
Lender prior to the Closing Date with respect to the bankruptcy of Borrower,
Borrower has not filed or been the subject of any bankruptcy, insolvency,
reorganization, dissolution or similar proceeding or any
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proceeding for the appointment of a receiver or trustee for all or any
substantial part of its property. Except as disclosed to Lender prior to the
Closing Date with respect to the bankruptcy of Borrower, Borrower has not
admitted in writing its inability to pay its debts when due, made an
assignment for the benefit of creditors or taken other similar action.
C. OTHER BORROWING. Except for the Loan and the Existing
Project Financing, no borrowings have been made by Borrower which are secured
by any Project or any other assets of Borrower or which might give rise to
any Lien other than the Liens created by the Loan Documents.
6.5 LIENS.
Borrower is the sole owner of the Projects, the Personal
Property and the Improvements and the sole ground lessee of the Ground Lease
Parcel, in each case free from any adverse Liens, except for Liens in favor
of Lender. Borrower has paid in full all contractors, materialmen, laborers,
architects or other such Persons hired by Borrower to perform services or
work with respect to the Projects and, except as disclosed in writing to
Lender prior to the date hereof, all statutory lien periods with respect to
services performed or work commenced prior to the Closing Date have expired
with respect to any such services or work. Except for the Junior Loan
Documents (which assignment and pledge shall be released in full on or before
the Closing Date), no previous assignment, sale, pledge, encumbrance or other
hypothecation of the Leases or the Project Documents has been made (except
for pledges and encumbrances which have been released in full prior to the
date hereof or will be released in full concurrently with the funding of the
Loan).
6.6 COMPLIANCE WITH LAWS.
The Projects and the use thereof are in material compliance
with the Americans with Disabilities Act and all other material Laws. The
Properties consist of legal and separate lot(s) for tax assessment purposes
and under the California Subdivision Map Act (California Government Code
Sections 66410 et. seq., as amended from time to time). All Permits,
easements and rights of way necessary for the occupancy, operation, ownership
and use of the Projects have been obtained by Borrower and are in full force
and effect.
6.7 DEFECTS.
There are no defects, facts or conditions affecting any Project
or any portion thereof which would make such Project unsuitable for the
occupancy, operation, use or sale thereof. There are no surface or
subsurface soils conditions adversely affecting any Property in any material
respect, including, without limitation, unstable soil or landfills.
6.8 UTILITIES.
All utilities necessary for the full enjoyment of the Projects,
including, without limitation, trash collection, police and fire protection,
sewer and storm drain, water, telephone, gas and electricity, are available
to the Projects and are not subject to any conditions which would limit the
use of such utilities, other than the payment of normal charges to the
utility supplier.
6.9 NO CONDEMNATION.
No Condemnation Event (as defined in the Deed of Trust) is
pending against any Project or any portion thereof. To Borrower's best
knowledge, no Condemnation Event is
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threatened against any Project which would impair the full utilization of
such Project in any material manner.
6.10 HAZARDOUS SUBSTANCES.
There are no Hazardous Substances on, in, under or at any
Project in violation of any applicable Environmental Laws. The Projects and
each portion thereof are in full compliance with all Environmental Laws.
There are no above or below ground storage tanks located at any Project.
Borrower has not received written notice from any Governmental Agency or
other third party alleging that any Project or any portion thereof does not
comply with any Environmental Laws.
6.11 NO DEFAULTS.
No Potential Default or Event of Default exists under this
Agreement or any of the other Loan Documents. No default by Borrower exists
under any Contractual Obligation which would have a material adverse effect
on Borrower's ability to repay the Loan or to perform its obligations under
any of the Loan Documents or under the Environmental Indemnity.
6.12 DISCLOSURE.
No representation or warranty of Borrower contained in this
Agreement, any Loan Document, or any Application Information contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.
6.13 JUNIOR LOAN DOCUMENTS.
Borrower has delivered to Lender true, correct and complete
copies of the Junior Loan Documents, and the Junior Loan Documents have not
been amended or modified except for agreements delivered to Lender prior to
the date hereof. The Junior Loan Documents are the only agreements
evidencing and/or securing the loan made by Junior Lender to Borrower. No
default, or event which, with the giving of notice or the passage of time, or
both, would constitute a default, exists under the Junior Loan Documents.
Neither Borrower nor any of the other Related Parties has received a default
notice under the Junior Loan Documents. The restrictions on payments under
the Junior Loan Documents set forth in SECTION 7.12, other than any
restriction on the repayment of the Junior Loan upon the maturity thereof,
shall not cause Borrower to be in default of its obligations under the Junior
Loan Documents. Effective on or before the Closing Date, the Junior Loan
Documents do not create a Lien, charge or encumbrance on the Projects, any of
the collateral securing the Loan or any of Borrower's other assets.
6.14 EXISTING PROJECT FINANCING.
Borrower has delivered to Lender true, correct and complete
copies of the documents evidencing the Existing Project Financing, and such
documents have not been amended or modified except for agreements delivered
to Lender prior to the date hereof. No default, or event which, with the
giving of notice or the passage of time, or both, would constitute a default,
exists under the documents evidencing the Existing Project Financing.
Neither Borrower nor any of the other Related Parties has received a default
notice in connection with the Existing Project Financing. The Existing
Project Financing is nonrecourse to the credit of Borrower and no event has
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occurred which will cause or allow any of the Existing Project Financing to
be recourse to the credit of Borrower.
ARTICLE 7
BORROWER'S COVENANTS
Borrower covenants and agrees that, until the Loan and all
other amounts owing to Lender under the Loan Documents have been paid in full
and all Secured Obligations have been satisfied, Borrower shall perform all
of the covenants in this ARTICLE 7.
7.1 NO LIENS.
Except as expressly provided in SECTION 1.12 of the Deed of
Trust, Borrower shall not permit any Lien to be made or filed. Borrower
shall be the sole owner of the Projects (other than the Ground Lease Parcel),
the sole ground lessee of the Ground Lease Parcel and any ground leased
Offered Project which becomes a Borrowing Base Project as provided in this
Agreement, and the sole owner or, to the extent permitted by the terms of
this Agreement, lessee, of the Personal Property, in each case free from any
adverse Liens, except for Liens in favor of Lender. Borrower shall not
assign, sell, pledge, encumber or otherwise hypothecate all or any portion of
the Leases or the Project Documents.
7.2 COMPLIANCE WITH LAWS.
Borrower will comply with all Laws applicable to Borrower, its
property, the Projects, the Personal Property and/or the occupancy,
operation, ownership or use thereof.
7.3 INSPECTION.
Subject to the rights of tenants at the Projects, during normal
business hours and upon reasonable advance notice (except in the event of an
emergency, in which event entry shall not be limited to normal business hours
and no advance notice shall be necessary) Borrower shall permit Lender and
any Person designated by Lender to visit and inspect the Projects.
7.4 LEASING OF SPACE.
A. Unless otherwise approved by Lender in writing in
advance, all Leases shall be entered into with bona fide third party tenants
financially capable of performing their obligations thereunder and shall
reflect arms-length transactions at the then current market rate for
comparable space. Borrower shall perform all obligations required to be
performed by it as landlord under any Lease. With respect to any Project
that is not a mini-storage facility, Borrower shall not accept any rent
(however denominated) or other charges under any of the Leases more than one
(1) month in advance. With respect to any Project that is a mini-storage
facility, Borrower shall not accept any rent (however denominated) or other
charges under any of the Leases more than two (2) months in advance; provided
that for each such Project, Borrower may accept up to one (1) year of advance
rent with respect to an aggregate maximum of five percent (5%) of the net
rentable square feet of space within the applicable Project.
B. Borrower shall not enter into, or modify, amend,
terminate (except upon the stated expiration of the term thereof) or accept
(where Borrower has the legal right to accept or
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reject) a surrender or cancellation of, any Lease, or consent to any
assignment or subletting under any Lease, without Lender's prior written
consent except as follows:
(i) Borrower may terminate Leases other than Major
Leases without Lender's prior written consent for the non-payment of rent if
Borrower would in good faith terminate such Lease in the ordinary course of
its business.
(ii) Lender's prior written consent shall not be
required for any new Lease (a) which is not a Major Lease, (b) which does not
include any Material Lease Provisions, (c) where the term of the Lease
(including any options to extend the initial term of the Lease) does not
exceed ten (10) years, and (d) where the proposed use of the portion of the
Project leased does not involve the use, storage, processing, manufacture,
transportation, disposal or release of Hazardous Substances.
(iii) Lender's prior written consent shall not be
required for any amendment or modification of a Lease if the amendment or
modification contains no provision which, had the provision been included in
the original Lease, would require Lender's prior written consent.
(iv) Lender's prior written consent shall not be
required in connection with any sublease or assignment of any Lease if either
(a)(1) the assignee or subtenant meets the requirements of SECTION 7.4(A),
and (2) the proposed use of the applicable Project by such assignee or
subtenant does not involve the use, storage, processing, manufacture,
transportation, disposal or release of Hazardous Substances, or (b) such
sublease or assignment does not require Borrower's consent under the terms of
the Lease executed by Borrower in accordance with the terms of this Agreement.
C. Borrower shall promptly deliver to Lender such Leases,
rent rolls, leasing reports, operating statements or other leasing information
as Lender may from time to time request. Borrower shall promptly notify
Lender of (i) any material tenant dispute, (ii) any material default by
Borrower or the tenants under any of the Major Leases, (iii) any material
adverse change in leasing activity for any Project, and (iv) any notice
received by Borrower relating to any material default by Borrower under any
Lease.
D. With respect to any Major Lease, and if requested by
Lender with respect to any other Lease, Borrower shall, within twenty (20)
days after Lender's request, execute and deliver to Lender, and cause the
tenants under the Leases (and any other party to, or guarantor of, the
Leases) to execute and deliver to Lender, nondisturbance and attornment
agreements and/or estoppel certificates, in form and substance reasonably
satisfactory to Lender.
E. As used herein, "MATERIAL LEASE PROVISION" means a
provision which materially increases the landlord's obligations under a
Lease, which provides the tenant with material rights or recourse against the
landlord or with the right to terminate the Lease, or which adversely affects
Lender's security in the Lease. Without limiting the generality of the
foregoing, each of the following shall constitute a Material Lease Provision:
(i) any provision which affects Lender's rights with respect to the Lease,
which affects the relative priority of the Lease and the Deed of Trust
without Lender's consent, or which requires Lender to agree to or provide any
nondisturbance agreement to the tenant; (ii) the grant of an option, right of
first offer or refusal or other right to purchase all or any portion of any
Project, (iii) the grant of an option, right of first offer or refusal or
other right to lease any additional space in any Project at a rent less than
market rent, (iv) the grant of any early termination option, (v) any
provision which provides for the
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application of insurance or condemnation proceeds in a manner contrary to the
Loan Documents, (vi) the grant of any offsets, or the agreement for the
payment of any amounts by the landlord, if such offset or payment obligation
would be applicable to any subsequent owner of the applicable Project,
including, without limitation any owner succeeding to the landlord's interest
by foreclosure or a deed in lieu or in aid thereof, (vii) a limit to the
expense reimbursements due from the tenant for increases in taxes or expenses,
or (viii) an environmental, hazardous substance or other indemnification
binding on the landlord that would be applicable to any subsequent owner of
the applicable Project, including, without limitation, any owner succeeding
to landlord's interest by foreclosure or a deed in lieu or in aid thereof.
7.5 ENVIRONMENTAL MATTERS.
A. Borrower shall, at its own expense, comply and cause all
persons entering the Projects to comply with all Environmental Laws
applicable thereto and Borrower shall not use, store, process, manufacture,
transport, dispose or release any Hazardous Substances on or adjacent to any
part of any Project or permit any of the foregoing to occur. Borrower shall
immediately advise Lender in writing of any (i) discovery of Hazardous
Substances on any Project or any portion thereof; or (ii) any claim, action
or order threatened or instituted by any third party (including any
Governmental Agency) against any Project or Borrower relating to damages,
cost recovery, loss or injury resulting from any Hazardous Substances.
Borrower shall provide Lender with copies of all communications with any
third party (including any Governmental Agency) relating to any Environmental
Law or any claim, action or order relating to Hazardous Substances at, on,
under or in any Project or any portion thereof. If any remedial action is
required to bring the applicable Project into compliance with Environmental
Laws, Borrower shall immediately notify Lender of such situation and shall
prepare a written plan setting forth a description of such situation (and all
environmental reports relating thereto) and the remedial action that Borrower
proposes to implement to bring such Project into compliance with all
Environmental Laws. Borrower shall, at its own expense, thereafter
diligently and continuously pursue the remediation of the condition necessary
to bring the applicable Project into compliance with all Environmental Laws
and cause all liens or encumbrances against such Project in connection
therewith to be removed and satisfied.
B. Lender shall have the right to retain a professional
environmental consultant to conduct tests and investigations of any Project
(including, without limitation, ground water and soils testing) with respect
to Hazardous Substances or such Project's compliance with Environmental Laws.
Borrower hereby grants to Lender, its agents, employees, consultants and
contractors, an irrevocable license and authorization to enter upon and
inspect any Project and to conduct such tests and investigations on such
Project or any portion thereof as Lender, in its sole discretion, determines
necessary, subject to the rights of the applicable tenant(s). Such tests and
investigations shall be at Lender's expense unless (i) Lender reasonably
believes that a breach of the provisions of SECTION 6.10 or this SECTION 7.5
has occurred, (ii) a breach of the provisions of SECTION 6.10 or this
SECTION 7.5 has in fact occurred, or (iii) an Event of Default or Potential
Default has occurred. Borrower acknowledges and agrees that, as between it
and Lender, only Borrower owns and operates the Projects and only Borrower
has the responsibility for compliance with this SECTION 7.5 and neither
Lender's enforcement of, or failure to enforce, SECTION 7.5 shall be deemed
to affect the obligations or provisions of this SECTION 7.5.
C. To the fullest extent permitted by law, Borrower hereby
indemnifies and agrees to defend, and hold harmless the Indemnitees from and
against any and all loss, claim, damage or liability of any kind or nature
and from any suits, actions, claims or demands, including without limitation,
all amounts described in SECTION 7.5(D), arising directly or indirectly, in
whole or in part, out of (i) the existence or alleged existence of any
Hazardous Substances at, on under or in
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any or all of the Projects or any portion thereof, (ii) the removal of or
failure to remove any Hazardous Substances from any or all of the Projects or
any portion thereof, (iii) any activity involving Hazardous Substances with
respect to any or all of the Projects carried on or undertaken on or off such
Projects, (iv) any residual contamination on or under any or all of the
Projects, or (v) any contamination of any property or natural resources
arising in connection with any activity involving Hazardous Substances, in
each case whether prior to or during the term of the Loan, and whether by
Borrower or any predecessor-in-title or any employees, agents, contractors or
subcontractors of Borrower or any predecessor-in-title, or any third parties
occupying or present on any or all of the Projects. Upon receiving knowledge
of any suit, action, claim or demand asserted by a third party that Lender
believes is covered by this indemnity, Lender shall give Borrower written
notice of the matter and an opportunity to defend it, at Borrower's sole cost
and expense, with legal counsel reasonably satisfactory to Lender. Lender
may also require Borrower to so defend the matter. The obligations of
Borrower under this SECTION 7.5(C) are, without limitation, intended to
operate as a binding valid indemnity agreement under 42 U.S.C.
Section 9607(e)(1) and shall survive the closing of the Loan and the repayment
of the Loan and the satisfaction of all other Secured Obligations.
D. The indemnity set forth in SECTION 7.5(C) shall include,
without limitation, (i) loss, claims, damage or liability for, or arising
from, personal injury and property damage, (ii) compensation for lost wages,
business income, profits or other economic loss, (iii) all consequential
damages; (iv) all damages to any natural resources and the environment, the
costs of any required or necessary repair, clean up, response cost, or
remediation of the Properties and the Projects, and the preparation and
implementation of any closure, remedial or other required plans; and (v) all
costs and expenses incurred in connection with any of the foregoing,
including reasonable attorneys' fees and costs.
7.6 INSURANCE REQUIREMENTS.
A. Borrower shall procure and maintain, or cause to be
procured and maintained, at all times until the repayment of the Loan and the
satisfaction of the Secured Obligations, policies of insurance in form and
amounts reasonably satisfactory to Lender, and issued by companies having a
Best's rating of at least B+, Class VI and otherwise reasonably satisfactory
to Lender, covering (i) such casualties, risks, perils, liabilities and other
hazards as may be reasonably required by Lender and (ii) such casualties,
risks, perils, liabilities and other hazards which are at the time commonly
insured against or required by institutional lenders to be insured against
with respect to properties similar to the Projects. All policies shall
expressly protect Lender's interest as required by Lender. Without limiting
the generality of the foregoing, Borrower shall maintain or cause to be
maintained the insurance coverage described in SECTION 7.6(B). If Borrower
fails to maintain the insurance coverage required hereunder, Lender may, but
shall have no obligation to, obtain such insurance, and Borrower will pay all
amounts expended by Lender, together with interest thereon at the Default
Interest Rate, within ten (10) days after demand by Lender. In the event of
any foreclosure of any Deed of Trust or a deed in lieu or in aid thereof, all
interest under the insurance policies required by this SECTION 7.6 and then
in force shall pass to the new owner of the applicable Projects.
B. Without limiting the generality of SECTION 7.6(A),
Borrower shall maintain or cause to be maintained the following insurance
coverages:
(i) property insurance for the full replacement cost
of the Projects (excluding the Properties), on an "all risks" basis
(including fire, extended coverage, vandalism and malicious mischief),
together with a 4% inflationary guard endorsement;
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(ii) commercial general liability insurance on an
"occurrence" basis in the minimum amount of Two Million Dollars ($2,000,000)
for personal injury to any one person, Four Million Dollars ($4,000,000) for
any one accident and Two Hundred Fifty Thousand Dollars ($250,000) for
property damage;
(iii) twelve (12) months of business interruption or
loss of rents coverage in an amount not less than the Minimum Rent Loss
Coverage;
(iv) (a) flood insurance in an amount equal to the
greater of the full replacement cost of the applicable Projects (excluding
the applicable Properties), or the maximum flood insurance available, if
either (a) any Property is located in an area now or hereafter designated as
having special flood hazards under the Flood Disaster Protection Act of 1973,
as amended from time to time, or any other Law, or (b) flood insurance is
required by any Law applicable to Borrower, Lender or any Project or by any
federal or state regulatory agency having jurisdiction over Lender, and
(b) with respect to the Project located at 1600 K Street, Sacramento,
California, flood insurance in an amount not less than Five Hundred Thousand
Dollars ($500,000);
(v) earthquake insurance if required by any Law
applicable to Borrower, Lender or any Project or by any federal or state
regulatory agency having jurisdiction over Lender or if otherwise required by
this SECTION 7.6; and
(vi) with respect to the Project located at 2501-2525
Cherry Avenue, Signal Hill, California (the "EL PROJECT"), for a term of not
less than four (4) years, specific remediation and pollution legal liability
insurance against environmental conditions (known or unknown) affecting the
El Project, whether such conditions arise from the El Project or any portion
thereof itself, or from adjacent sites, in form acceptable to Lender and in
an amount acceptable to Lender not less than One Million Dollars ($1,000,000)
for any one incident and Two Million Dollars ($2,000,000) in the aggregate.
With respect to the environmental insurance required by this subparagraph,
the failure by Borrower at any time to maintain such insurance as required
herein shall constitute an Event of Default under the Loan Documents.
Borrower shall take no action, or fail to take an action, that violates any
provision of the policy or documents evidencing such environmental insurance
or that would diminish in any way Borrower's or Lender's ability to seek
and/or obtain reimbursement in connection with any claims thereunder.
C. All original policies, or certificates thereof, and
endorsements and renewals thereof, shall be delivered to and retained by
Lender unless Lender agrees otherwise. In case of insurance about to expire,
Borrower shall deliver renewal policies to Lender not less than thirty (30)
days prior to the expiration thereof. All policies of insurance to be
furnished hereunder (i) shall be in form reasonably satisfactory to Lender;
(ii) shall have a deductible of not more than Ten Thousand Dollars ($10,000)
with respect to any insurance other than earthquake insurance and, with
respect to earthquake insurance, shall have a deductible acceptable to
Lender, (iii) shall include a Standard Mortgage Clause/Lender's Loss Payable
Endorsement and Chattel Mortgage Clause in favor of, and in form reasonably
satisfactory to, Lender, including a provision requiring that the coverage
evidenced thereby shall not be terminated or materially modified without
thirty (30) days' prior written notice to Lender, and (iv) may be in the form
of blanket policies in amount, form and substance satisfactory to Lender.
Borrower shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained
hereunder.
D. Notwithstanding anything to the contrary contained in
the Loan Documents, Borrower waives any and all right to claim or recover
against Lender, or its directors, officers,
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employees, agents and representatives, for loss of or damage or injury to the
Projects, Borrower, Borrower's property, or the property of others under
Borrower's control, from any cause insured against or required to be insured
against under this SECTION 7.6 or coverable by insurance.
E. Borrower shall, at its expense, provide from time to
time at the written request of Lender, not more frequently than once per
year, satisfactory evidence of the insurable value of the Projects. Such
evidence may be in the form of an insurance appraisal or valuation report
prepared by an insurance company, appraiser or other consultant approved by
Lender.
F. Without limiting Borrower's obligations under this
SECTION 7.6 and without limiting Lender's rights and remedies if Borrower
fails to comply with the provisions hereof, (i) Lender may at its sole
discretion and at any time and from time to time as provided herein conduct a
seismic risk review of any or all of the Projects (the "SEISMIC REVIEW"),
which, if required by Lender, shall be prepared by an engineer and in a
manner acceptable to Lender at Borrower's sole cost and expense, and (ii) if
the Seismic Review demonstrates in Lender's sole discretion a Probable
Maximum Loss for any Project in excess of thirty percent (30%) of the
applicable Project Value or an Average Loss in excess of twenty percent (20%)
of the applicable Project Value, Borrower shall either (a) maintain
earthquake insurance throughout the remaining term of the Loan in an amount,
with a deductible, and otherwise in form and substance acceptable to Lender,
or (b) if Borrower provides evidence reasonably satisfactory to Lender that
an earthquake retrofit of the applicable Project will reduce the Probable
Maximum Loss to thirty percent (30%) of the applicable Project Value or less
and the Average Loss to twenty percent (20%) of the applicable Project Value
or less, cause the applicable Project to be earthquake retrofitted (which
retrofitting shall be subject to Lender's prior written approval) in
compliance with all applicable laws, and maintain earthquake insurance in an
amount, with a deductible, and otherwise in form and substance acceptable to
Lender until a new Seismic Review demonstrates in Lender's sole discretion a
Probable Maximum Loss for such Project which does not exceed thirty percent
(30%) of the applicable Project Value, and an Average Loss which does not
exceed twenty percent (20%) of the applicable Project Value, and (iii) in the
event that Borrower fails at any time to maintain such earthquake insurance
if required herein, Borrower shall, within ten (10) days after demand by
Lender, pay to Lender an amount equal to the greater of (a) five percent (5%)
of the Loan Amount, or (b) the amount by which the Probable Maximum Loss for
the applicable Project exceeds thirty percent (30%) of the applicable Project
Value, or (c) the amount by which the Average Loss for the applicable Project
exceeds twenty percent (20%) of the applicable Project Value (the "SEISMIC
PRINCIPAL PAYMENT"). Such payment shall be applied first to the outstanding
principal balance of the Loan, then to accrued and unpaid interest on the
Loan, and then to any other amounts owed to Lender under the Loan Documents,
and such payment shall be in addition to all other payments required to be
made by Borrower under the terms of the Loan Documents; provided, however
that as a result of such payment, the Monthly Installments (as defined in the
Note) shall be adjusted effective with the Monthly Installment due
immediately following payment of the amount equal to the Seismic Principal
Payment. Lender may obtain a Seismic Review in connection with the Loan
closing, following any earthquake of a magnitude of 6.0 or higher or
following significant physical damage to any Project as determined by Lender
in its sole discretion. As used herein, "PROBABLE MAXIMUM LOSS" shall mean
the product of (1) the then estimated replacement cost of the Improvements
for the applicable Project(s) as determined by Lender in its sole discretion
and (2) the "90% Confidence Damage Ratio" calculated in such Seismic Review
based upon a 475 year return interval. As used herein, "AVERAGE LOSS" shall
mean the product of (1) the estimated replacement cost of the Improvements
for the applicable Project(s) as determined by Lender in its sole discretion
and (2) the "Average Damage Ratio" calculated in such Seismic Review based
upon a 475 year return interval. As used herein, "PROJECT VALUE" shall mean,
at any given time, the fair market value of the applicable Project(s) as
determined at such time by Lender in its sole discretion.
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7.7 NOTICE OF PROCEEDING.
Borrower will promptly notify Lender of any action, suit,
proceeding or arbitration (including, without limitation, any judicial or
nonjudicial foreclosure proceeding, any voluntary or involuntary bankruptcy
proceeding or any proceeding for the appointment of a receiver), commenced or
threatened against (a) Borrower or any of the Principals where the amount
claimed or involved is in excess of Two Hundred Fifty Thousand Dollars
($250,000) as to any single action, suit, proceeding or arbitration or Five
Hundred Thousand Dollars ($500,000) in the aggregate, or (b) any Project or
any portion thereof or interest therein. Borrower shall deliver to Lender
copies of all notices and other information in connection with any action,
suit, proceeding or arbitration promptly upon receipt or transmittal thereof.
7.8 FINANCIAL AND OTHER INFORMATION.
Borrower shall maintain full and complete books of account and
other records reflecting the results of operations of the Projects in
accordance with generally accepted accounting principles consistently applied
(or such other accounting method approved in writing by Lender). Borrower
shall furnish or cause to be furnished to Lender such financial information
concerning Borrower and the Projects as Lender may reasonably request from
time to time. Lender shall also have access to such books and records and
Borrower's corporate books, during regular business hours and upon reasonable
advance notice to Borrower and shall have the right to make copies thereof or
extracts therefrom and to discuss the affairs, finances and accounts of
Borrower with Borrower and its independent public accountants, all as Lender
may reasonably request. Without limiting the generality of the foregoing,
each year Borrower shall furnish to Lender, without prior request or demand:
A. Within ninety (90) days after the end of each Loan Year
and at such other times within thirty (30) days after request by Lender,
Borrower shall provide Lender with annual financial statements (including,
without limitation, a balance sheet and a profit and loss statement) for
Borrower's previous fiscal year and the current fiscal year-to-date, each of
which shall (i) be in form reasonably acceptable to Lender, (ii) contain
comparative information for the two (2) previous fiscal years, (iii) be
certified as true, correct and complete by Borrower, and (iv) at Lender's
election after the occurrence of an Event of Default or Potential Default, be
certified by a certified public accountant acceptable to Lender.
B. [Intentionally Omitted.]
C. Within ninety (90) days after the end of each Loan Year
and at such other times within thirty (30) days after request by Lender,
Borrower shall provide Lender with annual operating statements for the
Projects for the previous fiscal year and the current fiscal year-to-date,
which shall (i) be in form reasonably acceptable to Lender, (ii) contain
comparative information for the two (2) previous fiscal years, (iii) be
certified as true, correct and complete by Borrower, and (iv) at Lender's
election after the occurrence of an Event of Default or Potential Default, be
certified by a certified public accountant acceptable to Lender.
D. Within ninety (90) days after the end of each Loan Year
and at such other times within thirty (30) days after request by Lender,
Borrower shall provide Lender with an updated rent roll for each Project, in
form satisfactory to Lender and containing such information as is reasonably
required by Lender.
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E. Without limiting any of Lender's rights or remedies in
the event of any failure by Borrower to comply with the provisions of this
SECTION 7.8, if Borrower fails to deliver to Lender any of the financial
statements or other information required herein on or before the date
required in this SECTION 7.8 (the "INFORMATION DELIVERY DATE"), then
commencing on the Information Delivery Date the Variable Rate Margin (as
defined in the Note) or the Fixed Interest Rate (as defined in the Note), as
applicable, shall be increased by one-half percent (.50%) until such time as
Borrower has delivered, and Lender has approved, all of the financial
statements or other information required to be delivered by Borrower pursuant
to this SECTION 7.8. In addition to such increase in the Variable Rate
Margin or Fixed Interest Rate, the Monthly Installments (as defined in the
Note) shall be adjusted effective with the Monthly Installment due
immediately following the Information Delivery Date to reflect such increase.
Once Borrower has delivered, and Lender has approved, all of the financial
statements and other information required to be delivered by Borrower
pursuant to this SECTION 7.8, the Monthly Installments shall be readjusted
effective with the Monthly Installment due immediately thereafter.
7.9 REPRESENTATIONS AND WARRANTIES.
Until repayment of the Loan and all other amounts owing to
Lender under the Loan Documents and the satisfaction of all other Secured
Obligations, the representations and warranties set forth in ARTICLE 6 shall
remain true and complete in all material respects.
7.10 FURTHER ASSURANCES.
Borrower shall execute and deliver from time to time, within
ten (10) days after any request by Lender, any and all instruments,
agreements and documents and shall take such other action as may be
reasonably necessary or desirable in the opinion of Lender to maintain,
perfect or insure Lender's security provided for herein and in the other Loan
Documents, including, without limitation, the execution of UCC-1 renewal
statements, the execution of such amendments to the Deed of Trust and the
other Loan Documents and the delivery of such endorsements to the Title
Policy, all as Lender shall reasonably require, and shall pay all fees and
expenses (including reasonable attorney's fees) related thereto.
7.11 DISTRIBUTION OF ASSETS.
So long as any amounts are outstanding under the Loan
Documents, Borrower shall not (a) make any distribution of its assets,
directly or indirectly, to its partners, shareholders, members or other
owners; provided that the foregoing shall not limit the payment of employee
salaries and other customary, ordinary and reasonable benefits in the
ordinary course of the operation of Borrower's business or payments expressly
permitted by the provisions of SECTION 7.12, or (b) sell, transfer or
hypothecate, directly or indirectly, any of Borrower's assets if the amount
received by Borrower in connection therewith is less than the fair market
value of such assets as determined by Lender in its sole, good faith
discretion. As used herein, the distribution of assets shall include,
without limitation, the repayment of any loans, except for payments expressly
permitted by the provisions of SECTION 7.12, made to Borrower or any interest
or other charges payable in connection therewith, the return of capital
contributions and distributions upon the termination, liquidation or
dissolution of Borrower and the payment of fees, including management,
leasing, brokerage and other fees to the extent such fees exceed the amounts
payable in arms' length transactions with third parties. Borrower shall
maintain and preserve its existence and all rights and franchises material to
its business.
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7.12 JUNIOR LOAN DOCUMENTS.
Borrower shall promptly deliver to Lender a copy of any default
or other notice delivered to Borrower under the Junior Loan Documents.
Borrower shall not amend or modify the Junior Loan Documents without Lender's
prior written consent, which may be withheld in Lender's sole discretion
except for amendments or modifications extending the maturity date of the
Junior Loan without otherwise increasing Borrower's obligations under the
Junior Loan Documents, in which event Lender's consent shall not be
unreasonably withheld.
Borrower shall not make any payments under the Junior Loan
Documents except as follows: (a) Ten Million Dollars ($10,000,000) of the
initial disbursement of the Loan proceeds shall be used by Borrower to repay
a portion of the outstanding principal balance of the Junior Loan, (b)
interest payments under the Junior Loan Documents shall be paid only to the
extent there is Net Cash Flow sufficient to make such payment (and, to the
extent of Net Cash Flow, and so long as such payment is otherwise permitted
by this SECTION 7.12, such payment may be a partial payment), (c) without
limiting any other provision of the Loan Documents, prior to October 1, 2000,
principal of the Junior Loan shall be paid only from the net proceeds
actually received by Borrower from any sale or refinancing of Borrower's
assets (after the payment of all costs in connection with such sale or
refinancing including, without limitation, all closing costs, repayment of
encumbrances, and any amount due under SECTION 2.8) ("NET ASSET SALE
PROCEEDS"), (d) on and after October 1, 2000, principal of the Junior Loan
may be paid from Net Asset Sale Proceeds and, in addition, to the extent
there is Net Cash Flow sufficient to make such payment (and, to the extent of
Net Cash Flow, and so long as such payment is otherwise permitted by this
SECTION 7.12, such payment may be a partial payment) so long as such payment
is otherwise permitted by this SECTION 7.12, and (e) notwithstanding anything
to the contrary set forth herein, no payments in cash or any other assets or
property of Borrower shall be made in connection with the Junior Loan or
under the Junior Loan Documents if an Event of Default has occurred under any
of the Loan Documents or a monetary Potential Default or material nonmonetary
Potential Default has occurred and is continuing under any of the Loan
Documents. For the purposes of this SECTION 7.12, the issuance by Borrower
in accordance with the terms of the Junior Loan Documents of any additional
note(s) to Junior Lenders evidencing amounts due and unpaid (including,
without limitation, interest) to Junior Lenders shall not constitute a
"payment" to Junior Lenders, so long as no payments of cash or other assets
of Borrower are paid or transferred to Junior Lenders in connection
therewith. Without limiting the foregoing, if any payment to Junior Lenders
is prohibited because a Potential Default has occurred and is continuing,
then, if, and only if, such Potential Default is cured within the time period
provided in the Loan Documents without becoming an Event of Default, Borrower
may then make any payment to Junior Lenders under the Junior Loan Documents
which was prohibited during the continuance of the Potential Default, so long
as such payment otherwise complies with the provisions of this SECTION 7.12.
Further, without limiting any of the terms of this SECTION 7.12, if Lender,
in its sole, absolute and arbitrary discretion and without any obligation of
any kind whatsoever, allows Borrower to, and Borrower does fully and
completely, cure any Event of Default after the occurrence thereof, then
Borrower may then make any payment to Junior Lenders under the Junior Loan
Documents which was prohibited until such full and complete cure of such
Event of Default, so long as such payment otherwise complies with the
provisions of this SECTION 7.12; provided that the provisions of this
sentence (a) shall not constitute an agreement by Lender to allow Borrower to
cure any Event of Default after the occurrence thereof or a waiver of, or
otherwise limit, any of the terms and provisions of any of the Loan
Documents, including, without limitation, Lender's rights and remedies upon
the occurrence of an Event of Default, (b) shall not entitle Borrower to cure
any Event of Default after the occurrence thereof, and (c) shall be
applicable only to the first three (3) Events of Default which may occur
under the Loan Documents at any time during the term of the Loan, including
any extension thereof (and after three (3) Events of Default have occurred
under the Loan Documents, Borrower shall
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thereafter be prohibited under this SECTION 7.12 from making any payment in
connection with the Junior Loan or under the Junior Loan Documents if any
other Event of Default occurs under the Loan Documents).
Notwithstanding anything to the contrary contained herein,
Borrower shall not make any payment to Junior Lenders as permitted herein
until Lender shall first have received evidence satisfactory to Lender that
sufficient Net Cash Flow was generated for the three (3) consecutive month
period ending one month prior to the applicable due date of such payment.
For example, prior to Borrower making a payment which is due on May 1, 1999,
Lender shall first have received evidence satisfactory to Lender that
sufficent Net Cash Flow to make such payment was generated for the months of
January, February and March, 1999.
The Junior Loan Documents shall not create, and Junior Lender
shall not hold as security for the Junior Loan, a Lien, charge or encumbrance
on the Projects, any of the collateral securing the Loan or any of Borrower's
other assets. Without limiting any of the provisions of this SECTION 7.12,
Lender acknowledges that Junior Lenders are under no obligation to extend the
stated maturity date under the Junior Loan Documents or refrain from making
demand for payment upon the maturity thereof, from exercising any of their
rights or remedies with respect thereto or from receiving payment thereunder;
provided that any payment by Borrower upon the maturity thereof shall, as
between Borrower and Lender and for all purposes under the Loan Documents, be
subject to the terms and provisions of this SECTION 7.12. Notwithstanding
the foregoing, Borrower expressly acknowledges and agrees that any failure of
Junior Lenders to extend the stated maturity date under the Junior Loan
Documents for any reason or no reason shall not limit or affect any of the
provisions of the Loan Documents, including, without limitation, this SECTION
7.12, SECTION 8.1 of this Agreement, or Section 3.1 of the Note.
Not less frequently than once every six (6) months during the
term of the Loan, and more frequently upon Lender's written request, Borrower
shall deliver to Lender a statement setting forth Borrower's Net Cash Flow,
and all payments made by borrower to Junior Lender, for the term of the Loan
(or if Borrower has delivered a statement to Lender under this paragraph,
since the most recent statement delivered by Borrower), which statement shall
be certified as true, correct and complete by Borrower.
7.13 ASBESTOS OPERATIONS AND MAINTENANCE.
Without limiting the generality of the provisions of SECTION
7.5, Borrower acknowledges that the Projects identified on EXHIBIT D attached
hereto (the "ACM PROJECTS") contain asbestos-containing materials ("ACM"), as
disclosed by asbestos surveys or reports delivered to Lender (individually
and collectively, the "SURVEY"). Borrower agrees, at Borrower's sole cost
and expense, to follow all recommendations in the Survey, as the same may be
amended by subsequent annual surveys, regarding safety conditions for and
maintenance of the ACM, and, on or before the earlier of the date required by
applicable Laws or the date which is thirty (30) days after the Closing Date,
to institute an operations and maintenance plan for each of the ACM Projects
in form acceptable to Lender and in compliance with all Laws (the "O&M
PLAN"). Borrower shall at all times comply, and cause its employees,
tenants, contractors, agents and invitees to comply, with the O&M Plan for
each of the ACM Projects. While any portion of the Loan or any of the
Secured Obligations are outstanding, Borrower agrees to conduct, at
Borrower's sole cost and expense, an asbestos survey of the ACM Projects each
year. Each annual survey shall be conducted by a consultant acceptable to
Lender and shall determine the condition of the applicable ACM and whether
the applicable O&M Plan should be revised or any other measures taken to
ensure the continued safe condition of the ACM. Within thirty (30) days
after the end of each Loan
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Year, Borrower shall deliver to Lender a copy of the annual survey for each
of the ACM Projects and shall certify to Lender in writing that Borrower has
complied with all of the recommendations of the consultant contained in the
Survey.
7.14 LEAD BASED PAINT.
Without limiting the generality of the provisions of SECTION
7.5, on or before the date which is six (6) months after the Closing Date,
Borrower shall, at Borrower's sole cost and expense (a) perform and deliver
to Lender a survey for lead-based paint at the Project located at 685
Manzanita Court, Chico, California (the "LBP PROJECT"), which survey shall be
in form and substance acceptable to Lender and shall be performed by a
consultant acceptable to Lender (the "LBP SURVEY"), and (b) follow all
recommendations regarding lead-based paint set forth in the Phase I
Environmental Site Assessment dated December 7, 1998 prepared by ADR
Environmental Group, Inc. with respect to the LBP Project. In the event the
LBP Survey discloses any lead-based paint at the LBP Project, Borrower shall
at all times comply, and cause its employees, tenants, contractors, agents
and invitees to comply, with all Laws relating to the presence of lead-based
paint, including, without limitation, all Laws affecting the maintenance
and/or removal of such lead-based paint.
7.15 HOTEL RENOVATIONS.
On or before June 30, 1999, Borrower shall have (a) delivered
to Lender evidence satisfactory to Lender that (i) all renovations of the
Holiday Inn Hotels located on the Projects in Walnut Creek (2730 N. Main),
Sacramento (5321 Date Avenue), and Chico, California (685 Manzanita Court)
have been completed in accordance with the terms and conditions of Borrower's
license agreement with Holiday Hospitality Franchising, Inc. and in
compliance with all Laws and the provisions of the Loan Documents, and (ii)
all costs in connection with such renovations have been paid in full, and (b)
used reasonable efforts to obtain Holiday Inn's consent to Borrower's
execution and delivery of the Assignment of Franchise Agreement for each of
such Projects (and, upon such consent, Borrower shall concurrently therewith
duly execute and deliver to Lender an Assignment of Franchise Agreement in
substantially the form attached hereto as EXHIBIT E with respect to each such
Project) and Holiday Inn's delivery of a comfort letter in form satisfactory
to Lender with respect to each of such Projects.
7.16 INDEBTEDNESS.
Borrower shall not, directly or indirectly, create, incur,
assume, guaranty or otherwise become or remain directly or indirectly liable
with respect to any Indebtedness except (a) the Junior Loan, and (b)
Permitted Mortgage Financing and Permitted Recourse Financing. Before
incurring any Permitted Recourse Financing, Borrower shall first use
reasonable, good faith efforts to borrow such funds as Permitted Mortgage
Financing.
7.17 EXISTING PROJECT FINANCING.
Borrower shall not take or omit to take any action with respect
to any of the Existing Project Financing which would allow any such Existing
Project Financing to be recourse to the credit of Borrower. Borrower shall
promptly deliver to Lender a copy of any default or other notice delivered to
Borrower in connection with any of the Existing Project Financing. Borrower
shall not amend any of the nonrecourse provisions of the Existing Project
Financing without Landlord's prior written consent.
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ARTICLE 8
EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute
an Event of Default under this Agreement and the other Loan Documents:
A. FAILURE TO MAKE PAYMENTS WHEN DUE. Borrower's failure
to pay any principal, interest or other monies due under this Agreement or
any of the other Loan Documents within ten (10) days after such amount is
due.
B. BREACH OF CERTAIN COVENANTS. Borrower's failure to
perform or comply with any term, obligation or condition contained in this
Agreement or any of the other Loan Documents, other than those terms,
obligations and conditions otherwise referred to in this SECTION 8.1 and
other than Borrower's obligations under SECTION 1.10(A) of the Deed of Trust,
within thirty (30) days after the delivery of written notice from Lender of
such failure; provided that if such default is not reasonably capable of
being cured within such thirty (30) day period, such failure shall not
constitute an Event of Default so long as Borrower commences the cure of such
default within such thirty (30) day period and diligently prosecutes such
cure to completion within one hundred eighty (180) days after such written
notice from Lender.
C. BREACH OF WARRANTY. Any representation, warranty,
certification or other statement made by Borrower or any of the Principals
herein or in any other Loan Document or in any statement or certificate at
any time given by Borrower or any of the Principals to Lender in writing in
connection with the Loan shall be materially false or misleading.
D. INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) A court having proper jurisdiction shall enter a
decree or order for relief with respect to Borrower or any of the Principals
in an involuntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, which
decree or order is not stayed within seven (7) days after entry and dismissed
within ninety (90) days after the entry of such order; or any other similar
relief shall be granted under any applicable federal or state law; or
(ii) An involuntary case is commenced against Borrower
or any of the Principals, under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect; or a decree or order of a court
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Borrower or any of the
Principals or over all or a substantial part of their respective property,
shall be entered; or the involuntary appointment of an interim receiver,
trustee or other custodian of Borrower or any of the Principals, for all or a
substantial part of their respective property; or the issuance of a warrant
of attachment, execution or similar process against any substantial part of
the respective property of Borrower or any of the Principals, and the
continuance of any such event in this clause (ii) for ninety (90) days unless
dismissed or discharged.
E. VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
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(i) Borrower or any of the Principals shall have an
order for relief entered with respect to them or commence a voluntary case
under the Bankruptcy Code or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of their respective property; the
making by Borrower or any of the Principals of any assignment for the benefit
of creditors; or
(ii) The inability or failure of Borrower or any of
the Principals, or the admission by Borrower or any of the Principals in
writing of its inability, to pay their respective debts as such debts become
due.
F. LIEN PRIORITY. Lender fails to have a legal, valid,
binding and enforceable first priority Lien on any Project or any Personal
Property.
G. UNAPPROVED TRANSFERS. Any transfer (as defined in
SECTION 1.10 of the Deed of Trust or SECTION 2.7 of this Agreement) of any
Project or any interest in Borrower occurs without Lender's prior written
consent in accordance with SECTION 1.10 of the Deed of Trust.
H. FAILURE TO MAINTAIN INSURANCE. Borrower fails to
maintain or cause to be maintained the insurance coverage required by SECTION
7.6.
I. OTHER LIENS. Without limiting the provisions of SECTION
7.1 of this Agreement or SECTION 1.10 of the Deed of Trust, Borrower defaults
under any Lien (other than the Liens created by the Loan Documents) or
foreclosure or other proceedings are commenced to enforce any Lien (other
than the Liens created by the Loan Documents).
J. OTHER LOAN DOCUMENTS. The occurrence of an Event of
Default under any of the other Loan Documents (as "Event of Default" is
defined therein).
K. GROUND LEASE. The occurrence of any default under the
Ground Lease or the ground lease for any Ground Leased Project or any event
which, with the giving of notice or the passage of time, or both, would
constitute a default under the Ground Lease or the ground lease for any
Ground Leased Project.
L. HOTEL RENOVATIONS. Borrower fails to comply with the
provisions of SECTION 7.15 on or before the date set forth therein.
M. JUNIOR LOAN DOCUMENTS. The occurrence of any of the
following: (i) a monetary default or material nonmonetary default by Borrower
under any of the Junior Loan Documents, or (ii) a nonmonetary default by
Borrower under any of the Junior Loan Documents which is not material and the
expiration of any cure period expressly set forth in the Junior Loan
Documents, (iii) the acceleration of the maturity date under the Loan
Documents, or (iii) the stated maturity date of the Junior Loan Documents if,
without limiting any of the provisions of SECTION 7.12, the amounts due and
owing under the Junior Loan Documents are not repaid in full on or before
such stated maturity date.
M. MINIMUM OUTSTANDING BALANCE. The outstanding principal
balance of the Loan is at any time (other than the repayment in full of the
Loan and all amounts due under all of the Loan Documents) less than the
Minimum Outstanding Balance.
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8.2 GENERAL REMEDIES.
Notwithstanding anything to the contrary contained herein or in
any of the other Loan Documents, upon the occurrence of any Event of Default
(i) automatically without notice to Borrower as to SECTIONS 8.1(D), (E) AND
(J), and otherwise at the option of Lender upon written notice to Borrower as
to any other Event of Default, the unpaid principal amount of the Loan, all
accrued and unpaid interest and all other Secured Obligations shall become
immediately due and payable, without presentment, demand, protest, further
notice or other requirements of any kind, all of which are hereby expressly
waived by Borrower, (ii) Lender shall have the rights and remedies of a
secured party under the California Commercial Code, and under any other
applicable law, (iii) Lender may pursue all of its rights and remedies
hereunder, under the other Loan Documents, at law, in equity or otherwise,
including without limitation, obtaining the appointment of a receiver, (iv)
Lender may pursue any remedies available to it pursuant to California Code of
Civil Procedure Section 726.5, (v) all outstanding indebtedness and all other
amounts owing to Lender under the Loan Documents shall bear interest at the
Default Interest Rate, and (vi) Lender shall have no further obligation to
disburse Loan proceeds to Borrower.
8.3 SPECIFIC PERFORMANCE.
Upon the occurrence of an Event of Default, Lender may commence
and maintain an action in any court of competent jurisdiction for specific
performance of any of the covenants and agreements contained herein or in any
of the other Loan Documents, may obtain the aid and direction of the court in
the performance of any of the covenants and agreements contained herein or
therein, and may obtain orders or decrees directing the same and, in the case
of any sale under the Deed of Trust, directing, confirming or approving
Lender's or the trustee's actions.
8.4 REMEDIES AS TO PROJECT DOCUMENTS.
Upon the occurrence of an Event of Default, Lender shall have
the right (and Borrower hereby irrevocably constitutes and appoints Lender as
its attorney-in-fact, which power is coupled with an interest, to do so) to
(a) demand, receive and enforce Borrower's rights with respect to the Project
Documents, (b) give appropriate receipts, releases and satisfactions for and
on behalf of Borrower with respect to any of the Project Documents, (c) do
any and all acts in the name of Borrower or in the name of Lender with the
same force and effect as Borrower could do if the assignment in ARTICLE 4 had
not been made, and (d) perform and discharge each and every obligation,
covenant, condition and agreement of Borrower under the Project Documents.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 NONFOREIGN STATUS.
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Section 1445 of the Internal Revenue Code of 1985, as amended
(the "INTERNAL REVENUE CODE") and Sections 18662, 18668 and 18669 of the
California Revenue and Taxation Code (the "CALIFORNIA TAX CODE") provide that
a transferee of a U.S. real property interest, or California property
interest, as the case may be, must withhold tax under the circumstances
described therein. To inform Lender that the withholding of tax will not be
required in the event of the disposition of any Project pursuant to the terms
of the Deed of Trust, Borrower hereby certifies, under penalty of perjury,
that: (a) Borrower is not a foreign corporation, foreign partnership,
foreign trust or foreign estate, as those terms are defined in the Internal
Revenue Code and/or California Tax Code and the regulations promulgated
thereunder; and (b) Borrower's U.S. employer identification number is the Tax
Identification Number; (c) Borrower's principal place of business is at the
address set forth in SECTION 9.10, and (d) Borrower is qualified to do
business in the State of California. Lender may disclose the contents of
this SECTION 9.1 to the Internal Revenue Service or any other Governmental
Agency and Borrower acknowledges that any false statement contained herein
could be punished by fine, imprisonment or both. Borrower covenants and
agrees to execute further certificates, which shall be signed under penalty
of perjury, as Lender shall reasonably require in connection with the
certifications set forth herein. The covenant set forth herein shall survive
the foreclosure of the lien of the Deed of Trust or acceptance of a deed in
lieu or in aid thereof.
9.2 ASSIGNMENTS AND PARTICIPATIONS IN LOAN AND NOTE.
Lender may assign its rights and delegate its obligations under
this Agreement or any of the other Loan Documents and further may assign, or
sell participations in, all or any part of the Loan, the Loan Documents, or
any other interest herein or in the Note to any Person, all without notice to
or the consent of Borrower. To the extent of any such assignment, Lender
shall be relieved of its obligations with respect to the Loan and the
assignee shall have the same rights, benefits and obligations as it would if
it were Lender hereunder and a holder of the Note. Lender may furnish any
information (including, without limitation, financial information) concerning
the Project, Borrower, Principals and any of their assets to third parties
from time to time for legitimate business purposes.
9.3 EXPENSES.
Borrower agrees to pay, within ten (10) days after demand by
Lender, all reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and costs, fees of any consultants, and fees for
any environmental audits, appraisal, inspections or other review required by
Lender) incurred by Lender in connection with the Loan, the enforcement of
any of the Secured Obligations, the enforcement of any of Lender's rights and
remedies under the Loan Documents, the collection of any payments owing to
Lender hereunder or under any of the other Loan Documents, whether or not
such enforcement and collection includes the filing of a lawsuit, or the
retaking, holding, preparing for sale or selling any or all of the Projects
or any portion thereof or any interest therein. Such costs and expenses
shall include, without limitation, Lender's reasonable attorneys' fees and
costs, including without limitation attorneys' fees and costs incurred by
Lender in connection with any insolvency, bankruptcy, reorganization,
arrangement or other similar proceedings involving Borrower or any of the
Principals which in any way affect the exercise by Lender of its rights and
remedies hereunder, under any of the other Loan Documents, at law or in
equity.
9.4 [Intentionally Omitted.]
9.5 INDEMNITY.
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Borrower hereby indemnifies and agrees to defend and hold
harmless the Indemnitees from and against any and all expenses, loss, claims,
damage or liability, including, without limitation, architects', engineers'
and attorneys' fees and costs by reason of: (a) the construction of any
improvements on the Projects, (b) any capital improvements, other work or
things done in, on or about the Projects or any part thereof, (c) any use,
nonuse, misuse, possession, occupation, alteration, operation, maintenance or
management of the Projects or any part thereof or any street, drive,
sidewalk, curb passageway or space comprising a part thereof or adjacent
thereto, (d) any negligence or willful act or omission on the part of
Borrower or its agents, contractors, servants, employees, licensees or
invitees, (e) any accident, injury (including death) or damage to any person
or property occurring in, on or about the Projects or any part thereof, (f)
any Lien or claim which may be alleged to have arisen on or against the
Projects or any part thereof or any liability asserted against Lender with
respect thereto, (g) any tax (excluding Lender's income taxes) attributable
to the execution, delivery, filing or recording of the Deed of Trust, the
Note or the other Loan Documents, (h) any contest due to Borrower's actions
or failure to act, (i) any default under the Note or the other Loan
Documents, or (j) any claim by or liability to any contractor or
subcontractor performing work or any party supplying materials in connection
with the Projects.
9.6 WAIVER OF OFFSET.
All sums payable by Borrower pursuant to any of the Loan
Documents shall be paid without notice, demand, counterclaim, setoff,
deduction or defense and without abatement, suspension, deferment, diminution
or reduction, and the obligations and liabilities of Borrower under the Loan
Documents shall in no way be released, discharged or otherwise affected
(except as expressly provided in the Loan Documents) by reason of: a) any
damage to or destruction of the Projects or any part thereof or any
Condemnation Event (as defined in the Deed of Trust) affecting the Projects
or any part thereof; any restriction or prevention of or interference by any
third party with any use of the Projects or any part thereof; any title
defect or encumbrance or any eviction from the Projects or any part thereof
by title paramount or otherwise; any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to Lender, or any action taken with respect to any of the Loan
Documents by any trustee or receiver of Lender, or by any court, in any such
proceeding; any claim which Borrower has or might have against Lender; any
default or failure on the part of Lender to perform or comply with any of the
terms hereof or of any other agreement with Borrower; or any other
occurrence whatsoever, whether similar or dissimilar to the foregoing;
whether or not Borrower shall have notice or knowledge of any of the
foregoing. Except as expressly provided herein, Borrower waives all rights
now or hereafter conferred by statute or otherwise to any abatement,
suspension, deferment, diminution or reduction of any of the Secured
Obligations.
9.7 AMENDMENTS AND WAIVERS.
This Agreement and the other Loan Documents may only be
modified in writing signed by all of the parties hereto or thereto or their
respective successors and assigns. No waiver of any provision of this
Agreement or of any of the other Loan Documents, or consent to any departure
by Borrower therefrom, shall in any event be effective without the written
agreement of Lender. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
Except as expressly required by the terms of the Loan Documents, no notice to
or demand on Borrower in any case shall entitle Borrower to any other or
further notice or demand in similar or other circumstances.
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<PAGE>
9.8 WAIVER OF JURY TRIAL.
BORROWER AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY TORT OR CONTRACT LITIGATION BASED HEREON OR ON ANY OF THE OTHER LOAN
DOCUMENTS, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THE NOTE, ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY IN CONNECTION
THEREWITH.
9.9 SUBMISSION OF LOAN DOCUMENTS.
The submission of this Agreement, any of the other Loan
Documents or the Environmental Indemnity to Borrower or its agents or
attorneys for review or signature does not constitute a commitment by Lender
to make the Loan to Borrower, and the Loan Documents and the Environmental
Indemnity shall have no binding force or effect unless and until they are
executed and delivered by Borrower and Lender and all of the conditions set
forth in SECTION 3.1 have been satisfied.
9.10 NOTICES.
Any notice, or other document or demand required or permitted
under this Agreement or any of the other Loan Documents shall be in writing
addressed to the appropriate address set forth below and shall be deemed
delivered upon the earliest of (a) actual receipt, (b) the next Business Day
after the date when sent by recognized overnight courier, or (c) the second
Business Day after the date when sent by registered or certified mail,
postage prepaid. Any party may, from time to time, change the address at
which such written notice or other documents or demands are to be sent, by
giving the other party written notice of such change in the manner
hereinabove provided.
To Borrower: The Peregrine Real Estate Trust
1300 Ethan Way
Suite 200
Sacramento, California 95825
Attention: Larry Knorr
With a copy to: WinShip Properties
225 Bush Street
Suite 790
San Francisco, California 94104
Attention: Roger Snell
To Lender: Fremont Investment & Loan
175 N. Riverview Drive
Anaheim, California 92808
Attention: Commercial Real Estate
Loan No. 950113436
9.11 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS.
All agreements, indemnities, representations and warranties
made herein and in the other Loan Documents shall survive the execution and
delivery of this Agreement, the making of
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the Loan hereunder and the execution and delivery of the Note. All
representations and warranties made in this Agreement or in any of the other
Loan Documents shall further survive any and all investigations and inquiries
made by Lender, shall remain true, correct and complete in all material
respects and shall remain continuing obligations so long as any portion of
the Secured Obligations remains outstanding or unsatisfied. Notwithstanding
anything in this Agreement or the other Loan Documents or implied by law to
the contrary, any indemnities made by Borrower in the Loan Documents shall
survive the payment of the Loan, the satisfaction of the Secured Obligations,
and/or the termination of this Agreement or the other Loan Documents.
9.12 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Lender or any holder of the
Note or portion thereof in the exercise of any power, right or privilege
hereunder or under the Note shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under this Agreement and the other Loan
Documents are separate, distinct and cumulative to, and not exclusive of, any
rights or remedies otherwise available at law or in equity. No act of Lender
under any of the Loan Documents shall be construed as an election to proceed
under any one provision to the exclusion of any other provision,
notwithstanding anything in the Loan Documents to the contrary. Borrower
expressly waives all right to the benefit of any statute of limitations and
any moratorium, reinstatement, marshaling, forbearance, extension,
redemption, or appraisement now or hereafter provided by federal or state
law, as a defense to any demand against Borrower to the fullest extent
permitted by law.
9.13 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF AGREEMENT.
No termination or cancellation (regardless of cause or
procedure) of this Agreement or any of the other Loan Documents shall in any
way affect or impair the powers, obligations, duties, rights, and liabilities
of Borrower or Lender relating to (a) any transaction or event occurring
prior to such termination or cancellation, or (b) any of the undertakings,
agreements, covenants, indemnities, warranties and representations of
Borrower or Lender contained in this Agreement or any of the other Loan
Documents.
9.14 DISBURSEMENTS IN EXCESS OF LOAN AMOUNT.
In the event the total disbursements by Lender exceed the
amount of the Loan set forth herein, the total of all disbursements shall, to
the extent permitted by the laws of the State of California, constitute part
of the Secured Obligations and be secured by the Deed of Trust and other Loan
Documents. All other sums expended by Lender pursuant to this Agreement or
any of the other Loan Documents shall be deemed to have been paid to Borrower
and shall be secured by the Loan Documents.
9.15 SEVERABILITY.
If any term of this Agreement or any of the other Loan
Documents or the application thereof to any person or circumstances, shall,
to any extent, be invalid or unenforceable, the remainder of this Agreement
or other Loan Document or the application of such term to persons or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each term of this Agreement or other Loan
Document shall be valid and enforceable to the fullest extent.
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<PAGE>
9.16 RULES OF CONSTRUCTION.
Where the identity of the parties to this Agreement or any of
the other Loan Documents or the circumstances make it appropriate, the
masculine gender includes the feminine and/or neuter, and the singular number
includes the plural. Article and Section headings in this Agreement and the
other Loan Documents are included for convenience of reference only and shall
not constitute a part of this Agreement or such other Loan Documents for any
other purpose or be given any substantive effect. The recitals to this
Agreement and to each of the other Loan Documents are incorporated herein and
therein and made a part hereof and thereof.
9.17 APPLICABLE LAW.
This Agreement and the other Loan Documents shall be governed
by, and construed and enforced in accordance with, the laws of the State of
California.
9.18 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.
Except as expressly provided in the Deed of Trust, Borrower's rights and
obligations or any interest hereunder or under any of the other Loan
Documents may not be assigned, including, without limitation, assigned for
security purposes, without the prior written consent of Lender, which may be
withheld in Lender's sole discretion, and any purported assignment shall be
null and void AB INITIO. As used herein, and in the other Loan Documents,
"Lender" (or similar references to the lender) shall include all holders of
the Note, including, without limitation, pledgees of the Note, whether or not
named herein or therein. In exercising any rights hereunder or under any of
the other Loan Documents or taking any actions provided for herein or
therein, Lender may act through its employees, agents or independent
contractors authorized by Lender.
9.19 DISCLOSURE OF INFORMATION.
Borrower hereby acknowledges and agrees that upon the request
of any partner, member or shareholder of Borrower, excluding the Public
Shareholders, as applicable, Lender may disclose to such party any
information (including, without limitation, financial information) relating
to the Loan and Borrower's performance of its obligations under the Loan
Documents. Borrower hereby indemnifies and agrees to defend and hold
harmless the Indemnitees from and against any and all expenses, loss, claims,
damage or liability, including, without limitation, attorneys' fees and
costs, arising by reason of (a) any disclosure of information by Lender under
this SECTION 9.19, or (b) any failure by Lender to disclose any information
to any of the Public Shareholders.
9.20 COUNTERPARTS.
This Agreement and the other Loan Documents may be executed in
any number of counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which counterparts taken
together shall constitute but one and the same instrument. Signature and, if
applicable, acknowledgment pages may be detached from the counterparts and
attached to a single copy of the applicable document to physically form one
document, which may be recorded if applicable.
9.21 ENTIRE AGREEMENT.
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The Loan Documents and the Commitment Letter set forth the
entire understanding between Borrower and Lender relative to the Loan and the
same supersede all prior agreements and understandings relating to the
subject matter hereof or thereof.
9.22 INCONSISTENCIES.
In the event it is impossible to simultaneously comply with
the terms of this Agreement and any of the terms of any other Loan Document,
the terms of this Agreement shall control over any inconsistent term of any
other Loan Document.
9.23 TIME IS OF THE ESSENCE.
Time is strictly of the essence of this Agreement and the other
Loan Documents.
9.24 NO THIRD PARTY BENEFICIARIES.
This Agreement and the other Loan Documents are made and
entered into for the sole protection and benefit of the parties hereto, and,
except as provided in SECTION 9.18, no other person or entity (including,
without limitation, Junior Lenders) shall be a direct or indirect beneficiary
of, or shall have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
9.25 SHAREHOLDERS.
Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, in no event shall the
Shareholders (as defined in Borrower's Formation Documents) be personally or
individually liable for any debt, claim, obligation or damages under, or for
any money that may become due or payable in any way under, this Agreement or
any of the other Loan Documents. The provisions of this SECTION 9.25 shall
be applicable to each of the Loan Documents (whether or not explicitly stated
therein) and is hereby incorporated into each of the Loan Documents by this
reference.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by Borrower and Lender as of the date first above written.
BORROWER:
THE PEREGRINE REAL ESTATE TRUST,
an unincorporated California real estate
investment trust,
dba WinShip Properties
By:
-------------------------------------
Its:
-------------------------------
LENDER:
FREMONT INVESTMENT & LOAN,
a California industrial loan association
By:
-------------------------------------
Its:
-------------------------------
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<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF ________________ )
On ______________, before me, ________________, a Notary
Public, personally appeared ______________________, and
______________________, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
______________________________
Notary Public
<PAGE>
EXHIBIT A
DESCRIPTION OF PROPERTY
[SEE EXHIBITS A-1 THROUGH A-14 ATTACHED.]
A-1
<PAGE>
EXHIBIT A-1
DESCRIPTION OF SACRAMENTO PROPERTY
(3900 LENNANE DRIVE)
A-2
<PAGE>
EXHIBIT A-2
DESCRIPTION OF SIGNAL HILL PROPERTY
(2501-2525 CHERRY AVENUE)
A-3
<PAGE>
EXHIBIT A-3
DESCRIPTION OF SACRAMENTO PROPERTY
(1600 "K" STREET)
A-4
<PAGE>
EXHIBIT A-4
DESCRIPTION OF RANCHO CORDOVA PROPERTY
(2893 SUNRISE BOULEVARD, 11492 AND 11500 SUNRISE GOLD CIRCLE)
A-5
<PAGE>
EXHIBIT A-5
DESCRIPTION OF RANCHO CORDOVA PROPERTY
(11135 TRADE CENTER DRIVE)
A-6
<PAGE>
EXHIBIT A-6
DESCRIPTION OF RANCHO CORDOVA PROPERTY
(11167 TRADE CENTER DRIVE)
A-7
<PAGE>
EXHIBIT A-7
DESCRIPTION OF EL DORADO HILLS PROPERTY
(5200 GOLDEN FOOTHILL PARKWAY)
A-8
<PAGE>
EXHIBIT A-8
DESCRIPTION OF CITRUS HEIGHTS PROPERTY
(6307 SUNRISE BOULEVARD)
A-9
<PAGE>
EXHIBIT A-9
DESCRIPTION OF SACRAMENTO PROPERTY
(2318 16TH STREET)
A-10
<PAGE>
EXHIBIT A-10
DESCRIPTION OF SANTA ROSA PROPERTY
(1435 SEBASTOPOL ROAD)
A-11
<PAGE>
EXHIBIT A-11
DESCRIPTION OF CHICO PROPERTY
(685 MANZANITA COURT)
A-12
<PAGE>
EXHIBIT A-12
DESCRIPTION OF SACRAMENTO PROPERTY
(5321 DATE AVENUE)
A-13
<PAGE>
EXHIBIT A-13
DESCRIPTION OF WALNUT CREEK PROPERTY
(2730 NORTH MAIN STREET)
A-14
<PAGE>
EXHIBIT A-14
DESCRIPTION OF CONCORD PROPERTY
(1050 BURNETT AVENUE)
A-15
<PAGE>
EXHIBIT B
DESCRIPTION OF PERSONAL PROPERTY
[SEE EXHIBITS B-1 THROUGH B-3 ATTACHED]
B-1
<PAGE>
EXHIBIT B-1
DESCRIPTION OF PERSONAL PROPERTY FOR ALL PROJECTS OTHER THAN PROJECTS OPERATED
AS HOTELS AND MOTELS AND GROUND LEASED PROJECTS
All of Borrower's right, title and interest, now or hereafter acquired,
in and to the following:
(a) All personal property, including, without limitation, all
goods, supplies, equipment, furniture, furnishings, fixtures, machinery,
inventory and construction materials which Borrower now or hereafter owns or
in which Borrower now or hereafter acquires an interest or right, including,
without limitation, those which are now or hereafter located on or affixed to
the Project or used or useful in the operation, use or occupancy thereof or
the construction of any improvements thereon, including, without limitation,
any interest of Borrower in and to personal property which is leased or
subject to any superior security interest, or which is being manufactured or
assembled for later installation into the improvements now or hereafter
located at the Project, wherever located, and all books, records, leases and
other documents, of whatever kind or character, relating to the Project;
(b) All fees, income, rents, issues, profits, earnings, receipts,
royalties and revenues which, after the date hereof and while any portion of
the Secured Obligations remains unpaid, may accrue from such goods, fixtures,
furnishings, equipment and building materials or any part thereof or from the
Project or any part thereof, or which may be received or receivable by Borrower
from any hiring, using, letting, leasing, subhiring, subletting, or subleasing
therefor;
(c) All of Borrower's present and future rights to receive payments
of money, services or property including, without limitation, rights to all
deposits from tenants of the Project, deposits from prospective purchasers of
the Project, capital contributions from the constituent partners of Borrower
(if Borrower is a partnership), amounts payable on account of the sale of
partnership interests or stock of Borrower, accounts, accounts receivable,
deposit accounts, chattel paper, notes, drafts, contract rights, instruments,
general intangibles and principal, interest and payments due on account of
goods sold, services rendered, loans made or credit extended, together with
title or interest in all documents evidencing or securing the same.
(d) All other intangible property and rights relating to the
Project or the operation thereof, or used in connection therewith, including
but not limited to all governmental permits relating to construction or other
activities on the Project, all names under or by which the Project may at any
time be operated or known, all rights to carry on business under any such
names, or any variant thereof, all trade names and trademarks relating in any
way to the Project, goodwill in any way relating to the Project, and all
permits, licenses, franchises, approvals, variances and land use entitlements
relating in any way to, or to the occupancy, operation, ownership and use of,
the Project;
(e) All judgments, claims, settlements of claims and causes of
action under any legal proceeding relating to the Project or the ownership,
use, occupancy or operation thereof;
(f) All proceeds from sale or disposition of the Personal Property;
(g) Borrower's rights under all insurance policies covering the
Project or any of the Personal Property (whether or not Borrower is required
to maintain such insurance under the terms of the Loan Documents), and all
proceeds, loss payments and premium refunds payable regarding the same;
B-2
<PAGE>
(h) All reserves, deferred payments, deposits, refunds, cost
savings and payments of any kind relating to the construction of any
improvements on the Project;
(i) All water stock relating to the Project;
(j) All causes of action, claims, compensation and recoveries for
any damage to or condemnation or taking of the Project or the Personal
Property, or for any conveyance in lieu thereof, whether direct or
consequential, or for any damage or injury to the Project or the Personal
Property, or for any loss or diminution in value of the Project or the
Personal Property;
(k) All architectural, structural, mechanical and engineering plans
and specifications prepared for construction of improvements or extraction of
minerals or gravel from the Project and all studies, data and drawings
related thereto, and all Project Documents and all contracts and agreements
of Borrower relating to such plans and specifications or such studies, data
and drawings or to the construction of improvements on or extraction of
minerals or gravel from the Project;
(l) All of Borrower's present and future rights in and to all
refunds, rebates, reimbursements, reserves, deferred payments, deposits, cost
savings, governmental subsidy payments, governmentally-registered credits
(such as emissions reduction credits), other credits, waivers and payments,
whether in cash or kind, due from or payable by any Governmental Agency or
any insurance or utility company relating to any or all of the Project, any
improvements thereon or any of the collateral described herein or arising out
of satisfaction of any condition imposed upon or the obtaining of any
approvals for the development of the Project or the improvements thereon;
(m) All of Borrower's present and future rights in and to all
refunds, rebates, reimbursements, credits and payments of any kind due from
or payable by any Governmental Agency or other entity for any taxes, special
taxes, assessments, or similar governmental or quasi-governmental charges or
levies imposed upon Borrower with respect to the Project, any improvements
thereon or any of the collateral described herein or arising out of the
satisfaction of any condition imposed upon or the obtaining of any approvals
for the development of the Project or the improvements thereon;
(n) All Borrower's rights in proceeds of the Loan;
(o) All Borrower's rights to receive the proceeds of any "take-out"
or permanent financing or commitment to provide such financing; and
(p) All proceeds and products of any of the foregoing (and proceeds
and products of proceeds and products).
All terms used herein which are defined in the California Commercial
Code shall have the same meanings when used herein, unless the context
requires otherwise.
B-3
<PAGE>
EXHIBIT B-2
DESCRIPTION OF PERSONAL PROPERTY FOR PROJECTS AS HOTELS OR MOTELS
All of Borrower's right, title and interest, now or hereafter
acquired, in and to the following property now or hereafter affixed to,
located on or at the applicable Project, or used in connection with the
operation of the Property or the Improvements, and all the cash and noncash
proceeds of such property:
(a) All FF&E (as hereinafter defined), including, without
limitation, all goods, supplies, equipment, furniture, furnishings, fixtures,
machinery, inventory and construction materials which Borrower now or
hereafter owns or in which Borrower now or hereafter acquires an interest or
right, including, without limitation, those which are now or hereafter
located on or affixed to the Project or used or useful in the operation, use
or occupancy thereof or the construction of any improvements thereon,
including, without limitation, any interest of Borrower in and to personal
property which is leased or subject to any superior security interest, or
which is being manufactured or assembled for later installation into the
improvements now or hereafter located at the Project, wherever located, and
all books, records, leases and other documents, of whatever kind or
character, relating to the Project;
(b) All fees, income, rents, issues, profits, earnings, receipts,
royalties and revenues which, after the date hereof and while any portion of
the Secured Obligations remains unpaid, may accrue from such goods, fixtures,
furnishings, equipment and building materials or any part thereof or from the
Project or any part thereof (including all operating revenues, income, gross
receipts, credits, royalties, rights to refunds, accounts, accounts
receivable and all other rights to receive payment of monies or benefits of
any kind relating to or derived from the operation of the Property and any
hotel on the Property, and any income-producing activity directly related to
the Project and any hotel on the Property, including without limitation
revenues from guest rooms and suites, banquet rooms, meeting rooms,
restaurants, bars, cocktail lounges, retail space, health club facilities,
parking facilities and any other hotel operations, to the extent that any
such revenues do not constitute rents, issues and profits of the Project
under applicable laws), or which may be received or receivable by Borrower
from any hiring, using, letting, leasing, subhiring, subletting, or
subleasing of any part of the Property;
(c) All of Borrower's present and future rights to receive payments
of money, services or property, including, without limitation, rights to all
deposits from tenants of the Project, deposits from prospective purchasers of
the Project, capital contributions from the constituent partners of Borrower
(if Borrower is a partnership), amounts payable on account of the sale of
partnership interests or stock of Borrower, accounts, accounts receivable,
deposit accounts, chattel paper, notes, drafts, contract rights, instruments,
general intangibles and principal, interest and payments due on account of
goods sold, services rendered, loans made or credit extended, together with
title or interest in all documents evidencing or securing the same.
(d) All other intangible property and rights relating to the
Project or the operation thereof, or used in connection therewith, including
but not limited to all governmental permits relating to construction or other
activities on the Project, all names under or by which the Project may at any
time be operated or known, all rights to carry on business under any such
names, or any variant thereof, all trade names and trademarks relating in any
way to the Project, goodwill in any way relating to the Project, and all
permits, licenses, franchises, approvals, variances and land
B-4
<PAGE>
use entitlements relating in any way to, or to the occupancy, operation,
ownership and use of, the Project;
(e) All judgments, claims, settlements of claims and causes of
action under any legal proceeding relating to the Project or the ownership,
use, occupancy or operation thereof;
(f) All proceeds from sale or disposition of the Personal Property;
(g) Borrower's rights under all insurance policies covering the
Project or any of the Personal Property (whether or not Borrower is required
to maintain such insurance under the terms of the Loan Documents), and all
proceeds, loss payments and premium refunds payable regarding the same;
(h) All reserves, deferred payments, deposits, refunds, cost
savings and payments of any kind relating to the construction of any
improvements on the Project;
(i) All water stock relating to the Project;
(j) All causes of action, claims, compensation and recoveries for
any damage to or condemnation or taking of the Project or the Personal
Property, or for any conveyance in lieu thereof, whether direct or
consequential, or for any damage or injury to the Project or the Personal
Property, or for any loss or diminution in value of the Project or the
Personal Property;
(k) All architectural, structural, mechanical and engineering plans
and specifications prepared for construction of improvements or extraction of
minerals or gravel from the Project and all studies, data and drawings
related thereto, and all contracts and agreements of Borrower relating to
such plans and specifications or such studies, data and drawings or to the
construction of improvements on or extraction of minerals or gravel from the
Project;
(l) All of Borrower's present and future rights in and to all
refunds, rebates, reimbursements, reserves, deferred payments, deposits, cost
savings, governmental subsidy payments, governmentally-registered credits
(such as emissions reduction credits), other credits, waivers and payments,
whether in cash or kind, due from or payable by any Governmental Agency or
any insurance or utility company relating to any or all of the Project, any
improvements thereon or any of the collateral described herein or arising out
of satisfaction of any condition imposed upon or the obtaining of any
approvals for the development of the Project or the improvements thereon;
(m) All of Borrower's present and future rights in and to all
refunds, rebates, reimbursements, credits and payments of any kind due from
or payable by any Governmental Agency or other entity for any taxes, special
taxes, assessments, or similar governmental or quasi-governmental charges or
levies imposed upon Borrower with respect to the Project, any improvements
thereon or any of the collateral described herein or arising out of the
satisfaction of any condition imposed upon or the obtaining of any approvals
for the development of the Project or the improvements thereon;
(n) All Borrower's rights in proceeds of the Loan;
(o) All Borrower's rights to receive the proceeds of any "take-out"
or permanent financing or commitment to provide such financing; and
B-5
<PAGE>
(p) All proceeds and products of any of the foregoing (and proceeds
and products of proceeds and products).
All terms used herein which are defined in the California Commercial
Code shall have the same meanings when used herein, unless the context
requires otherwise. In addition, as used in this EXHIBIT B-2, the following
terms shall have the following meanings:
FF&E: The Personal Property and the Fixtures (each as hereinafter defined in
this Exhibit B-2), including, without limitation, all machinery, equipment,
engines, appliances and fixtures for generating or distributing air, water,
heat, electricity, light, fuel or refrigeration, or for ventilating or
sanitary purposes, or for the exclusion of vermin or insects, or for the
removal of dust, refuse or garbage; all beds, dressers, tables, chairs,
wallbeds, wall safes, built-in furniture and installations, shelving,
lockers, partitions, doorstops, vaults, motors, elevators, dumbwaiters,
awnings, window shades, venetian blinds, light fixtures, fire hoses and
brackets and boxes for the same, fire sprinklers, alarm systems, draperies,
drapery rods and brackets, mirrors, mantles, screens, linoleum, carpets and
carpeting, plumbing, bathtubs, sinks, basins, pipes, faucets, water closets,
laundry equipment, washers, dryers, ice boxes, refrigerators, heating units,
stoves, ovens, ranges, dishwashers, disposals, water heaters, incinerators,
furniture, fixtures and furnishings, telephone, sound, security and
communications systems, all specifically designed installations and
furnishings, all building materials, supplies and equipment now or hereafter
delivered to the Project, all office equipment, including, without
limitation, all computers, computer systems, hardware and software, access
codes, access keys, computer programs, file names, typewriters, duplicating
machines, word processing equipment, adding machines, calculators, dictating
equipment and file cabinets, television sets, clocks, radios and other
electronic or audio/video equipment, all works of art, including, without
limitation, all paintings, wall hangings, fountains and sculptures.
FIXTURES: All fixtures now or hereafter located upon or within the
Improvements or now or hereafter installed in, or used in connection with any
of the Improvements, including, but not limited to, any and all partitions,
screens, awnings, motors, engines, boilers, furnaces, pipes, plumbing,
elevators, cleaning and sprinkler systems, fire extinguishing apparatus and
equipment, water tanks, heating, ventilating, air conditioning, and air
cooling equipment, built-in refrigerated rooms, and gas and electric machinery,
appurtenances and equipment, whether or not permanently affixed to the Land
or the Improvements, together with all present and future attachments,
accessions, replacements, substitutions and additions thereto or therefor.
PERSONAL PROPERTY: Borrower's interest in all furniture, furnishings,
equipment, machinery, construction materials and supplies, and all other
personal property (other than Fixtures) now or hereafter located in, upon or
about the Project, together with all present and future attachments,
accessions, replacements, substitutions and additions thereto or therefor.
B-6
<PAGE>
EXHIBIT B-3
DESCRIPTION OF PERSONAL PROPERTY FOR GROUND LEASED PROJECTS
All of Borrower's right, title and interest, now or hereafter
acquired, in and to the following:
(a) All personal property, including, without limitation, all
goods, supplies, equipment, furniture, furnishings, fixtures, machinery,
inventory and construction materials which Borrower now or hereafter owns or
in which Borrower now or hereafter acquires an interest or right, including,
without limitation, those which are now or hereafter located on or affixed to
the Project or used or useful in the operation, use or occupancy thereof or
the construction of any improvements thereon, including, without limitation,
any interest of Borrower in and to personal property which is leased or
subject to any superior security interest, or which is being manufactured or
assembled for later installation into the improvements now or hereafter
located at the Project, wherever located, and all books, records, leases and
other documents, of whatever kind or character, relating to the Project;
(b) All fees, income, rents, issues, profits, earnings, receipts,
royalties and revenues which, after the date hereof and while any portion of
the Secured Obligations remains unpaid, may accrue from such goods, fixtures,
furnishings, equipment and building materials or any part thereof or from the
Project or any part thereof, or which may be received or receivable by
Borrower from any hiring, using, letting, leasing, subhiring, subletting, or
subleasing therefor;
(c) All of Borrower's present and future rights to receive payments
of money, services or property (including, without limitation, rights to all
deposits from tenants of the Project, deposits from prospective purchasers of
the Project, capital contributions from the constituent partners of Borrower
(if Borrower is a partnership), amounts payable on account of the sale of
partnership interests or stock of Borrower, accounts, accounts receivable,
deposit accounts, chattel paper, notes, drafts, contract rights, instruments,
general intangibles and principal, interest and payments due on account of
goods sold, services rendered, loans made or credit extended, together with
title or interest in all documents evidencing or securing the same.
(d) All other intangible property and rights relating to the
Project or the operation thereof, or used in connection therewith, including
but not limited to all governmental permits relating to construction or other
activities on the Project, all names under or by which the Project may at any
time be operated or known, all rights to carry on business under any such
names, or any variant thereof, all trade names and trademarks relating in any
way to the Project, goodwill in any way relating to the Project, and all
permits, licenses, franchises, approvals, variances and land use entitlements
relating in any way to, or to the occupancy, operation, ownership and use of,
the Project;
(e) All judgments, claims, settlements of claims and causes of
action under any legal proceeding relating to the Project or the ownership,
lease, use, occupancy or operation thereof;
(f) All proceeds from sale or disposition of the Personal Property;
(g) Borrower's rights under all insurance policies covering the
Project or any of the Personal Property (whether or not Borrower is required
to maintain such insurance under the terms of the Loan Documents), and all
proceeds, loss payments and premium refunds payable regarding the same;
B-7
<PAGE>
(h) All reserves, deferred payments, deposits, refunds, cost savings
and payments of any kind relating to the construction of any improvements on
the Project;
(i) All water stock relating to the Project;
(j) All causes of action, claims, compensation and recoveries for
any damage to or condemnation or taking of the Project or the Personal
Property, or for any conveyance in lieu thereof, whether direct or
consequential, or for any damage or injury to the Project or the Personal
Property, or for any loss or diminution in value of the Project or the
Personal Property;
(k) All architectural, structural, mechanical and engineering plans
and specifications prepared for construction of improvements or extraction of
minerals or gravel from the Project and all studies, data and drawings
related thereto, and all contracts and agreements of Borrower relating to
such plans and specifications or such studies, data and drawings or to the
construction of improvements on or extraction of minerals or gravel from the
Project;
(l) All of Borrower's present and future rights in and to all
refunds, rebates, reimbursements, reserves, deferred payments, deposits, cost
savings, governmental subsidy payments, governmentally-registered credits
(such as emissions reduction credits), other credits, waivers and payments,
whether in cash or kind, due from or payable by any Governmental Agency or
any insurance or utility company relating to any or all of the Project, any
improvements thereon or any of the collateral described herein or arising out
of satisfaction of any condition imposed upon or the obtaining of any
approvals for the development of the Project or the improvements thereon;
(m) All of Borrower's present and future rights in and to all
refunds, rebates, reimbursements, credits and payments of any kind due from
or payable by any Governmental Agency or other entity for any taxes, special
taxes, assessments, or similar governmental or quasi-governmental charges or
levies imposed upon Borrower with respect to the Project, any improvements
thereon or any of the collateral described herein or arising out of the
satisfaction of any condition imposed upon or the obtaining of any approvals
for the development of the Project or the improvements thereon;
(n) All Borrower's rights in proceeds of the Loan;
(o) All Borrower's rights to receive the proceeds of any "take-out"
or permanent financing or commitment to provide such financing;
(p) All Borrower's right, title and interest in and to all security
deposits and other deposits now or hereafter made by Borrower pursuant to,
and all other refunds, credits, claims, causes of action and other rights now
or hereafter arising under, the Ground Lease, as subsequently amended and
assigned; and
(q) All proceeds and products of any of the foregoing (and proceeds
and products of proceeds and products).
All terms used herein which are defined in the California Commercial
Code shall have the same meanings when used herein, unless the context
requires otherwise.
B-8
<PAGE>
EXHIBIT C
MINIMUM RENT LOSS COVERAGE
<TABLE>
<CAPTION>
MINIMUM RENT
PROJECT LOSS COVERAGE
------- -------------
<S> <C>
Sacramento (3900 Lennane) $426,871
Signal Hill (2501-2525 Cherry) $1,078,196
Sacramento (1600 "K") $472,536
Rancho Cordova (2893 Sunrise,
11492 and 11500 Sunrise Gold Circle) $301,689
Rancho Cordova (11135 Trade Center) $641,245
Rancho Cordova (11167 Trade Center) $149,181
El Dorado Hills (5200 Golden Foothill) $230,211
Citrus Heights (6307 Sunrise) $117,075
Sacramento (2318 16th) $282,278
Santa Rosa (1435 Sebastopol) $350,067
Chico (685 Manzanita) $442,261
Sacramento (5321 Date) $1,012,782
Walnut Creek (2730 N. Main) $894,864
Concord (1050 Burnett) $758,474
</TABLE>
C-1
<PAGE>
EXHIBIT D
ACM PROJECTS
5321 Date Avenue, Sacramento, California
2316 16th Street, Sacramento, California
11135 Trade Center Drive, Rancho Cordova, California
1050 Burnett Avenue, Concord, California
685 Manzanita Court, Chico, California
D-1
<PAGE>
EXHIBIT E
FORM OF ASSIGNMENT OF FRANCHISE AGREEMENTS
Attached.
E-1
<PAGE>
Loan No. 950113436
SECURED PROMISSORY NOTE
(REVOLVER)
$44,000,000 February 15, 1999
FOR VALUE RECEIVED, THE PEREGRINE REAL ESTATE TRUST, an unincorporated
California real estate investment trust, dba WinShip Properties ("BORROWER")
promises to pay to the order of FREMONT INVESTMENT & LOAN, a California
industrial loan association, and its successors and assigns ("LENDER"), at 175
N. Riverview Drive, Anaheim, California 92808, Attention: Commercial Real
Estate, Loan No. 950113436, or at such other place as Lender may designate in
writing, in lawful money of the United States of America, the principal sum of
Forty-Four Million Dollars ($44,000,000), together with interest thereon at the
rate set forth herein from the date of disbursement until paid, on the terms set
forth herein.
ARTICLE 1
DEFINITIONS
As used herein, the following initially-capitalized terms shall have the
meanings set forth below. Any initially-capitalized terms not otherwise defined
herein shall have the meanings given such terms in that certain Loan and
Security Agreement of even date herewith between Borrower and Lender (the "LOAN
AGREEMENT").
"ADJUSTMENT DATE" during the Initial Term means the Initial Adjustment
Date and the first day of every sixth month thereafter and during the Extension
Term means the first day of the sixth month after the Initial Maturity Date and
the first day of every sixth month thereafter.
"ADVANCE" means the Initial Advance (as defined in SECTION 2.6) or any
Subsequent Advance (as defined in SECTION 2.6).
"ADVANCE CONDITIONS" is defined in SECTION 2.6.
"CEILING RATE" means a rate of 14.6463% per annum during the Initial
Term, and a rate per annum equal to six percent (6%) in excess of the Variable
Interest Rate in effect upon the commencement of the Extension Term during the
Extension Term.
"DEFAULT INTEREST RATE" means a rate of five percent (5%) per annum in
excess of the Variable Interest Rate in effect from time to time under this
Note.
"EXTENDED MATURITY DATE" means April 1, 2003.
"EXTENSION TERM" means the extended term of this Note commencing on the
day after the Initial Maturity Date.
<PAGE>
"FINAL PAYMENT" means the final payment due on the Maturity Date of all
unpaid principal, interest, charges and other amounts due under this Note or any
of the other Loan Documents.
"FLOOR RATE" means a rate of seven percent (7%) per annum.
"INITIAL ADJUSTMENT DATE" means October 1, 1999.
"INITIAL ADVANCE" is defined in SECTION 2.6.
"INITIAL MATURITY DATE" means April 1, 2001; provided that, if the
conditions set forth in SECTION 3.1(A) are not satisfied on or before the
maturity date of the Junior Loan, the Initial Maturity Date shall instead be
the earlier date which is sixty (60) days after the notice sent by Lender to
Borrower pursuant to SECTION 3.1(A). In no event shall the Initial Maturity
Date be later than April 1, 2001.
"INITIAL PAYMENT DATE" means May 1, 1999.
"INITIAL TERM" means the original term of this Note commencing on the
Closing Date and ending on the Initial Maturity Date.
"INTEREST RATE" means the Variable Interest Rate or the Default Interest
Rate, as applicable.
"LIBOR RATE" means the Six-Month LIBOR rate of interest published on
each Monday under this designation in the WALL STREET JOURNAL, in its Money
Rates section. Changes in the Variable Interest Rate shall be based on the
Six-Month LIBOR rate quoted in the WALL STREET JOURNAL. If such rate ceases
to be available, or ceases to be published in the WALL STREET JOURNAL, Lender
may select a substantially similar alternate.
"LOAN" means the loan evidenced by this Note.
"MATURITY DATE" means the Initial Maturity Date or, if Borrower has
exercised its option to extend the Initial Maturity Date as provided herein, the
Extended Maturity Date.
"MONTHLY INSTALLMENT" means the monthly payments to be made by Borrower
under SECTION 2.3.
"PAYMENT" means the Monthly Installments, the Annual Fee, the Final
Payment and/or any other payment required to be made by Borrower pursuant to the
terms of the Loan Documents.
"PREPAYMENT" is defined in SECTION 2.4.
"SUBSEQUENT ADVANCE" is defined in SECTION 2.6.
"VARIABLE INTEREST RATE" during the Initial Term means an annual rate
equal to (a) 8.6463% until the Initial Adjustment Date, and (b) from and
after the Initial Adjustment Date, the LIBOR Rate as of the date which is one
(1) Business Day prior to the applicable Adjustment Date plus the Variable
Rate Margin; and during the Extension Term means an annual rate equal to (x)
the LIBOR Rate as of the date which is one (1) Business Day prior to the
Initial Maturity Date plus the Variable Rate Margin until the first day of
the sixth month after the Initial Maturity Date, and (y) thereafter, the
LIBOR Rate as of the date which is one (1) Business Day prior to the
applicable Adjustment Date plus the Variable Rate Margin.
-2-
<PAGE>
"VARIABLE RATE MARGIN" means three and one-half percent (3.5%) per
annum, provided that at any time that, and so long as, sixty-five percent
(65%) or more of the aggregate Appraised Value of the Borrowing Base Projects
is comprised of Borrowing Base Projects operated or to be operated as hotels,
then the "Variable Rate Margin" means three and three-quarters percent
(3.75%) per annum, in each case as the same may be increased as provided in
SECTION 7.8 of the Loan Agreement. Any adjustment of the Variable Rate
Margin as provided herein (excluding any increase provided in SECTION 7.8 of
the Loan Agreement which shall be handled as provided therein) shall be
effective, and the Variable Interest Rate shall be adjusted as of, the first
day of the first month following the date on which sixty-five percent (65%)
or more of the aggregate Appraised Value of the Borrowing Base Projects is
comprised of Borrowing Base Projects operated or to be operated as hotels (or
the first day of the first month following the date on which the same ceases
to be true).
ARTICLE 2
INTEREST; PAYMENTS; ADVANCES
2.1 VARIABLE INTEREST RATE.
Subject to the provisions of SECTIONS 2.2 and 4.3 and ARTICLE 3, interest
shall accrue on the unpaid principal balance outstanding under this Note from
time to time at the Variable Interest Rate. The Variable Interest Rate shall be
adjusted as provided herein to reflect changes in the Variable Rate Margin and
shall be adjusted on the Initial Adjustment Date and on each Adjustment Date
thereafter to reflect changes in the LIBOR Rate; provided that in no event shall
the Variable Interest Rate (a) exceed the Ceiling Rate, (b) be less than the
Floor Rate, or (c) be adjusted by more than one percent (1%) at any Adjustment
Date. Borrower acknowledges and agrees that (x) Lender has no obligation to
purchase, sell and/or match funds in connection with the use of the LIBOR Rate
as a basis for calculating the Variable Interest Rate; (y) the LIBOR Rate is
used merely as a reference in determining the Variable Interest Rate; and (z)
the LIBOR Rate is a reasonable and fair basis for calculating the Variable
Interest Rate.
2.2 [INTENTIONALLY OMITTED].
2.3 PAYMENTS.
A. Borrower shall make monthly payments (the "MONTHLY
INSTALLMENTS") of interest only beginning on the Initial Payment Date and on
the first day of each month thereafter. The Monthly Installments shall be
subject to adjustment to reflect any adjustments in the Variable Interest
Rate of this Note, with each such adjustment effective thirty (30) days after
the applicable Adjustment Date. Monthly Installments shall also be adjusted
as provided in SECTION 7.6(F) and SECTION 7.8 of the Loan Agreement. Monthly
Installments shall not be adjusted on any partial repayments of the Loan
until the first day of the following month. Further, the Monthly
Installments shall be adjusted upon the funding of any Subsequent Advances by
Lender in accordance with SECTION 2.6.
B. Interest shall commence to accrue under this Note upon the
disbursement by Lender of Loan proceeds into the escrow for the Loan closing.
Interest for any partial calendar month in which the Closing Date occurs shall
be deducted from the funds disbursed by Lender on the Closing Date. All
interest shall be calculated based on a three hundred and sixty (360) day year,
but shall be computed for the actual number of days in the period for which
interest is charged.
C. Each Monthly Installment and the Final Payment shall be applied
first to the payment of accrued and unpaid charges and interest under this Note
and the other Loan
-3-
<PAGE>
Documents as of the date of receipt and the remainder, if any, shall be
applied to the unpaid principal balance of the Loan; provided that upon the
occurrence of a Potential Default or Event of Default under any of the Loan
Documents, Lender shall be entitled to allocate Monthly Installments, the
Final Payment and any other payments received by Lender to principal,
interest, and/or charges in such order as Lender may elect. All payments of
principal, interest and other amounts under this Note and the other Loan
Documents shall be payable without any right of reduction, deferral, set-off,
deduction, abatement, rescission or counterclaim.
D. Whenever any payment to be made hereunder or under any of the
other Loan Documents shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day
and such extension of time shall be included in the computation of the
interest due hereunder or under the other Loan Documents.
E. In addition to the other payments required to be made by this
SECTION 2.3, Borrower shall each year pay to Lender the fees provided in
SECTION 2.10 of the Loan Agreement.
2.4 PREPAYMENT PRIVILEGE.
A. Within the limit of the Loan Amount, and subject to the
provisions of SECTION 2.1 of the Loan Agreement, Borrower may repay all or
any portion of the Loan without the imposition of a premium or penalty, and
reborrow such amount, on the terms and conditions set forth in this Note and
in the Loan Agreement.
B. As a condition precedent to Borrower's right to make any
repayment of the principal of the Loan, Borrower shall provide Lender with
not less than thirty (30) days prior written notice in the event of a full
repayment, and not less than ten (10) business days prior written notice in
the event of a partial repayment.
2.5 ADDITIONAL ADVANCES.
If Lender advances funds under the terms of this Note or any of the
other Loan Documents other than Advances pursuant to SECTION 2.6, such
amounts (a) shall be deemed advances under this Note and shall be secured by
the Deed of Trust and other Loan Documents, notwithstanding that such
advances may cause the total amount advanced to exceed the face amount of
this Note, (b) shall be subject to the imposition of a loan fee of one
percent (1%) of the amount advanced, plus interest thereon at the Default
Interest Rate from the date of Lender's advance of funds until the date of
reimbursement, and (c) shall be due and payable, together with such loan fee
and interest, within ten (10) days after demand by Lender.
2.6 ADVANCES.
A. The Loan proceeds will be advanced by Lender to Borrower
pursuant to the terms and conditions of the Loan Agreement and this SECTION
2.6 in an initial disbursement in the amount set forth on EXHIBIT A attached
hereto, less any fees, costs, expenses and interest payable to Lender as of
such date (the "INITIAL ADVANCE"), upon the closing of the Loan, and
subsequent disbursements as provided in the Loan Agreement and this SECTION
2.6 (individually, a "SUBSEQUENT ADVANCE" and collectively, the "SUBSEQUENT
ADVANCES"), upon the terms and conditions set forth in the Loan Agreement and
this SECTION 2.6. Without limiting any other provision of this Note or the
Loan Agreement, each Subsequent Advance shall be in the minimum amount of Two
Hundred Fifty Thousand Dollars ($250,000). Subsequent Advances shall be
funded by Lender not more frequently than twice per month.
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<PAGE>
B. The proceeds of any Subsequent Advance shall only be used for
(i) capital improvements to the Borrowing Base Projects (all of which capital
improvements shall be performed in compliance with the terms of the Loan
Documents), or (ii) the normal, customary and reasonable direct costs
incurred in the ordinary course in connection with Borrower's acquisition of
income-producing commercial properties for its own account, or (iii) up to a
maximum aggregate amount of One Million Two Hundred Thousand Dollars
($1,200,000) may be paid to the Public Shareholders as cash in lieu of
fractional interests or shares paid by Borrower or WinShip Properties, Inc.
in connection with the reorganization of Borrower contemplated by SECTION 2.7
of the Loan Agreement. Concurrently with any request by Borrower for any
Subsequent Advance, Borrower shall deliver to Lender evidence satisfactory to
Lender that all of the proceeds of such Subsequent Advance shall be used for
the purposes permitted herein. Without limiting the foregoing, within thirty
(30) days after any Subsequent Advance, Borrower shall deliver to Lender
evidence satisfactory to Lender that such entire Subsequent Advance was in
fact used for the purposes set forth herein. Lender may, at its election,
disburse any Subsequent Advance directly to the applicable contractor,
supplier, acquisition escrow or Public Shareholder.
C. Each Subsequent Advance shall be made by Lender to Borrower at
Borrower's request only if and when all of the conditions set forth on
EXHIBIT A attached hereto (the "ADVANCE CONDITIONS") shall have been
satisfied with respect to each such Subsequent Advance. Lender shall make
each Subsequent Advance within fifteen (15) business days of its
determination that all of the Advance Conditions with respect to such
Subsequent Advance have been satisfied in full, unless new collateral is
required from Borrower pursuant to the terms of SECTION 2(G) of EXHIBIT A
attached hereto and SECTION 2.6 of the Loan Agreement, in which event Lender
shall make each Subsequent Advance within thirty (30) calendar days of its
determination that all of the Advance Conditions with respect to such
Subsequent Advance and all of the terms and conditions set forth in SECTION
2.6 of the Loan Agreement have been satisfied in full.
D. Lender shall disburse each Subsequent Advance to Borrower net
of the interest on such Subsequent Advance pursuant to this Note for the
remainder of the month in which such disbursement is made, and the Monthly
Installments shall thereafter be recalculated, effective on the first day of
the following calendar month, based upon the new unpaid principal balance of
the Loan.
E. Borrower acknowledges and agrees that Lender shall have no
obligation to make any or all of the Subsequent Advances unless all of the
Advance Conditions with respect thereto have been satisfied in full. In the
event that all of the Advance Conditions for any Subsequent Advance have not
been satisfied in full, Lender's obligation to make, and Borrower's right to
receive, such Subsequent Advance shall terminate and be of no further force
or effect. Lender's obligation to fund any Subsequent Advances shall
terminate on the date which is thirty (30) days before the Maturity Date.
F. The parties agree that the provisions of this SECTION 2.6
constitute a contract to make a loan (extend debt financing or financial
accommodations) within the meaning of 11 U.S.C. Section 365(c)(2) and Section
365(e)(2)(B).
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ARTICLE 3
MATURITY DATE; EXTENSION TERM INTEREST RATE
3.1 MATURITY DATE; EXTENSION OF INITIAL MATURITY DATE.
A. The Final Payment and all other amounts owing by Borrower to
Lender under the Loan Documents shall be due and payable on the Initial
Maturity Date. In the event that on or before October 1, 2000, the Junior
Loan, and all amounts due under the Junior Loan Documents, are not repaid in
full, and Borrower fails to enter into an agreement with the Junior Lender,
in form and substance satisfactory to Lender, extending the maturity date of
the Junior Loan to a date no earlier than the Initial Maturity Date, then the
Initial Maturity Date shall be the date which is sixty (60) days after
written notice from Lender to Borrower (but in no event later than April 1,
2001) and all principal, interest and other indebtedness evidenced by this
Note shall be due and payable in full on such date without any presentment,
demand, protest or other notice of any kind. If Lender fails to give such
notice to Borrower, the Initial Maturity Date shall be April 1, 2001.
B. The Initial Maturity Date may be extended to the Extended
Maturity Date upon the satisfaction of all of the following terms and
conditions:
(i) at least sixty (60) days prior to the Initial Maturity
Date, Borrower shall give Lender written notice that Borrower desires to
extend the Initial Maturity Date to the Extended Maturity Date;
(ii) concurrently with Borrower's notice to Lender pursuant
to SECTION 3.1(A) above, Borrower shall deliver to Lender an extension fee
(the "EXTENSION FEE") in an amount equal to Four Hundred Forty Thousand
Dollars ($440,000), which Extension Fee shall be nonrefundable except as
expressly provided in SECTION 3.2;
(iii) Lender shall have approved the extension of the Initial
Maturity Date under Lender's then current underwriting criteria for similar
loans and properties, including, without limitation, Lender's requirements
regarding current and projected loan-to-value-ratios, net operating income,
occupancy levels, debt service coverage, condition of the Project and
Borrower's and the Principal Parties' financial condition;
(iv) the Junior Loan and all amounts due under the Junior
Loan Documents shall have been paid in full, or the maturity date of the
Junior Loan shall have been extended to a date no earlier than the Extended
Maturity Date pursuant to agreement(s) in form and substance acceptable to
Lender;
(v) Borrower shall pay all reasonable costs and expenses
incurred by Lender in connection with the extension of the Maturity Date and
Lender's approval thereof, including, without limitation, appraisal costs,
title fees and reasonable attorneys' fees and costs;
(vi) there shall be no Event of Default or Potential Default
under this Note or any of the other Loan Documents either on the date of
Borrower's notice to Lender pursuant to SECTION 3.1(A) above or on the
Initial Maturity Date; and
(vii) both on the date of Borrower's notice to Lender pursuant
to SECTION 3.1(A) above and on the Initial Maturity Date, the Ground Lease
shall be in full force and effect and there
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shall be no default, or event which, with the giving of notice or the passage
of time or both, would constitute a default, under the Ground Lease.
In accordance with the terms of the Loan Agreement, the
Appraised Value of the Borrowing Base Projects and Borrowing Base Amount
shall be recalculated upon the extension of the Initial Maturity Date.
3.2 EXTENSION FEE. The Extension Fee shall be refunded to Borrower
only if (i) Lender does not approve the extension of the Initial Maturity
Date as provided in SECTION 3.1(C), and (ii) no Event of Default, monetary
Potential Default or material nonmonetary Potential Default exists under this
Note or any of the other Loan Documents. If the Initial Maturity Date is not
extended as provided herein because Lender does not approve the extension of
the Initial Maturity Date, and if the Extension Fee is not refunded to
Borrower because an Event of Default, monetary Potential Default or material
nonmonetary Potential Default exists under the Loan Documents, Lender shall
apply the Extension Fee to the payment of amounts owed to Lender under the
Loan Documents in such order as Lender may elect in its sole discretion (and
in no other circumstances shall the Extension Fee be applied to the payment
of Borrower's obligations under the Loan Documents).
3.3. EXTENSION INTEREST RATE. If the Maturity Date is extended to
the Extended Maturity Date, subject to the provisions of SECTION 4.3,
interest shall accrue on the unpaid principal balance outstanding under this
Note from time to time at the Variable Interest Rate; provided that in no
event shall the Variable Interest Rate (a) exceed the Ceiling Rate, (b) be
less than the Floor Rate, or (c) be adjusted by more than one percent (1%) at
any Adjustment Date.
ARTICLE 4
MISCELLANEOUS PROVISIONS
4.1 RESTRICTIONS ON TRANSFER AND ENCUMBRANCE.
This Note is secured by, among other things, the Deed of Trust. The
Deed of Trust contains provisions allowing for the acceleration of the
maturity date of this Note upon the sale, transfer, conveyance, assignment,
encumbrance, hypothecation or other alienation without Lender's prior written
consent (which may be withheld in Lender's sole discretion), of all or any
portion of the Project or any interest therein or of certain interests in
Borrower or its Principals. Further, the Loan Agreement contains provisions
for the acceleration of the Maturity Date of this Note upon the occurrence of
certain events described therein.
4.2 INTEREST RATE LIMITATION.
It is the intent of Borrower and Lender that the Loan be exempt from
the restrictions of the usury laws of the State of California. In the event
that for any reason it is nonetheless determined that California usury law is
applicable to the Loan, Borrower and Lender stipulate and agree that none of
the terms and provisions contained herein or in any of the Loan Documents
shall ever be construed to create a contract for the use, forbearance or
detention of money requiring payment of interest at a rate in excess of the
maximum interest rate permitted to be charged by the laws of the State of
California. In such event, if Lender shall collect monies which are deemed
to constitute interest which would otherwise increase the effective interest
rate under this Note to a rate in excess of the maximum rate permitted to be
charged by the laws of the State of California, all such sums shall, at the
option of Lender, be credited to the payment of the sums due hereunder or
returned to Borrower.
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4.3 LATE CHARGE AND DEFAULT INTEREST RATE.
If any Payment is not received by Lender within ten (10) days after
its due date, or if the due date is not a Business Day, if any Payment is not
received by Lender on the next succeeding Business Day after such ten (10)
day period, Borrower shall pay to Lender a late charge of ten percent (10%)
of such Payment, which late charge shall be immediately due and payable
without demand or notice by Lender. In addition, at Lender's option in its
sole discretion, all amounts owing to Lender under the Loan Documents shall
bear interest at the Default Interest Rate if any Payment is not received by
Lender within thirty (30) days after its due date, or if the due date is not
a Business Day, if any Payment is not received by Lender on the next
succeeding Business Day after such thirty (30) day period, or if any other
Event of Default occurs hereunder or under any of the other Loan Documents.
The Default Interest Rate shall apply until the delinquent Payment, together
with all interest at the Default Interest Rate and all late charges thereon,
have been received by Lender or such other Event of Default has been fully
cured. Borrower acknowledges that late payment of any Payment or the
occurrence of an Event of Default will cause Lender to incur costs which
would be costly or inconvenient to establish. Borrower and Lender agree that
it would be impractical or extremely difficult to fix Lender's actual damages
if any Payment is not paid when due or an Event of Default occurs, and such
late charge and Default Interest Rate represent a reasonable sum considering
all of the circumstances and represent a fair and reasonable estimate of the
costs that Lender will incur by reason of late payment or default.
Acceptance of such late charge and interest at the Default Interest Rate
shall not limit Lender's right to compel performance of any obligation or to
exercise any of its rights or remedies under the Loan Documents.
4.4 EVENT OF DEFAULT; REMEDIES.
Borrower's failure to pay any principal, interest or other monies due
under this Note within ten (10) days after such amount is due, or the
occurrence of any "Event of Default" under any of the other Loan Documents
(as "Event of Default" is defined therein), shall constitute an event of
default (an "EVENT OF DEFAULT") hereunder and under the other Loan Documents.
Upon the occurrence of any Event of Default hereunder or under any of the
Loan Documents (as "Event of Default" is defined in the other Loan
Documents), Lender may, at its option, declare all principal, interest and
other indebtedness evidenced by this Note to be immediately due and payable
without any presentment, demand, protest or notice of any kind, and Lender
shall be entitled to exercise any and all remedies available to it under the
Loan Documents or at law or equity.
4.5 ATTORNEYS' FEES AND OTHER EXPENSES.
If Borrower fails to pay any amounts owing under this Note or any of
the other Loan Documents when due or if an Event of Default occurs under any
of the Loan Documents, Borrower shall pay Lender, within ten (10) days after
demand by Lender, all reasonable attorneys' fees and costs, and all other
reasonable and necessary out-of-pocket expenses, including, without
limitation, title, filing, recording, appraisal, environmental, trustee and
other costs or fees, incurred by Lender in connection with this Note and the
exercise of any right or remedy under this Note or any of the other Loan
Documents.
4.6 WAIVERS.
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Borrower hereby waives diligence, presentment, protest and demand,
notice of protest, dishonor and repayment of this Note and, to the extent
permitted by applicable law, the defense of the statute of limitations.
Borrower expressly agrees that, without in any way affecting the liability of
Borrower hereunder and without giving any notice to Borrower thereof, Lender
may, at its option, extend the Maturity Date or the time for payment of any
Payment due hereunder, accept additional security, release any party liable
hereunder, release any security now or hereafter securing this Note, accept a
renewal of this Note or join in any subordination agreement. No provision in
this Note (including, without limitation, the provisions for the late charge
or interest at the Default Interest Rate) shall be construed as in any way
excusing Borrower from its obligation to make each Payment under this Note
promptly when due.
4.7 SUCCESSORS AND ASSIGNS.
This Note and all of the obligations hereunder shall be the joint and
several obligation of all makers of this Note (who are referred to jointly
and severally as "BORROWER" in this Note). This Note shall be binding upon
and shall inure to the benefit of Borrower and Lender and their respective
successors and assigns.
4.8 NOTICES.
All notices to be given under this Note shall be in writing and shall
be given in the manner provided in the Loan Agreement.
4.9 COUNTERPARTS.
This Note may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. Signature pages may be detached from the counterparts and
attached to a single copy of this Note to physically form one document.
4.10 GOVERNING LAW.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of California.
4.11 LIMITED RECOURSE OBLIGATIONS.
A. Except as provided in SECTIONS 4.11(B), 4.11(C), 4.11(D) or
4.11(E) below, in the event of any default under the terms of the Loan
Documents, Lender's recourse shall be limited to proceeding against the
collateral (the "COLLATERAL") covered by the Deed of Trust and the other Loan
Documents and any other deed of trust, assignment or security agreement
creating or evidencing any lien, right or security interest granted in favor
of Lender for the purpose of securing the obligations of Borrower under this
Note or the other Loan Documents (collectively, the "SECURITY DOCUMENTS") and
to proceeding against any guarantor under any guaranty delivered to Lender in
connection with the Loan Documents. It is expressly understood and agreed,
however, that nothing contained in this SECTION 4.11 shall in any way
constitute or be deemed a release of the debt evidenced by this Note or of
any other obligation of Borrower under the Loan Documents or otherwise affect
or impair the enforceability against Borrower or any other party of the
liens, assignments and security interests created by the Security Documents
or relating to the Loan evidenced by this Note.
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B. Notwithstanding anything to the contrary contained in this
SECTION 4.11, Borrower shall be fully and personally liable for all expenses,
losses, claims, damages and liabilities incurred or suffered by Lender in
connection with:
(i) Any negligent or grossly negligent tortious conduct or
material misrepresentation by Borrower or any of the Principals in connection
with the Loan, any of the Loan Documents or any of the Collateral;
(ii) Any waste to any part of the Collateral;
(iii) Any failure to deliver to Lender any Casualty Proceeds
(as defined in the Deed of Trust) covering any portion of the Collateral or
any Condemnation Proceeds (as defined in the Deed of Trust) as to any portion
of the Collateral in accordance with the provisions of the Loan Documents or
any failure by Borrower to apply any such proceeds released by Lender to
Borrower in accordance with the terms of the Loan Documents;
(iv) All indemnity agreements of Borrower in any of the Loan
Documents to the extent such indemnity agreements cover losses, costs and
expenses, damages, claims and/or liabilities to, by or from third parties;
(v) Any failure to deliver to Lender any Rents (as defined
in the Assignment of Rents), security deposits or other such amounts relating
to the Collateral in accordance with the provisions of the Loan Documents;
(vi) Any failure to procure or maintain policies of insurance
as required by the Loan Documents;
(vii) Borrower's environmental obligations under the Loan
Documents and the obligations of Borrower and any other signatory under the
Environmental Indemnity;
(viii) Amounts necessary to pay Impositions (as defined in the
Deed of Trust), to the extent not previously deposited with Lender pursuant
to SECTION 1.4 of the Deed of Trust, either paid by Lender and not reimbursed
by Borrower prior to, or remaining due or delinquent on, (a) the later of the
date on which title to the Collateral vests in the purchaser at a foreclosure
sale under the Deed of Trust or the date on which Borrower's statutory right
of redemption expires, or (b) the date on which the Collateral is transferred
to Lender by a deed in lieu or in aid of foreclosure of the Deed of Trust; and
(ix) Amounts necessary to pay any Liens against the Project
or any interest therein which are not expressly permitted by the terms of the
Loan Documents.
C. Notwithstanding anything to the contrary contained in this
SECTION 4.11, Borrower shall be fully and personally liable for the Loan and
all amounts owing to Lender under the Loan Documents (including, without
limitation, all principal and accrued interest) in the event of:
(i) Any fraud, intentional tortious conduct or intentional
material misrepresentation by Borrower or any of the Principals in connection
with the Loan, any of the Loan Documents or any of the Collateral; and
(ii) Any "transfer" (as defined in SECTION 1.10 of the Deed
of Trust and SECTION 2.7 of the Loan Agreement) in violation of the
provisions of SECTION 1.10 of the Deed of Trust other than mechanics' liens
being contested by Borrower in accordance with the Loan Documents.
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D. Notwithstanding anything to the contrary contained in this
SECTION 4.11, Borrower shall be fully and personally liable for the payment
of the Seismic Principal Payment in accordance with SECTION 7.6(F) of the
Loan Agreement in the event that Borrower fails either to maintain any
earthquake insurance now or hereafter required by Lender in accordance with
such SECTION 7.6(F) or to make the earthquake repairs required under the Loan
Documents.
E. Notwithstanding anything to the contrary contained in this
SECTION 4.11, if Borrower has distributed any or all of its assets, directly
or indirectly, to its partners, shareholders, members or other owners during
the twelve (12) months prior to the occurrence of an Event of Default under
the Loan Documents or at any time after the occurrence of an Event of Default
or Potential Default under the Loan Documents, then Borrower shall be fully
and personally liable for a portion of the Loan and the other amounts owing
to Lender under the Loan Documents in an amount equal to such distributions
made by Borrower. As used herein, the distribution of assets shall include,
without limitation, the repayment of any loans made to Borrower or any
interest or other charges payable in connection therewith, the return of
capital contributions, distributions upon the termination, liquidation or
dissolution of Borrower and the payment of fees, including management,
leasing, brokerage and other fees to the extent such fees exceed the amounts
payable in arms' length transactions with third parties.
F. Nothing contained in this SECTION 4.11 shall limit any of
Lender's rights under the Environmental Indemnity or under California Code of
Civil Procedure Section 726.5 or any other Law which gives Lender the right
to waive its lien against environmentally impaired property and pursue the
rights of an unsecured creditor or otherwise obtain a money judgment against
the Limited Recourse Parties in connection therewith.
G. Nothing contained in this SECTION 4.11 shall limit or affect in
any manner any of Lender's rights or remedies under any guaranty now or
hereafter delivered to Lender in connection with the Loan.
4.12 SHAREHOLDERS.
Notwithstanding anything to the contrary contained in this Note
or any of the other Loan Documents, in no event shall the Shareholders (as
defined in Borrower's Formation Documents) be personally or individually
liable for any debt, claim, obligation or damages under, or for any money
that may become due or payable in any way under, this Agreement or any of the
other Loan Documents. The provisions of this SECTION 4.12 shall be applicable
to each of the Loan Documents (whether or not explicitly stated therein) and
is hereby incorporated into each of the Loan Documents by this reference.
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IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of
the date first above written.
THE PEREGRINE REAL ESTATE TRUST, an
unincorporated California real estate
investment trust,
dba WinShip Properties
By:
-----------------------------------
Its:
-------------------------------
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STATE OF CALIFORNIA )
) SS.
COUNTY OF ____________ )
On ______________, before me, ________________, a Notary Public,
personally appeared ______________________, and ______________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
-------------------------------------------
Notary Public
<PAGE>
EXHIBIT A
ADVANCE CONDITIONS
The following shall be conditions precedent to each Subsequent Advance:
A. No Event of Default shall have occurred, and no Potential
Default shall have occurred and be continuing, under any of the Loan
Documents.
B. Without limiting the provisions of the Loan Documents, no
payment required to be made by Borrower under the Loan Documents shall have
been made more than thirty (30) days after the due date under the Loan
Documents which in the aggregate has a material adverse effect on (i)
Borrower's ability to timely pay Monthly Installments or otherwise comply
with the terms of the Loan Documents, or (ii) the operation of any of the
Projects.
C. No material adverse change shall have occurred with respect to
any of the Projects, the Ground Lease, Borrower's assets, net worth,
financial condition, or management or operational capability.
D. Borrower shall have paid all reasonable costs incurred by
Lender in connection with Lender's determination that the Advance Conditions
have or have not been satisfied, including, without limitation, title
insurance charges, credit reporting fees, attorneys' fees and costs,
appraisal fees, inspection fees and engineering fees.
E. Borrower shall have made a written request for the specific
Subsequent Advance.
F. The outstanding principal balance of the Loan, without
consideration of such disbursement, shall be equal to or greater than Eleven
Million Dollars ($11,000,000).
G. In the event that Lender determines that Lender's funding of
any Subsequent Advance will cause the outstanding principal balance of the
Loan to exceed the Borrowing Base Amount, Borrower shall have delivered to
Lender sufficient additional collateral for the Loan in accordance with the
terms and conditions of SECTION 2.6 of the Loan Agreement to increase the
Borrowing Base Amount to an amount not less than the outstanding principal
balance of the Loan, including such Subsequent Advance.
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FOR IMMEDIATE RELEASE
CONTACT: LARRY KNORR, (916) 929-8244, EXT. 29
WINSHIP PROPERTIES ANNOUNCES EXPANDED CREDIT FACILITY AND TWO PROPERTY SALES.
SACRAMENTO, CA, March 15, 1999: WinShip Properties announced today that it
has expanded its credit facility to $44 Million with Fremont Investment & Loan,
replacing a $27.5 Million credit facility with another lender. This expanded
facility will provide capital to WinShip Properties for such things as property
improvements and where appropriate, new investments. $10 Million of the loan
proceeds was utilized to retire the company's outstanding senior notes. The
senior noteholders are also significant shareholders of the company.
WinShip Properties also announced two unrelated property sales. The
Company sold its mini-storage facility in Santa Rosa for $3.6 Million as well as
an office building in Sacramento for $4.8 Million. Net proceeds from these two
sales were used to reduce the outstanding loan balance of the new credit
facility.
