<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X]Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1994
[]Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________ to ________________
Commission file number 1-9524
BURNHAM PACIFIC PROPERTIES, INC.
----------------------------------------------
(Exact name of Registrant as specified in its Charter)
California 33-0204162
- --------------------------------------------- ---------------------
(State of other jurisdiction of incorporation) (IRS Employer Identification
No.)
610 West Ash Street, San Diego, California 92101
- ------------------------------------------ ----------------------
(Address of principal executive offices) (Zip Code)
(619) 232-2001
--------------
Registrant's telephone number, including area code
NA
----------------------------------------------
Former name, former address and former fiscal year if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO-----
---
Number of shares of the Registrant's common stock outstanding at October 28,
1994: 16,608,201
1
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
BURNHAM PACIFIC PROPERTIES, INC.
BALANCE SHEETS
SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS September 30, 1994 December 31, 1993
------------------- ------------------
<S> <C> <C>
Less Accumulated Depreciation (48,607) (40,751)
-------- --------
Property-Net 339,296 343,112
Cash and Cash Equivalents 390 900
Receivables-Net 9,226 7,393
Other Assets 8,257 8,857
-------- --------
Total $357,169 $360,262
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Accounts Payable and Other Liabilities $ 2,305 $ 1,976
Accrued Interest on Convertible 396 1,650
Debentures
Tenant Security Deposits 889 940
Dividends Declared 5,944
Notes Payable 111,952 115,253
Convertible Debentures 25,710 42,354
Line of Credit Advances 5,000 5,000
-------- --------
Total Liabilities 152,196 167,173
-------- --------
Stockholders' Equity:
Preferred Stock, 5,000,000 Shares
Authorized; No Shares Issued or
Outstanding
Common Stock, No Par Value,
40,000,000 Shares Authorized;
16,511,748 and 14,987,097 Shares
Outstanding at September 30, 1994, and
December 31, 1993, Respectively 254,889 231,021
Dividends in Excess of Net Income (49,916) (37,932)
-------- --------
Total Stockholders' Equity 204,973 193,089
-------- --------
Total $357,169 $360,262
======== ========
</TABLE>
See the Accompanying Notes
2
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
REVENUES THREE MONTHS ENDED NINE MONTHS ENDED
9/30/94 9/30/93 9/30/94 9/30/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Rents $ 12,838 $ 10,361 $ 38,300 $ 28,115
Interest 109 192 301 658
-------- -------- -------- --------
Total Revenues 12,947 10,553 38,601 28,773
------ ------ ------ ------
COSTS AND EXPENSES
Interest 2,878 2,077 8,693 7,641
Rental Operating 3,104 2,593 9,040 6,619
General and Administrative 355 503 1,483 1,243
Depreciation and Amortization 2.886 2,220 8,733 6,510
----- ----- ----- -----
Total Costs and Expenses 9,223 7,393 27,949 22,013
----- ----- ------ ------
Net Income $ 3,724 $ 3,160 $ 10,652 $ 6,760
======== ======== ======== ========
Net Income Per Share $ 0.23 $ 0.23 $ 0.69 $ 0.56
======== ======== ======== ========
Dividends Paid Per Share $ 0.355 $ 0.35 $ 1.055 $ 1.04
======== ======== ======== ========
</TABLE>
See the Accompanying Notes
3
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30, September 30,
1994 1993
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $10,652 $6,760
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating
Activities:
Depreciation and Amortization 8,733 6,510
Changes in Other Assets and
Liabilities:
Receivables and Other Assets (3,597) (1,530)
Accounts Payable and Other (925) (2,662)
Tenant Security Deposits (51) 52
-------- --------
Net Cash Provided By Operating 14,812 9,130
Activities -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for Acquisitions of Property (4,094) (37,952)
Principal Payments on Notes Receivable 770 77
Advances for Notes Receivable (1,382)
------- --------
Net Cash Used For Investing Activities (3,216) (39,257)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings Under Line of Credit 16,660 11,900
Agreements
Repayments Under Line of Credit (19,070) (8,000)
Agreements
Principal Payments of Notes Payable (891) (27,764)
Redemption of Convertible Debentures (1,631)
Issuance of Stock-Net 6,059 66,136
Dividends Paid (16,695) (13,096)
Dividend Reinvestment 1,832 1,728
-------- --------
Net Cash (Used for) Provided by (12,106) 29,273
Financing Activities -------- --------
Net Decrease in Cash and Cash (510) (854)
Equivalents
Cash and Cash Equivalents at Beginning 900 2,060
Of Period -------- --------
Cash and Cash Equivalents at End Of $ 390 $ 1,206
Period ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash Paid During Nine Months For $ 9,919 $ 9,707
Interest ======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Conversion of Debentures Into Common
Stock $ 16,644 $ 32,950
======== ========
(continued)
</TABLE>
4
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30,
1993
-----------------
<S> <C>
Reduction of Receivables in Connection
with Property Acquisitions $2,922
Notes Payable Assumed 2,945
Common Stock Issued in Connection with
Property Acquisitions 2,891
Cash Paid for Properties 400
------
Fair Value of Properties Acquired $9,158
======
See the Accompanying Notes
</TABLE>
5
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994, DECEMBER 31, 1993, AND SEPTEMBER 30, 1993
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are unaudited but, in the opinion of
management, reflect all normal recurring adjustments necessary for a fair
presentation of operating results. These financial statements should be
read in conjunction with the latest audited financial statements of Burnham
Pacific Properties, Inc. at December 31, 1993. Certain of the 1993 amounts
have been reclassified to conform to 1994 presentation.
Dividends Per Share - Dividends of 35.5 cents per share were paid on
September 30, 1994 to shareholders of record on September 20, 1994. The
Corporation has declared a dividend of 36 cents per share payable on
December 30, 1994 to shareholders of record on December 16, 1994.
2. EARNINGS PER SHARE
Earnings per share is computed by dividing the net income for the
respective periods by the weighted average number of shares outstanding
during the applicable period. The computations follow:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
9/30/94 9/30/93 9/30/94 9/30/93
----------------------------------------------
<S> <C> <C> <C> <C>
Net Income $ 3,724,000 $ 3,160,000 $10,652,000 $ 6,760,000
Weighted Average Number
of Shares Outstanding 15,914,702 13,989,636 15,424,712 12,046,486
----------- ----------- ----------- -----------
Net Income Per Share $ 0.23 $ 0.23 $ 0.69 $ 0.56
=========== =========== =========== ===========
</TABLE>
3. REGISTRATION STATEMENT
During September 1993, the Corporation filed with the Securities and
Exchange Commission a $200 million shelf registration statement on Form S-
3. This registration statement was filed for the purpose of issuing either
common stock or debentures for the purpose of repaying outstanding debt,
potential future acquisitions of commercial properties and for general
corporate purposes. As of September 30, 1994, no such issuances have
occurred.
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
(1) CHANGES IN FINANCIAL CONDITION
September 30, 1994 and December 31, 1993:
During the nine months ended September 30, 1994, 1,040,248 shares of the
Corporation's common stock were issued as a result of the conversion of $16.6
million of the Corporation's convertible debentures and 472,132 shares were
issued for $7.8 million under the Dividend Reinvestment and Optional Cash
Payment Plan. The Corporation experienced no other material changes in
financial condition.
(2) CHANGES IN RESULTS OF OPERATIONS
Nine Months Ended September 30, 1994 and 1993:
During the nine months ended September 30, 1994, net income increased $3.9
million, or 57%, to $10.7 million ($0.69 per share) compared to $6.8 million
($0.56 per share) for the same period in 1993. Funds from operations increased
$6.1 million, or 46%, to $19.4 million for the 1994 period. These increases
were primarily due to property acquisitions and financing activities during
1993.
For the nine months ended September 30, 1994, compared to the same period in
1993, the Corporation experienced an increase in rental revenue of $10.2
million, of which $2.3 million was due to the April 1993 acquisition of the
Pacific West Outlet Center, $255,000 was due to the September 1993 acquisition
of the remaining 50% interest in the Navajo Shopping Center, $452,000 was due to
the September 1993 acquisition of the remaining 50% interest in the Village
Station Shopping Center, $369,000 was due to the October 1993 acquisition of the
K-Mart building and $6.2 million was due to the Plaza at Puente Hills
acquisition in October 1993. Interest income during the 1994 period was less
than 1993 primarily due to the reduction of $1.9 million of notes receivable
related to the Navajo Shopping Center.
Interest expense increased $1.1 million for the nine months ended September 30,
1994 to $8.7 million, as compared to $7.6 million for the same period in 1993.
This was primarily due to the $58.0 million of credit line advances for the
purchase of the Plaza at Puente Hills in October 1993 and rising interest rates,
offset by the conversion of $30.6 million of Convertible Debentures during the
second half of 1993 and the first nine months of 1994, and the paydown of $29.5
million in notes payable and credit line advances from the proceeds of the April
1993 public offering.
Rental operating expenses were $9.0 million for the nine months ended September
30, 1994, and $6.6 million for the same period in 1993, and Depreciation and
Amortization was $8.7 million for the nine months ended September 30, 1994 and
$6.5 million for the same period in 1993. These increases were primarily the
result of the property additions made during 1993.
7
<PAGE>
Three Months Ended September 30, 1994 and 1993
During the three months ended September 30, 1994, net income increased $500,000,
or 16%, to $3.7 million ($.23 per share) compared to $3.2 million ($.23 per
share) for the same period in 1993. Funds from operations increased $1.2
million, or 22%, to $6.6 million for the same period. These increases were
primarily due to property acquisitions and financing activities during 1993.
For the three months ended September 30, 1994, compared to the same period in
1993, the Corporation experienced an increase in rental revenue of $2.5 million,
of which $368,000 was due to the April 1993 acquisition of the Pacific West
Outlet Center, $37,000 was due to the September 1993 acquisition of the
remaining 50% interest in the Navajo Shopping Center, $123,000 was due to the
September 1993 acquisition of the remaining 50% interest in the Village Station
Shopping Center, $123,000 was due to the October 1993 acquisition of the K-Mart
building and $2.0 million was due to the Plaza at Puente Hills acquisition in
October 1993, offset by a $376,000 early lease termination fee at Independence
Square in the three months ended September 30, 1993. Interest income during the
1994 period was less than 1993 primarily due to the reduction of $1.9 million of
notes receivable related to the Navajo Shopping Center.
Interest expense increased $800,000 for the three months ended September 30,
1994 to $2.9 million, as compared to $2.1 million for the same period in 1993.
This was primarily due to the $58.0 million of credit line advances for the
purchase of the Plaza at Puente Hills in October 1993 and rising interest rates
offset by the conversion of $30.6 million of Convertible Debentures subsequent
to June 30, 1993, and the paydown of $29.5 million in notes payable and credit
line advances from the proceeds of the April 1993 public offering.
Rental operating expenses were $3.1 million for the three months ended September
30, 1994, and $2.6 million for the same period in 1993, and Depreciation and
Amortization was $2.9 million for the three months ended September 30, 1994 and
$2.2 million for the same period in 1993. These increases were primarily the
result of the property additions made during 1993.
(3) LIQUIDITY AND CAPITAL RESOURCES
During the three months ended September 30, 1994, the Corporation's $35.0
million non-revolving secured line was replaced with a $35.0 million seven year
term loan, secured by the Plaza at Puente Hills. During the nine months ended
September 30, 1994, the Corporation obtained an additional $5.0 million of
capacity on its $25.0 million revolving secured line of credit. This additional
capacity brings the Corporation's total credit line availability to $35.0
million, consisting of $30.0 million revolving secured line, and $5.0 million
unsecured line.
At September 30, 1994, the Corporation had $26.7 million outstanding under its
bank lines of credit including $21.7 million under its $30.0 million revolving
secured line and $5.0 million under its $5.0 million unsecured line. Such
amounts were borrowed primarily to finance the October 1993 acquisition of the
Plaza at Puente Hills.
8
<PAGE>
During September 1993, the Corporation filed with the Securities and Exchange
Commission a $200 million shelf registration statement on Form S-3. This
registration statement was filed for the purpose of issuing either common stock
or debentures for the purpose of repaying outstanding debt, potential future
acquisitions of commercial properties and for general corporate purposes. As of
September 30, 1994, no such issuances have occurred.
The Corporation expects that its sources of capital, including cash flow from
operations, potential mortgage financing, bank lines of credit, and the public
equity and debt markets are adequate to provide necessary funds for corporate
obligations, the payment of dividends, and other corporate needs in the
foreseeable future under current conditions.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
The Corporation was not a party to any material legal proceedings during the
period covered by this report or subsequently.
ITEM 2. CHANGES IN SECURITIES:
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Not Applicable.
ITEM 5. SUBSEQUENT EVENT:
On October 24, 1994, Louis J. Garday resigned as President, Chief Executive
Officer and Director of the Corporation. The Corporation's Chairman Malin
Burnham has assumed the position of President and Chief Executive Officer until
a successor is identified.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: 10.1 Bank of America NT&SA Loan Agreement dated July 26, 1994
for $35,000,000.
(b) The Corporation did not file any 8-K's during the quarter ended September
30, 1994.
9
<PAGE>
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.
BURNHAM PACIFIC PROPERTIES, INC.
Date: 10/28/94 By: //Malin Burnham//
------------------- -----------------------------
Malin Burnham, President
Date: 10/28/94 By: //Jeffrey R. Fisher//
------------------- -----------------------------
Jeffrey R. Fisher, Vice President/Finance
10
<PAGE>
EXHIBIT 10.1
TERM LOAN AGREEMENT
This Term Loan Agreement (this "Agreement"), dated as of July 26, 1994, is
between BURNHAM PACIFIC PROPERTIES, INC., a California corporation, ("Borrower")
and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank").
Agreement
---------
I. Loan Terms.
----------
1.1 Amount and Purpose.
------------------
(a) Bank shall make a loan to Borrower in the principal amount of
Thirty-five Million Dollars ($35,000,000) (the "Loan") to be used for
refinancing existing loan no. 8615402361 - 208/224 which is secured by the
Property (as defined below).
(b) The Loan will be evidenced by a promissory note (the "Note")
payable to Bank in the original principal amount of the Loan and will be secured
by a Deed of Trust With Assignment of Rents, Security Agreement and Fixture
Filing (the "Deed of Trust") covering certain improved real property commonly
known as Plaza at Puente Hills and more particularly described on Exhibit A
attached to the Deed of Trust (the "Real Property") (the Real Property together
with all buildings, structures, improvements now or hereafter located thereon
(the "Improvements"), and the personal property described in the Deed of Trust,
being hereinafter referred to as the "Property"). This Agreement, the Note, the
Deed of Trust, and all other documents evidencing, securing or otherwise
pertaining to the Loan will be referred to as the "Loan Documents."
1.2 Documentation. At the closing of this transaction, Borrower will
-------------
deliver the following documents and other items, executed and acknowledged as
appropriate, all in form and substance satisfactory to Bank: (a) this Agreement;
(b) the Note; (c) the Deed of Trust; (d) a UCC-1 Financing Statement perfecting
a first-position lien on all personal property collateral that is perfected by
filing; (e) an ALTA title insurance policy insuring Bank that the Deed of Trust
constitutes a valid and enforceable lien on the Property subject and subordinate
only to such liens or other matters as Bank has approved in writing, together
with such indorsements as Bank may require; (f) if requested, an ALTA/ASCM
survey of the Real Property and the improvements thereon certified to Bank; (g)
evidence of the casualty and other insurance coverage required under this
Agreement; (h) if Borrower is anything other than a natural person, evidence of
Borrower's due formation and good standing, as well as due authorization and
execution of the Loan Documents; (i) if the Property is to be leased to third
parties, Borrower's pro forma lease form; and (j) such other documents, property
information and other assurances as Bank may reasonably require.
1.3 Disbursement Procedures; Debt Service Coverage Ratio; Loan to Value
-------------------------------------------------------------------
Ratio. Bank shall disburse to itself the Loan proceeds in the amount of
- -----
$35,000,000 to repay the principal amount of existing loan no. 8615402361-
208/224 (the "Existing Loan"), which Existing Loan is secured by the Property.
As a condition to Bank's obligation to disburse the Loan proceeds, Borrower
shall use its own immediately available funds to pay the following amounts:
-1-
<PAGE>
(a) Any accrued and unpaid interest or other sums or charges owed with
respect to the Existing Loan shall be paid to Bank.
(b) All legal fees and expenses (not to exceed $15,000), documentation
fees, title insurance premiums, UCC filing fees and any other costs or expenses
(including allocated costs of in-house services) incurred by Bank in connection
with the negotiation or closing of the Loan shall be paid to Bank.
(c) If the funding of the Loan proceeds is other than on the first day
of a calendar month, all interest due on the indebtedness evidenced by, and at
the interest rate specified in, the Note from the date of funding until the
first day of the month following the month in which funding occurs shall be paid
to Bank.
(d) As additional conditions to Bank's obligation to disburse the Loan
proceeds, Borrower shall be in compliance with the following:
(i) Borrower's Debt Service Coverage Ratio, determined by Bank as
of the end of the most recent fiscal quarter of Borrower, shall not be less than
1.20 to 1.0. As used herein, "Debt Service Coverage Ratio" means the ratio of
the Aggregate Cash Flow from the Property, determined on an annualized basis, to
the annualized costs of servicing the $35,000,000 obligation under the Loan
assuming that such obligation must be amortized over a period of twenty-five
(25) years, and that interest thereon will accrue and be payable at a per annum
rate equal to nine and one-half percent (9.5%). "Aggregate Cash Flow" shall
mean, at any time, the annualized year-to-date net operating cash flow of the
Property which is defined as Property net income before debt service plus non-
cash charges.
(ii) At the time of closing, the $35,000,000 principal balance of
the Loan shall not exceed sixty percent (60%) of the "as-is" market value of the
Property (as rounded to the nearest one percent), as such value was determined
by an appraisal made by or on behalf of the Bank which was dated September 25,
1993.
II. Covenants of the Borrower.
-------------------------
Borrower promises to keep each of the following covenants:
2.1 Compliance with Law. Borrower shall comply with all existing and
-------------------
future laws, regulations, orders, building restrictions and requirements of, and
all permits and approvals from, and agreements with and commitments to, all
governmental, judicial or legal authorities having jurisdiction over the
Property or Borrower's business conducted thereon or therefrom, and with all
restrictive covenants and other title encumbrances encumbering the Property (all
collectively, the "Requirements").
2.2 Conditional Sales Contracts; Removal of Fixtures and Equipment.
--------------------------------------------------------------
Without Bank's prior written consent, Borrower shall not (i) purchase any
materials, equipment, furnishings or fixtures to be installed on the Property
under any agreement where the seller reserves a lien, security interest or title
thereto, or the right of removal or repossession after such items are installed
on the Property; and (ii) remove or permit to be removed from the Real Property
or the Improvements any equipment, machinery or fixtures used in connection with
the management, maintenance, operation or enjoyment thereof unless replaced by
articles of equal suitability and value owned by Borrower free and clear of any
lien or security interest. Notwithstanding the foregoing, John Burnham Company,
the property manager ("Manager Affiliate"), shall have the right to remove from
the Real Property or the Improvements the
-2-
<PAGE>
computer owned by the Manager Affiliate and its on-site phone lines,
(collectively, the "Manager Affiliate Property") provided that the Manager
Affiliate repairs any damage, if any, caused to the Real Property or the
Improvements as a result of such removal.
2.3 Site Visits. Borrower grants Bank, its agents and representatives
-----------
the right to enter and visit the Property at any reasonable time for the
purposes of observing it, performing appraisals, inspecting the Property, taking
soil or groundwater samples, and conducting tests, among other things, to
investigate for the presence of Hazardous Substances, as defined in Article IV.
Borrower shall also allow Bank to examine, copy and audit its books and records.
Bank is under no duty to visit or observe the Property, or to examine any books
or records. Any site visit, observation or examination by Bank shall be solely
for the purpose of protecting Bank's security and preserving Bank's rights under
the Loan Documents. Neither Borrower nor any other party is entitled to rely on
any site visit, observation or testing by Bank, its agents or representatives.
Bank owes no duty of care to protect Borrower or any other party against, or to
inform Borrower or any other party of, any adverse condition affecting the
Property, including any defects in the design or construction of any
improvements on the Property or the presence of any Hazardous Substances on the
Property. Prior to entering the Property, Bank shall give Borrower reasonable
notice of its intent to enter. Bank shall exercise reasonable efforts to avoid
interfering with Borrower's use of the Property in connection with the
activities permitted under this Section. Bank shall reimburse Borrower for the
reasonable costs of any damage to the Property caused by Bank in conducting the
activities permitted under this Section.
2.4 Insurance. Borrower shall maintain, or where appropriate cause a
---------
tenant of the Property to maintain, the following insurance:
(a) All risk property damage insurance in nonreporting form on the
Property, with a policy limit in an amount not less than the full insurable
value of the Property on a replacement cost basis, including tenant
improvements, if any. The policy shall include a business interruption (or rent
loss, if more appropriate) endorsement in the amount of twelve months' principal
and interest payments, taxes and insurance premiums, a lender's loss payable
endorsement (438 BFU, or its equivalent) in favor of Bank, and any other
endorsements required by Bank.
(b) Commercial General Liability coverage, in the amount of
$10,000,000.00 per occurrence. This policy shall name Bank as an additional
insured. Coverage shall be written on an occurrence basis, not claims made.
(c) Such other insurance as Bank may require, except earthquake,
unless required by Bank regulatory authorities, which may include flood.
All policies of insurance required by Bank must be issued by companies approved
by Bank having a minimum A.M. Best's rating of A:IX and otherwise be acceptable
to Bank as to amounts, forms, risk coverages, deductibles and loss payable and
cancellation provisions. In addition, each policy (except workers'
compensation) must provide Bank at least thirty (30) days' prior notice of
cancellation, non-renewal or modification. At least thirty (30) days before
expiration of any required insurance policy, Borrower shall furnish Bank with
proof acceptable to Bank that a new policy has been issued, continuing in force
the insurance covered by the policy which is expiring. At the same time,
Borrower shall also furnish Bank with evidence satisfactory to Bank that all
premiums for any such new policy have been paid. If, at least thirty (30) days
before a required policy expires, Bank does not receive proof and evidence that
a new policy has been issued and that premiums for it have
-3-
<PAGE>
been paid, Bank in Bank's sole discretion may procure a new policy and advance
funds to pay the premiums for it. Borrower shall reimburse Bank, on demand, for
any funds advanced by Bank to pay insurance premiums, which advances shall be
considered to be additional loans to Borrower secured by the Deed of Trust and
bearing interest at the Default Rate provided in the Note.
2.5 Preservation of Rights. Borrower shall obtain, preserve and
----------------------
maintain in good standing, as applicable, all rights, privileges and franchises
necessary or desirable for the operation of the Property and the conduct of
Borrower's business thereon and therefrom.
2.6 Maintenance and Repair. Borrower shall (i) maintain the Property,
----------------------
including the parking and landscaping portions thereof, in good condition and
repair, (ii) promptly make all necessary structural and non-structural repairs
to the Improvements (or cause tenants under any leases to perform such
obligation), (iii) not demolish, alter, remove or add to any Improvements,
excepting (A) the repair and restoration of Improvements following damage
thereto as required by the Deed of Trust, (B) the construction or installation
of non-structural alterations or improvements, provided the same are in all
respects consistent with the character and utility of the existing Improvements,
(C) the installation or construction of tenant improvements and related
demolition in connection with any leases approved in accordance with this
Agreement, and (iv) not erect any new buildings, structures or building
additions on the Real Property, without the prior written consent of Bank, which
consent shall be deemed given if Bank does not respond within ten (10) business
days after its receipt of a written request from Borrower accompanied by such
supporting information as Bank may reasonably request. Borrower shall pay when
due all claims for labor performed and materials furnished therefor in
connection with any improvements or construction activities.
2.7 Payment of expenses. Borrower shall pay all costs and expenses
-------------------
incurred by Bank in connection with the making, disbursement and administration
of the Loan, as well as any revisions, extensions, renewals or "workouts" of the
Loan, and in the exercise of any of Bank's rights or remedies under this
Agreement. Such costs and expenses include title insurance, recording and
escrow charges, fees for environmental services, legal fees and expenses of
Bank's counsel and any other reasonable fees and costs for services, regardless
of whether such services are furnished by Bank's employees or by independent
contractors. It is agreed, however, that Borrower shall pay a maximum of
$15,000 for legal fees relating to the negotiation and initial closing of the
Loan. All such sums incurred by Bank and not immediately reimbursed by Borrower
shall be considered an additional loan to Borrower secured by the Deed of Trust
and bearing interest at the Default Rate provided in the Note.
2.8 Financial and Other Information. Borrower shall maintain full and
-------------------------------
complete books of account and other records reflecting the results of operations
of the Property in accordance with generally accepted accounting principles
consistently applied (or such other accounting method approved in writing by
Bank), and will furnish or cause to be furnished to Bank such financial
information concerning Borrower and the Property as Bank may reasonably request.
Without limiting the generality of the foregoing, Borrower shall furnish to
Bank, without prior request or demand:
(a) Borrower shall provide a quarterly operating (income/expense)
statement and balance sheet for the Property, in substantially the form attached
hereto as Exhibit A, within forty-five (45) days of quarter end;
-4-
<PAGE>
(b) Annual Financial Information. Within one hundred twenty (120)
days after the end of each fiscal year of Borrower, annual reports of the
Borrower, balance sheets and financial statements of the Borrower as of the end
of such fiscal year, the related statements of income and operations and changes
in cash flow and/or shareholders' equity for such year, all prepared in
accordance with generally accepted accounting principles, consistently applied
(except as to changes to which an independent accountant concurs), and audited
and certified by Deloitte & Touche (or other independent public accountants
selected by Borrower and satisfactory to the Bank, it being understood that any
of the other so-called "big six" accounting firms shall be acceptable), such
certification not being limited or qualified because of restricted or limited
examination by such accountant of any material portion of the Borrower's
records; and within 90 days following year end, a copy of Borrower's Report of
Form 10-K filed with the Securities and Exchange Commission;
(c) Quarterly Financial Information. Within forty-five (45) days
after the end of each fiscal quarter of Borrower, a copy of Borrower's Report on
Form 10-Q filed with the Securities and Exchange Commission, including interim
balance sheets and financial statements, prepared in accordance with generally
accepted accounting principles, consistently applied;
(d) Rent Rolls and Operating Statement. Within forty-five (45) days
after the end of each quarter, unaudited rent rolls and quarterly consolidating
operating statements in substantially the form attached hereto as Exhibit A, for
all of Borrower's real properties as of the end of each quarter.
Borrower shall permit any representative of Bank, at any reasonable time, to
inspect, audit and examine the books and records of Borrower relating to the
Property, make copies of the same, and inspect the properties of Borrower.
2.9 Notices. Borrower shall promptly notify Bank in writing of:
-------
(a) any litigation affecting Borrower or controlling shareholder of
Borrower, or the Property that may reasonably be expected to result in a
material adverse change in (i) the financial condition of any of the foregoing
parties, (ii) Borrower's ability to timely perform any of its obligations under
any of the Loan Documents, or (iii) the physical condition or operation of the
Property;
(b) any notice that the Property or Borrower's business fails in
any respect to comply with any applicable Requirement; and
(c) any other circumstance, event or occurrence that results in a
material adverse change in (i) the physical condition or operation of the
Property, or (ii) the financial condition of Borrower or controlling shareholder
of Borrower, or (iii) Borrower's ability to timely perform any of its
obligations under any of the Loan Documents.
2.10 Indemnity. Borrower agrees to indemnify, defend with counsel
---------
acceptable to Bank, and hold Bank harmless from and against all liabilities,
claims, actions, damages, costs and expenses (including all legal fees and
expenses of Bank's counsel) arising out of or resulting from the ownership,
operation or use of the Property, whether such claims are based on theories of
derivative liability, comparative negligence or otherwise. Notwithstanding
anything to the contrary in any other Loan Document, the provisions of this
Section 2.10 shall not be secured by the Deed of Trust, and shall survive the
-5-
<PAGE>
termination of this Agreement, repayment of the Loan and foreclosure of the Deed
of Trust or similar proceedings.
2.11 Performance of Acts. Upon request by Bank, Borrower shall perform
-------------------
all acts which may be necessary or advisable to perfect any lien or security
interest provided for in the Loan Documents or to carry out the intent of the
Loan Documents.
2.12 Tax Receipts. Borrower shall provide to Bank, within thirty (30)
------------
days after the end of the fiscal year of the applicable governmental authority,
bills showing the payment (to the extent then due and payable) of all taxes and
assessments that are or may become a lien upon the Property or any portion
thereof. If Borrower fails, following demand, to provide Bank the tax receipts
required by this Section, without limiting the other remedies available to Bank
under this Agreement, Bank may, at Borrower's sole expense, obtain and enter
into a tax services contract with respect to the Property with a tax reporting
agency satisfactory to Bank.
2.13 Notice of Change. Borrower shall give Bank prior written notice of
----------------
any change in:
(a) the location of its place of business or its chief executive
office if it has more than one place of business; and
(b) Borrower's name or business structure. Unless otherwise
approved by Bank in writing, Borrower agrees that all Property that consists of
personal property (other than the books and records) will be located at the Real
Property and that all books and records will be located at Borrower's place of
business or chief executive office if Borrower has more than one place of
business.
2.14 No Encumbrances. Borrower shall not cause or permit the Property to
---------------
become subject to any deed of trust, encumbrance or other security instrument
(other than the Deed of Trust). Upon the Property becoming subject to any such
deed of trust, encumbrance or other security instrument, Bank at its option may
declare the entire principal balance, all accrued and unpaid interest and all
other sums and charges owing with respect to the Loan immediately due and
payable.
2.15 Negative Covenants. Without Bank's prior written consent, which
------------------
consent shall not be unreasonably withheld, Borrower shall not, and shall not
cause or permit any subsidiary to:
(a) engage in any business activities substantially different from
Borrower's present business;
(b) liquidate or dissolve Borrower's business;
(c) merge with (whether or not Borrower or the relevant subsidiary
is the surviving entity) or consolidate with or into, any other entity, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired in the ordinary course of business), or permit or cause any
subsidiary to do any of the foregoing.
The Bank's consent to any of the foregoing matters shall be deemed given if Bank
does not respond within thirty (30) days after its receipt of a written request
from Borrower accompanied by such supporting information as may reasonably
request.
-6-
<PAGE>
III. Use or Leasing of the Property.
------------------------------
3.1 Use of the Property. Borrower shall develop and hold the Property as
-------------------
income property for lease to unaffiliated third parties in accordance with the
provisions of this Article III.
3.2 Lease Approval. At Bank's option, Bank shall have the right to
--------------
require Bank's prior written approval of all new leases of space within the
Improvements (and amendments to such leases) which cover at least 10,000
rentable square feet of the Improvements; provided that (i) Bank will not
unreasonably withhold its approval of proposed leases and (ii) if Bank does not
respond to a request for approval within five (5) business days following its
receipt of the proposed lease and any related back-up documentation requested by
Bank, such lease shall be deemed approved. No such lease shall be entered into
without delivering to Bank a copy of the lease to be executed and such other
information concerning the proposed tenant as may be reasonably requested by
Bank, and receipt by Borrower of Bank's approval.
3.3 Notice Regarding Leases. If any tenant of a lease which covers at
-----------------------
least 10,000 rentable square feet of the Improvements at any time abandons or
vacates its premises,or breaches or disavows the lease, or claims any breach of
landlord's obligations, Borrower shall promptly notify Bank. If the leased
premises of any tenant under a lease covering at least 10,000 rentable square
feet of the Improvements terminates or such tenant otherwise abandons or vacates
the Property, Borrower covenants and agrees to replace any such tenant with a
new tenant, satisfactory to Bank, pursuant to an executed lease, in form and
content satisfactory to Bank, as promptly as reasonably possible.
3.4 Leasing Information and Documents. Borrower has disclosed to Bank
---------------------------------
any and all leases which affect the Property or any portion of or interest in
it. Borrower shall promptly deliver to Bank such quarterly rent rolls, leasing
schedules and reports, operating statements and other leasing information as
Bank from time to time may request. In addition, Borrower shall use its best
efforts to promptly obtain and deliver to Bank such estoppel certificates and
subordination and attornment agreements executed by such tenants in such forms
as Bank from time to time may require.
3.5 Purpose and Effect of Lease Approval. No approval of any lease by
------------------------------------
Bank shall be for any purpose other than to protect Bank's security and to
preserve Bank's rights under the Loan Documents. No approval by Bank shall
result in a waiver of any default of Borrower. In no event shall any approval
by Bank of a lease be a representation of any kind with regard to the lease or
its enforceability, or the financial capacity of any tenant or guarantor.
3.6 Landlord's Obligations. Borrower shall perform all obligations
----------------------
required to be performed by it as landlord under any lease affecting any part of
the Property or any space within the Improvements.
3.7 Income from Property. Borrower shall first apply all income derived
--------------------
from the Property, including all income from leases, to pay costs and expenses
associated with the ownership, maintenance, operation and leasing of the
Property, including all amounts then required to be paid under the Loan
Documents, before using or applying such income for any other purpose. No such
income shall be distributed or paid to any shareholder unless all such costs and
expenses which are then due have been paid in full.
IV. Hazardous Substances.
--------------------
-7-
<PAGE>
Notwithstanding any provision in the Deed of Trust or any other Loan
Document, the provisions of this Article IV shall not be secured by the Deed of
Trust and shall survive termination of this Agreement, repayment of the Loan,
and foreclosure of the Deed of Trust or similar proceedings.
4.1 Definition of Hazardous Substance. For purposes of this Agreement,
---------------------------------
a "Hazardous Substance" is defined to mean any substance, material or waste,
including asbestos and petroleum (including crude oil or any fraction thereof),
which is or becomes designated, classified or regulated as "toxic," "hazardous,"
a "pollutant" or similar designation under any federal, state or local law,
regulation or ordinance.
4.2 Indemnity Regarding Hazardous Substances. Borrower agrees to
----------------------------------------
indemnify and hold Bank harmless from and against all liabilities, claims,
actions, foreseeable and unforeseeable consequential damages, costs and expenses
(including sums paid in settlement of claims and all consultant, expert and
legal fees and expenses of Bank's counsel) or loss directly or indirectly
arising out of or resulting from any Hazardous Substance being present at any
time in or around any part of the Property, or in the soil, groundwater or soil
vapor on or under the Property, including those incurred in connection with any
investigation of site conditions or any clean-up, remedial, removal or
restoration work, or any resulting damages or injuries to the person or property
of any third parties or to any natural resources. In addition, Borrower shall
similarly indemnify, defend and hold harmless any persons purchasing the
Property through a foreclosure sale or following a foreclosure sale, and any
persons purchasing the Loan or any portion of or interest in it. Upon demand by
Bank, Borrower shall defend any investigation, action or proceeding alleging the
presence of any Hazardous Substance in any such location, which affects the
Property or which is brought or commenced against Bank, whether alone or
together with Borrower or any other person, all at Borrower's own cost and by
counsel to be approved by Bank in the exercise of its reasonable judgment. In
the alternative, Bank may elect to conduct its own defense at the expense of
Borrower.
4.3 Representation and Warranty. Before signing this Agreement,
---------------------------
Borrower researched and inquired into the previous, current and contemplated
uses and ownership of the Property. Based on that due diligence, Borrower
represents and warrants that, to the best of its knowledge, no Hazardous
Substance has been or will be disposed of, released onto or otherwise exists in,
on, or under the Property, except as Borrower has disclosed to Bank in writing.
4.4 Compliance with Law; Notices. Borrower has complied, and
----------------------------
shall comply and cause all occupants of the Property to comply, with all laws,
regulations and ordinances governing or applicable to Hazardous Substances as
well as the recommendations of any qualified environmental engineer or other
expert. Borrower shall promptly notify Bank if it knows or suspects there may be
any Hazardous Substance in or around the Property, or in the soil or groundwater
under the Property, or if any action or investigation by any governmental agency
or third party pertaining to Hazardous Substances is pending or threatened.
V. Representations and Warranties.
------------------------------
Borrower promises that each representation and warranty set forth below is
true, accurate and correct.
-8-
<PAGE>
5.1 Formation; Authority. If Borrower is anything other than a
--------------------
natural person, it has complied with all laws and regulations concerning its
organization, existence and the transaction of its business, and is in good
standing in each state in which it conducts its business. Borrower is authorized
to execute, deliver and perform its obligations under each of the Loan
Documents.
5.2 Compliance With Law. The Property and the actual use thereof by
-------------------
Borrower complies in all material respects with all Requirements. Borrower has
received no notices of violations of any Requirements. There are no claims,
actions, proceedings or investigations pending or threatened against Borrower or
affecting the Property except for those previously disclosed by Borrower to Bank
in writing.
5.3 No Violation. The execution and delivery of this Agreement and the
------------
other Loan Documents and the performance by Borrower of its obligations
hereunder and thereunder will not result in a default under any other material
agreement to which Borrower is a party, or violate any Requirements.
5.4 Financial Information. All financial information which has been and
---------------------
will be delivered to Bank, including all information relating to the financial
condition of Borrower and the Property, does and will fairly and accurately
represent the financial condition being reported on. All such information was
and will be prepared in accordance with generally accepted accounting principles
consistently applied, unless otherwise noted. As of the date hereof, there has
been no material adverse change in any financial condition reported at any time
to Bank.
5.5 Borrower Not a "Foreign Person". Borrower is not a "foreign person"
-------------------------------
within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986,
as amended from time to time.
5.6 Ownership of Property. Borrower owns directly, and not through any
---------------------
affiliated entity, all of the personal property and fixtures necessary for the
operation and management of the Property for the uses presently being conducted
thereon, except that the Manager Affiliate Property is owned by the Manager
Affiliate.
5.7 Community Redevelopment Issues. Borrower has reviewed and is
------------------------------
familiar with the terms and conditions of (i) the Redevelopment Plan referenced
under that certain Notice of Proceedings Having Been Instituted Under The
California Community Redevelopment Law recorded September 17, 1971 as Instrument
No. 3729 in the Official Records of Los Angeles County (the "Redevelopment
Plan"), (ii) that certain Disposition and Development Agreement between
Industry-Urban Development Agency and Dicker-Warmington Properties recorded
April 10, 1991 as Instrument No. 91-511027 in the Official Records of Los
Angeles County (the "DDA") and (iii) that certain Owner Participation Agreement
by and between Industry Urban Development Agency and Industry Number 1 dated as
of August 20, 1985 (the "OPA"). To the best of Borrower's knowledge, effective
concurrently with the recording of the Deed of Trust, (A) the DDA and OPA, to
the extent they affect the Property, have been terminated by the recording of a
certificate or certificates of completion with respect to the improvements
constructed thereunder, in accordance with the terms thereof, (B) the Property,
as presently constituted and operated, is in full compliance with the
Redevelopment Plan and is not subject to the terms of the DDA or OPA, and (C)
Borrower will not have or be subject to (y) any monetary obligations under the
Redevelopment Plan, the OPA or the DDA, or (z) any obligations with respect to
construction of any improvements on the Property. To the best of Borrower's
knowledge, no other document or agreement affecting the Property exists in
connection with the California Community Redevelopment Law or the Industry-Urban
Development Agency ("Agency") and the Agency has not
-9-
<PAGE>
instituted any condemnation or other action or proceeding against or with
respect to the Property.
VI. Default and Remedies.
--------------------
6.1 Events of Default. Borrower will be in default under this Agreement
-----------------
upon the occurrence of any one or more of the following events ("Event of
Default"):
(a) Borrower fails to make any payment due under the Note, or fails
to make any payment demanded by Bank under any other Loan Document, within
fifteen (15) days after the date due or demanded, as the case may be; or
(b) Borrower fails to timely observe, perform and comply with any
covenant contained in this Agreement other than those referred to in clause (a),
and does not either cure that failure within thirty (30) days after written
notice from Bank, or, if the default cannot be cured in thirty (30) days, within
a reasonable time not to exceed ninety (90) days; or
(c) Borrower becomes insolvent or the subject of any bankruptcy or
other voluntary or involuntary proceeding, in or out of court, for the
adjustment of debtor-creditor relationships; or
(d) Borrower dissolves or liquidates; or
(e) Any representation or warranty made or given in any of the Loan
Documents proves to be false or misleading in any material respect; or
(f) Bank fails to have an enforceable first lien on or security
interest in any property given as security for the Loan; or
(g) There is a material adverse change in Borrower's financial
condition, or event or condition that materially impairs Borrower's intended use
of the Property or Borrower's ability to repay the Loan; or
(h) A default is declared or occurs under any Loan Document other
than this Agreement (and, if a cure period is provided with respect to said
default, said default is not fully cured within the period provided in said Loan
Document for cure of said default).
6.2 Remedies. If an Event of Default occurs under this Agreement,
--------
(a) Bank may exercise any right or remedy which it has under any
of the Loan Documents, or which is otherwise available at law or in equity or by
statute, and all of Bank's rights and remedies shall be cumulative. All of
Borrower's obligations under the Loan Documents shall become immediately due and
payable without notice of default, presentment or demand for payment, protest or
notice of nonpayment or dishonor, or other notices or demands of any kind or
character, all at Bank's option, exercisable in its sole discretion.
(b) Bank shall have the right in its sole discretion to enter the
Property and take possession of it, whether in person, by agent or by court-
appointed receiver, collect rents and otherwise protect its collateral and
rights under the Loan Documents. If Bank exercises any of the rights or
remedies provided in this clause (b), that exercise shall not make Bank a
-10-
<PAGE>
partner or joint venturer of Borrower. All sums which are expended by Bank in
preserving its collateral shall be considered an additional loan to Borrower
secured by the Deed of Trust and bearing interest at the default rate provided
in the Note.
VII. Reference and Arbitration.
-------------------------
7.1 Judicial Reference. In any judicial action between or among the
------------------
parties, including but not limited to any action or cause of action arising out
of or relating to this Agreement or the Loan Documents or based on or arising
from an alleged tort, all decisions of fact and law shall at the request of any
party be referred to a referee in accordance with California Code of Civil
Procedure Sections 638 et seq. The parties shall designate to the court a
-- ---
referee or referees selected under the auspices of the American Arbitration
Association ("AAA") in the same manner as arbitrators are selected in AAA-
sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645.
7.2 Mandatory Arbitration. After the Deed of Trust has been released,
---------------------
fully reconveyed, or extinguished, any controversy or claim between or among the
parties, including those arising out of or relating to this Agreement or the
Loan Documents and any claim based on or arising from an alleged tort, shall at
the request of any party be determined by arbitration. The arbitration shall be
conducted in accordance with the United States Arbitration Act (Title 9, U.S.
Code), notwithstanding any choice of law provision in this Agreement, and under
the Commercial Rules of the AAA. The arbitrator(s) shall give effect to
statutes of limitation in determining any claim. Any controversy concerning
whether an issue is arbitrable shall be determined by the arbitrator(s).
Judgment upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the controversy or
claim to arbitration if any other party contests such action for judicial
relief.
7.3 Real Property Collateral. Notwithstanding the provisions of Section
------------------------
7.2, no controversy or claim shall be submitted to arbitration without the
consent of all parties if, at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation to Bank which is
secured by real property collateral. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy or
claim shall be determined as provided in Section 7.1.
7.4 Provisional Remedies, Self-Help and Foreclosure. No provision of
-----------------------------------------------
this Article VII shall limit the right of any party to this Agreement to
exercise self-help remedies such as setoff, foreclosure against or sale of any
real or personal property collateral or security, or obtaining provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration or other proceeding. The exercise of a
remedy does not waive the right of either party to resort to arbitration or
reference. At Bank's option, foreclosure under a deed of trust or mortgage may
be accomplished either by exercise of power of sale under the deed of trust or
mortgage or by judicial foreclosure.
-11-
<PAGE>
VIII. Miscellaneous Provisions.
------------------------
8.1 No Waiver; Consents. No alleged waiver by Bank shall be effective
-------------------
unless in writing, and no waiver shall be construed as a continuing waiver. No
waiver shall be implied from any delay or failure by Bank to take action on
account of any default of Borrower. Consent by Bank to any act or omission by
Borrower shall not be construed as a consent to any other or subsequent act or
omission.
8.2 No Third Parties Benefited. This Agreement is made and entered into
--------------------------
for the sole protection and benefit of Bank and Borrower and their successors
and assigns. No trust fund is created by this Agreement and no other persons or
entities shall have any right of action under this Agreement or any right to the
Loan funds.
8.3 Notices. All notices given under this Agreement shall be in writing
-------
and shall be effectively served upon delivery, or if mailed, upon the first to
occur of receipt or the expiration of forty-eight (48) hours after deposit in
first-class or certified United States mail, postage prepaid, sent to the party
at its address appearing below its signature. Those addresses may be changed by
either party by notice to the other party.
8.4 Attorneys' Fees. If any lawsuit, reference or arbitration is
---------------
commenced which arises out of, or which relates to this Agreement, the Loan
Documents or the Loan, including any alleged tort action, regardless of which
party commences the action, the prevailing party shall be entitled to recover
from each other party such sums as the court, referee or arbitrator may adjudge
to be reasonable attorneys' fees in the action or proceeding, in addition to
costs and expenses otherwise allowed by law. Any such attorneys' fees incurred
by either party in enforcing a judgment in its favor under this Agreement shall
be recoverable separately from and in addition to any other amount included in
such judgment, and such attorneys' fees obligation is intended to be severable
from the other provisions of this Agreement and to survive and not be merged
into any such judgment. In all other situations, including any bankruptcy or
other voluntary or involuntary proceeding, in or out of court, for the
adjustment of debtor-creditor relationships, Borrower agrees to pay all of
Bank's costs and expenses, including attorneys' fees, which may be incurred in
any effort to collect or enforce the Loan or any part of it or any term of any
Loan Document. Attorneys' fees shall include the allocated costs for services
of in-house counsel.
8.5 Heirs, Successors and Assigns. The terms of this Agreement shall
-----------------------------
bind and benefit the heirs, legal representatives, successors and assigns of the
parties; provided, however, that Borrower may not assign this Agreement without
the prior written consent of Bank. Bank shall have the right to transfer the
Loan to any other persons or entities without the consent of or notice to
Borrower. Without the consent of or notice to Borrower, Bank may disclose to any
prospective purchaser of any securities issued by Bank, and to any prospective
or actual purchaser of any interest in the Loan or any other loans made by Bank
to Borrower, any financial or other information relating to Borrower, the Loan
or the Property.
8.6 Interpretation. The language of this Agreement shall be construed
--------------
as a whole according to its fair meaning, and not strictly for or against any
party. The word "include(s)" means "include(s), without limitation," and the
word "including" means "including, but not limited to."
8.7 Miscellaneous. This Agreement may not be modified or amended except
-------------
by a written agreement signed by the parties. The invalidity or
-12-
<PAGE>
unenforceability of any one or more provisions of this Agreement shall in no way
affect any other provision. Time is of the essence in the performance of this
Agreement and the other Loan Documents. This Agreement shall be governed by
California law. This Agreement may be executed in one or more counterparts,
each of which shall, for all purposes, be deemed an original and all such
counterparts taken together shall constitute one and the same instrument.
8.8 Integration and Relation to Loan Commitment. The Loan Documents
-------------------------------------------
fully state all of the terms and conditions of the parties' agreement regarding
the matters mentioned in or incidental to this Agreement. The Loan Documents
supersede all oral negotiations and prior writings concerning the subject matter
of the Loan Documents, including any loan commitment issued to Borrower.
8.9 Actions. Bank shall have the right, but not the obligation, to
-------
commence, appear in, and defend any action or proceeding which might affect its
security or its rights, duties or liabilities relating to the Loan, the
Property, or any of the Loan Documents. Borrower shall pay promptly on demand
all of Bank's reasonable out-of-pocket costs, expenses, and legal fees and
expenses of Bank's counsel incurred in those actions or proceedings.
8.10 Publicity. Borrower hereby agrees that Bank, at its expense, may
---------
publicize the financing of the Property and, in connection therewith, may use
the address, description and a photograph or other illustrative drawing of the
Property.
8.11 Relationships with Other Bank Customers. From time to time, Bank
---------------------------------------
may have business relationships with Borrower's customers, suppliers,
contractors, tenants, partners, shareholders, officers or directors, with
businesses offering products or services similar to those of Borrower, or with
persons seeking to invest in, borrow from or lend to Borrower. Borrower agrees
that in no event shall Bank be obligated to disclose to Borrower any information
concerning any other Bank customer. Borrower further agrees that Bank may extend
credit to those parties and may take any action it may deem necessary to collect
any such credit, regardless of any effect the extension or collection of such
credit may have on Borrower's financial condition or operations.
-13-
<PAGE>
IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement as of
the date first above written.
Borrower: Bank:
BURNHAM PACIFIC PROPERTIES, INC., BANK OF AMERICA NATIONAL
a California corporation TRUST AND SAVINGS ASSOCIATION
By:_________________________ By:__________________________
Name:Marybeth Waniek
Name:_______________________ Title:Vice President
Title:______________________
By:_________________________
Name:_______________________
Title:______________________
Address: Mailing Address:
Burnham Pacific Properties, Inc. Bank of America N.T. & S.A.
610 West Ash Street CRESG - Unit 1778
San Diego, California 92101-1312 P.O. Box 2925
ATTN: Jeffrey R. Fisher Costa Mesa, California 92628-2925
ATTN: Marybeth Waniek
Address for Personal Delivery:
Bank of America N.T. & S.A.
CRESG - Unit 1778
555 Anton Boulevard, Suite 1100
Costa Mesa, CA 92626
-14-
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<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> SEP-30-1994
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<RECEIVABLES> 9,965
<ALLOWANCES> 739
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<CURRENT-ASSETS> 17,873
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0
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