<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 31, 1997
BURNHAM PACIFIC PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
California
(State or other jurisdiction of incorporation)
1-9524 33-0204162
(Commission File Number) (IRS Employer Identification No.)
610 West Ash Street, San Diego, California 92101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 652-4700
--------------------------------------------------------------
(former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(A) Downey Portfolio Acquisition
On January 31, 1997, the Company purchased a portfolio of four retail shopping
centers (the "Downey Portfolio") from partnerships controlled by an affiliate
of Downey Savings and Loan, which are unrelated to the Company. The Company's
acquisition cost was approximately $52,100,000. The portfolio consists of the
following four centers:
Company Owned
Center Name Location Square Footage
- ----------- -------- --------------
Valley Central Lancaster, CA 480,092
Cameron Park Cameron Park, CA 97,434
Ontario Village Ontario, CA 39,954
West Lancaster - Phase III Lancaster, CA 29,318
The acquisition of the portfolio was financed by the assumption of a $3,693,000
mortgage loan from Sun Life of Canada, bearing interest at 9.75%, due in July
1998, secured by Ontario Village; a new $25,400,000, 7.98%, 7-year mortgage loan
from Nomura Asset Capital Corporation ("Nomura"), secured by Valley Central;
with the balance coming from borrowings under the Company's credit facility from
Nomura (the "Credit Facility") which secured portion of such Credit Facility
bears interest at LIBOR (London Inter-Bank Offer Rate) plus 1.65% and which
unsecured portion of such Credit Facility bears interest at LIBOR plus 1.75%.
The issuer of the $25,400,000 mortgage note secured by Valley Central is a
bankruptcy remote special purpose partnership in which the Company has
substantially all economic benefits.
The only property included within the Downey Portfolio whose acquisition price
exceeded 10% of the Company's assets at December 31, 1996 or whose 1996 revenues
exceeded 10% of the Company's 1996 revenues was Valley Central. The portion of
the acquisition price allocated to Valley Central was $39,577,000, and Valley
Central's 1996 revenues were approximately $5,457,000. Financial information
herein relating specifically to Valley Central is derived from information
provided by the former owner.
At December 31, 1996, annual base rents at Valley Central ranged from $5.80 to
$52.05 per square foot. At December 31, 1996, two tenants, WalMart and HomeBase
each occupied more than 10% of the gross leasable area ("GLA"), 117,645 square
feet and 113,789 square feet, respectively. The WalMart lease at December 31,
1996, provides for base annual rents of $811,751, expires in 2010 and contains
four 5 year renewal options. The HomeBase lease at December 31, 1996, provides
for base annual rents of $660,443, expires in 2008 and contains four 5 year
renewal options. The 1996 property tax rate at Valley Central was approximately
1.08%, resulting in aggregate property tax of $509,462, substantially all of
which is reimbursed by tenants under their leases. Management believes the
property is adequately insured.
<PAGE> 3
During the period from 1992 to 1996 Valley Central experienced the following
average rental rate per square foot and occupancy percentage:
As of the Year-Ended Rental Rate Per Square Foot Occupancy %
-------------------- --------------------------- -----------
1992 $8.62 97%
1993 8.79 98
1994 9.10 97
1995 9.01 96
1996 9.44 98
The following tabulation shows the expiration schedule of leases as of December
31, 1996.
<TABLE>
<CAPTION>
Total Number Approximate
Leases of Gross Leasable Annualized Base Rent(1)
Expiring In Leases Expiring Area Square Feet Percent of Total
- ----------- --------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
1997 4 23,378 $ 317,695 7%
1998 3 5,958 99,741 2
1999 3 8,960 139,032 3
2000 6 37,474 550,544 12
2001 4 42,766 383,150 8
2002 0 0 0 0
2003 4 34,990 432,870 10
2004 0 0 0 0
2005 0 0 0 0
2006 0 0 0 0
2007+ 7 316,236 2,604,609 58
</TABLE>
(1) Annualized Base Rent is computed by multiplying the monthly base rent in
effect at December 31, 1996 by 12.
(B) BRE Portfolio Acquisition
On April 4, 1997, the Company purchased a portfolio of three retail shopping
centers from BRE Properties, Inc., (the "BRE Portfolio") an apartment real
estate investment trust, which is unrelated to the Company. The Company's
acquisition cost was $69,800,000. The portfolio consists of the following three
centers:
Company Owned
Center Name Location Square Footage
- ----------- -------- --------------
Fremont Hub Fremont, CA 492,263
Central Shopping Center Ventura, CA 62,314
Santa Fe Springs Plaza Santa Fe Springs, CA 164,730
In order to facilitate the closing of this acquisition, the Company obtained a
temporary increase in its Credit Facility with Nomura of $70,000,000 (the
"Bridge Financing"). Of the total amount, $42,000,000 is secured by mortgages on
the three properties so acquired and $28,000,000 is unsecured. The secured and
unsecured portion of the Bridge Financing bear interest at LIBOR plus 1.65% and
LIBOR plus 2.50%, respectively. The Bridge Financing will mature sixty days from
the date of funding and such maturity may be extended for ninety additional
days. The loan is expected to be repaid from proceeds from the issuance of
Common Stock of the Company.
<PAGE> 4
The only property included within the BRE Portfolio whose acquisition price
exceeded 10% of the Company's assets at December 31, 1996 or whose 1996 revenues
exceeded 10% of the Company's 1996 revenues was Fremont Hub. The portion of the
acquisition price allocated to Fremont Hub was $47,000,000, and Fremont Hub's
1996 revenues were approximately $6,978,000. Financial information herein
relating specifically to Fremont Hub is derived from information provided by the
former owner.
At December 31, 1996, annual base rents at Fremont Hub ranged from $1.88 to
$53.22 per square foot. At December 31, 1996, two tenants, Home Express and
Safeway each occupied more than 10% of the GLA, 50,000 square feet and 48,858
square feet, respectively. The Home Express lease at December 31, 1996, provides
for base annual rents of $350,000, expires in 2002 and contains one 5 year
renewal option. The Safeway lease at December 31, 1996, provides for base annual
rents of $96,006, expires in 2004 and contains four 5 year renewal options. The
1996 property tax rate at Fremont Hub was approximately 1.07%, resulting in
aggregate property tax of $431,815, substantially all of which is reimbursed by
tenants under their leases. Management believes the property is adequately
insured.
During the period from 1992 to 1996 Fremont Hub experienced the following
average rental rate per square foot and occupancy percentage:
As of the Year-Ended Rental Rate Per Square Foot Occupancy %
-------------------- --------------------------- -----------
1992 (July 31) $10.36 91%
1993 10.69 89
1994 10.87 95
1995 10.92 95
1996 11.43 91
The following tabulation shows the expiration schedule of leases as of December
31, 1996.
<TABLE>
<CAPTION>
Total Number Approximate
Leases of Gross Leasable Annualized Base Rent(1)
Expiring In Leases Expiring Area Square Feet Percent of Total
- ----------- --------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
1997 24 102,352 $1,035,931 20%
1998 7 16,701 221,286 4
1999 9 19,350 376,084 8
2000 7 59,178 646,724 13
2001 6 42,505 569,734 11
2002 5 10,113 201,775 4
2003 6 38,983 297,372 6
2004 4 81,297 475,971 9
2005 3 3,124 95,385 2
2006 2 10,929 153,963 3
2007+ 5 63,995 1,005,979 20
</TABLE>
(1) Annualized Base Rent is computed by multiplying the monthly base rent in
effect at December 31, 1996 by 12.
Audited financial information concerning the Downey and BRE Portfolios and
certain unaudited and pro forma financial information relating to these
acquisitions are contained in this report. (See Item 7)
<PAGE> 5
ITEM 5. OTHER EVENTS
(A) Foothill Plaza Acquisition
On February 28, 1997, the Company purchased Foothill Plaza in Los Altos,
California, a 52,315 square foot drugstore anchored community shopping center
from an unrelated seller. The Company's acquisition cost was approximately
$6,202,000 and was funded from borrowings under the Company's Credit Facility.
(B) Crenshaw Imperial Acquisition
On April 3, 1997, the Company purchased Crenshaw Imperial Plaza in Inglewood,
California, a 151,151 square foot supermarket and drug store anchored community
shopping center from an unrelated seller. The Company's acquisition cost was
approximately $9,080,000.
The acquisition was financed by the assumption of an approximately $5,287,000
mortgage loan from Boatmen's National Mortgage Company, bearing interest at
8.8%, maturing in 2020, with the remainder financed with borrowings under the
Company's Credit Facility.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Attachment (I) - The Downey Portfolio Combined Statements of Revenue and Direct
Operating Expenses for the years ended December 31, 1996, 1995 and 1994 and
related notes and Independent Auditors' Report, filed in accordance with Rule
3.14(a)(1) of Regulation S-X.
Attachment (II) - Statement of Estimated Taxable Operating Results of The Downey
Portfolio and Estimated Cash to be Made Available by Operations of The Downey
Portfolio for a Twelve-Month Period (unaudited), filed in accordance with Rule
3.14(a)(2) of Regulation S-X.
Attachment (III) - The BRE Portfolio Combined Statements of Gross Income and
Direct Operating Expenses for the years ended December 31, 1996, 1995 and 1994
and related notes and Independent Auditors' Report, filed in accordance with
Rule 3.14(a)(1) of Regulation S-X.
Attachment (IV) - Statement of Estimated Taxable Operating Results of The BRE
Portfolio and Estimated Cash to be Made Available by Operations of The BRE
Portfolio for a Twelve-Month Period (unaudited), filed in accordance with Rule
3.14(a)(2) of Regulation S-X.
<PAGE> 6
(b) Pro Forma Financial Information
Attachment (V) - Burnham Pacific Properties, Inc. Pro Forma Consolidated Balance
Sheet as of December 31, 1996, Pro Forma Condensed Consolidated Statement of
Income for the year ended December 31, 1996 and notes thereto, filed in
accordance with Article 11 of Regulation S-X.
(c) Exhibits
10.1 Agreement for Sale of Partnership Interests dated September 30,
1996, by and between DSL Service Company and Downey Savings and Loan
Association, F.A., as Seller, and the Company, as Buyer, with
respect to The Downey Portfolio
10.2 Nomura Asset Corporation Loan Agreement dated January 30, 1997 for
$25,400,000 secured by Valley Central Shopping Center
10.3 Purchase and Sale Agreement dated March 26, 1997, by and between the
Company, as Buyer, and BRE Properties, Inc., as Seller, with
respect to The BRE Portfolio
10.4 First Amendment to Revolving Loan Agreement dated April 3, 1997,
between the Company, as Borrower, and Nomura Capital Corporation,
as Lender, (the "Bridge Financing")
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Ernst & Young LLP
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: April 15, 1997 By: //Daniel B. Platt//
--------------------- ------------------------------------
Daniel B. Platt, Chief Financial Officer
<PAGE> 7
ATTACHMENT I
THE DOWNEY PORTFOLIO
Combined Statements of Revenue
and Direct Operating Expenses
Years ended December 31, 1996, 1995 and 1994
(With Independent Auditors' Report Thereon)
<PAGE> 8
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Burnham Pacific Properties, Inc.:
We have audited the accompanying combined statements of revenue and direct
operating expenses of The Downey Portfolio (Downey), as described in note 1, for
each of the years in the three-year period ended December 31, 1996. These
combined statements are the responsibility of Downey's management. Our
responsibility is to express an opinion on these combined statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statements of revenue and direct
operating expenses are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the combined statements. We believe that
our audits provide a reasonable basis for our opinion.
The accompanying combined statements are prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission. They
exclude certain material revenue and expenses, described in note 1, and are not
intended to be a complete presentation of The Downey Portfolio's combined
revenue and expenses.
In our opinion, such combined statements present fairly, in all material
respects, the combined revenue and direct operating expenses, as described in
note 1, of The Downey Portfolio for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
//KPMG Peat Marwick LLP//
San Diego, California
January 31, 1997
<PAGE> 9
THE DOWNEY PORTFOLIO
Combined Statements of Revenue and Direct Operating Expenses
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Revenue:
Rental revenue $5,661,286 5,513,293 5,891,649
Expense reimbursements 1,203,198 1,298,079 1,332,068
Other operating revenue 89,220 59,872 35,106
---------- --------- ---------
Total revenue 6,953,704 6,871,244 7,258,823
---------- --------- ---------
Direct operating expenses:
Property taxes 657,134 609,579 656,815
Interest (note 4) 363,669 369,069 372,301
General maintenance and repair 231,397 212,394 192,245
Management fees paid to affiliate 226,673 213,809 214,978
(note 5)
Landscaping 138,374 117,091 71,871
Utilities 112,827 131,834 136,156
Insurance 105,507 119,801 138,691
Parking lot maintenance 92,268 101,214 166,678
Security 49,663 42,308 30,585
Miscellaneous 23,233 10,610 57,423
Legal 9,254 38,903 57,220
---------- --------- ---------
Total direct operating expenses 2,009,999 1,966,612 2,094,963
---------- --------- ---------
Excess of revenue over
direct operating expenses $4,943,705 4,904,632 5,163,860
========== ========= =========
</TABLE>
See accompanying notes to combined statements of revenue and direct operating
expenses.
<PAGE> 10
THE DOWNEY PORTFOLIO
Notes to Combined Statements of Revenue and Direct Operating Expenses
December 31, 1996, 1995 and 1994
(1) BASIS OF PRESENTATION
The accompanying combined statements of revenue and direct operating
expenses relate to the operations of The Downey Portfolio (Downey) and have
been prepared for the purpose of complying with the rules and regulations
of the Securities and Exchange Commission. The Downey Portfolio consists of
the following retail properties:
NAME LOCATION
--------------------- ----------------
Valley Central Lancaster, CA
West Lancaster Lancaster, CA
Ontario Village Plaza Ontario, CA
Cameron Park Cameron Park, CA
The Downey Portfolio was purchased by an affiliate of Burnham Pacific
Properties, Inc. (Burnham) on January 31, 1997.
Certain revenue, costs and expenses that are dependent on the particular
owner and carrying value of the properties have been excluded from the
accompanying combined statements. The excluded revenue consists of
nonoperating revenue related to the entity owning the property and not the
operations of the property. The excluded expenses consist of depreciation
and amortization of improvements and other nonoperating expenses related to
the entity owning the property and not the operations of the property.
Interest expense related to the debt assumed by Burnham has been adjusted
to reflect a principal paydown that occurred in conjunction with the
purchase transaction, referred to above, as if it occurred on January 1,
1994 and has been included in the accompanying statements. Interest expense
related to debt not assumed by Burnham has been excluded from the
statements. Consequently, the excess of revenue over direct operating
expenses is neither intended to be a complete presentation of Downey's
combined revenue and expenses nor is it expected to be comparable to the
proposed future operations of Downey.
(2) SIGNIFICANT ACCOUNTING POLICIES
PROPERTY OPERATIONS
Rental revenue is recognized on a straight-line basis over the term of the
respective lease. Repair and maintenance costs are expensed as incurred.
USE OF ESTIMATES
The preparation of the combined statements of revenue and direct operating
expenses in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of revenue and expenses during the reporting periods.
Actual results could differ from those estimates.
<PAGE> 11
(3) RENTAL REVENUE
The retail properties are leased to tenants under various arrangements
classified as operating leases. The leases generally provide for base rent
and reimbursement of various expenses such as common area maintenance, real
estate taxes and insurance. Certain leases also contain provisions for
percentage rents. Percentage rents received were $0, $41,801 and $150,693
for the years ended December 31, 1996, 1995 and 1994, respectively.
Minimum future rentals (excluding percentage rents and renewal options) on
noncancelable leases are as follows for the years ending December 31:
1997 $ 5,579,000
1998 5,131,000
1999 4,837,000
2000 4,351,000
2001 3,609,000
Thereafter 28,574,000
------------
$ 52,081,000
============
(4) MORTGAGE NOTE PAYABLE
Burnham assumed a mortgage note payable as part of the Downey acquisition.
The note payable is collateralized by a first deed of trust on Ontario
Village Plaza. The note payable matures July 1998 and bears interest at
9.75%.
(5) RELATED PARTY TRANSACTIONS
Included in the accompanying statements of revenue and direct operating
expenses are management fees paid to a related party.
<PAGE> 12
ATTACHMENT II
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING
RESULTS OF THE DOWNEY PORTFOLIO AND ESTIMATED CASH TO BE
MADE
AVAILABLE BY OPERATIONS OF THE DOWNEY PORTFOLIO
FOR A TWELVE-MONTH PERIOD
(UNAUDITED)
<TABLE>
<CAPTION>
Revenues: (in thousands)
<S> <C>
Rents $ 5,751
Reimbursed Expenses 1,203
-------
Total 6,954
-------
Cost and Expenses:
Rental Operating Expenses 1,646
Depreciation 1,194
-------
Total 2,840
-------
Estimated Taxable Operating Income 4,114
Add Back Depreciation 1,194
-------
Estimated Cash to be Made Available by Operations $ 5,308
=======
</TABLE>
- --------------
Note
This statement of estimated taxable operating results and estimated cash to be
made available from operations is an estimate of operating results of The Downey
Portfolio for a period of twelve months based on information provided by the
seller of the property and by management's independent review of the leases and
other documents and does not purport to reflect actual results for any period.
<PAGE> 13
ATTACHMENT III
THE BRE PORTFOLIO
Combined Statements of Gross Income
and Direct Operating Expenses
Years ended December 31, 1996, 1995 and 1994
(With Independent Auditors' Report Thereon)
<PAGE> 14
REPORT OF INDEPENDENT AUDITORS
To Burnham Pacific Properties, Inc.
We have audited the accompanying combined statements of gross income and direct
operating expenses of The Hub, Central Shopping Center, and Santa Fe Springs
Plaza (the "BRE Portfolio") for the three years in the period ended December 31,
1996. These combined statements are the responsibility of the BRE Portfolio's
management. Our responsibility is to express an opinion on the combined
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes assessing
the basis of accounting used and significant estimates made by management, as
well as evaluating the overall presentation of the BRE Portfolio's combined
gross income and direct operating expenses.
In our opinion, the statements referred to above present fairly, in all material
respects, the combined gross income and direct operating expenses described in
Note 2 of the BRE Portfolio for the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
//Ernst & Young LLP//
San Francisco, California
March 9, 1997
<PAGE> 15
The BRE Portfolio
(The Hub,
Central Shopping Center,
and Santa Fe Springs Plaza)
Combined Statements of Gross Income
and Direct Operating Expenses
For the years ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------
<S> <C> <C> <C>
(Amounts in thousands)
GROSS INCOME
Rental income........... $ 7,252 $ 7,434 $ 7,159
Percentage rent......... 86 105 114
Tenant reimbursements... 2,756 2,789 2,468
Other income............ 28 20 32
-----------------------------------------
10,122 10,348 9,773
DIRECT OPERATING EXPENSES
Maintenance............. 1,275 1,232 1,264
Property taxes.......... 588 633 655
Salaries and wages...... 196 200 246
Utilities............... 209 239 216
Management fees......... 207 223 213
Insurance............... 249 193 192
Administrative.......... 80 86 195
Marketing and other..... 356 342 305
-----------------------------------------
3,160 3,148 3,286
-----------------------------------------
TOTAL GROSS INCOME LESS DIRECT
OPERATING EXPENSES $ 6,962 $ 7,200 $ 6,487
=========================================
</TABLE>
See report of independent auditors and accompanying notes to the combined
statements of gross income and direct operating expenses.
<PAGE> 16
The BRE Portfolio
(The Hub,
Central Shopping Center,
and Santa Fe Springs Plaza)
Notes to Combined Statements of Gross Income
and Direct Operating Expenses
For the Years Ended December 31, 1996, 1995 and 1994
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICY
Burnham Pacific Properties, Inc. ("Burnham") is planning to acquire The Hub,
Central Shopping Center, and Santa Fe Springs Plaza (the "BRE Portfolio") in
early 1997 from an unrelated party. The BRE Portfolio is comprised of
approximately 719,307 square feet of retail space located in Fremont, Ventura,
and Santa Fe Springs, California, respectively.
Expenditures for repairs, maintenance and minor renewals are charged to expense
as incurred, while those expenditures that improve or extend the estimated life
of the BRE Portfolio are capitalized.
NOTE 2. BASIS OF PRESENTATION
The combined statements of gross income and direct operating expenses exclude
the following expenses which are not comparable with those resulting from the
proposed future operations of the BRE Portfolio:
- - Depreciation and amortization expense
- - Mortgage interest expense
Property taxes have not been adjusted to reflect the estimated reassessed value
of the BRE Portfolio after acquisition by Burnham.
Burnham is not aware of any material factors relating to the BRE Portfolio that
would cause the reported financial information not to be indicative of future
operations.
<PAGE> 17
ATTACHMENT IV
BURNHAM PACIFIC PROPERTIES, INC.
STATEMENT OF ESTIMATED TAXABLE OPERATING
RESULTS OF THE BRE PORTFOLIO AND ESTIMATED CASH TO BE MADE
AVAILABLE BY OPERATIONS OF THE BRE PORTFOLIO
FOR A TWELVE-MONTH PERIOD
(UNAUDITED)
<TABLE>
<CAPTION>
Revenues: (in thousands)
<S> <C>
Rents $ 7,366
Reimbursed Expenses 2,756
-------
Total 10,122
-------
Cost and Expenses:
Rental Operating Expenses 3,160
Depreciation 1,559
-------
Total 4,719
-------
Estimated Taxable Operating Income 5,403
Add Back Depreciation 1,559
-------
Estimated Cash to be Made Available by Operations $ 6,962
=======
</TABLE>
- --------------
Note
This statement of estimated taxable operating results and estimated cash to be
made available from operations is an estimate of operating results of The BRE
Portfolio for a period of twelve months based on information provided by the
seller of the property and by management's independent review of the leases and
other documents and does not purport to reflect actual results for any period.
<PAGE> 18
ATTACHMENT V
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Capitalized terms used herein and not otherwise defined have the
respective meanings ascribed to such terms in Rider A to this Attachment (V)).
The accompanying unaudited pro forma condensed consolidated statement of
income gives effect to the following transactions as if they had occurred on
January 1, 1996; (i) the acquisition of Ladera Shopping Center ("Ladera") (which
occurred in July 1996), (ii) the acquisition of Margarita Plaza ("Margarita")
(which occurred in December 1996) and the consummation of the other Recent
Acquisitions (which were completed after December 31, 1996), (iii) the
redemption of the Convertible Debentures (which occurred in 1996), (iv) the
consummation of the Offering and the application of the estimated net proceeds
therefrom, (v) the sale of interests in five properties (which occurred in 1996)
and the application of the proceeds therefrom to repay indebtedness, and (vi)
the sale of a 75% joint venture interest in each of Ladera and Margarita (one
such sale having occurred in February 1997, while the other such sale is
pending) and the application of the estimated proceeds therefrom to repay
indebtedness. The accompanying unaudited pro forma condensed consolidated
balance sheet gives effect to the following transactions as if they had occurred
on December 31, 1996: (i) the acquisition of Foothill Plaza ("Foothill"), the
Downey Portfolio, Crenshaw Imperial Plaza ("Crenshaw") and the BRE Portfolio
which acquisitions were completed after December 31, 1996, (ii) the consummation
of the Offering and the application of the estimated net proceeds therefrom, and
(iii) the sale of a 75% joint venture interest in each of Ladera and Margarita
and the application of the estimated proceeds therefrom to repay indebtedness.
The pro forma condensed consolidated financial statements are unaudited and
are subject to a number of estimates, assumptions and other uncertainties, and
do not purport to be indicative of the actual financial position or results of
operations that would have occurred had the transactions and events reflected
therein in fact occurred on the dates specified, nor do such financial
statements purport to be indicative of the results of operations or financial
condition that may be achieved in the future. In particular, although the
Company believes that it is probable that the pending sale of a 75% joint
venture interest in Ladera will be consummated, there can be no assurance in
that regard. Moreover, the historical financial information for Margarita,
Foothill and Crenshaw, three of the Recent Acquisitions, which was used in
preparing the pro forma condensed consolidated statement of income was provided
by the prior owners of those properties and there can be no assurance as to its
accuracy. In addition, because Ladera was acquired by the Company in July 1996,
the historical financial information for Ladera which was used in preparing the
pro forma condensed consolidated statement of income was prepared by annualizing
Ladera's results of operations for the five months ended December 31, 1996 and
therefore does not represent Ladera's actual historical results of operations
for the year ended December 31, 1996.
There can be no assurance that the Offering or any other future event
referred to in these pro forma statements will actually occur.
<PAGE> 19
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
RECENT JOINT VENTURE
HISTORICAL(1) ACQUISITIONS(2) OFFERING(3) FINANCINGS(4) PRO FORMA
------------- --------------- ----------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Real Estate................................. $ 389,634 $ 137,182 $ -- $(29,854) $496,962
Less Accumulated Depreciation............... (48,978) (48,978)
-------- ------- -------- -------- --------
Real Estate - Net........................... 340,656 137,182 -- (29,854) 447,984
Investment in Unconsolidated Subsidiaries... 7,464 7,464
Cash and Cash Equivalents................... 4,095 4,095
Receivables - Net........................... 4,860 4,860
Other Assets................................ 6,584 254 6,838
-------- ------- -------- -------- --------
Total................................... $ 356,195 $ 137,436 $ -- $(22,390) $471,241
======== ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts Payable and Other.................. $ 2,655 $ -- $ -- -- $ 2,655
Tenant Security Deposits.................... 929 929
Notes Payable............................... 105,552 34,380 139,932
Credit Facility............................. 72,900 103,035 (64,341) (22,390) 89,204
-------- ------- -------- -------- --------
Total Liabilities....................... 182,036 137,415 (64,341) (22,390) 232,720
-------- ------- -------- -------- --------
Minority Interest........................... 434 21 -- -- 455
-------- ------- -------- -------- --------
STOCKHOLDERS' EQUITY:
Common Stock................................ 262,340 64,341 326,681
Distributions Paid in Excess of Net
Income.................................... (88,615) (88,615)
-------- ------- -------- -------- --------
Total Stockholders' Equity.............. 173,725 -- 64,341 -- 238,066
-------- ------- -------- -------- --------
Total................................... $ 356,195 $ 137,436 $ -- $(22,390) $471,241
======== ======= ======== ======== ========
</TABLE>
- ---------------
(1) Reflects the historical condensed consolidated balance sheet of the Company
as of December 31, 1996.
(2) Reflects the acquisitions of Foothill, the Downey Portfolio, Crenshaw and
the BRE Portfolio, which were acquired by the Company after December 31,
1996 for an aggregate investment of approximately $137,182,000. The
acquisitions were funded with the assumption of $8,980,000 of mortgage loans
and a new $25,400,000 mortgage loan, with the remaining funds provided by
borrowings under the Company's Credit Facility, including the Bridge
Financing. Margarita was acquired by the Company on December 31, 1996 and is
included in the Historical column.
(3) Reflects the estimated net proceeds from the Offering of approximately
$64,341,000, assuming a public offering price of $12.50 per share and the
application of such estimated net proceeds. The actual net proceeds received
in the Offering, as well as the actual number of shares which may be issued,
will depend on market conditions at the time, and therefore the number of
shares issued may differ, and the price per share will likely differ, from
the amounts assumed in the preparation of these pro forma financial
statements.
(4) Reflects the Company's sale of a 75% interest in each of Ladera and
Margarita for approximately $22,390,000 and the use of the estimated
proceeds therefrom to repay borrowings under the Company's Credit Facility.
<PAGE> 20
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
REDEMPTION OF
RECENT CONVERTIBLE REAL ESTATE JOINT VENTURE
HISTORICAL(1) ACQUISITIONS(2) DEBENTURES(3) OFFERING(4) SALES(5) FINANCINGS(6) PRO FORMA
------------- --------------- ------------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Rents......................... $ 46,864 $22,518 $ -- $ -- $(4,417) $(4,377) $ 60,588
Interest...................... 450 11 (19) 442
----------- ------- ----- ------- -------- ------- -------
Total Revenues............ 47,314 22,529 -- -- (4,417) (4,396) 61,030
----------- ------- ----- ------- -------- ------- -------
COSTS AND EXPENSES:
Interest...................... 10,744 12,036 (288) (4,748) (1,329) $(1,652) 14,763
Rental Operating Costs........ 12,603 6,325 (1,038) (1,250) 16,640
Provision for Bad Debt........ 410 410
General and Administrative.... 2,415 2,415
Depreciation and
Amortization................ 11,250 3,570 (425) (664) 13,731
----------- ------- ----- ------- -------- ------- -------
Total Costs and
Expenses................ 37,422 21,931 (288) (4,748) (2,792) (3,566) 47,959
----------- ------- ----- ------- -------- ------- -------
Income From Operations Before
Gain on Sales of Real
Estate, Distribution to
Minority Interest Holders,
Income From Unconsolidated
Subsidiaries and
Extraordinary Item.......... 9,892 598 288 4,748 (1,625) (830) 13,071
Gain on Sales of Real
Estate...................... 2,298 2,298
Distribution to Minority
Interest Holders............ (35) (2) (37)
Income from Unconsolidated
Subsidiaries................ 654 654
----------- ------- ----- ------- -------- ------- -------
Net Income Before
Extraordinary Item.......... $ 12,155 $ 596 $ 288 $ 4,748 $(1,625) $ (176) $ 15,986
=========== ======= ===== ======= ======== ======= =======
Net Income Per Share Before
Extraordinary Item.......... $ 0.71 $ 0.71
Weighted Average Number of
Shares Outstanding.......... 17,084,498 22,584,498
</TABLE>
- ---------------
(1) Reflects the historical condensed consolidated statement of income of the
Company for the year ended December 31, 1996, excluding extraordinary items.
(2) Reflects (i) the acquisition of Ladera (which occurred in July 1996) and
(ii) the acquisition of Margarita (which occurred in December 1996) and the
consummation of the other Recent Acquisitions (which were completed after
December 31, 1996), as if such transactions had occurred on January 1, 1996.
The acquisitions were funded with the assumption of $3,693,000 and
$5,287,000 of mortgage indebtedness bearing interest at 9.75% and 8.8% per
annum, respectively, and a new $25,400,000 mortgage loan bearing interest at
7.98% per annum, with the remaining funds provided by borrowings under the
Company's Credit Facility at an assumed rate of 7.38% per annum (the
weighted average interest rate on the Company's Credit Facility at April 1,
1997). Estimated depreciation and amortization expense is based upon the
Company's investment in such properties using asset lives of 30 years.
(3) Reflects the redemption of $25,700,000 aggregate principal amount of the
Convertible Debentures, plus payment of accrued interest thereon, using
borrowings of $26,000,000 under the Company's Credit Facility based on an
assumed interest rate of 7.38% per annum.
(4) Reflects the application of the estimated net proceeds from the Offering to
repay borrowings under the Credit Facility (assuming an interest rate of
7.38% per annum on such borrowings).
(5) Reflects the elimination of the operations of the Company's interest in five
properties sold during 1996, and the application of the proceeds therefrom
to repay indebtedness under the Credit Facility (assuming an interest rate
of 7.38%), as if such transactions had occurred on January 1, 1996.
(6) Reflects the Company's sale of a 75% joint venture interest in each of
Ladera and Margarita, and the application of the estimated proceeds
therefrom to repay indebtedness under the Credit Facility (assuming an
interest rate of 7.38%), as if such transactions had occurred on January 1,
1996. The joint venture interest in Margarita was sold during the first
quarter of 1997, while the sale of the joint venture interest in Ladera is
pending.
<PAGE> 21
Rider A
DEFINITIONS -- ATTACHMENT (V)
"BRE Portfolio" means the three retail properties which the Company
acquired from BRE Properties, Inc., a real estate investment trust, on April 4,
1997. These properties are Fremont Hub, Central Shopping Center and Santa Fe
Springs Plaza.
"Convertible Debentures" means the Company's 8 1/2 Convertible
Debentures due 2002, which the Company redeemed at par ($25,700,000) during
November, 1996.
"Credit Facility" means the $135 million Credit Facility which the Company
entered into with Nomura Asset Capital Corporation in November 1996. The Credit
Facility is scheduled to mature in November 1998, with a one-year extension
option available. Of the total facility, $90 million is secured by mortgages on
seven of the Company's properties and carries an interest rate equal to the
London Inter Bank Offer Rate ("LIBOR") plus 1.65%, and $45 million is unsecured
and carries an interest rate equal to LIBOR plus 1.75%. In order to facilitate
the closing of the acquisition of the BRE Portfolio on April 4, 1997, the
Company negotiated a temporary increase in its Credit Facility of approximately
$70 million (the "Bridge Financing"). Of the total amount, $42 million is
secured by mortgages on the three BRE Portfolio properties and $28 million is
unsecured. The secured and unsecured portions of the Bridge Financing carry an
interest rate equal to LIBOR plus 1.65% and LIBOR plus 2.50%, respectively. The
Bridge Financing will mature sixty days from the date of funding and such
maturity may be extended for ninety additional days.
"Downey Portfolio" means the four retail properties in which the Company
acquired interests from an affiliate of Downey Savings & Loan, an institutional
lender, on January 31, 1997. These properties are Valley Central Shopping
Center, Cameron Park Shopping Center, Ontario Village Shopping Center and West
Lancaster Plaza.
"Offering" means a proposed public offering of Common Stock, no par value,
of the Company pursuant to the Company's $200 million shelf registration
statement. Depending on market conditions, the Company anticipates that it may
repay borrowings with approximately $64,300,000 of net proceeds from the sale of
approximately 5,500,000 shares of its common Stock at an assumed price per share
of $12.50, after costs and expenses.
"Recent Acquisitions" means the acquisition by the Company of Margarita
Plaza on December 31, 1996, the Downey Portfolio on January 31, 1997, Foothill
Plaza on February 28, 1997, Crenshaw-Imperial Plaza on April 3, 1997 and the BRE
Portfolio on April 4, 1997.
<PAGE> 1
Exhibit 10.1
AGREEMENT FOR SALE OF
PARTNERSHIP INTERESTS
by and between
DSL SERVICE COMPANY,
A CALIFORNIA CORPORATION
and
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
as Seller
and
BURNHAM PACIFIC PROPERTIES, INC.,
A CALIFORNIA CORPORATION
as Buyer
Dated: September 30, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
1. Definitions ........................................................... 2
2. Assignment of Partnership Interests ................................... 8
3. Purchase Price ........................................................ 8
3.1 Deposit ........................................................... 8
3.2 Cash Balance ...................................................... 9
4. Due Diligence ......................................................... 9
4.1 Delivery of Due Diligence Materials ............................... 9
4.2 Right of Entry .................................................... 9
4.2.1 Notice ..................................................... 9
4.2.2 Expenses ................................................... 9
4.2.3 License .................................................... 10
4.2.4 Physical Testing ........................................... 10
4.2.5 Scheduling of Tests ........................................ 10
4.2.6 Representative ............................................. 10
4.2.7 No Interference ............................................ 10
4.2.8 Liens ...................................................... 10
4.2.9 Restoration ................................................ 11
4.2.10 Indemnity .................................................. 11
4.2.11 Confidential ............................................... 11
4.3 Disapproval of Seller's Studies or Buyer
Inspections ....................................................... 11
4.4 Contracts ......................................................... 12
5. As Is Purchase ........................................................ 12
6. Indemnity ............................................................. 13
6.1 Seller's Indemnity ................................................ 13
6.2 Buyer's Indemnity ................................................. 13
6.3 Indemnified Parties ............................................... 13
6.4 Survival .......................................................... 14
7. Grant Deeds ........................................................... 14
8. Conditions Precedent to Close of Escrow ............................... 14
8.1 Seller ............................................................ 14
8.1.1 No Suit .................................................... 14
8.1.2 Buyer's Representations .................................... 14
8.1.3 Buyer's Covenants .......................................... 14
8.1.4 Resolutions ................................................ 14
8.1.5 Consents ................................................... 15
8.1.6 Concurrent Transaction ..................................... 15
8.1.7 Riley Finder Fee ........................................... 15
-i-
<PAGE> 3
Page
8.2 Buyer .............................................................. 15
8.2.1 Due Diligence Period ........................................ 15
8.2.1.1 Inspection ......................................... 15
8.2.1.2 Preliminary Report ................................. 15
8.2.1.3 Board of Directors ................................. 15
8.2.2 Close of Escrow ............................................. 15
8.2.2.1 Title Policy ....................................... 15
8.2.2.2 No Suit ............................................ 16
8.2.2.3 Seller's Representations ........................... 16
8.2.2.4 Seller's Covenants ................................. 16
8.2.2.5 Concurrent Transaction ............................. 16
8.2.2.6 Resolutions ........................................ 16
8.2.2.7 Consents ........................................... 16
8.2.2.8 Contracts .......................................... 17
8.2.2.9 Tenant Estoppels ................................... 17
8.2.2.10 REA Estoppels ...................................... 17
8.2.2.11 Condition of Real Property ......................... 17
8.2.2.12 No Material Change ................................. 17
9. Closing ............................................................... 18
9.1 Time .............................................................. 18
9.2 Documents ......................................................... 18
9.2.1 Seller ..................................................... 18
9.2.1.1 Assignments of Partnership Interest ............... 18
9.2.1.2 Non-Foreign Certificate ........................... 18
9.2.1.3 Notice to Tenants ................................. 18
9.2.1.4 California Form 590 ............................... 18
9.2.1.5 Amended and Restated Statements of Partnership .... 18
9.2.1.6 Additional Documents .............................. 19
9.2.1.7 Beneficiary Statement ............................. 19
9.2.2 Buyer ...................................................... 19
9.2.2.1 Purchase Price .................................... 19
9.2.2.2 Additional Funds .................................. 19
9.2.2.3 Notice to Tenants ................................. 19
9.2.2.4 Amended and Restated
-ii-
<PAGE> 4
Page
Statements of Partnership ......................... 19
9.2.2.5 Additional Documents .............................. 19
9.2.3 JV Partnerships ............................................ 19
9.2.3.1 Deeds ............................................. 19
9.2.3.2 Assignments ....................................... 19
-iii-
<PAGE> 5
Page
9.3 Procedure ........................................................ 20
9.3.1 Amended and Restated Statements ........................... 20
9.3.2 Deeds ..................................................... 20
9.3.3 Purchase Price ............................................ 20
9.3.4 Deliveries to Buyer ....................................... 20
9.3.5 Deliveries to Seller ...................................... 20
9.4 Escrow Instructions .............................................. 20
9.5 Closing Costs and Prorations ..................................... 21
9.5.1 Closing Costs ............................................. 21
9.5.2 Prorations ................................................ 21
9.5.2.1 Lease Rentals .................................... 21
9.5.2.2 CAM Charges ...................................... 22
9.5.2.3 Leasing Costs .................................... 22
9.5.2.4 Security Deposits ................................ 22
9.5.2.5 Real Estate Taxes ................................ 22
9.5.2.6 Utilities ........................................ 23
9.5.2.7 Final Adjustment After Closing ................... 23
9.5.3 Refunds of Real Estate Taxes .............................. 23
9.5.4 Additional Costs .......................................... 24
9.5.5 Replacement of Bonds, Passbooks, Etc ...................... 24
9.6 Delivery of Real Property
Documents ........................................................ 24
10. No Brokerage Commissions ............................................. 24
11. Condemnation/Casualty ................................................ 25
11.1 Condemnation .................................................... 25
11.2 Casualty ........................................................ 25
11.2.1 Material Casualty ....................................... 25
11.2.2 Nonmaterial Casualty .................................... 26
12. Representations and Warranties ....................................... 26
12.1 Buyer ........................................................... 26
12.1.1 Binding ................................................. 26
12.1.2 Authority ............................................... 26
12.1.3 No Bankruptcy ........................................... 27
12.2 DSL and Downey .................................................. 27
12.2.1 Binding ................................................. 27
12.2.2 Authority ............................................... 27
12.3 DSL ............................................................. 27
12.3.1 Environmental Matters ................................... 27
12.3.2 Notice of Noncompliance ................................. 28
12.3.3 Use and Operation ....................................... 28
12.3.4 Legal Action ............................................ 28
12.3.5 Leases; Rent Roll ....................................... 28
-iv-
<PAGE> 6
Page
12.3.6 Contracts ............................................... 28
12.3.7 Other Rights ............................................ 29
12.3.8 Due Diligence Materials ................................. 29
12.3.9 Persons With Actual Knowledge ........................... 29
12.3.10 Related Entities ........................................ 29
12.3.11 Violation of Laws ....................................... 29
12.3.12 Access .................................................. 29
13. Operation of Real Property ........................................... 29
13.1 Ordinary Operation ............................................. 29
13.2 Leasing ........................................................ 30
13.3 New Contracts .................................................. 30
13.4 Tax Proceedings ................................................ 30
13.5 Copies of Notices .............................................. 30
13.6 Prohibition on Marketing ....................................... 30
14. Liquidated Damages ................................................... 31
15. Miscellaneous ........................................................ 31
15.1 Successors and Assigns ......................................... 31
15.2 Entire Agreement ............................................... 31
15.3 Professional Fees and Costs .................................... 31
15.4 Waiver of Trial by Jury ........................................ 32
15.5 Governing Law .................................................. 32
15.6 Further Assurances ............................................. 32
15.7 Severability ................................................... 32
15.8 Notices ........................................................ 32
15.9 Counterparts ................................................... 32
15.10 Time ........................................................... 33
15.11 Nonwaiver ...................................................... 33
15.12 Captions ....................................................... 33
15.13 Exhibits ....................................................... 33
15.14 Construction ................................................... 33
15.15 Confidentiality ................................................ 33
EXHIBIT A Partnership Interests
EXHIBIT B Form of Assignment of Partnership Interest
EXHIBIT C Environmental Reports
EXHIBIT D Legal Description of LVA Property
EXHIBIT E-1 Legal Description of Cameron Park Property
EXHIBIT E-2 Legal Description of West Lancaster Property
EXHIBIT E-2 Legal Description of Ontario Property
EXHIBIT F Due Diligence Materials
EXHIBIT G Form of Grant Deed
EXHIBIT H Form of Estoppel and List of Major Tenants
-v-
<PAGE> 7
Page
EXHIBIT I Form of Notice to Tenants
EXHIBIT J Form of Assignment of Leases and Contracts
EXHIBIT K Litigation
-vi-
<PAGE> 8
AGREEMENT FOR SALE OF PARTNERSHIP INTERESTS
This Agreement for Sale of Partnership Interests ("Agreement") is
entered into as of September 30, 1996 by and between DSL Service Company, a
California corporation ("DSL"), individually and in its capacity as the managing
general partner of the JV Partnerships, and Downey Savings and Loan Association,
F.A. ("Downey", and together with DSL collectively "Seller") and Burnham Pacific
Properties, Inc., a California corporation ("Buyer").
R E C I T A L S:
A. DSL and Downey own the interests in the JV Partnerships as more
particularly set forth on EXHIBIT A (the "Partnership Interests").
B. The real property owned by LVA and the real property owned by
DSL/West Lancaster Phase II are currently encumbered by the Downey Loans. The
real property owned by DSL/Cameron Park and the real property owned by
DSL/Ontario are currently encumbered by the Sun Life Loans.
C. Buyer wishes to acquire the Partnership Interests and Seller is
willing to sell the Partnership Interests to Buyer on the terms set forth in
this Agreement.
D. Concurrently with the Closing, each Riley/Pearlman Partner will
contribute all of its right, title and interest in and to the respective JV
Partnership to the Umbrella Partnership, Buyer will acquire at no cost to Buyer
the interest held by Costco in LVA, Buyer will contribute the Partnership
Interests acquired hereunder to the Umbrella Partnership and the Partnership
Properties and the LVA Property will be deeded to the Umbrella Partnership (the
"Concurrent Transaction"). The cost to acquire the interest held by Costco in
LVA, which is the "Distributable Cash" required to be paid to Costco pursuant to
the terms of the Agreement of Limited Partnership of LVA, will be paid by DSL up
to $100,000; and if such amount exceeds $100,000, subject to the mutual
agreement of DSL and LVCLP, each of LVCLP and DSL will pay one-half of any
amount in excess of $100,000.
<PAGE> 9
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Definitions. For the purposes of this Agreement the following terms
shall be defined as follows:
Actual Knowledge of Seller: "Actual Knowledge of Seller" means and
is limited to the actual knowledge of Diane Klein, Director of Property
Management, and Wendell Hindley, Vice President of Real Estate, without having
conducted any independent inquiry or inspection.
Assignment: "Assignment" shall have the meaning given thereto in
Section 9.2.3.2.
Assignment of Partnership Interest: "Assignment of Partnership
Interest" shall mean the document, the form of which is attached hereto as
EXHIBIT B, pursuant to which Seller will transfer the Partnership Interests to
Buyer.
Business Hours: "Business Hours" means 8:00 a.m. to 7:00 p.m. Monday
through Friday.
Buyer Inspection: "Buyer Inspection" shall have the meaning given
thereto in Section 4.2.
Closing and Close of Escrow: "Closing" or "Close of Escrow" shall be
deemed to have occurred when the four Assignments of Partnership Interest, duly
executed, are delivered to Buyer and the four Deeds have recorded in the
Official Records. "Closing" and "Close of Escrow" are terms used interchangeably
in this Agreement.
Closing Date: "Closing Date" means the date the Closing occurs which
is scheduled to be December 15, 1996, which date can be extended by either party
to satisfy any conditions to Closing, but in no event beyond the Outside Closing
Date.
Concurrent Transaction: The "Concurrent Transaction" shall have the
meaning given thereto in Recital D.
Contracts: "Contracts" means all of the contracts affecting the
Partnership Properties.
Costco: "Costco" means Costco Wholesale Corporation, a Washington
corporation.
-2-
<PAGE> 10
Deeds: "Deeds" shall have the meaning given thereto in Section 7.
Deposit: "Deposit" means the deposit of Two Hundred Fifty Thousand
Dollars ($250,000) which Buyer will place in Escrow no later than the expiration
of the Due Diligence Period.
Downey Loans: "Downey Loans" means those certain loans to (a) LVA
from Downey in the original principal amount of $37,000,000 and (b) DSL/West
Lancaster Phase II from Downey in the original principal amount of
$3,662,941.00.
DSL/Ontario: "DSL/Ontario" means the general partnership formed
between DSL and Ontario Village Limited Partnership, a California Limited
Partnership ("OVLP") pursuant to that certain Joint Venture Agreement dated
October 31, 1985, as amended by a First Amendment to Joint Venture Agreement
dated January 15, 1993 between Downey, as successor in interest to DSL, and
OVLP, and a Second Amendment to Joint Venture Agreement of DSL/Ontario dated
June 25, 1993 between Downey, OVLP and DSL, pursuant to which DSL was appointed
to manage the partnership and its property and Downey was released from all
obligations as managing general partner.
DSL/Cameron Park: "DSL/Cameron Park" means the general partnership
formed between DSL and Cameron Park Limited Partnership, a California limited
partnership ("CPLP") pursuant to that certain Joint Venture Agreement of
DSL/Cameron Park dated April 18, 1988, as amended by a First Amendment to Joint
Venture Agreement dated January 15, 1993 between DSL and CPLP.
DSL/Valley Central: "DSL/Valley Central" means the general
partnership formed between DSL and Lancaster Valley Central Limited Partnership,
a California Limited Partnership ("LVCLP") pursuant to that certain Joint
Venture Agreement of DSL/Valley Central dated January 8, 1988, as amended by a
First Amendment to Joint Venture Agreement between DSL and LVCLP, dated
September 1, 1989, a Second Amendment to Joint Venture Agreement between DSL and
LVCLP, dated March 20, 1990, and a Third Amendment to Joint Venture Agreement of
DSL/Valley Central between DSL and LVCLP, dated January 15, 1993.
-3-
<PAGE> 11
DSL/West Lancaster Phase II: "DSL/West Lancaster Phase II" means the
general partnership formed between DSL and West Lancaster Phase II, a California
limited partnership ("WLP") pursuant to that certain Joint Venture Agreement
dated September 13, 1984, as amended by a First Amendment to Joint Venture
Agreement of DSL/West Lancaster Phase II between DSL and WLP, dated November 11,
1986 and a Second Amendment to Joint Venture Agreement dated January 15, 1993.
Due Diligence Materials: "Due Diligence Materials" shall have the
meaning given thereto in Section 4.1.
Due Diligence Period: The "Due Diligence Period" is the period
commencing on the date hereof and ending at 5:00 p.m. Pacific Time on October
31, 1996 during which Buyer must complete its due diligence as described in
Section 4.
Environmental Law: "Environmental Law" means any law, statute,
ordinance or regulation pertaining to health, industrial hygiene or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, and the Resources
Conservation and Recovery Act of 1976, as amended.
Environmental Report(s): "Environmental Reports" means all of the
environmental reports in Seller's possession with respect to the Partnership
Properties and the LVA Property, as listed on EXHIBIT C.
Escrow: "Escrow" shall have the meaning given thereto in Section 3.
Escrow Holder: "Escrow Holder" is:
Commonwealth Land Title Insurance Company
200 West Santa Ana Boulevard
Santa Ana, California 92701
Telephone: (714) 835-8511
Facsimile: (714) 835-4201
Attention: Sharon Cram
-4-
<PAGE> 12
Exhibits: "Exhibits" means the following, each of which is attached
hereto and incorporated herein by this reference:
Exhibit A Partnership Interests
Exhibit B Form of Assignment of Partnership Interest
Exhibit C Environmental Reports
Exhibit D Legal Descriptions of LVA Property
Exhibit E-1 Legal Description of Cameron Park Property
Exhibit E-2 Legal Description of West Lancaster Property
Exhibit E-3 Legal Description of Ontario Property
Exhibit F Due Diligence Materials
Exhibit G Form of Grant Deed
Exhibit H Form of Estoppel and List of Major Tenants for Each
Property
Exhibit I Form of Notice to Tenants
Exhibit J Form of Assignment of Leases and Contracts
Exhibit K Litigation
Hazardous Substance: "Hazardous Substance" means any substance,
material or waste which is or becomes designated, classified or regulated as
being "toxic" or "hazardous" or a "pollutant" or which is or becomes similarly
designated, classified or regulated, under any Environmental Law, including,
without limitation, PCB's, asbestos, petroleum and petroleum products.
JV Partnerships: "JV Partnerships" means DSL/Valley Central,
DSL/West Lancaster Phase II, DSL/Ontario and DSL/Cameron Park.
Leases: "Leases" means all leases of space or occupancy agreements
(including licenses and concession agreements) affecting the Real Property.
Leasing Costs: "Leasing Costs" shall have the meaning given thereto
in Section 9.5.2.2.
LVA: "LVA" means Lancaster Valley Associates, a California limited
partnership formed between DSL/Valley Central, as general partner, and Costco,
as limited partner.
-5-
<PAGE> 13
LVA Property: "LVA Property" means that certain improved real
property owned by LVA, as more particularly described on EXHIBIT D.
Non-Foreign Certificate: "Non-Foreign Certificate" shall have the
meaning given thereto in Section 9.2.1.4.
Notices: "Notices" means all notices or other communications
required or permitted hereunder, which Notices shall be sent as follows to:
DSL and/or Downey: DSL Service Company
Downey Savings and Loan Association
North Tower
3501 Jamboree Road, Suite 5000
Newport Beach, CA 92660
Attn: Donald E. Royer, Esq.
and
Scott S. Brooks, Esq.
Telecopy No. (714) 725-0619
with a copy to: Paul, Hastings, Janofsky & Walker LLP
Seventeenth Floor
695 Town Center Drive
Costa Mesa, CA 92626
Attn: Janet T. Davidson, Esq.
Telecopy No. (714) 979-1921
Buyer: Burnham Pacific Properties, Inc.,
a California corporation
610 W. Ash, Suite 1600
San Diego, CA 92101
Attn: Mr. Michael Rubin
Telecopy No. (619) 652-4711
with a copy to: Cassidy & Verges
20 California Drive, Suite 500
San Francisco, CA 94111
Attn: Scott C. Verges, Esq.
Telecopy No. (415) 788-2039
Notice to Tenants: "Notice to Tenants" shall have the meaning given
thereto in Section 9.2.1.5.
-6-
<PAGE> 14
Outside Closing Date: "Outside Closing Date" means December 31, 1996
and is the last date on which the Closing/Close of Escrow can occur.
Partnership Interests: "Partnership Interests" shall have the
meaning given thereto in Recital A.
Partnership Properties: "Partnership Properties" means those certain
improved real properties owned by DSL/Cameron Park, DSL/West Lancaster II and
DSL/Ontario, respectively, each as more particularly described on EXHIBITS E-1,
E-2, E-3.
Permitted Exceptions: "Permitted Exceptions" shall have the meaning
given thereto in Section 8.2.1.2.
Proration Date: "Proration Date" shall have the meaning given
thereto in Section 9.5.2.
Purchase Price: The "Purchase Price" for the Partnership Interests
is Fifty-Five Million Dollars ($55,000,000) less, if Buyer elects to assume
either or both of the Sun Life Loans and the lender consents thereto, the
outstanding principal balance, any accrued and unpaid interest and any other
amounts then payable to the lender under the Sun Life Loans assumed, as set
forth in the lender's beneficiary statement(s) delivered to Escrow Holder. The
Purchase Price shall not be reduced by any prepayment penalty if the Sun Life
Loans (or either of them) are paid off or by any assumption fee if the Sun Life
Loans (or either of them) are assumed.
Real Property: "Real Property" means collectively the Partnership
Properties and the LVA Property.
Riley/Pearlman Partner: "Riley/Pearlman Partner" means collectively
OVLP, CPLP, LVCLP and WLP.
Riley Finder Fee: The "Riley Finder Fee" means the Two Million Five
Hundred Thousand Dollar ($2,500,000) payment to be made by Buyer to Malcolm
Riley or an affiliated entity ("Riley") and, pursuant to a separate agreement,
to be paid to DSL at Close of Escrow in repayment of amounts owed to DSL with
respect to DSL/West Lancaster II, DSL/Ontario and DSL/Cameron Park.
Sun Life Loans: "Sun Life Loans" means those certain loans to (a)
DSL/Cameron Park from Sun Life Assurance Company of Canada in the original
principal amount
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of $5,250,000 and (b) DSL/Ontario from Sun Life Assurance Company of Canada in
the original principal amount of $4,850,000.
Tenants: "Tenants" means the tenants under the Leases.
Termination Notice: "Termination Notice" shall have the meaning
given thereto in Section 4.3.
Title Policies: "Title Policies" shall have the meaning given
thereto in Section 8.2.2.1.
Title Company: The "Title Company" is:
Commonwealth Land Title Insurance Company
200 West Santa Ana Boulevard
Santa Ana, California 92701
Telephone: (714) 835-8511
Facsimile: (714) 835-0513
Attention: Jim Prasch
Umbrella Partnership: "Umbrella Partnership" means the partnership
to be formed by Buyer prior to the Close of Escrow.
2. Assignment of Partnership Interests. Subject to the terms of this
Agreement, Seller hereby agrees to sell, transfer, assign and convey to Buyer,
and Buyer hereby agrees to purchase from Seller, all right, title and interest
of Seller in and to the Partnership Interests.
3. Purchase Price. The Purchase Price will be paid as follows:
3.1 Deposit. No later than the expiration of the Due Diligence
Period, Buyer will deliver to Escrow Holder in cash, by wire transfer or by
certified or cashier's check collectible in same day funds, the Deposit which,
except as expressly provided otherwise in this Agreement, shall be
nonrefundable. Escrow Holder will invest the Deposit in an interest-bearing
account and interest will accrue for the account of Buyer except as otherwise
provided in this Agreement and will be applied against the Purchase Price at
Closing. The Deposit and all interest accrued thereon will be immediately
returned to Buyer in the event of a Seller default or failure of a condition
precedent to Buyer's obligations or a termination pursuant to Sections 11.1 or
11.2.
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3.2 Cash Balance. On or before the day immediately prior to the
Close of Escrow, Buyer shall deposit with Escrow Holder by immediately available
federal wire transfer the Purchase Price, plus or minus the closing adjustments
and prorations described in Section 9.5, and the Riley Finder Fee with an
assignment thereof from Riley to DSL.
4. Due Diligence.
4.1 Delivery of Due Diligence Materials. Seller has delivered to
Buyer all of the materials relating to the Partnership Interests and the Real
Property as listed on EXHIBIT F (collectively, the "Due Diligence Materials")
for use by Buyer in connection with Buyer's investigation of the Partnership
Interests and the Real Property. Seller shall make available to Buyer, at
Seller's offices, all additional materials regarding the Partnership Interests
and the Real Property in Seller's possession. Seller makes no representation or
warranty of any kind with respect to the Due Diligence Materials, including
their accuracy, completeness or suitability for reliance thereon by Buyer,
except to the extent specifically set forth in Section 12. Seller shall deliver
to Buyer within one (1) day following the execution of this Agreement evidence
of the net worth of DSL as set forth in the Downey Financial Corporation Annual
Report Form 10K for 1995 and the second quarter form 10Q for the period ending
June 30, 1996.
4.2 Right of Entry. During the Due Diligence Period, provided that
Buyer is not in default hereunder, Buyer shall have the right to (i) have
discussions concerning the Real Property with Tenants, lenders on the Real
Property, parties to reciprocal easement agreements or other agreements
affecting the Real Property ("REA Agreements"), service providers and
governmental agencies, subject to the provisions of Section 15.15, and (ii)
enter and inspect the Real Property (each, a "Buyer Inspection") during Business
Hours pursuant to the following terms and conditions:
4.2.1 Notice. Buyer shall provide Seller with at least one (1)
business day's prior written notice of any Buyer Inspection (describing Buyer's
intended activities on the Real Property).
4.2.2 Expenses. Each Buyer Inspection shall be at Buyer's sole
cost and expense.
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4.2.3 License; Insurance. The persons or entities performing
the Buyer Inspection shall, if they are to make any invasive inspections or
studies, be properly licensed and qualified, shall have obtained all of the
appropriate permits for performing relevant tests and shall have delivered to
Seller, prior to performing any tests or entering the Real Property, evidence of
proper and adequate insurance reasonably satisfactory to Seller. In addition,
Buyer shall arrange for Seller to be named as an additional insured on Buyer's
commercial public liability insurance policy covering liability to property or
persons for Buyer's activities on or about the Real Property in an amount not
less than Two Million Dollars ($2,000,000.00).
4.2.4 Physical Testing. Seller shall have the right of
approval (which shall not be unreasonably withheld or delayed) of any proposed
physical testing or drilling of the Real Property. If Buyer, or its agents,
representatives or employees, undertake any borings or other disturbance of the
soil, such borings or disturbance shall be recompacted to the original condition
before such activities and Buyer shall obtain at its expense a certification
from a soils engineer that the borings or disturbance has been so recompacted.
4.2.5 Scheduling of Tests. Buyer shall schedule all tests
during Business Hours unless otherwise requested by Seller.
4.2.6 Representative. Seller shall have the right to have a
representative of Seller accompany Buyer and Buyer's representatives, agents or
designees while they are on the Real Property, provided Seller shall not delay
or inhibit Buyer's Inspection.
4.2.7 No Interference. Buyer and its representatives, agents
or designees shall use reasonable efforts to minimize interference with the
business operations on, or use of, the Real Property by Seller, the JV
Partnerships, or any tenant on the Real Property.
4.2.8 Liens. Buyer shall not cause or suffer any lien or other
encumbrance to be recorded against the Real Property, or any portion thereof,
and shall promptly cause any lien or other encumbrance caused or suffered by
Buyer (including mechanics' liens arising out of Buyer's activities under this
Section 4.2) to be immediately discharged or bonded over, to Seller's reasonable
satisfaction.
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4.2.9 Restoration. If any portion of the Real Property is
damaged due to Buyer's entry thereon, Buyer shall, at its sole cost and expense,
immediately repair and restore the Real Property, or portion thereof, to
substantially the same condition the Real Property was in immediately prior to
the date the damage occurred.
4.2.10 Indemnity. Buyer shall indemnify, protect and defend
(by counsel reasonably acceptable to Seller) and hold harmless Seller for, from
and against any and all claims for property damage, personal injury or
mechanics' liens, arising out of any entry, investigations, inspections, tests
and other activities undertaken by Buyer or its agents, designees or
representatives, including (a) reasonable attorneys' fees and expenses and other
reasonable costs and expenses incurred by Seller in connection with
investigating or defending any such matters, (b) any and all costs or expenses
incurred by Seller resulting from or arising out of the aggravation of physical
defects or conditions regarding hazardous, toxic or contaminated substances or
materials and (c) any and all costs or expenses incurred by Seller in defending,
discharging or bonding over any liens or encumbrances against any of the Real
Property resulting from Buyer's activities with respect thereto. This indemnity
provision shall survive Close of Escrow or any earlier termination of this
Agreement.
4.2.11 Confidential. Each Buyer Inspection, and the results
thereof, shall remain confidential pursuant to the terms of Section 13.15.
4.3 Disapproval of Seller's Studies or Buyer Inspections. Buyer
shall have the right, at any time during the Due Diligence Period, in Buyer's
sole and absolute discretion to disapprove the results of Buyer's review of the
Due Diligence Materials or the Buyer Inspections of the Real Property by
providing Seller and Escrow Holder with written notice thereof (a "Termination
Notice"). If Buyer delivers a Termination Notice to Seller and Escrow Holder
during the Due Diligence Period, then (a) this Agreement, and all of the
obligations, rights and liabilities of the parties to each other hereunder
(except for Buyer's indemnification obligations under Section 4.2.11, Buyer's
restoration obligations under Section 4.2.10, and the parties' confidentiality
obligations under Section 13.15), shall terminate and be of no further effect,
(b) Buyer shall immediately return to Seller the Due Diligence Materials and, if
requested by Seller and Seller pays to Buyer the cost thereof, deliver to Seller
any written reports, tests
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or memoranda in Buyer's possession relating to the Buyer Inspections. If Buyer
does not provide Seller and Escrow Holder with a Termination Notice unless Buyer
has elected to proceed with the transaction by written notice to Seller and
Escrow Holder prior to the expiration of the Due Diligence Period, then (i)
Buyer shall be deemed irrevocably to have delivered a Termination Notice and
(ii) this Agreement and the Escrow shall terminate without further instructions.
The parties' participation in Close of Escrow shall be deemed a waiver of (i)
each party's ability to terminate this Agreement on the basis of any failure of
any conditions precedent and (ii) each party's right to seek damages from the
other party for the breach of any representation, warranty or covenant of which
the non-breaching party had actual knowledge prior to Close of Escrow.
4.4 Contracts. During the Due Diligence Period, Buyer shall review
all of the Contracts and advise Seller of those Contracts which Buyer agrees to
assume ("Approved Contracts") and those Contracts which Buyer requests be
terminated on or before the Closing Date ("Disapproved Contracts"). Seller
agrees to terminate all Disapproved Contracts which are terminable without
payment or penalty at the Closing Date.
5. As Is Purchase. Buyer shall examine, inspect and conduct its own
investigation of (1) all matters relating to the Partnership Interests, (ii) all
matters relating to the Real Property including with respect to taxes, bonds,
environmental condition, permissible uses, zoning, covenants, conditions and
restrictions and (iii) all other matters which, in Buyer's judgment, bear upon
the value and suitability of the Partnership Interests and the Real Property or
Buyer's purposes. Except as otherwise specifically stated in Section 12, Seller
hereby specifically disclaims any warranty, guaranty or representation, oral or
written, past, present or future, of, as to or concerning (i) the nature and
condition of the Real Property, including the water, soil, geology,
environmental conditions (including the presence or absence of any Hazardous
Substance), and the suitability thereof for any and all activities and uses
which Buyer may elect to conduct thereon; (ii) the nature and extent of any
right-of-way, lease, possession, lien, encumbrance, license, reservation,
condition or otherwise; or (iii) the compliance of the Real Property or the
operation thereof with any laws, ordinances or regulations of any government or
other body (including the Americans With Disabilities Act). The sale of the
Partnership Interests and the transfer of the Partnership
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<PAGE> 20
Properties as provided for herein is made on an "AS IS" basis, and Buyer
expressly acknowledges that, in consideration of the agreements of Seller
herein, except as otherwise expressly specified in this Agreement, SELLER MAKES
NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF
LAW, WITH RESPECT TO THE PARTNERSHIP INTERESTS OR THE REAL PROPERTY, INCLUDING,
BUT IN NO WAY LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE REAL PROPERTY. The
foregoing shall not relieve Seller of any claim based on the fraud or
intentional misrepresentation by Seller.
6. Indemnity.
6.1 Seller's Indemnity. Seller shall indemnify, protect and defend
by counsel reasonably acceptable to Buyer and hold harmless Buyer from and
against any and all claims, damages, losses, costs, expenses and liabilities
(including all reasonable attorneys' fees and court costs paid or incurred by
Buyer) which arise out of or are in any way connected with (i) the ownership of
the Partnership Interests or the ownership and/or operation of the Real Property
from and after January 1, 1993 through the Closing or (ii) any misrepresentation
or breach of warranty or covenant by Seller in this Agreement. This indemnity
does not apply, however, to any item, matter, occurrence or condition which was
actually known to Buyer prior to the Closing Date.
6.2 Buyer's Indemnity. Buyer shall indemnify, protect and defend by
counsel reasonably acceptable to Seller and hold harmless Seller from and
against any and all claims, damages, losses, costs, expenses and liabilities
(including all reasonable attorneys' fees and court costs paid or incurred by
Seller) which arise out of or are in any way connected with (i) the ownership of
the Partnership Interests or the ownership and/or operation of the Real Property
after the Closing Date through the date of sale of the Real Property by the
Umbrella Partnership to an unrelated third party or (ii) any misrepresentation
or breach of warranty or covenant by Buyer in this Agreement. This indemnity
does not apply, however, to any item, matter, occurrence or condition which was
actually known to Seller prior to the Closing.
6.3 Indemnified Parties. For purposes of this Section 6.3, all
references to "Buyer" or "Seller" shall include (A) their parent, subsidiary or
affiliate corpora-
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tions and (B) their directors, officers, shareholders, employees and agents.
6.4 Survival. The provisions of this Section 6 shall survive the
Closing Date.
7. Grant Deeds. At the Closing, Buyer, as assignee of the Partnership
Interests, and the respective Riley/Pearlman Partner shall cause each of
DSL/Ontario, DSL/West Lancaster Phase II and DSL/Cameron Park to convey the
Partnership Properties and LVA Associates to convey the LVA Property to the
Umbrella Partnership by grant deed (the "Deeds"), in the form of EXHIBIT G,
attached hereto.
8. Conditions Precedent to Close of Escrow. In addition to the
documents and funds which must be deposited into Escrow prior to Close of Escrow
as detailed in Section 9.2, the following are conditions precedent to Close of
Escrow:
8.1 Seller. Seller's conditions precedent to Close of Escrow are the
following:
8.1.1 No Suit. No suit, action or other proceeding shall be
pending or threatened which seeks, nor shall there exist any judgment the effect
of which is, to restrain the transactions contemplated in this Agreement.
8.1.2 Buyer's Representations. Buyer's representations and
warranties set forth herein shall be true and correct as of Close of Escrow.
8.1.3 Buyer's Covenants. Buyer shall have performed all of
Buyer's covenants and agreements contained herein which are required to be
performed by Buyer on or prior to Close of Escrow.
8.1.4 Resolutions. To the extent requested by either Seller or
Title Company, Buyer shall have provided Seller and Title Company at Close of
Escrow with certified copies of corporate resolutions approving the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, together with such other certificates of incumbency and
other evidences of corporate or regulatory authority, including but not limited
to certificates of good standing, as Seller or Title Company may reasonably
require.
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8.1.5 Consents. Any consents or waivers required from the
Riley/Pearlman Partner and Costco and, if either or both of the Sun Life Loans
is to be assumed by Buyer, the lender under the Sun Life Loans shall have been
obtained.
8.1.6 Concurrent Transaction. The Concurrent Transaction shall
close concurrently with the transactions contemplated herein.
8.1.7 Riley Finder Fee. The Riley Finder Fee shall have been
deposited in Escrow with instructions that it be delivered with the Purchase
Price to Seller at Close of Escrow.
8.2 Buyer. Buyer's conditions precedent to Close of Escrow are the
following:
8.2.1 Due Diligence Period. Prior to the end of the Due
Diligence Period, Buyer's inspection and approval, in its sole and absolute
discretion, of the following:
8.2.1.1 Inspection. The Buyer Inspections, surveys
(if any) and all other physical, environmental, legal and any other matters
relating to the Real Property as Buyer may elect to investigate.
8.2.1.2 Preliminary Report. The current preliminary
reports issued by Title Company for each of the Partnership Properties and the
LVA Property and all of the exceptions contained in such reports. The Sun Life
Loans, if assumed by Buyer, and all of the exceptions contained in the
preliminary reports, including any survey exceptions, which are approved are
hereinafter referred to as the "Permitted Exceptions."
8.2.1.3 Board of Directors. Buyer shall have obtained
the approval of this Agreement and the trans actions contemplated herein by
Buyer's Board of Directors evidence of which shall be delivered to Seller prior
to the end of the Due Diligence Period.
8.2.2 Close of Escrow. As of Close of Escrow:
8.2.2.1 Title Policy. The willingness of Title Company
to issue, upon the payment of its regularly scheduled premium, an Owner's ALTA
Extended Coverage title insurance policy for each of the Partnership Properties
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showing title to the Partnership Properties vested of record in the Umbrella
Partnership ("Title Policies"), subject only to (i) a lien for real property
taxes and assessments not then delinquent; (ii) the Permitted Exceptions; and
(iii) matters affecting the condition of title to the Partnership Properties
created by or with the written consent of Buyer, with such endorsements
reasonably requested by Buyer and available from the Title Company. The Downey
Loans shall be removed from title at the Close of Escrow. Seller, as general
partner of the JV Partnership, agrees to provide an owner's certificate to Title
Company as may be required for the issuance of the Title Policies.
8.2.2.2 No Suit. No suit, action or other proceeding
shall be pending or threatened which seeks, nor shall there exist any judgment
the effect of which is, to restrain the transactions contemplated in this
Agreement.
8.2.2.3 Seller's Representations. Seller's
representations and warranties set forth herein shall be true and correct as of
the Close of Escrow.
8.2.2.4 Seller's Covenants. Seller shall have performed
all of Seller's covenants and agreements contained herein which are required to
be performed by Seller on or prior to Close of Escrow.
8.2.2.5 Concurrent Transaction. The Concurrent
Transaction shall close concurrently with the transactions contemplated herein.
8.2.2.6 Resolutions. To the extent requested by Buyer or
the Title Company, Seller shall have provided Buyer and the Title Company at
Close of Escrow with certified copies of corporate resolutions approving the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, together with such other certificates of
incumbency and other evidences of corporate or regulatory authority, including
but not limited to certificates of good standings, as Buyer or Title Company may
reasonably require.
8.2.2.7 Consents. Any consents or assignments or waivers
required from the Riley/Pearlman Partner and Costco and, if either or both of
the Sun Life Loans is to be assumed by Buyer, the consent of the lender under
the Sun Life Loans shall have been obtained, in a form satisfactory to Buyer.
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<PAGE> 24
8.2.2.8 Contracts. DSL shall have terminated all
Disapproved Contracts in accordance with Section 4.4.
8.2.2.9 Tenant Estoppels. DSL shall have delivered to
Buyer not less than ten (10) days prior to the Closing, and Buyer shall have
approved not less than five (5) days prior to the Closing, estoppel certificates
in the form attached hereto as EXHIBIT H or in the form required by a Lease with
respect to such Lease ("Estoppels") from the major tenants (listed on the
attachment to EXHIBIT H) and all other Tenants on each of the Partnership
Properties and the LVA Property. If DSL is unable to deliver the required
Estoppels with respect to any Tenant other than a Major Tenant, DSL shall have
the right but not the obligation to deliver its estoppel (in the form attached
as EXHIBIT H and approved by Buyer) in substitution for up to 20% of such
Tenants. The Estoppels shall be dated no earlier than November 1, 1996.
8.2.2.10 REA Estoppels. DSL shall have delivered to Buyer
not less than ten (10) days prior to the Closing, and Buyer shall have approved
not less than five (5) days prior to the Closing, estoppel certificates or
offset statements from any parties to an REA Agreement which requires such party
to provide such an estoppel or offset statement in form and content reasonably
acceptable to Buyer. Seller shall use reasonable efforts to obtain from the
parties to any other REA Agreement, as requested by Buyer, estoppels or offset
statements prior to the end of the Due Diligence Period but receipt of such
estoppels or offset statements shall not be a condition to Closing and failure
to obtain the same shall not be a Seller default.
8.2.2.11 Condition of Real Property. The physical
condition of the Real Property, including, without limitation, the HVAC,
plumbing and electrical systems shall be in the same condition as on the date of
this Agreement, ordinary wear and tear excepted.
8.2.2.12 No Material Change. Buyer shall not have
discovered any new matter between the expiration of the Due Diligence Period and
the Closing Date which is of such a nature that it would materially and
adversely affect Buyer's acquisition, use or sale of the Real Property.
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9. Closing.
9.1 Time. Escrow shall close ("Close of Escrow") when all
documents and funds specified in this Section 9 have been deposited into Escrow.
The failure of Seller or Buyer to be in a position to close Escrow by the
Outside Closing Date shall constitute a default under this Agreement, this
Agreement and the Escrow shall terminate, and the Deposit and all interest
accrued thereon shall be delivered to Seller unless the failure to close is
caused by Seller or a Buyer closing condition has not been satisfied or this
Agreement is terminated pursuant to Sections 11.1 or 11.2.
9.2 Documents. Not less than one (1) day prior to Close of Escrow,
which shall occur on or before the Outside Closing Date, the parties shall
deposit into Escrow the funds and the documents described below.
9.2.1 Seller. Seller shall deposit the following:
9.2.1.1 Assignments of Partnership Interest. A
duly executed Assignment of Partnership Interest for each of the JV Partnerships
assigning and transferring the Partnership Interests.
9.2.1.2 Non-Foreign Certificate. If required, a
duly executed certificate (the "Non-Foreign Certificate") certifying that Seller
is not a "foreign person" within the meaning of Section 1445(f)(3) of the
Internal Revenue Code.
9.2.1.3 Notice to Tenants. Duplicate originals
of letters to the tenants on the Real Property (the "Notice to Tenants") in the
form of, and upon the terms and conditions contained in, EXHIBIT I, attached
hereto.
9.2.1.4 California Form 590. If required, a
properly executed California Form 590 or other evidence sufficient to establish
that no portion of the Purchase Price is required to be withheld pursuant to
Sections 18805 and 26131 of the California Revenue and Taxation Code.
9.2.1.5 Amended and Restated Statements of
Partnership. A duly executed, acknowledged and verified Amended and Restated
Statement of Partnership for each of the JV Partnerships evidencing the removal
of Seller as a
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partner of each of the JV Partnerships and appointing a new managing general
partner ("Amended and Restated Statement").
9.2.1.6 Additional Documents. Such other
documents, including escrow instructions, as may be reasonably required of
Seller to close the transaction in accordance with this Agreement.
9.2.1.7 Beneficiary Statement. If Buyer has
elected to assume either of the Sun Life Loans, Seller will request the lender
to deliver an updated beneficiary statement with respect to the loan or loans to
be assumed.
9.2.2 Buyer. Buyer shall deposit the following:
9.2.2.1 Purchase Price. The Purchase Price and
the Riley Finder Fee.
9.2.2.2 Additional Funds. Additional cash in
the amount necessary to pay Buyer's share of the closing costs and prorations,
as hereinafter set forth.
9.2.2.3 Notice to Tenants. Duplicate originals
of the Notice to Tenants.
9.2.2.4 Amended and Restated Statements of
Partnership. A duly, executed, acknowledged and verified Amended and Restated
Statement for each of the JV Partnerships.
9.2.2.5 Additional Documents. Such other
documents and funds, including escrow instructions, as may be reasonably
required of Buyer to close the transaction in accordance with this Agreement.
9.2.3 JV Partnerships. Buyer and the Riley/Pearlman
Partner shall deposit the following:
9.2.3.1 Deeds. The Deeds, duly executed and
acknowledged by the JV Partnerships which own the Partnership Properties,
conveying the Partnership Properties to the Umbrella Partnership and by LVA
conveying the LVA Property.
9.2.3.2 Assignments. Two (2) duly executed
counterpart originals of Assignments of the Leases and Contracts (the
"Assignments"), in the form of EXHIBIT J, attached hereto pursuant to which
DSL/West Lancaster Phase
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II, DSL/Ontario and DSL/Cameron Park assign to the Umbrella Partnership all of
their right, title and interest in the Leases and Contracts with respect to the
respective Partnership Properties; and an original of an assignment of
partnership interest executed by Costco transferring Costco's interest in LVA to
Buyer.
9.3 Procedure. Escrow Holder shall close Escrow as follows:
9.3.1 Amended and Restated Statements. Publish and file
the Amended and Restated Statements.
9.3.2 Deeds. Record the Deeds in the official records of
the counties in which each of the Partnership Properties is located (instructing
the County Recorder not to affix the amount of any documentary or transfer taxes
to the Deed but to attach a separate statement to the Deed after recording) and
deliver conformed copies thereof to Buyer and Seller.
9.3.3 Purchase Price. Deliver the Purchase Price to Seller
(less prorations credited to Buyer and less the amount of Downey's payoff
demands deposited in Escrow with respect to the Downey Loans) via wire transfer
of U.S. federal funds to the account or accounts designated by Seller in
accordance with Seller's instructions provided to Escrow Holder prior to Close
of Escrow.
9.3.4 Deliveries to Buyer. Deliver to Buyer (i) the duly
executed Assignments of Partnership Interest, (ii) one (1) fully-executed
counterpart original of each of the Assignments, (iii) the original Non-Foreign
Certificate and Form 590-RE, (iv) a conformed copy of the recorded Deeds, (v)
Buyer's closing statement and (vi) the original Title Policies.
9.3.5 Deliveries to Seller. Deliver to Seller (i) a
conformed copy of the recorded Deeds, (ii) one (1) fully-executed counterpart
original of each of the Assignments, and (iii) Seller's closing statement.
9.4 Escrow Instructions. This Agreement shall serve as escrow
instructions and an executed copy of this Agreement shall be deposited by Seller
and Buyer with Escrow Holder following the execution and delivery hereof. The
parties agree to execute for the benefit of Escrow Holder such additional escrow
instructions as are necessary to close the Escrow, provided that the additional
escrow
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instructions do not change the terms of this Agreement. In the event of any
conflict between the terms of such additional escrow instructions and this
Agreement, the terms of this Agreement will prevail. Escrow Holder is designated
as the "Reporting Person" for the transaction pursuant to Section 6045(e) of the
Internal Revenue Code.
9.5 Closing Costs and Prorations.
9.5.1 Closing Costs. All of the closing costs incurred in
connection with the transactions contemplated herein shall be borne by Buyer
including, without limitation, the following: the title insurance premium for
the Title Policies; all Escrow fees; any endorsements to the Title Policies; all
city and county documentary transfer taxes; the cost of any required survey; and
all recording costs.
9.5.2 Prorations. The adjustments and prorations set forth
below with respect to the Partnership Properties shall be made at Close of
Escrow. For purposes of this Section 9.5.2, the term "Proration Date" shall be
defined as 11:59 p.m. on the day preceding Close of Escrow.
9.5.2.1 Lease Rentals. Except for common area
maintenance charges, taxes and insurance charged to Tenants under the Leases
(collectively, "CAM Charges"), which are covered under Section 9.5.2.2 below,
all accrued rent (including all accrued operating expense and tax escalations
and recoveries), charges and revenues of any kind under the Leases shall be
prorated as of the Proration Date based on the actual number of days in the
month in which Close of Escrow occurs. Delinquent rent and rent not paid by
Close of Escrow shall not be prorated. Buyer shall receive a credit at Close of
Escrow for all rents applicable to the period from and after Close of Escrow
that are due and payable in the month in which Close of Escrow occurs and that
have been collected by Seller. Percentage rent for 1996 which will be calculated
and may be paid by Tenants under the Leases after the Closing will be forwarded
promptly upon receipt to Seller, prorated in the event the Closing occurs prior
to December 31, 1996, without offset. If Buyer, Seller, the Umbrella Partnership
or any JV Partnership receives any revenues to which it is not entitled, said
party shall promptly forward such amounts to Buyer who shall disburse such
amounts to the party entitled thereto; provided, the first rents and other
payments collected after the Proration Date from any Tenant shall be applied
first to current rents, then to Buyer's cost of
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collection and then to delinquent rents in inverse chronological order. Seller
shall have the right to pursue Tenants for payment of rent delinquent at Closing
provided Seller agrees not to bring an action for unlawful detainer or file a
petition for involuntary bankruptcy against any Tenant.
9.5.2.2 CAM Charges. Seller will prepare the
1996 year-end reconciliation of CAM Charges and submit invoices therefor to the
Tenants requesting payment to Seller. Buyer agrees to include a statement on its
rent invoices that statements for 1996 CAM Charges will be sent directly from
Seller and that Tenants are to pay such charges directly to Seller. In the event
the Closing occurs prior to December 31, 1996, CAM Charges for December 1996
will be prorated as of the Proration Date and only the prorated portion for the
period to the Proration Date will be payable to Seller. Any refunds of 1996 CAM
Charges will be paid by Seller to the Tenants without offset. If Buyer receives
any payments for 1996 CAM Charges, Buyer will promptly forward the same to
Seller without offset.
9.5.2.3 Leasing Costs. All amounts payable by
the landlord under the Leases, such as leasing commissions, tenant improvement
costs and any other monetary concessions ("Leasing Costs"), shall be allocated
as follows: Seller shall pay all Leasing Costs with respect to existing Leases
and to New Leases which have not been approved by Buyer under Section 13.2; and,
if the Closing occurs, Buyer shall pay any Leasing Costs with respect to
renewal, extensions or expansion rights under the Leases and any Leasing Costs
with respect to New Leases which have been approved by Buyer under Section 13.2
for space which was unleased at July 31, 1996.
9.5.2.4 Security Deposits. Buyer shall receive
a credit against the Purchase Price equal to all tenant security deposits or any
other tenant deposits deposited by the Tenants under their Leases, less any
portion thereof previously applied by Seller and acknowledged by Tenants in
their estoppels.
9.5.2.5 Real Estate Taxes. All real and
personal property taxes, installments of bonds and special taxes and assessments
attributable to the Partnership Properties shall be prorated as of the Proration
Date based on a 365-day year and the assessed value of the Partnership
Properties in effect at Close of Escrow. Each of the respective JV Partnerships
shall pay all such real estate
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taxes which are due for the period of their ownership of the Partnership
Properties through and including the Proration Date.
9.5.2.6 Utilities. Buyer shall arrange with all
utility services and companies serving the Partnership Properties to have
accounts started in the name of the Umbrella Partnership or its property manager
beginning as of the Closing Date and shall provide deposits, as are required to
obtain the release of any Seller deposit therefor. Seller will retain any
deposits they have with any utility services or companies. Buyer and Seller
shall cooperate to have the utility services and companies make utility readings
as of the Proration Date. If readings cannot be made, utility charges shall be
prorated as of the Proration Date based on estimates from the latest bills
available; provided, in any event, the JV Partnership shall pay, through and
including the Proration Date, all utility charges attributable to the
Partnership Properties and LVA shall pay, through and including the Proration
Date, all utility charges attributable to the LVA Property which are not payable
directly by Tenants.
9.5.2.7 Final Adjustment After Closing. If
final prorations cannot be made at Closing for any item being prorated under
this Section 9.5.2, or if either party discovers an error in the prorations,
then Buyer and Seller agree to allocate such items on a fair and equitable basis
as soon as invoices or bills or information regarding the error are available,
with final adjustment to be made as soon as reasonably possible after the
Closing Date but no later than one hundred twenty (120) days after the Closing
Date at which time all prorations shall be deemed to be final. Payments in
connection with any final adjustment shall be due within thirty (30) days after
the parties have agreed thereto. The parties shall each have reasonable access
to and the right to inspect and audit the other party's books if necessary to
confirm the final prorations.
9.5.3 Refunds of Real Estate Taxes. Buyer specifically
acknowledges that Seller shall be entitled to any refund of real and personal
property taxes, installments of bonds and special taxes and assessments
attributable to the Partnership Properties or to the LVA Property and allocable
to the period prior to Close of Escrow. Any such refunds shall be paid to Seller
regardless of when they are received less Buyer's cost of collection and subject
to the rights of Tenants to receive all or any portion of such refunds. Buyer
shall have the absolute right to retain any
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such refunds which are attributable to any fiscal tax year after the Closing
Date.
9.5.4 Additional Costs. Buyer and Seller each shall pay
its own legal, lending and other fees and expenses incurred in connection with
the negotiation, documentation and closing of the transactions contemplated by
this Agreement.
9.5.5 Replacement of Bonds, Passbooks, Etc. During the Due
Diligence Period, Seller will provide Buyer with a list of any bonds, passbook
accounts, or other similar security (collectively, "Security") which has been
posted or provided by Seller or the Partnership as required by any governmental
entity. Buyer agrees to replace any such Security with its own security at
Closing and assist in the release of Seller's Security. If at any time after the
Closing Seller becomes aware of any Security which has not been replaced prior
to Closing, Seller will notify Buyer and Buyer will provide substitute Security
within thirty (30) days after receipt of notice, provided that Buyer shall not
be required to replace Security in excess of $10,000 per Security and $20,000 in
the aggregate.
9.6 Delivery of Real Property Documents. Within five (5) days
following the Closing or at such later date as may be requested by Buyer, Seller
will deliver to Buyer all original estoppels and Sun Life Loans documents (if
such loans are assumed), and all documents relating to the Real Property in
Seller's possession which have not, as originals, previously been delivered to
Buyer.
10. No Brokerage Commissions. Buyer is a licensed real estate broker acting
as a principal in this transaction and claims no right to payment of a
commission in connection with the transactions contemplated herein. Except for
the Riley Finder Fee which shall be paid by Buyer to Riley and assigned to
Seller as provided herein, each party to this Agreement warrants to the other
parties that no person or entity can properly claim a right to a real estate
commission, finder's fee or other real estate brokerage-type commission based
upon the acts of that party with respect to the transactions contemplated with
respect to this Agreement. Each party hereby agrees to indemnify, protect and
defend the other parties (by counsel acceptable to the party seeking
indemnification) against and hold the other harmless from and against any and
all damages, liabilities, loss, cost and expense, including, but not limited to,
reasonable attorneys' fees and court costs, resulting from any claims
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for a commission or fee by any person or entity based upon such acts. Seller has
advised Buyer of the allegation by Richard S. Dyer and Paul R. Dolan
("Dyer/Dolan") that a commission of $940,000 is due to Dyer/Dolan in connection
with a proposed sale of the LVA Property to their client. The foregoing
indemnity shall extend to any claim Dyer/Dolan may make against Buyer, provided
that the obligation to defend shall be by joint counsel selected by Seller.
11. Condemnation/Casualty.
11.1 Condemnation. If prior to Close of Escrow a taking or
condemnation of any portion of any one of the Partnership Properties or the LVA
Property has occurred, either party, at its option, may terminate this Agreement
within five (5) days after Seller has sent and Buyer has received written notice
of such event (and, if necessary, Close of Escrow shall be extended by the
number of days necessary to give Buyer this full five (5) day period but not
beyond the Outside Closing Date). If Buyer does not deliver to Seller or Seller
does not deliver to Buyer a Termination Notice within the five (5) day period,
Close of Escrow shall take place as provided in this Section 11.1.1 with a
credit against the Purchase Price in an amount equal to any condemnation awards
actually received by the respective JV Partnership or LVA on account of such
occurrence. If the transaction contemplated by this Agreement is not consummated
due to such an event of condemnation, any condemnation award received as a
result thereof shall be the sole property of the respective JV Partnership or
LVA.
11.2 Casualty.
11.2.1 Material Casualty. If prior to Close of Escrow any
of the Partnership Properties or the LVA Property is materially damaged or
destroyed by fire or other casualty, Buyer, at its option, may terminate this
Agreement within five (5) days after notice of such event (and, if necessary,
Close of Escrow shall be extended by the number of days necessary to give Buyer
this full five (5) day period but not beyond the Outside Closing Date). For
purposes of this Section 11.2.1, a property shall be deemed "materially" damaged
or destroyed if the cost of repairing or restoring such property is in excess of
ten percent (10%) of the value of such property. If Buyer does not deliver to
Seller a Termination Notice within the five (5) day period, Close of Escrow
shall take place as provided in this Section 11.2.1 with a credit against the
Purchase Price in an amount equal to the cost of repairing or restoring the
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damaged property plus any lost rents and out-of-pocket costs to be incurred by
Buyer, as reasonably determined by Seller; provided, however, in no event shall
Buyer be entitled to a credit to the Purchase Price under this Section 11.2.1 in
excess of ten percent (10%) of the value of the damaged property; and provided,
further, if Seller will be obligated pursuant to the foregoing to pay any such
lost rents or out-of-pocket costs to Buyer as a result of the damage, Seller
shall have the right to terminate this Agreement and the Escrow.
11.2.2 Nonmaterial Casualty. If prior to Close of Escrow
any of the Partnership Properties or the LVA Property is damaged or destroyed by
fire or other casualty which is not governed by Section 11.2.1, Close of Escrow
shall take place as provided in this Agreement with a credit against the
Purchase Price equal to the cost of repairing or restoring the damaged property
plus any lost rents and out-of-pocket costs to be incurred by Buyer, as
reasonably determined by Seller; provided, however, in no event shall Buyer be
entitled to a credit to the Purchase Price under this Section 11.2.2 in excess
of ten percent (10%) of the value of the damaged property; and provided,
further, if Seller will be obligated pursuant to the foregoing to pay any such
lost rents or out-of-pocket costs to Buyer as a result of the damage, Seller
shall have the right to terminate this Agreement and the Escrow.
11.3 Value of Properties. For purposes hereof, the value of each
of the Partnership Properties and the LVA Property are as follows: Cameron Park
Shopping Center - $6,000,000; Ontario Village Plaza - $5,000,000; West Lancaster
Plaza - $2,000,000; and the LVA Property - $42,000,000.
12. Representations and Warranties.
12.1 Buyer. Buyer represents and warrants to Seller, which
representations and warranties shall survive the execution of this Agreement and
Close of Escrow, the following:
12.1.1 Binding. This Agreement constitutes a valid and
legally binding obligation of Buyer, enforceable in accordance with its terms.
12.1.2 Authority. Buyer has the full power and authority
to execute and deliver and fully perform its obligations under this Agreement.
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12.1.3 No Bankruptcy. Buyer has not made (i) a general
assignment for the benefit of creditors; (ii) filed any voluntary petition in
bankruptcy or suffered the filing of an involuntary petition by Buyer's
creditors; (iii) suffered the appointment of a receiver to take possession of
all or substantially all of Buyer's assets; (iv) suffered the attachment or
other judicial seizure of all, or substantially all, of Buyer's assets; (v)
admitted in writing its inability to pay its debts as they become due; or (vi)
made an offer of settlement, extension or composition to its creditors
generally.
12.2 DSL and Downey. DSL and Downey each represents and warrants
to Buyer, which representations and warranties shall survive the execution of
this Agreement and Close of Escrow, the following:
12.2.1 Binding. This Agreement constitutes a valid and
legally binding obligation of DSL and Downey, enforceable in accordance with its
terms.
12.2.2 Authority. DSL and Downey each have the full power
and authority to execute and deliver and fully perform its obligations under
this Agreement.
12.3 DSL. DSL, in its capacity as managing general partner of the
JV Partnerships, represents and warrants to Buyer, which representations and
warranties shall survive the execution of this Agreement and Close of Escrow for
eighteen (18) months following the Close of Escrow, the following:
12.3.1 Environmental Matters. To the Actual Knowledge of
Seller and except as set forth in the Environmental Reports, (i) no Hazardous
Substances are now or have been used, generated, disposed, released, discharged
or stored in, under, about or on the Real Property except those Hazardous
Substances which are or which have been used or stored on the Real Property in
the normal course of use and operation of the Real Property and in compliance
with all applicable Environmental Laws, (ii) there are and have been no federal,
state or local enforcement, clean-up, removal, remedial or other governmental or
regulatory actions instituted or completed affecting the Real Property, and
(iii) no claims have been made by any third party against Seller, the JV
Partnerships which own the Partnership Properties, or LVA with respect to the
LVA Property, relating to any Hazardous Substances on or within the Real
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Property and (iv) there are no underground storage tanks at the Partnership
Properties or the LVA Property.
12.3.2 Notice of Noncompliance. Seller has received no
written notice that the current use and operation of the Partnership Properties
or the LVA Property are not in compliance with applicable Environmental Laws,
building codes, zoning and land use laws, and other applicable local, state and
federal laws and regulations.
12.3.3 Use and Operation. Seller has received no written
notice of any condemnation, environmental, zoning or other land use regulation
proceedings, either instituted or planned to be instituted, which would
detrimentally affect the use and operation of the Real Property.
12.3.4 Legal Action. To Seller's Actual Knowledge (which
for purposes of this representation only shall include the actual knowledge of
Scott S. Brooks, Esq. the agent for service of process for DSL), there are no
condemnation, environmental, zoning or other land-use regulation proceedings,
either instituted, or planned to be instituted or, except as set forth in
EXHIBIT K, any other litigation, actions, suits or proceedings pending or
threatened which would affect the use, occupancy or operation of the Real
Property for its intended purpose or Seller's ability to perform hereunder or
the value of the Real Property, nor has Seller received notice of any pending or
threatened special assessment proceedings affecting the Real Property.
12.3.5 Leases; Rent Roll. There are and will be no oral or
written agreements with respect to any Lease allowing the Tenant any reduction,
abatement, concession, allowance or subsidy of rent under its Lease or allowing
the payment of any portion of the rent in any form other than in cash except as
may be fully noted on the rent roll delivered to Buyer; and no rentals or other
payments for periods in excess of one month have been received under any Lease
except as reflected on the rent roll. The rent roll for each of the Partnership
Properties and the LVA Property delivered to Buyer is true, correct and complete
as of the date thereof.
12.3.6 Contracts. All of the Contracts are valid and in
full force and effect and unmodified, and (i) no party has breached any material
condition or provision of any Contract, (ii) no party is in default in any
material respect under the terms of any Contract, and (iii) no event
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has occurred which with the giving of notice or the passage of time, or both,
would constitute a material default. As of the Closing, there will be no
management, listing or other broker agreement in effect.
12.3.7 Other Rights. No person, firm or entity has any
right to acquire or lease all or any part of the Real Property or the
Partnership Interests, other than the rights of the Tenants under the Leases to
lease portions of the Real Property to the terms of such Leases.
12.3.8 Due Diligence Materials. The Due Diligence
Materials delivered to Buyer in accordance with Section 4.1 are true, complete
and correct copies of those documents in Seller's possession.
12.3.9 Persons With Actual Knowledge. Seller hereby
represents to Buyer (i) that the persons named in the definition of Actual
Knowledge are the persons principally involved with the management and operation
of the Real Property and most familiar with the Real Property and (ii) that
Diane Klein is responsible for the day to day operations of the Real Property.
12.3.10 Related Entities. DSL has no subsidiary or
affiliated management company with possession of documents which DSL is required
to provide, or to provide access to, under the terms of this Agreement.
12.3.11 Violation of Laws. To Seller's Actual Knowledge,
Seller has not received notice of a violation of any law affecting the Real
Property from any governmental entity.
12.3.12 Access. Seller has not denied Buyer or its agents
and representatives access to documents regarding the Real Property in Seller's
possession.
13. Operation of Real Property.
13.1 Ordinary Operation. From the date hereof to the Closing Date,
DSL shall manage and operate the Partnership Properties and the LVA Property in
the ordinary and usual manner in which they have been operated and managed prior
to the date hereof by DSL, and make all necessary repairs and replacements
consistent with its prior practices. DSL shall not remove any fixtures,
equipment or other tangible personal property, if any, from the Real
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Property unless prior to the Closing the same are replaced with similar items of
at least equal quality and value.
13.2 Leasing. From and after the date hereof, Seller will deliver
to Buyer copies of any new Leases entered into after the date hereof and
amendments to or renewals of existing Leases (collectively ("New Leases"). Prior
to the end of the Due Diligence Period, Buyer shall have no right to approve or
disapprove New Leases. Following the end of the Due Diligence Period, Buyer
shall have the right to approve, prior to execution thereof, all New Leases,
which approval shall not be unreasonably withheld. Failure to disapprove a New
Lease within three (3) business days after delivery shall be deemed approval. If
Buyer disapproves a Lease and, notwithstanding, Seller proceeds with the Lease,
Buyer shall have the right to terminate this Agreement and the escrow and
receive a refund of the Deposit and all interest accrued thereon.
13.3 New Contracts. Without Buyer's prior written consent, Seller
shall not become a party to any new Contracts that are not cancellable as of the
Closing.
13.4 Tax Proceedings. Seller shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Real Property for any fiscal period in which the
Closing is to occur or any subsequent fiscal period without the prior written
consent of Buyer, which consent shall not be unreasonably withheld.
13.5 Copies of Notices. Promptly upon receipt, Seller shall
provide Buyer with copies of (i) any material notices (including notices of
default or breach) under a Lease received from any Tenant or sent by Seller
after the date of this Agreement, and (ii) any notices and correspondence
received from any insurance company or Board of Fire Underwriters, or from any
governmental authority with respect to the Real Property.
13.6 Prohibition on Marketing. From and after the end of the Due
Diligence Period, Seller shall withdraw the Real Property from the market and
terminate all negotiations for any such sale with any party other than Buyer;
provided, however, the foregoing shall not restrict Seller from accepting
unsolicited back-up offers.
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14. Liquidated Damages. IF THE TRANSACTION CONTEMPLATED HEREUNDER IS NOT
CONSUMMATED DUE SOLELY TO A DEFAULT BY BUYER IN CLOSING THE TRANSACTION, SELLER
MAY IMMEDIATELY TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO BUYER AND WITHOUT
FURTHER OBLIGATION TO BUYER, AND ESCROW HOLDER SHALL WITHOUT FURTHER
INSTRUCTIONS IMMEDIATELY DISBURSE TO SELLER THE DEPOSIT AND ALL INTEREST ACCRUED
THEREON. SELLER SHALL RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES AND AS SELLER'S
SOLE REMEDY. THE PARTIES AGREE THAT SELLER'S ACTUAL DAMAGES AS RESULTED BUYER'S
DEFAULT WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, AND THE DEPOSIT IS THE
BEST ESTIMATE OF THE AMOUNT OF DAMAGES SELLER WOULD SUFFER AS A RESULT OF SUCH
DEFAULT; PROVIDED, HOWEVER, THAT THIS PROVISION WOULD NOT LIMIT BUYER'S
INDEMNITY OBLIGATION AND SELLER'S RIGHTS TO THOSE INDEMNITY OBLIGATIONS UNDER
THIS AGREEMENT. THE PAYMENT OF THE DEPOSIT OF LIQUIDATED DAMAGES IS NOT INTENDED
AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS
3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGE TO SELLER PURSUANT
TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. SELLER HEREBY WAIVES THE
PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. THE PARTIES WITNESS THEIR
AGREEMENT TO THIS LIQUIDATED DAMAGES PROVISION BY INITIALING THIS SECTION:
----------------- ----------------
Seller's Initials Buyer's Initials
15. Miscellaneous.
15.1 Successors and Assigns. This Agreement is binding upon and
inures to the benefit of the successors and assigns of Seller and Buyer.
15.2 Entire Agreement. This Agreement contains all of the
covenants, conditions and agreements between the parties and shall supersede all
prior correspondence, agreements and understandings, both oral and written, with
respect to the matters set forth herein.
15.3 Professional Fees and Costs. In the event of the bringing of
any action, arbitration or suit by a party hereto against another party or
parties hereunder by reason of any breach of any of the covenants, agreements or
provisions on the part of the other party or parties arising out of this
Agreement, then in that event the prevailing party will be entitled to have the
recovery of and from the other party or parties all costs and expenses of the
action,
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arbitration or suit, actual attorneys' fees, witness fees and any other
professional fees resulting therefrom.
15.4 Waiver of Trial by Jury. Each of Seller and Buyer hereby
waives its rights to a trial by jury as to any matter arising out of or
concerning the subject matter of this Agreement.
15.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
15.6 Further Assurances. Seller and Buyer shall promptly perform,
execute and deliver or cause to be performed, executed and/or delivered at or
after Close of Escrow any and all acts, deeds and assurances as either party or
Escrow Holder may reasonably require in order to carry out the intent and
purpose of this Agreement.
15.7 Severability. In case any one or more of the provisions
contained in this Agreement for any reason is held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
15.8 Notices. All Notices required or permitted hereunder shall be
in writing, and shall be personally delivered or sent by registered or certified
mail, postage prepaid, return receipt requested, national overnight courier
service or facsimile to the addresses stated above. Notices and other
communications shall be deemed received upon the earlier of (i) if personally
delivered, the date of delivery to the address of the person to receive such
notice, (ii) if mailed, three (3) business days after the posting by the United
States Post Office, (iii) if sent by national overnight courier service, one (1)
business day after delivery to such courier service, or (iv) if given by
facsimile, when sent and receipt is confirmed. Any notice, request, demand,
direction or other communication sent by facsimile must be confirmed within
twenty-four (24) hours by a letter mailed or delivered in accordance with the
foregoing.
15.9 Counterparts. This Agreement may be executed in one (1) or
more counterparts, and all of the counterparts shall constitute but one and the
same agreement, notwithstanding that all parties hereto are not signatory to
the
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same or original counterpart. To facilitate execution of this Agreement, the
parties may execute and exchange by facsimile counterparts of the signature
pages to be followed with originally executed counterpart signature pages.
15.10 Time. Time is of the essence of every provision herein
contained.
15.11 Nonwaiver. Unless otherwise expressly provided herein, no
waiver by a party of any provision hereof shall be deemed to have been made
unless expressed in writing and signed by the party waiving the provision. No
delay or omission in the exercise of any right or remedy accruing to a party
upon any breach under this Agreement shall impair such right or remedy or be
construed as a waiver of any such breach theretofore or thereafter occurring.
The waiver by a party of any breach of any term, covenant or condition herein
stated shall not be deemed to be a waiver of any other term, covenant or
condition. All rights or remedies afforded to a party hereunder or by law shall
be cumulative and not alternative, and the exercise of one right or remedy shall
not bar other rights or remedies allowed herein or by law.
15.12 Captions. Section titles or captions contained herein are
inserted as a matter of convenience and for reference, and in no way define,
limit, extend or describe the scope of this Agreement.
15.13 Exhibits. All exhibits attached hereto shall be incorporated
herein by reference as if set out herein in full.
15.14 Construction. The parties acknowledge that each party and
its counsel have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendment or exhibits hereto.
15.15 Confidentiality. Prior to the Close of Escrow or if the
Close of Escrow does not occur, Buyer and Seller agree to keep confidential, and
not publicly disclose, the existence and/or terms of this Agreement and the
transaction contemplated hereby or the results, contents or analysis of the
Buyer Inspections of the Real Property; provided, however, that both Seller and
Buyer may disclose the existence and terms of this Agreement and the Buyer
Inspections to: (i) Buyer's and Seller's respective
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consultants, agents, architects, independent contractors, attorneys or surveyors
associated with the purchase and sale of the Partnership Interests, (ii) any
third party to whom the non-disclosing party to this Agreement has given its
prior written consent for such a disclosure, which consent shall not be
unreasonably withheld or delayed, (iii) governmental, administrative, regulatory
or judicial authorities in the investigation of the compliance of the Real
Property with applicable legal requirements, (iv) governmental or regulatory
authorities pursuant to applicable disclosure requirements, or (v) with respect
to the existence and/or terms of this Agreement and the transaction contemplated
hereby, shareholders and prospective shareholders if the party desiring to make
the disclosure believes in its reasonable judgement that such disclosure is
necessary or prudent and such party gives notice to the other party prior to
disclosure so that the parties can coordinate, if deemed necessary or prudent,
on the timing of any such disclosure. However, Buyer expressly covenants and
agrees that it will not disclose any code compliance, environmental or other
regulatory matters to governmental or other authorities without the express
prior written approval of Seller unless required by law. The provisions of this
Section 15.15 shall survive the termination of this Agreement other than by
Close of Escrow. After the Closing, Buyer agrees not to use the name of Seller
in any published materials without Seller's prior written consent which shall
not be unreasonably withheld or delayed.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in one or more counterparts as of the date first above written.
SELLER:
DSL Service Company, a California
corporation
By:_________________________________
Name:_______________________________
Title:______________________________
By:_________________________________
Name:_______________________________
Title:______________________________
DOWNEY SAVINGS AND LOAN
ASSOCIATION, F.A.
By:_________________________________
Name:_______________________________
Title:______________________________
By:_________________________________
Name:_______________________________
Title:______________________________
(Signature Page Continues)
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BUYER:
Burnham Pacific Properties, Inc.
a California corporation
By:_________________________________
Name:_______________________________
Title:______________________________
By:_________________________________
Name:_______________________________
Title:______________________________
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<PAGE> 1
EXHIBIT 10.2
LOAN AGREEMENT
Dated as of January 30, 1997
by and between
BPP/VALLEY CENTRAL, L.P.
(as Borrower)
and
NOMURA ASSET CAPITAL CORPORATION
(as Lender)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. CERTAIN DEFINITIONS..................................................................... 1
Section 1.1. Definitions................................................................. 1
ARTICLE II. GENERAL TERMS.......................................................................... 25
Section 2.1. Amount of the Loan.......................................................... 25
Section 2.2. Use of Proceeds............................................................. 25
Section 2.3. Security for the Loan....................................................... 25
Section 2.4. Borrower's Note............................................................. 25
Section 2.5. Principal and Interest Payments............................................. 25
Section 2.6. Voluntary Defeasance........................................................ 27
Section 2.7. Prepayment.................................................................. 27
Section 2.8. Application of Payments..................................................... 28
Section 2.9. Payment of Debt Service, Method and Place of Payment........................ 28
Section 2.10. Taxes...................................................................... 28
Section 2.11. Defeasance Requirements.................................................... 28
Section 2.12. Central Cash Management.................................................... 30
Section 2.13. Security Agreement......................................................... 37
Section 2.14. Securitization............................................................. 39
Section 2.15. Supplemental Mortgage Affidavits........................................... 40
Section 2.16. Transfer of Mortgaged Property............................................. 40
ARTICLE III. CONDITIONS PRECEDENT.................................................................. 43
Section 3.1. Conditions Precedent to the Making of the Loan.............................. 43
Section 3.2. Form of Loan Documents and Related Matters.................................. 48
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE IV. REPRESENTATIONS AND WARRANTIES......................................................... 48
Section 4.1. Representations and Warranties of Borrower.................................. 48
Section 4.2. Survival of Representations and Warranties.................................. 56
ARTICLE V. AFFIRMATIVE COVENANTS................................................................... 56
Section 5.1. Borrower Covenants.......................................................... 56
ARTICLE VI. NEGATIVE COVENANTS..................................................................... 68
Section 6.1. Borrower Negative Covenants................................................. 68
ARTICLE VII. DEFAULTS.............................................................................. 70
Section 7.1. Event of Default............................................................ 70
Section 7.2. Remedies.................................................................... 73
Section 7.3. Remedies Cumulative......................................................... 74
Section 7.4. Lender's Right to Perform................................................... 74
ARTICLE VIII. MISCELLANEOUS........................................................................ 74
Section 8.1. Survival.................................................................... 74
Section 8.2. Lender's Discretion......................................................... 75
Section 8.3. Governing Law............................................................... 75
Section 8.4. Modification, Waiver in Writing............................................. 76
Section 8.5. Delay Not a Waiver.......................................................... 76
Section 8.6. Notices..................................................................... 76
Section 8.7. Trial By Jury............................................................... 77
Section 8.8. Headings.................................................................... 77
Section 8.9. Assignment.................................................................. 77
Section 8.10. Severability............................................................... 77
Section 8.11. Preferences................................................................ 77
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
Section 8.12. Waiver of Notice........................................................... 78
Section 8.13. Remedies of Borrower....................................................... 78
Section 8.14. Exculpation................................................................ 78
Section 8.15. Exhibits Incorporated...................................................... 79
Section 8.16. Offsets, Counterclaims and Defenses........................................ 79
Section 8.17. No Joint Venture or Partnership............................................ 80
Section 8.18. Waiver of Marshalling of Assets Defense.................................... 80
Section 8.19. Waiver of Counterclaim..................................................... 80
Section 8.20. Conflict: Construction of Documents........................................ 80
Section 8.21. Brokers and Financial Advisors............................................. 78
Section 8.22. Counterparts............................................................... 79
Section 8.23. Estoppel Certificates...................................................... 79
Section 8.24. Payment of Expenses........................................................ 81
Section 8.25. Bankruptcy Waiver.......................................................... 79
Section 8.26. Entire Agreement........................................................... 80
Section 8.27. Dissemination of Information............................................... 82
Section 8.28. Limitation of Interest..................................................... 82
Section 8.29. Indemnification............................................................ 81
Section 8.30. Borrower Acknowledgments................................................... 83
Section 8.31. Publicity.................................................................. 81
</TABLE>
iii
<PAGE> 5
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of January 30, 1997, is by and
between NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an
address at 2 World Financial Center, Building B, New York, New York 10281-1198,
Attention: Sheryl McAfee, Telefax Number (212) 667-1206 (together, with its
successors and assigns, "Lender"), and BPP/VALLEY CENTRAL, L.P., a California
limited partnership, with an address of c/o Burnham Pacific Properties, Inc.,
610 West Ash Street, San Diego, California 92101, Attention: Daniel Platt,
Telefax Number: (619) 652-4711 (the "Borrower").
RECITALS
WHEREAS, Borrower desires to obtain a loan (the "Loan") from
Lender in the principal amount of Twenty-Five Million Four Hundred Thousand
Dollars ($25,400,000.00) (the "Loan Amount") to pay the acquisition costs for
the Facility to be acquired by Borrower;
WHEREAS, Lender is willing to make the Loan on the condition
that Borrower joins in the execution and delivery of this Agreement which shall
establish the terms and conditions of the Loan; and
WHEREAS, Lender and Borrower contemplate that all or any
portion of Lender's interest in the Loan and to the Loan Documents may be
assigned, in whole or in part, by Lender to another Person, including, without
limitation, to a trustee on behalf of security holders in connection with a
Securitization.
NOW, THEREFORE, in consideration of the making of the Loan by
Lender and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement:
(a) the capitalized terms defined in this Article I have the
meanings assigned to them in this Article I, and include the plural as well as
the singular;
(b) all accounting terms have the meanings assigned to them in
accordance with GAAP;
(c) the words "herein", "hereof", and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section , or other subdivision; and
(d) the following terms have the following meanings:
<PAGE> 6
"Account Collateral" has the meaning provided in Section
2.13(a).
"Accounts" means any of Borrower's rights to payment for goods
sold or leased or for services rendered arising from the ownership or operation
of the Facility and not evidenced by an Instrument, including, without
limitation, all accounts and accounts receivable arising from the ownership or
operation of the Facility, now existing or hereafter coming into existence, and
all proceeds thereof (whether cash or non-cash, moveable or immovable, tangible
or intangible), received from the sale, exchange, transfer, collection or other
disposition or substitution thereof. In addition to the foregoing, the term
"Accounts" shall include the meaning as such term has in the UCC.
"Accrued Interest" has the meaning provided in Section 2.5(e).
"Adjusted Net Operating Income" means, for any applicable
period, the Net Operating Income for such period subject to the following
adjustments and assumptions: (i) Operating Income shall not be considered for
tenants who, as of the date of such calculation, are not in occupancy and paying
rent; (ii) reimbursements from tenants will be included only to the extent
Lender determines, in its sole discretion, that such reimbursements are
stabilized and recurring, but reimbursements in excess of the corresponding
expense items shall not be included; (iii) percentage rent will be included only
to the extent Lender determines that such percentage rent is stabilized and
recurring, up to a maximum of 50-75% of percentage rent collected in the
preceding 12 months; (iv) income from month-to-month tenants and temporary
tenants will be included only to the extent Lender determines that such
month-to-month income and temporary income are stabilized and recurring, up to a
maximum of 50% of such rent collected in the preceding 12 months; (v) other
income may be included on a case-by-case basis in Lender's sole discretion, and
in any event only to the extent such income is determined by Lender to be
stabilized and recurring and of an operating nature for a period of at least
three years; (vi) a vacancy and credit loss allowance will be applied, in an
amount equal to the greatest of (a) actual historical vacancy and/or credit
loss, (b) 5% of the non-anchor revenues (to the extent not accounted for), and
(c) market vacancy allowances; (vii) expenses will be equal to the actual
expenses for the trailing 12 months ended in the most recently completed fiscal
quarter (except for real estate taxes and insurance, which will be included at
their stabilized, recurring levels), and will exclude any non-recurring items
and the costs of capital improvements; (viii) management fees will be assumed to
be the greater of (a) actual management fees and (b) 5% of effective gross
income for the Facility (provided, that the amount of the management fees so
determined will be reduced by those costs which are incurred by the Facility and
were deducted under other sections hereof, but would ordinarily be paid by the
manager from its management fee; (ix) capital expenditures will be deemed to be
the greater of (a) $0.15 per square foot and (b) the amount recommended by the
structural engineering/property condition reports approved by Lender prior to
the Closing; (x) a deduction will be made for the pro-rated amount of tenant
improvement costs and leasing commissions, based on a 60% retention rate
assumption and other assumptions based on market information, for tenants that
are scheduled to roll over during the amortization period of the Loan, without
duplication for costs deducted under other sections, subject to a minimum of
$1.00 per occupied square foot for non-anchor space; and (xi) such other
adjustments as determined by Lender in its reasonable discretion
2
<PAGE> 7
consistent with its due diligence findings and prevailing market conditions.
Notwithstanding the foregoing, Adjusted Net Operating Income shall be determined
in a manner consistent with and using the same underwriting standards and
methodology as used in calculating Base Net Operating Income.
"Advisor" means Nomura Securities International, Inc.
"Affiliate" of any specified Person means any other Person
controlling, controlled by or under common control with such specified Person.
For the purposes of this Agreement, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controls", "controlling" and "controlled" have the meanings correlative
to the foregoing.
"Agreement" means this Loan Agreement, as the same may from
time to time hereafter be modified, supplemented or amended.
"Annual Operating Budget" means an annual budget for the
operations of the Facility (broken down on a month-by-month basis) prepared, and
submitted by Borrower to Lender on or prior to December 1, 2003 for the calendar
year commencing January 1, 2004 and thereafter on each December 1 for each
succeeding calendar year, all in form and substance reasonably satisfactory to
Lender and as reasonably approved by Lender, as the same shall be amended by
Borrower from time to time, with Lender's written consent, not be unreasonably
withheld or delayed. Lender's approval shall be deemed given if Lender does not
respond to Borrower's proposed budget within thirty (30) days of Lender's
receipt thereof.
"Appraisals" means the appraisals, if any, with respect to the
Facility delivered to Lender in connection with the Loan and any more recent
appraisal of the Facility delivered to Lender or Lender's servicer, as
applicable, each made by an Appraiser at the request of Borrower or Lender, as
any of the same may be updated by recertification from time to time (and
pursuant to the terms of this Agreement) by the Appraiser performing such
Appraisal.
"Appraiser" means any Independent appraiser selected by
Borrower (and reasonably satisfactory to Lender) who is (i) a member of the
Appraisal Institute with a national practice and who has at least ten years
experience with real estate of the same type and in the geographic area of the
Facility to be appraised or (ii) otherwise reasonably acceptable to Lender.
"Appurtenant Rights" has the meaning set forth in the
Mortgage.
"Assignment of Agreements" means, with respect to the
Facility, a first priority Assignment of Agreements Affecting Real Estate, in
form and substance satisfactory to Lender in its sole discretion, dated as of
the Closing Date from Borrower, as assignor, to Lender, as assignee, as the same
may thereafter from time to time be supplemented, amended, modified or extended
by one or more written agreements supplemental thereto.
3
<PAGE> 8
"Assignment of Leases" means, with respect to the Facility, a
first priority Assignment of Leases and Rents, in form and substance
satisfactory to Lender in Lender's sole discretion, dated as of the Closing Date
from Borrower, as assignor, to Lender, as assignee, assigning to Lender
Borrower's interest in and to the Leases and the Rents with respect to the
Facility as security for the Loan, as the same may thereafter from time to time
be supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Base Payment" has the meaning provided in Section 2.5(c).
"Base Net Operating Income" means the amount shown on Exhibit
B.
"Basic Carrying Costs" means the following costs with respect
to the Facility: (i) real property taxes, assessments and Impositions applicable
to the Facility, and (ii) insurance premiums for policies of insurance required
or permitted to be maintained by Borrower pursuant to this Agreement or the
other Loan Documents.
"Basic Carrying Costs Monthly Installment" means, with respect
to the Facility, Lender's reasonable and good faith estimate of one-twelfth
(1/12th) of the annual amount of the Basic Carrying Costs (provided, that Lender
may calculate reasonably and in good faith the monthly amount to assure that
funds are reserved in sufficient amounts to enable the payment of all
Impositions, including, without limitation, taxes and insurance premiums thirty
(30) days prior to their respective due dates). Should the Basic Carrying Costs
for the then current Fiscal Year or payment period not be ascertainable by
Lender at the time a monthly deposit is required to be made, the Basic Carrying
Costs Monthly Installment shall be Lender's reasonable and good faith estimate
based on one-twelfth (1/12th) of the aggregate Basic Carrying Costs for the
prior Fiscal Year or payment period, with reasonable adjustments as reasonably
determined by Lender. As soon as the Basic Carrying Costs are fixed for the then
current Fiscal Year or period, the next ensuing Basic Carrying Costs Monthly
Installment shall be reasonably adjusted to reflect any deficiency or surplus in
prior Basic Carrying Costs Monthly Installments.
"Basic Carrying Costs Sub-Account" means the Sub-Account of
the Cash Collateral Account established and maintained pursuant to Section 2.12
relating to the payment of Basic Carrying Costs.
"Borrower" has the meaning provided in the first paragraph of
this Agreement.
"Business Day" means any day other than (i) a Saturday or a
Sunday, and (ii) a day on which federally insured depository institutions in New
York, New York, Chicago, Illinois and any state in which the Collection Account
or the Cash Collateral Account is located are authorized or obligated by law,
regulation, governmental decree or executive order to be closed.
"Capital Improvement Costs" means costs incurred by Borrower
in connection with capital improvements to the Facility.
"Capital Reserve Amount" means with respect to the Facility,
an amount equal to the greater of (i) $0.15 multiplied by the number of square
feet of gross rentable area (as
4
<PAGE> 9
approved by Lender) for the Facility per annum and (ii) the amount indicated in
the Engineering Report(s) as the annual amount required to maintain the
Facility.
"Capital Reserve Monthly Installment" means, with respect to
the Facility, an amount equal to one-twelfth (1/12th) of the Capital Reserve
Amount.
"Capital Reserve Sub-Account" means the Sub-Account of the
Cash Collateral Account established and maintained pursuant to Section 2.12
relating to the payment of Capital Improvement Costs.
"Cash Collateral Account" has the meaning provided in Section
2.12(b).
"Cash Collateral Account Agreement" has the meaning provided
in Section 2.13(c).
"Cash Collateral Account Bank" means the bank chosen by Lender
to hold the Cash Collateral Account, or any successor bank hereafter selected by
Lender upon prior written notice to Borrower and otherwise in accordance with
the terms hereof.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and as it may be further amended from time to time, any successor statutes
thereto, and applicable U.S. Department of Treasury regulations issued pursuant
thereto in temporary or final form.
"Collateral" means, collectively, the Land, Appurtenant
Rights, Improvements, Equipment, Rents, Leases, Accounts, Account Collateral,
General Intangibles, goods, Instruments, Inventory, Money, Permitted Investments
and (to the full extent assignable) Permits and all Proceeds and products of the
foregoing, all whether now owned or hereafter acquired and all other property
which is or hereafter may become subject to a Lien in favor of Lender as
security for the Loan.
"Collateral Security Instrument" means any right, document or
instrument, other than a Mortgage, given as security for the Loan (including,
without limitation, the Assignment of Leases, the Assignment of Agreements, and
the Manager's Subordination (if any)), as the same may hereafter from time to
time be supplemented, amended, extended or modified.
"Collection Account" has the meaning provided in Section
2.12(a).
"Collection Account Agreement" has the meaning set forth in
Section 2.12(b).
"Collection Account Bank" means, with respect to the Facility,
the applicable collection bank for the Facility and any successor bank hereafter
selected by Borrower and reasonably approved by Lender.
"Combined Debt Service Coverage Ratio" shall mean, for any
period, the quotient obtained by dividing (x) the sum of Adjusted Net Operating
5
<PAGE> 10
Income and Adjusted Net Operating Income (as defined in the Puente Loan
Agreement) for the specified period, by (y) the sum of the aggregate amount of
Base Payments due for such period plus the aggregate amount of Base Payments (as
defined in the Puente Loan Agreement) due for such period.
"Condemnation Proceeds" has the meaning provided in Section
2.12(h).
"Contingent Obligation" means, without duplication, any
obligation of Borrower guaranteeing any indebtedness, leases, dividends or other
obligations ("primary obligations") of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including, without limitation,
any obligation of Borrower, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of
the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary obligation
or (iv) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the Borrower's maximum
anticipated liability in respect thereof (assuming that Borrower is required to
perform thereunder) as determined by Lender in good faith (taking into account
the non-recourse or limited recourse nature of such Contingent Obligation, if
applicable).
"Cross-Collateralization" means the consummation, upon terms
and conditions satisfactory to Lender in its sole discretion, pursuant to that
certain Commitment of Lender dated January 28, 1997, in favor of the SPE Equity
Owner of a secured loan transaction (the "Puente Hills Loan") between Lender, as
lender, and a Single-Purpose Entity (the "Puente Hills Entity") which is or
becomes the fee owner of The Plaza at Puente Hills, located in the City of
Industry, California, subject to satisfaction of each and all of the following
terms and conditions on or prior to February 28, 1997: (i) the Puente Hills Loan
shall be in an amount not less than $33,100,000.00 and shall have the same
Optional Prepayment Date and Maturity Date, respectively, as are applicable to
the Loan; (ii) Borrower shall execute a guaranty of the repayment in full of the
Puente Hills Loan in form and substance satisfactory to Lender in its sole
discretion (the "Guaranty"); (iii) the Mortgage and, if required by Lender, the
other Loan Documents shall be amended to provide that the Guaranty is secured by
the Mortgage, such amendments to be in form and substance satisfactory to Lender
in its sole discretion; (iv) Lender shall receive endorsements to the Title
Insurance Policy satisfactory to Lender in its sole discretion confirming the
priority of the lien of the Mortgage upon consummation of the conditions
described herein and, if it so requests, reinsurance of liability under the
Title Insurance Policy and the title insurance policy insuring the mortgage
executed by the Puente Hills Entity; (v) there shall be no Default or Event of
Default under any of the Loan Documents; (vi) Lender shall have received an
opinion of counsel satisfactory to Lender in its sole discretion that the
Guaranty and the Loan Documents, as amended, have been duly authorized, executed
and delivered by Borrower and constitute the legal, valid and binding obligation
of Borrower enforceable against Borrower in accordance with its terms; (vii)
Lender shall have received a substantive non-consolidation opinion satisfactory
to Lender in its sole discretion that Borrower and the Puente Hills Entity taken
together would not be consolidated with any other entity in a
6
<PAGE> 11
Federal Bankruptcy case; and (viii) all of the costs and expenses of Lender in
connection with the Cross-Collateralization, including without limitation the
fees and expenses of Lender's counsel and the cost of endorsements to the Title
Insurance Policy, shall have been paid by Borrower and/or the Puente Hills
Entity.
"Current Interest Accrual Period" has the meaning provided in
Section 2.12(g).
"Debt Service" means, for any period, the principal, interest
payments, Default Rate interest, Late Charges and Yield Maintenance Premium that
accrue or are due and payable in accordance with the Loan Documents during such
period.
"Debt Service Coverage Ratio" means, for any period, the
quotient obtained by dividing Net Operating Income for the specified period by
the aggregate amount of the Base Payments due for such period.
"Debt Service Payment Sub-Account" means the Sub-Account of
the Cash Collateral Account established and maintained pursuant to Section 2.12
relating to the payment of Debt Service.
"Deed of Trust Trustee" means the trustee, if any, under the
Mortgage.
"Default" means the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would be an Event of Default.
"Default Collateral" has the meaning provided in Section 8.14.
"Default Rate" means the per annum, interest rate equal to the
lesser of (i) the Maximum Amount or (ii) the Interest Rate plus five percent
(5%).
"Defeasance Deposit" means the following in each of the
following circumstances:
(i) in the case of a total defeasance of the Loan and Facility
pursuant to Section 2.11, "Defeasance Deposit" means an amount equal to
125% of the amount that will be sufficient to purchase U.S. Obligations
(A) having maturity dates on or prior to, but as close as possible to,
successive scheduled Payment Dates (after the Defeasance Release Date)
upon which Payment Dates interest and principal payments would be
required under the Note as though the Maturity Date of the Note were
the Optional Prepayment Date and (B) in amounts sufficient to pay all
scheduled principal and interest payments on the Note as if the
Maturity Date of the Note were the Optional Prepayment Date (but
without any adjustment of the monthly amortization schedule); provided,
that if (x) the Cross-Collateralization shall not have been
consummated, or (y) a Transfer of the Facility shall have occurred
pursuant to Section 2.16 below, or (z) there shall occur concurrently
with the total defeasance of the Loan the total defeasance of the
Puente Hills Loan in accordance with the Puente Loan Agreement,
7
<PAGE> 12
then in any such case the Defeasance Deposit shall mean an amount equal
to 100% of the foregoing amount; and
(ii) in the case of a partial defeasance of the Loan pursuant
to Section 5.1(P) or Section 2.16(c), "Defeasance Deposit" means the
amount that will be sufficient to purchase U.S. Obligations (A) having
maturity dates on or prior to, but as close as possible to, the
successive scheduled Payment Dates (after the date of such voluntary
defeasance) upon which Payment Dates interest and principal payments
would be required under the Note as though the Maturity Date of the
Note were the Optional Prepayment Date and (B) in amounts sufficient to
pay all scheduled principal and interest payments on the Note (1) as if
the Maturity Date of the Note were the Optional Prepayment Date (but
without any adjustment of the monthly amortization schedule) and (2) as
if the outstanding principal indebtedness due under the Note were an
amount equal to the amount required to be defeased pursuant to Section
5.1(P) or Section 2.16(c) in connection with such partial defeasance.
"Defeasance Release Date" has the meaning provided in Section
2.11(a).
"Deferred Maintenance Amount" means with respect to the
Facility, or any portion thereof, the amount shown on Exhibit B.
"Deferred Maintenance Costs" means the costs incurred by
Borrower in connection with completion of the repairs to (including, but not
limited to, work in connection with causing the Facility to comply with the
Americans with Disabilities Act) and environmental remediation of the Facility
itemized on Exhibit C hereto.
"Deferred Maintenance Sub-Account" means the Sub-Account of
the Cash Collateral Account established and maintained pursuant to Section 2.12
relating to the payment of Deferred Maintenance Costs.
"Eighteen Year Treasury Rate" means the yield, calculated by
linear interpolation (rounded to three decimal places) of the yields of United
States Treasury Constant Maturities with terms (one longer and one shorter) most
nearly approximating that of noncallable United States Treasury obligations
having maturities as close as possible to eighteen (18) years from the Optional
Prepayment Date, as determined by Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by Lender for the week prior to the
Optional Prepayment Date.
"Eligible Account" means (i) an account maintained with a
federal or state chartered depository institution or trust company whose (x)
commercial paper, short-term debt obligations or other short-term deposits are
rated at least A-1 by each Rating Agency if the deposits in such account are to
be held in such account for thirty (30) days or less or (y) long-term unsecured
debt obligations are rated at least AA- by each Rating Agency if the deposits in
such account are to be held in such account for more than thirty (30) days; or
(ii) a segregated
8
<PAGE> 13
trust account maintained with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which institution or trust company is subject to regulations regarding
fiduciary funds on deposit substantially similar to 12 C.F.R. Section 9.10(b);
or (iii) an account otherwise acceptable to each Rating Agency, as confirmed in
writing that such account would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any security
issued in connection with a Securitization.
"Engineer" means any reputable Independent engineer, properly
licensed in the relevant jurisdiction and approved by Lender in Lender's
reasonable discretion.
"Engineering Reports" means the structural engineering reports
with respect to the Facility prepared by an Engineer and delivered to Lender in
connection with the Loan and any amendments or supplements thereto delivered to
Lender.
"Entity" means (a) limited partnership, if Borrower is listed
as a limited partnership in the first paragraph of this Agreement or (b) limited
liability company, if Borrower is listed as a limited liability company in the
first paragraph of this Agreement.
"Environmental Claim" means any written request for
information by a Governmental Authority, or any written notice, notification,
claim, administrative, regulatory or judicial action, suit, judgment, demand or
other written communication by any Person or Governmental Authority requiring,
alleging or asserting liability with respect to Borrower, or the Facility,
whether for damages, contribution, indemnification, cost recovery, compensation,
injunctive relief, investigatory, response, remedial or cleanup costs, damages
to natural resources, personal injuries, fines or penalties arising out of,
based on or resulting from (i) the presence, Use, Release or threatened Release
into the environment of any Hazardous Substance originating at or from, or
otherwise affecting the Facility, (ii) any fact, circumstance, condition or
occurrence forming the basis of any violation, or alleged violation, of any
Environmental Law by Borrower or otherwise affecting the Facility or (iii) any
alleged injury or threat of injury to health, safety or the environment by
Borrower or otherwise affecting the Facility.
"Environmental Laws" means any and all applicable federal,
state, local and foreign laws, rules, regulations or municipal ordinances, each
as amended from time to time, any judicial or administrative orders, decrees,
settlement agreements or judgments thereunder, and any Permits, approvals,
licenses, registrations, filings and authorizations, in each case as in effect
as of the relevant date, relating to the environment, health or safety, or the
Release or threatened Release of Hazardous Substances into the indoor or outdoor
environment including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
presence or Use of Hazardous Substances.
"Environmental Reports" means, with respect to the Facility,
the environmental audit reports delivered to Lender in connection with the Loan
and any amendments or supplements thereto delivered to Lender.
9
<PAGE> 14
"Equipment" means all fixtures, appliances, machinery,
furniture, furnishings, decorations, tools and supplies, now owned or hereafter
acquired by Borrower, including but not limited to, all beds, linens, radios,
televisions, carpeting, telephones, cash registers, computers, lamps, glassware,
restaurant and kitchen equipment, and building equipment, including but not
limited to, all heating, lighting, incinerating, waste removal and power
equipment, engines, pipes, tanks, motors, conduits, switchboards, security and
alarm systems, plumbing, lifting, cleaning, fire prevention, fire extinguishing,
refrigeration, washing machines, dryers, stoves, refrigerators, ventilating, and
communications apparatus, air cooling and air conditioning apparatus,
escalators, elevators, ducts, and compressors, materials and supplies, and all
other machinery, apparatus, equipment, fixtures and fittings now owned or
hereafter acquired by Borrower wherever located, any portion thereof or any
appurtenances thereto, together with all additions, replacements, parts,
fittings, accessions, attachments, accessories, modifications and alterations of
any of the foregoing. In addition to the foregoing, the term "Equipment" shall
include the meaning as such term has in the UCC.
"Equity Interests" means (a) if Borrower is a limited
partnership, limited partnership interests in Borrower or (b) if Borrower is a
limited liability company, membership interests in Borrower; provided, however,
that Equity Interests shall not include any direct or indirect legal or
beneficial ownership interest, or any other interest of any nature or kind
whatsoever, of the SPE Equity Owner in Borrower.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefore.
"ERISA Affiliate" means any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which Borrower is a member, and (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which
Borrower is a member.
"Event of Default" has the meaning set forth in Section 7.1.
"Excess Cash Flow" has the meaning set forth in Section 2.12.
"Extra Funds" has the meaning set forth in Section 2.12.
"Facility" means each "Real Property" (as defined in the
Mortgage), and the Collateral with respect thereto, for so long as such Real
Property and related Collateral is encumbered by a Mortgage.
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<PAGE> 15
"Fiscal Year" means the 12-month period ending on December 31
of each year or such other fiscal year of Borrower as Borrower may select from
time to time with the prior written consent of Lender not to be unreasonably
withheld or delayed.
"GAAP" means generally accepted accounting principles
consistently applied in the United States of America as of the date of the
applicable financial report.
"General Intangibles" means all intangible personal property
of Borrower (other than Accounts, Rents, Instruments, Inventory, Money and
Permits), including, without limitation, things in action, settlements,
judgments, contract rights, rights to performance (including, without
limitation, rights under warranties), refunds of real estate taxes and
assessments and other rights to payment of Money, copyrights, trademarks, trade
names and patents now existing or hereafter in existence. In addition to the
foregoing, the term "General Intangibles" shall include the meaning as such term
has in the UCC.
"Governmental Authority" means any national or federal
government, any state, regional, local or other political subdivision thereof
with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Gross Revenue" means, with respect to the Facility, the total
dollar amount of all income and receipts of any kind whatsoever received by
Borrower in the ordinary course of its business with respect to the Facility,
including, without limitation, all Rents (but excluding security deposits until
forfeited or otherwise entitled to be retained by Borrower) and Money.
"Guaranty" shall have the meaning set forth under the
definition of "Cross-Collateralization."
"Hazardous Substance" means, collectively, (i) any petroleum
or petroleum products or waste oils, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"),
lead in drinking water, and lead-based paint, the presence, generation, use,
transportation, storage or disposal of or exposure to which (x) is regulated or
could lead to liability under any Environmental Law or (y) is subject to notice
or reporting requirements under any Environmental Law, (ii) any chemicals or
other materials or substances which are now or hereafter become defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," "pollutants" or
words of similar import under any Environmental Law and (iii) any other chemical
or any other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Impositions" means all taxes (including, without limitation,
all real estate, ad valorem, sales (including those imposed on lease rentals),
use, single business, gross receipts, value added, intangible transaction
privilege, privilege, license or similar taxes), assessments (including, without
limitation, to the extent not discharged prior to the Closing Date, all
assessments for public improvements or benefits, whether or not commenced or
completed
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<PAGE> 16
within the term of the Mortgage), ground rents, water, sewer or other rents and
charges, excises, levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental charges,
in each case whether general or special, ordinary or extraordinary, foreseen or
unforeseen, of every character in respect of the Facility, (including all
interest and penalties thereon), which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a Lien upon (i) Borrower (including, without limitation, all income, franchise,
single business or other taxes imposed on Borrower for the privilege of doing
business in the jurisdiction in which the Facility, or any other Collateral is
located) or Lender, (ii) the Facility, or any other Collateral or any part
thereof or (iii) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with the Facility or the leasing or
use of the Facility or any part thereof or the acquisition or financing of the
acquisition of the Facility by Borrower. Nothing contained in this Agreement
shall be construed to require Borrower to pay any tax, assessment levy or charge
imposed on Lender, in the nature of a franchise, capital levy, estate,
inheritance, succession, income or net revenue tax.
"Improvements" means, with respect to the Facility, all
buildings, structures and improvements of every nature whatsoever situated on
the Land on the Closing Date or thereafter, including, but not limited to, to
the extent (if any) of Borrower's right, title or interest therein or thereto,
all gas and electric fixtures, radiators, heaters, washing machines, dryers,
refrigerators, ovens, engines and machinery, boilers, ranges, elevators and
motors, plumbing and heating fixtures, antennas, carpeting and other floor
coverings, water heaters, awnings and storm sashes, and cleaning apparatus which
are or shall be attached to the Land or said buildings, structures or
improvements.
"Indebtedness" means, at any given time, the Principal
Indebtedness, together with all accrued and unpaid interest thereon and all
other obligations and liabilities due or to become due to Lender pursuant
hereto, under the Note or in accordance with any of the other Loan Documents,
and all other amounts, sums and expenses paid by or payable to Lender hereunder
or pursuant to the Note or any of the other Loan Documents.
"Indemnified Party" shall have the meaning set forth in
Section 8.29.
"Independent" means, when used with respect to any Person, a
Person who (i) does not have any direct financial interest or any material
indirect financial interest in Borrower or in any Affiliate of Borrower, and
(ii) is not connected with Borrower or any Affiliate of Borrower as an officer,
employee, promoter, underwriter, trustee, partner, member, manager, creditor,
director or person performing similar functions.
"Independent Director" means a duly appointed member of the
board of directors of the relevant entity who shall not have been, at the time
of such appointment or at any time in the preceding five (5) years, (a) a direct
or indirect legal or beneficial owner in such entity or any of its affiliates,
(b) a creditor, supplier, employee, officer, director, manager or contractor of
such entity or any of its affiliates, (c) a person who controls such entity or
any of its affiliates, or (d) a member of the immediate family of a person
defined in (a), (b) or (c) above.
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<PAGE> 17
"Initial Basic Carrying Cost Amount" means, for Borrower and
its Facility, the amount shown on Exhibit B.
"Initial Interest Rate" means 7.975% per annum; provided,
however, that if the Cross-Collateralization is not consummated on or before
February 28, 1997, then from and after such date the Initial Interest Rate shall
be 8.125%.
"Instruments" means all instruments, chattel paper, documents
or other writings obtained by Borrower from or in connection with the ownership
or operation of the Facility evidencing a right to the payment of Money,
including, without limitation, all notes, drafts, acceptances, documents of
title, and policies and certificates of insurance, including but not limited to,
liability, hazard, rental and credit insurance, guarantees and securities, now
or hereafter received by Borrower or in which Borrower has or acquires an
interest pertaining to the foregoing. In addition to the foregoing,
"Instruments" shall include the meaning such term has in the UCC.
"Insurance Proceeds" has the meaning provided in Section
2.12(h).
"Insurance Requirements" means all material terms of any
insurance policy required pursuant to the Loan Documents and all material
regulations and then current standards applicable to or affecting the Facility
or any part thereof or any use or condition thereof, which may, at any time, be
recommended in writing by the Board of Fire Underwriters, if any, having
jurisdiction over the Facility, or such other body exercising similar functions.
"Interest Accrual Period" means each period of time running
from and including the eleventh (11th) day of a calendar month to and including
the tenth (10th) day of the following calendar month during the term of the
Loan. If the Closing Date shall occur prior to the tenth (10th) day of a
calendar month, the first Interest Accrual Period shall commence on and include
the Closing Date and end on and include the tenth (10th) day of the calendar
month in which the Closing Date occurs. If the Closing Date shall occur after
the tenth (10th) day of a calendar month, the first Interest Accrual Period
shall commence on the Closing Date and end on and include the tenth (10th) day
of the calendar month following the month in which the Closing Date occurs. If
the Closing Date shall occur on the tenth (10th) day of a calendar month, the
first Interest Accrual Period shall consist of a one (1) day period consisting
of the Closing Date.
"Interest Rate" means, as applicable, before the Optional
Prepayment Date, the Initial Interest Rate and, on and after the Optional
Prepayment Date, the Revised Interest Rate.
"Inventory" means all goods now owned or hereafter acquired by
Borrower intended for sale or lease, or to be furnished under contracts of
service by Borrower in connection with the Facility, including without
limitation, all inventories held by Borrower for sale or use at or from the
Facility, and all other such goods, wares, merchandise, and materials and
supplies of every nature owned by Borrower and all such other goods returned to
or repossessed by Borrower. In addition to the foregoing, the term "Inventory"
shall include the meaning as such term has in the UCC.
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<PAGE> 18
"Investor" has the meaning provided in Section 8.27.
"Issuer" means any issuer of securities issued in connection
with a Securitization.
"Land" has the meaning provided in the Mortgage.
"Late Charge" means the lesser of (i) five percent (5%) of any
unpaid amount and (ii) the maximum late charge permitted to be charged under the
laws of the State of New York.
"Leases" means all leases and other agreements or arrangements
affecting the use or occupancy of all or any portion of the Facility now in
effect or hereafter entered into (including, without limitation, all lettings,
subleases, licenses, concessions, tenancies and other occupancy agreements
covering or encumbering all or any portion of the Facility), together with any
guarantees, supplements, amendments, modifications, extensions and renewals of
the same, and all additional remainders, reversions, and other rights and
estates appurtenant thereto.
"Legal Requirements" means all statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting Borrower, the Loan Documents, the Facility or any part
thereof, or the ownership, construction, use, alteration or operation thereof or
any part thereof enacted and in force as of the relevant date, and all Permits
and regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any instruments, either of record or known to
Borrower, at any time in force affecting the Facility or any part thereof,
including, without limitation, any which (i) may require repairs, modifications,
or alterations in or to the Facility or any part thereof, or (ii) in any way
limit the use and enjoyment thereof.
"Lender" has the meaning provided in the first paragraph of
this Agreement.
"Liabilities" has the meaning set forth in Section 2.14.
"Lien" means any mortgage, deed of trust, lien (statutory or
other), pledge, easement, restrictive covenant, hypothecation, assignment,
preference, priority, security interest, or any other encumbrance or charge on
or affecting the Facility or any portion thereof or any Collateral or Borrower,
or any interest therein, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing
statement or similar instrument under the UCC or comparable law of any other
jurisdiction, domestic or foreign, and mechanic's, materialmen's and other
similar liens and encumbrances.
"Loan" has the meaning provided in the Recitals hereto.
"Loan Amount" has the meaning provided in the Recitals hereto.
"Loan Documents" means, collectively, this Agreement, the
Note, the Mortgage, the Assignment of Leases, the Assignment of Agreements, the
Manager's Subordination (if any), the Cash Collateral Account Agreement, the
Guaranty (if the Cross-Collateralization
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<PAGE> 19
is consummated) and all other agreements, instruments, certificates and
documents delivered by or on behalf of Borrower or any Affiliate to evidence or
secure the Loan or otherwise in satisfaction of the requirements of this
Agreement, the Mortgage or the other documents listed above.
"Losses" has the meaning provided in Section 5.1(I).
"Management Agreement" means, with respect to the Facility,
the management agreement, if any, entered into between Manager and Borrower
pertaining to the management of the Facility.
"Manager" means any manager of the Facility acceptable to
Lender in Lender's discretion.
"Manager's Subordination" means, with respect to the Facility,
the Manager's Consent and Subordination of Management Agreement, if any, in form
and substance satisfactory to Lender in Lender's sole discretion, executed by
Manager, Borrower and Lender, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
"Material Adverse Effect" means a material adverse effect upon
(i) the business or the financial position or results of operation of Borrower,
(ii) the ability of Borrower to perform, or of Lender to enforce, any of the
Loan Documents or (iii) the value of (x) the Collateral taken as a whole or (y)
the Facility.
"Material Lease" has the meaning set forth in the Mortgage.
"Maturity Date" means February 11, 2022, or such earlier date
resulting from acceleration of the Indebtedness by Lender.
"Maximum Amount" means the maximum rate of interest designated
by applicable laws relating to payment of interest and usury.
"Money" means all moneys, cash, rights to deposit or savings
accounts, credit card receipts, rents or other items of legal tender obtained
from or for use in connection with the ownership or operation of the Facility.
"Mortgage" means, with respect to the Facility, a first
priority Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing or such other comparable document which is customarily used by prudent
lenders in the jurisdiction in which the Collateral is located, in form and
substance satisfactory to Lender in Lender's sole discretion, dated as of the
Closing Date, granted by Borrower to Lender (or, in the case of a Deed of Trust,
to Deed of Trust Trustee for the benefit of Lender) with respect to the Facility
as security for the Loan, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.
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<PAGE> 20
"Mortgaged Property" means, at any time, the real property,
improvements and other property rights and interests encumbered by the Mortgage.
"Multiemployer Plan" means a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been made by Borrower
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Operating Income" means for any period the excess, if
any, of Operating Income for such period over Operating Expenses for such
period. Notwithstanding the foregoing part of this definition of "Net Operating
Income" to the contrary, if the period for which Net Operating Income is being
calculated includes periods prior to the Closing Date, Net Operating Income
shall be calculated for such period based on the applicable pro rata portion of
Base Net Operating Income.
"Note" means and refers to the promissory note, in form and
substance satisfactory to Lender in Lender's sole discretion, dated the Closing
Date, made by Borrower to Lender pursuant to this Agreement as such note may be
modified, amended, supplemented, extended or consolidated in writing, and any
note(s) issued in exchange therefor or in replacement thereof.
"Officer's Certificate" means a certificate of the Borrower
which is signed by the managing equity owner of the Borrower.
"Operating Expense Certificate" means a certificate of the
Borrower in the form attached hereto as Exhibit A.
"Operating Expense Monthly Installment" means, with respect to
each Interest Accrual Period commencing on or after the Optional Prepayment
Date, the amount shown on the Annual Operating Budget for such period.
"Operating Expense Sub-Account" means the Sub-Account of the
Cash Collateral Account established and maintained pursuant to Section 2.12
relating to the payment of operating expenses, as reasonably approved by Lender.
"Operating Expenses" means, for any period, for Borrower, all
expenditures by Borrower as and to the extent required to be expensed under GAAP
during such period in connection with the ownership, operation, maintenance,
repair or leasing of the Facility, including, without limitation or duplication:
(i) expenses in connection with cleaning, repair,
replacement, painting and maintenance;
(ii) wages, benefits, payroll taxes, uniforms,
insurance costs and all other related expenses for employees
of Borrower or any Affiliate engaged in repair, operation,
maintenance of the Facility or service to tenants;
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<PAGE> 21
(iii) any management fees and expenses;
(iv) the cost of all electricity, oil, gas, water,
steam, heat, ventilation, air conditioning and any other
energy, utility or similar item and overtime services;
(v) the cost of cleaning supplies;
(vi) Impositions;
(vii) business interruption, liability, casualty and
fidelity insurance premiums;
(viii) legal, accounting and other professional fees
and expenses incurred in connection with the ownership,
leasing or operation of the Facility, including, without
limitation, collection costs and expenses;
(ix) costs and expenses of security and security
systems;
(x) trash removal and exterminating costs and
expenses;
(xi) advertising and marketing costs;
(xii) costs of environmental audits and monitoring,
environmental, investigation, remediation, or other response
actions or any other expenses incurred with respect to
compliance with Environmental Laws; and
(xiii) all other ongoing expenses which in accordance
with GAAP are required to be or are included in Borrower's
annual financial statements as operating expenses of the
Facility.
Notwithstanding the foregoing, Operating Expenses shall not include (1) Capital
Improvement Costs, (2) any taxes imposed on Borrower's net income, (3)
depreciation or (4) Debt Service and other payments in connection with the
Indebtedness. Operating Expenses shall be calculated in accordance with GAAP.
"Operating Income" means, for any period, for Borrower, all
income of Borrower during such period from the operation of the Facility,
including, without limitation:
(i) all amounts payable as Rents (other than security
deposits, unless forfeited or entitled to be retained by
Borrower) and all other amounts payable under Leases or other
third party agreements relating to the ownership and operation
of the Facility;
(ii) business interruption proceeds; and
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<PAGE> 22
(iii) all other amounts which in accordance with GAAP
are required to be or are included in Borrower's annual
financial statements as operating income of the Facility.
"Optional Prepayment Date" means February 11, 2004.
"Other Borrowings" means, without duplication (but not
including the Indebtedness or any Transaction Costs payable in connection with
the Transactions), (i) all indebtedness of Borrower for borrowed money or for
the deferred purchase price of property or services, (ii) all indebtedness of
Borrower evidenced by a note, bond, debenture or similar instrument, (iii) the
face amount of all letters of credit issued for the account of Borrower and,
without duplication, all unreimbursed amounts drawn thereunder, (iv) all
indebtedness of Borrower secured by a Lien on any property owned by Borrower
whether or not such indebtedness has been assumed, (v) all Contingent
Obligations of Borrower, and (vi) all payment obligations of Borrower under any
interest rate protection agreement (including, without limitation, any interest
rate swaps, caps, floors, collars or similar agreements) and similar agreements,
excluding unsecured trade debt incurred in the ordinary course of business up to
an aggregate amount of $250,000.
"Payment Date" means the eleventh (11th) day of each calendar
month during the term of the Loan, provided, however, that for purposes of
making payments hereunder, but not for purposes of calculating interest accrual
periods, if the eleventh (11th) day of a given month shall not be a Business
Day, then the Payment Date for such month shall be the next succeeding Business
Day.
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"PCBs" has the meaning provided in the definition of
"Hazardous Substance."
"Permits" means, with respect to the Facility, all licenses,
registrations, permits, allocations, filings, authorizations, approvals and
certificates used in connection with the ownership, operation, construction,
renovation, use or occupancy of the Facility, including, without limitation,
building permits, business licenses, state health department licenses, food
service licenses, liquor licenses, licenses to conduct business, and all such
other permits, licenses and rights, obtained from any Governmental Authority or
private Person concerning ownership, operation, construction, renovation, use or
occupancy of the Facility, the failure of which to maintain or possess could
have a Material Adverse Effect.
"Permitted Encumbrances" means, with respect to the Facility,
collectively, (i) the Lien created by the Mortgage or the other Loan Documents,
of record, (ii) all Liens and other matters disclosed in the Title Insurance
Policy concerning the Facility, or any part thereof which have been approved by
Lender in Lender's sole discretion, (iii) Liens, if any, for Impositions imposed
by any Governmental Authority not yet delinquent or being contested in good
faith and by appropriate proceedings in accordance with the Mortgage, (iv)
without limiting the foregoing, any and all governmental, public utility and
private restrictions, covenants, reservations,
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<PAGE> 23
easements, licenses or other agreements of an immaterial nature which may be
granted by Borrower after the Closing Date and which do not materially and
adversely affect (A) the ability of Borrower to pay any of its obligations to
any Person as and when due, (B) the marketability of title to the Facility, (C)
the fair market value of the Facility, or (D) the use or operation of the
Facility as of the Closing Date and thereafter.
"Permitted Investments" shall have the meaning ascribed to
such term in the Cash Collateral Account Agreement.
"Permitted Transfers" shall mean, provided that no Event of
Default has occurred and is continuing, (i) Permitted Encumbrances; (ii) all
transfers of worn out or obsolete furnishings, fixtures or equipment; (iii) all
Leases which are not Material Leases; and (iv) all Material Leases which have
been approved by Lender in writing in Lender's reasonable discretion.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
"Plan" means an employee benefit or other plan established or
maintained by Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Principal Indebtedness" means the principal amount of the
entire Loan outstanding as the same may be increased or decreased, as a result
of prepayment or otherwise, from time to time.
"Pro Forma Debt Service Coverage Ratio" means, for any period
and any Facility, the quotient obtained by dividing Net Operating Income for
such Facility by the aggregate amount of the Base Payments due for such period
(adjusted to exclude principal and interest payments associated with the
portion, if any, of the Loan being defeased).
"Proceeds" means all proceeds whether cash or non-cash,
movable or immovable, tangible or intangible (including Insurance Proceeds and
Condemnation Proceeds), from the Collateral, including, without limitation,
those from the sale, exchange, transfer, collection, loss, damage, disposition,
substitution or replacement of any of the Collateral and all income, gain,
credit, distributions and similar items from or with respect to the Collateral.
In addition to the foregoing, the term "Proceeds" shall also include the meaning
as such term has in the UCC.
"Puente Hills Entity" shall have the meaning set forth under
the definition of "Cross-Collateralization."
"Puente Hills Loan" shall have the meaning set forth under the
definition of "Cross-Collateralization."
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<PAGE> 24
"Puente Loan Agreement" shall mean the loan agreement executed
in connection with the Puente Hills Loan.
"Rating Agencies" means Fitch Investors Service, Inc., Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. and S&P or any
successor thereto, and any other nationally recognized statistical rating
organization to the extent that any of the foregoing have been or will be
engaged by Lender or its designees in connection with a Securitization (each,
individually a "Rating Agency").
"Recourse Distributions" has the meaning provided in
Section 8.14.
"Release" means any release, threatened release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment including, without
limitation, the movement of Hazardous Substances through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata.
"Remedial Work" has the meaning provided in Section 5.1(D)(i).
"REMIC" means a real estate mortgage investment conduit as
defined under Section 860 D(a) of the Code.
"Rents" means all receipts, rents (whether denoted as advance
rent, minimum rent, percentage rent, additional rent or otherwise), issues,
income, royalties, profits, revenues, proceeds, bonuses, deposits (whether
denoted as security deposits or otherwise), lease termination fees or payments,
rejection damages, buy-out fees and any other fees made or to be made in lieu of
rent, any award made hereafter to Borrower in any court proceeding involving any
tenant, lessee, licensee or concessionaire under any of the Leases in any
bankruptcy, insolvency or reorganization proceedings in any state or federal
court, and all other payments, rights and benefits of whatever nature from time
to time due under any of the Leases, including, without limitation, (i) rights
to payment earned under the Leases for space in the Improvements for the
operation of ongoing businesses, such as restaurants, news stands, barber shops,
beauty shops and pharmacies, and (ii) all other income, consideration, issues,
accounts, profits or benefits of any nature arising from the ownership,
possession, use or operation of the Facility.
"Required Base Debt Service Payment" means all of the Required
Debt Service Payment except for that portion of the Required Debt Service
Payment which consists of payments of Excess Cash Flow which may be due and
payable after the Optional Prepayment Date.
"Required Debt Service Payment" means, on any Payment Date,
the Debt Service then due and payable by Borrower.
"Revised Interest Rate" means a rate equal to five hundred
(500) basis points plus the greater of (x) the Initial Interest Rate, and (y)
the sum of the (i) the Eighteen Year Treasury Rate as of the Optional Prepayment
Date, and (ii) one hundred fifty (150) basis points (or, if the
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<PAGE> 25
Cross-Collateralization has not been consummated on or before February 28, 1997,
one hundred sixty-five (165) basis points), such Revised Interest Rate not to
exceed the Maximum Amount
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc.
"Secretary's Certificate" means, with respect to Borrower, the
certificate in form and substance satisfactory to Lender in Lender's sole
discretion dated as of the Closing Date.
"Securitization" shall have the meaning provided in
Section 2.14.
"Securitization Closing Date" means the date on which a
Securitization is effected.
"Security Agreement" has the meaning provided in Section 2.11.
"Single-Purpose Entity" means a corporation, limited
partnership, or limited liability company which, at all times, since its
formation and thereafter (i) was organized solely for the purpose of (x) owning
the Facility or (y) acting as the managing member of the limited liability
company which owns the Facility or (z) acting as the general partner of a
limited partnership which owns the Facility, (ii) has not and will not engage in
any business unrelated to the (x) the ownership of the Facility or (y) acting as
a member of a limited liability company which owns the Facility or (z) acting as
a general partner of a limited partnership which owns the Facility, (iii) has
not and will not have any assets other than (x) those related to the Facility or
(y) its member interest in the limited liability company which owns the Facility
or (z) its general partnership interest in the limited partnership which owns
the Facility, as applicable, (iv) except as otherwise expressly permitted by
this Agreement, has not and will not engage in, seek or consent to any
dissolution, winding up, liquidation, consolidation, merger, asset sale,
transfer of partnership or membership interests, or amendment of its limited
partnership agreement, articles of incorporation, articles of organization,
certificate of formation or operating agreement (as applicable), (v) if such
entity is a limited partnership, has as its only general partners, general
partners which are Single-Purpose Entities which are corporations, (vi) if such
entity is a corporation, at all relevant times will have at least one
Independent Director, (vii) the board of directors of such entity may not take
any action requiring the unanimous affirmative vote of 100% of the members of
the board of directors unless all of the directors, including an Independent
Director shall have participated in such vote, (viii) has not and will not fail
to correct any known misunderstanding regarding the separate identity of such
entity, (ix) if such entity is a limited liability company, has at least one
member that is a Single-Purpose Entity which is a corporation, and such
corporation is the managing member of such limited liability company, (x)
without the unanimous consent of all of the partners, directors or members, as
applicable, has not and will not with respect to itself or to any other entity
in which it has a direct or indirect legal or beneficial ownership interest (a)
file a bankruptcy, insolvency or reorganization petition or otherwise institute
insolvency proceedings or otherwise seek any relief under any laws relating to
the relief from debts or the protection of debtors generally, (b) seek or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or any similar official for such entity or all or any
portion of such entity's properties; (c) make any
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assignment for the benefit of such entity's creditors; or (d) take any action
that might cause such entity to become insolvent, (xi) has maintained and will
maintain its accounts, books and records separate from any other person or
entity, (xii) has maintained and will maintain its books, records, resolutions
and agreements as official records, (xiii) has not and will not commingle its
funds or assets with those of any other entity, (xiv) has held and will hold its
assets in its own name, (xv) has conducted and will conduct its business in its
name, (xvi) has maintained and will maintain its financial statements,
accounting records and other entity documents separate from any other person or
entity, (xvii) has paid and will pay its own liabilities out of its own funds
and assets, (xviii) has observed and will observe all partnership, corporate or
limited liability company formalities as applicable, (xix) has maintained and
will maintain an arms-length relationship with its Affiliates, (xx) (a) if such
entity owns the Facility, has no indebtedness other than the Indebtedness and
unsecured trade payables in the ordinary course of business relating to the
ownership and operation of the Facility which (1) do not exceed, at any time, a
maximum amount of $250,000 and (2) are paid within sixty (60) days of the date
incurred, or (b) if such entity acts as the general partner of a limited
partnership which owns the Facility, has no indebtedness other than unsecured
trade payables in the ordinary course of business relating to acting as general
partner of the limited partnership which owns the Facility which (1) do not
exceed, at any time, $10,000 and (2) are paid within sixty (60) days of the date
incurred, or (c) if such entity acts as a member of a limited liability company
which owns the Facility, has no indebtedness other than unsecured trade payables
in the ordinary course of business relating to acting as a member of the limited
liability company which owns the Facility which (1) do not exceed, at any time,
$10,000 and (2) are paid within sixty (60) days of the date incurred, (xxi) has
not and will not assume or guarantee or become obligated for the debts of any
other entity or hold out its credit as being available to satisfy the
obligations of any other entity except for the Indebtedness, (xxii) will not
acquire obligations or securities of its partners, members or shareholders,
(xxiii) has allocated and will allocate fairly and reasonably shared expenses,
including, without limitation, shared office space and uses separate stationary,
invoices and checks, (xxiv) except pursuant hereto, has not and will not pledge
its assets for the benefit of any other person or entity, (xxv) has held and
identified itself and will hold itself out and identify itself as a separate and
distinct entity under its own name and not as a division or part of any other
person or entity, (xxvi) has not made and will not make loans to any person or
entity, (xxvii) has not and will not identify its partners, members or
shareholders, or any affiliates of any of them as a division or part of it,
(xxviii) if such entity is a limited liability company, its articles of
organization, certificate of formation and/or operating agreement, as
applicable, shall provide that such entity will dissolve only upon the
bankruptcy of the managing member, (xxix) has not entered and will not enter
into or be a party to, any transaction with its partners, members, shareholders
or its affiliates except in the ordinary course of its business and on terms
which are intrinsically fair and are no less favorable to it than would be
obtained in a comparable arms-length transaction with an unrelated third party,
(xxx) has paid and will pay the salaries of its own employees from its own
funds, (xxxi) has maintained and will maintain adequate capital in light of its
contemplated business operations and (xxxii) if such entity is a limited
liability company or limited partnership, and such entity has one or more
managing members or general partners, as applicable, then such entity's
organizational documents shall provide that such entity shall continue (and not
dissolve) for so long as a solvent managing member or general partner, as
applicable, exists. Notwithstanding the foregoing, Borrower shall be entitled in
connection with
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the Cross-Collateralization to guaranty certain indebtedness of the Puente Hills
Entity to Lender, which indebtedness shall be secured by, inter alia, Liens upon
the Facility.
"SPE Equity Owner" means Burnham Pacific Properties, Inc.
"SPE Equity Owner's Certificate" means the SPE Equity Owner's
Certificate in form and substance satisfactory to Lender in Lender's sole
discretion dated as of the Closing Date.
"Start-Up Day" means the "start-up day," within the meaning of
Section 860G(a)(9) of the Code, of any "real estate mortgage investment
conduit," within the meaning of Section 860D of the Code, that holds the Note.
"Sub-Account" shall have the meaning provided in
Section 2.12(c).
"Survey" means, with respect to the Facility, a survey of the
Facility satisfactory to Lender, prepared by a registered Independent surveyor
reasonably satisfactory to Lender and Title Insurer, together with a metes and
bounds legal description of the land corresponding with the survey and
containing the Surveyor's Certification.
"Surveyor's Certification" means a surveyor's certification in
form and substance satisfactory to Lender in Lender's sole discretion.
"Taking" means a taking or voluntary conveyance during the
term hereof of all or part of the Facility, or any interest therein or right
accruing thereto or use thereof, as the result of or in settlement of any
condemnation or other eminent domain proceeding by any Governmental Authority
affecting the Facility or any portion thereof whether or not the same shall have
actually been commenced.
"Tax Fair Market Value" means, with respect to the Facility,
the fair market value of the Facility, and (x) shall not include the value of
any personal property or other property that is not an "interest in real
property" within the meaning of Treasury Regulation Sections 1.860G-2 and
1.856-3(c), or is not "qualifying real property" within the meaning of Treasury
Regulation Section 1.593-11(b)(iv), and (y) shall be reduced by the "adjusted
issue price" (within the meaning of Code Section 1272(a)(4)) (the "Tax Adjusted
Issue Price") of any indebtedness, other than the Loan, secured by a Lien
affecting the Facility, which Lien is prior to or on a parity with the Lien
created under the Mortgage.
"Title Instruction Letter" means an instruction letter in form
and substance satisfactory to Lender in Lender's sole discretion.
"Title Insurance Policy" means, with respect to the Facility,
the loan policy of title insurance for the Facility issued by Title Insurer with
respect to the Facility in an amount acceptable to Lender and insuring the first
priority Lien in favor of Lender created by the Mortgage and acceptable to
Lender in Lender's discretion, and "Title Insurance Policies" means all such
loan policies of title insurance collectively.
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"Title Insurer" means Commonwealth Land Title Insurance
Company and any reinsurer reasonably required by Lender and/or any other
nationally recognized title insurance company acceptable to Lender in Lender's
reasonable discretion, provided, however, that the reinsurer of any Title
Insurance Policy may include, in amounts reasonably acceptable to Lender,
Chicago Title Insurance Company, First American Title Insurance Company and
Stewart Title Insurance Company.
"Transaction Costs" means all fees, costs, expenses and
disbursements paid or payable by Borrower relating to the Transactions,
including, without limitation, all appraisal fees, legal fees, accounting fees
and the costs and expenses described in Section 8.24.
"Transactions" means the transactions contemplated by the Loan
Documents.
"Transfer" means any conveyance, transfer (including, without
limitation, any transfer of any direct legal or beneficial interest in
Borrower), sale, Lease (including, without limitation, any amendment, extension,
modification, waiver or renewal thereof), or Lien, whether by law or otherwise,
of, on or affecting any Collateral or Borrower (other than a Permitted
Transfer). In addition to the foregoing, a "Transfer" shall be deemed to have
occurred if during any 24 month period, persons who were directors of the SPE
Equity Owner at the beginning of such period and persons who were nominated to
be directors of the SPE Equity Owner by persons who were directors of the SPE
Equity Owner at the beginning of such period, cease to constitute a majority of
the Board of Directors of the SPE Equity Owner.
"Transfer Fee" means all reasonable expenses of Lender
incurred in connection with a Transfer, including, but not limited to,
attorneys' fees and expenses, up to a maximum for any one Transfer of one
percent (1%) of the outstanding principal amount of the Loan.
"UCC" means, with respect to any Collateral, the Uniform
Commercial Code in effect in the jurisdiction in which the relevant Collateral
is located.
"UCC Searches" has the meaning specified in Section 3.1.
"U.S. Obligations" means obligations or securities not subject
to prepayment call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America.
"Use" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance or transportation to or from
the property of any Person of such Hazardous Substance.
"Yield Maintenance Premium" means, in the event that all or
any portion of the Note is accelerated, the amount that, when added to the
amount otherwise due as a result of such acceleration, would be sufficient to
purchase U.S. Obligations (A) having maturity dates on or
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prior to, but as close as possible to, successive scheduled Payment Dates (after
the date of such acceleration of the Note) upon which Payment Dates interest and
principal payments would be required under the Note as though the Maturity Date
of the Note was the Optional Prepayment Date and (B) in amounts sufficient to
pay all scheduled principal and interest payments on the Note as if the Maturity
Date of the Note was the Optional Prepayment Date (but without any adjustment of
the monthly amortization schedule); provided, however, that under no
circumstances shall the Yield Maintenance Premium be less than zero.
ARTICLE II
GENERAL TERMS
Section 2.1. Amount of the Loan. Lender shall lend to Borrower
a total aggregate amount equal to the Loan Amount.
Section 2.2. Use of Proceeds. Proceeds of the Loan shall be
used to pay the acquisition costs for the Facility owned by Borrower. Any excess
will be available to Borrower and may be used for any lawful purpose.
Section 2.3. Security for the Loan. The Note and Borrower's
obligations hereunder and under the other Loan Documents shall be secured by the
Mortgage, the Assignment of Leases, the Assignment of Agreements, the Manager's
Subordination (if any), and the security interest and liens granted in this
Agreement and in the other Loan Documents.
Section 2.4. Borrower's Note. (a) Borrower's obligation to pay
the principal of and interest on the Loan (including Late Charges, Default Rate
interest, and the Yield Maintenance Premium, if any), shall be evidenced by this
Agreement and by the Note, duly executed and delivered by Borrower. The Note
shall be payable as to principal, interest, Late Charges, Default Rate interest
and Yield Maintenance Premium, if any, as specified in this Agreement, with a
final maturity on the Maturity Date. Borrower shall pay all outstanding
Indebtedness on the Maturity Date.
(b) Lender is hereby authorized, at its sole option, to
endorse on a schedule attached to the Note (or on a continuation of such
schedule attached to the Note and made a part thereof) an appropriate notation
evidencing the date and amount of each payment of principal, interest, Late
Charges, Default Rate interest and Yield Maintenance Premium, if any, in respect
thereof, which books and records shall be made available to Borrower, at
Borrower's sole cost and expense on reasonable advance notice, for examination
at Lender's offices.
Section 2.5. Principal and Interest Payments.
(a) Accrual of Interest before the Optional Prepayment Date.
Before the Optional Prepayment Date, interest shall accrue on the outstanding
principal balance of the Note and all other amounts due to Lender under the Loan
Documents at the Initial Interest Rate.
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(b) Accrual of Interest on or after the Optional Prepayment
Date. On and after the Optional Prepayment Date, interest shall accrue on the
outstanding principal balance of the Note and all other amounts due to Lender
under the Loan Documents at the Revised Interest Rate.
(c) Monthly Base Payments, of Principal and Interest at the
Initial Interest Rate. On each Payment Date, Borrower shall pay to Lender a
monthly constant payment as indicated on Exhibit B, which payment is based on
the Initial Interest Rate and an amortization schedule of 360 months. Each
payment required to be made by Borrower pursuant to this Section 2.5(c) is
hereinafter sometimes referred to as a "Base Payment."
(d) Payments of Excess Cash Flow. On and after the earlier to
occur of (i) the Optional Prepayment Date or (ii) at Lender's sole election,
upon the occurrence and during the continuation of an Event of Default
hereunder, any date on or after the occurrence and during the continuation of
such Event of Default, in addition to the Base Payment, Borrower shall pay to
Lender all Excess Cash Flow to be applied as described in Section 2.8.
(e) Payments of Excess of Revised Interest Rate Over Initial
Interest Rate. To the extent, for any period, that accrued interest at the
Revised Interest Rate exceeds interest required to be paid hereunder for such
period at the Initial Interest Rate (such amount, the "Accrued Interest"),
Borrower shall only be required to pay such Accrued Interest after the
outstanding principal balance of the Note has been paid in full. Unpaid Accrued
Interest shall accrue and compound on a monthly basis at the Revised Interest
Rate.
(f) Payment Dates. All payments required to be made pursuant
to Paragraphs (a) through (e) above shall be made beginning on the first Payment
Date immediately after the end of the second Interest Accrual Period; provided,
however, that Borrower shall pay interest for the first Interest Accrual Period
on the Closing Date.
(g) Calculation of Interest. Interest shall accrue on the
outstanding principal balance of the Loan and all other amounts due to Lender
under the Loan Documents commencing upon the Closing Date. Interest shall accrue
on Accrued Interest commencing on the first Payment Date following the Optional
Prepayment Date. Interest shall be computed on the actual number of days
elapsed, based on a 360 day year.
(h) Default Rate Interest. If an Event of Default has occurred
and is continuing the entire unpaid amount outstanding hereunder and under the
Note will bear interest at the Default Rate.
(i) Late Charge. If Borrower fails to make any payment of any
sums due under the Loan Documents after the same is due, Borrower shall, at
Lender's option evidenced by written notice of Lender to Borrower, pay a Late
Charge.
(j) Maturity Date. On the Maturity Date Borrower shall pay to
Lender all amounts owing under the Loan Documents, including without limitation,
interest, principal, Late Charges, Default Rate interest, Accrued Interest and
any Yield Maintenance Premium. The
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Yield Maintenance Premium shall only be due and payable on the date of
acceleration of the Note.
Section 2.6. Voluntary Defeasance.
(a) Provided that no Event of Default has occurred and is then
continuing then after two years after the Start-Up Day (but only before the
Optional Prepayment Date), Borrower may voluntarily defease (A) all of the Loan
or (B) a portion of the Loan, but only pursuant to Section 5.1(P) or Section
2.16(c); provided, that for any defeasance, Borrower must comply with Section
2.11.
(b) In the event of any such voluntary defeasance Borrower
shall give Lender written notice of its intent to defease, which notice shall be
given at least thirty (30) days prior to the date upon which defeasance is to be
made and shall specify the Payment Date and the amount of such defeasance. If
any such notice of defeasance is given, Borrower shall be required to defease
the Loan or a portion thereof pursuant to Section 5.1(P) or Section 2.16(c) on
the specified Payment Date (unless such notice is revoked by Borrower prior to
the date specified therein in which event Borrower shall immediately reimburse
Lender for any reasonable costs incurred by Lender in connection with Borrower's
giving of such notice and revocation).
(c) Any voluntary defeasance of the Loan by Borrower is
required to be made on a Payment Date.
(d) Borrower shall not be permitted at any time to defease all
or any part of the Loan except as expressly provided in this Section 2.6.
Section 2.7. Prepayment. (a) On and after the earlier to occur
of (i) the Optional Prepayment Date or (ii) at Lender's sole election, upon the
occurrence and during the continuation of an Event of Default hereunder, any
date on or after and during the continuation of such Event of Default, in
addition to all other payments required hereunder, Borrower shall pay and use
all Excess Cash Flow to prepay the Loan on each Payment Date in accordance with
Section 2.12(g) and Section 2.8 and, after payment in full of the Principal
Indebtedness (but not Accrued Interest or interest thereon) to pay Accrued
Interest and interest thereon and all other amounts then owing.
(b) If Borrower is required by Lender under the provisions of
the Mortgage to prepay the Loan or any portion thereof in the event of damage,
destruction or a Taking of the Facility, Borrower shall prepay the Loan to the
full extent of the Insurance Proceeds or the Condemnation Proceeds, and there
shall be no Yield Maintenance Premium or penalty assessed against Borrower by
reason thereof.
(c) On any Payment Date occurring on and after the third
Payment Date preceding the Optional Prepayment Date (provided no Event of
Default has occurred and is continuing), Borrower may voluntarily prepay the
Loan in whole or in part, and there shall be no Yield Maintenance Premium or
penalty assessed against Borrower by reason thereof.
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(d) All prepayments made pursuant to this Section 2.7 shall be
applied in accordance with the provisions of Section 2.8
(e) Any prepayment of the Loan by Borrower is required to be
made on a Payment Date.
(f) Borrower shall not be permitted at any time to prepay all
or any part of the Loan except as expressly provided in this Section 2.7.
Section 2.8. Application of Payments. Except during the
continuation of an Event of Default, all proceeds of any repayment, including
prepayments, of the Loan shall be applied to pay: first, any costs and expenses
of Lender, including, without limitation, the Lender's reasonable attorney's
fees and disbursements actually arising as a result of such repayment or
reasonably expended by Lender to protect the Collateral; second, accrued and
unpaid interest at the Initial Interest Rate; third, to the Principal
Indebtedness (but not to Accrued Interest or interest thereon); fourth, to
Accrued Interest and interest accrued thereon; and fifth, any other amounts then
due and owing under the Loan Documents. After the occurrence and during the
continuation of an Event of Default, all proceeds of repayment, including any
payment or recovery on the Collateral shall, unless otherwise provided in the
Mortgage, be applied in such order and in such manner as Lender shall elect in
its sole discretion.
Section 2.9. Payment of Debt Service, Method and Place of
Payment. (a) Except as otherwise specifically provided herein, all payments and
prepayments under this Agreement and the Note shall be made to Lender not later
than 12:00 noon, New York City time, on the date when due and shall be made in
lawful money of the United States of America in federal or other immediately
available funds to an account specified to Borrower by Lender in writing, and
any funds received by Lender after such time, for all purposes hereof, shall be
deemed to have been paid on the next succeeding Business Day.
(b) All payments made by Borrower hereunder or by Borrower
under the other Loan Documents, shall be made irrespective of, and without any
deduction for, any set-offs or counterclaims.
Section 2.10. Taxes. All payments made by Borrower under this
Agreement and under the other Loan Documents shall be made free and clear of,
and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority (other than taxes imposed on the income
of Lender).
Section 2.11. Defeasance Requirements. (a) Subject to Section
2.6, the Loan may be defeased (A) in whole, or (B) in part, but only pursuant to
Section 5.1(P) or Section 2.16(c); provided, that Borrower: (i) provides not
less than thirty (30) days prior written notice to the Lender specifying a
Payment Date (the "Defeasance Release Date") on which the payments provided in
clauses (ii) and (iii) below are to be made and the deposits provided in clause
(iv) below are to be made, (ii) pays all interest accrued and unpaid on the
Principal Indebtedness to
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and including the Defeasance Release Date, (iii) pays all other sums then due
and payable under the Loan Documents, (iv) deposits with the Lender an amount
equal to the Defeasance Deposit, (v) intentionally omitted, (vi) intentionally
omitted, and (vii) delivers to the Lender (A) a security agreement, in form and
substance reasonably satisfactory to Lender, creating a first priority perfected
Lien on the deposits required pursuant to this Section and the U.S. Obligations
purchased on behalf of Borrower in accordance with this Section (the "Security
Agreement") securing Borrower's obligations under the Loan Documents, (B)
intentionally omitted, (C) an Officer's Certificate of Borrower certifying that
the requirements set forth in this Section have been satisfied, (D) an opinion
of counsel from Borrower's counsel in form and substance reasonably satisfactory
to the Lender stating, among other things, (x) that, without qualification, the
U.S. Obligations have been duly and validly assigned and delivered to Lender and
Lender has a first priority perfected security interest on the deposits required
pursuant to this Section and a first priority perfected lien on the U.S.
Obligations and the proceeds thereof purchased hereunder and (y) that the
defeasance will not adversely affect the status of any REMIC formed in
connection with a Securitization, and (E) such other certificates, documents or
instruments as the Lender may reasonably request including, without limitation,
(x) written confirmation from the relevant Rating Agencies that such defeasance
will not cause any Rating Agency to withdraw, qualify or downgrade the then
applicable rating on any security issued in connection with any Securitization
and (y) a certificate from an Independent certified public accountant certifying
that the amounts of the U.S. Obligations comply with all of the requirements of
this Loan Agreement. The U.S. Obligations shall mature on or be redeemable, or
provide for payment thereon, on or prior to the Business Day preceding the date
on which payments under the Note are due and payable and the proceeds thereof
shall be payable directly to the Cash Collateral Account. In connection with the
foregoing, Borrower appoints the Lender as its agent for the purpose of applying
the amounts delivered pursuant to clause (iv) above to purchase U.S.
Obligations. Notwithstanding anything in this Agreement to the contrary, in the
event the Yield Maintenance Premium is due as a result of the acceleration of
the Indebtedness after the occurrence of an Event of Default, Lender shall have
the right to receive and collect the Yield Maintenance Premium but shall have no
obligation to purchase U.S. Obligations or otherwise comply with this Section
2.11.
(b) Upon compliance with the requirements of this Section 2.11
in the event of a total defeasance of the Loan, the Facility shall be released
from the Lien of the Mortgage. In connection with a defeasance of the Loan,
Borrower may be required by Lender to assign its obligations under the Note, the
other Loan Documents and the Security Agreements together with the pledged U.S.
Obligations to such other entity or entities established or designated by Lender
(the "Successor Mortgagor"). Such Successor Mortgagor shall assume the
obligations under the Note, the other Loan Documents and the Security Agreements
and, upon such assignment Borrower shall be relieved of its obligations
thereunder.
(c) Nothing in this Section 2.11 shall release Borrower from
any liability or obligation relating to any environmental matters arising under
Sections 4.1(b)(U) or 5.1(D)-(I), inclusive, hereof.
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Section 2.12. Central Cash Management. (a) Collection Account.
Borrower shall open and maintain at the Collection Account Bank a trust account
(the "Collection Account"), and the Collection Account Bank shall not commingle
the amounts in such account with any other amounts held on behalf of Lender or
any other Person. The Collection Account shall be assigned an identification
number by the Collection Account Bank and shall be opened and maintained in the
name "Nomura Asset Capital Corporation as Mortgagee of BPP/Valley Central, L.P."
Neither Borrower nor Manager, if any, shall have any right of withdrawal from
the Collection Account. Borrower shall cause all tenants of the Facility to pay
all Rents, Money or other items of Gross Revenue (other than security deposits)
received by Borrower in violation of the preceding sentence directly into the
Collection Account for the Facility. Without in any way limiting Borrower's
obligations pursuant to the preceding sentence, Borrower shall deposit all
Rents, Money or other items of Gross Revenue (other than security deposits)
within two (2) Business Days after receipt thereof directly into the Collection
Account for the Facility. Borrower may designate a new financial institution to
serve as a Collection Account Bank hereunder as provided in Section 2.13(i). Any
breach of this Section 2.12(a) by Borrower shall be an Event of Default.
(b) Cash Collateral Account. Pursuant to the Collection
Account Agreement between the Collection Account Bank, Borrower and Lender (the
"Collection Account Agreement") Borrower will authorize and direct the
Collection Account Bank to transfer on a daily basis all funds deposited in the
Collection Account for Borrower's Facility to the cash collateral account. The
cash collateral account shall be an Eligible Account established by Lender in
Lender's name. Lender may elect to change the financial institution at which the
cash collateral account shall be maintained. Lender shall give Borrower not
fewer than thirty (30) days prior notice of each change. The cash collateral
account shall be under the sole dominion and control of Lender. Borrower shall
have no right of withdrawal in respect to the cash collateral account. The cash
collateral account referred to in this Section 2.12(b) is referred to herein as
the "Cash Collateral Account." Notwithstanding the foregoing, provided that (i)
no Event of Default shall have ever occurred and (ii) Borrower has deposited
with the Cash Collateral Account Bank for deposit into the Cash Collateral
Account as of the Closing Date the amount agreed to by Borrower and Lender for
allocation therein, and thereafter on the first Business Day prior to the
eleventh day of each month deposits into the Cash Collateral Account an amount
equal to the sum of the Required Base Debt Service Payment and the Capital
Reserve Monthly Installment, and annually deposits into the Cash Collateral
Account within ten (10) days after notice from Lender an amount equal to the
applicable percentage of any increase in the Basic Carrying Costs as reasonably
determined by Lender, then Lender shall direct the Collection Account Bank not
to transfer funds in the Collection Account to the Cash Collateral Account, and
shall further direct the Collection Account Bank to remit all such funds in the
Collection Account to the Borrower. Upon the earliest to occur of an Event of
Default or the Optional Prepayment Date, Lender may revoke such instructions and
require the Collection Account Bank to transfer funds daily to the Cash
Collateral Account as aforesaid.
(c) Establishment of Sub-Accounts. The Cash Collateral Account
shall contain a Debt Service Payment Sub-Account, a Basic Carrying Costs
Sub-Account, a Capital Reserve Sub-Account, a Deferred Maintenance Sub-Account
and an Operating Expense Sub-
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Account, each of which accounts (individually, a "Sub-Account" and collectively,
the "Sub-Accounts") shall be an Eligible Account to which certain funds shall be
allocated and from which disbursements shall be made pursuant to the terms of
this Loan Agreement.
(d) Permitted Investments. Upon the written request of
Borrower, which request may be made once per Interest Accrual Period, Lender
shall direct the Cash Collateral Account Bank to invest and reinvest any balance
in the Cash Collateral Account from time to time in Permitted Investments as
instructed by Borrower; provided, however, that (i) if Borrower fails, to so
instruct Lender, or an Event of Default shall have occurred and is continuing,
Lender may direct the Cash Collateral Account Bank to invest and reinvest such
balance in Permitted Investments as Lender shall determine in Lender's sole
discretion, (ii) the maturities of the Permitted Investments on deposit in the
Cash Collateral Account shall, to the extent such dates are ascertainable, be
selected and coordinated to become due not later than the day before any
disbursements from the Sub-Accounts must be made, (iii) all such Permitted
Investments shall be held in the name and be under the sole dominion and control
of Lender; (iv) no Permitted Investment shall be made unless Lender shall retain
a perfected first priority Lien in such Permitted Investment securing the
Indebtedness and all filings and other actions necessary to ensure the validity,
perfection, and priority of such Lien have been taken; (v) Lender shall only be
required to follow the investment instructions which were most recently received
by Lender and Borrower shall be bound by such last received investment
instructions; and (vi) any written request from Borrower continuing investment
instructions shall contain an Officer's Certificate from Borrower (which may be
conclusively relied upon by Lender and its agents) that any such investments
constitute Permitted Investments. It is the intention of the parties hereto that
all amounts deposited in the Cash Collateral Account (or as much thereof as
Lender may arrange to invest) shall at all times be invested in Permitted
Investments. All funds in the Cash Collateral Account that are invested in a
Permitted Investment are deemed to be held in such Cash Collateral Account for
all purposes of this Agreement and the other Loan Documents. All gain in
investments of funds in the Cash Collateral Account shall be allocated in the
same manner as any other funds in the Cash Collateral Account. Lender shall have
no liability for any loss in investments of funds in the Cash Collateral Account
that are invested in Permitted Investments (unless invested contrary to
Borrower's request other than after the occurrence of a Default or an Event of
Default) and no such loss shall affect Borrower's obligation to fund, or
liability for funding, the Cash Collateral Account and each Sub-Account, as the
case may be. Borrower and Lender agree that Borrower shall include all such
earnings and losses (other than those for Lender's account in accordance with
the immediately preceding sentence) on the Cash Collateral Account as income of
Borrower for federal and applicable state tax purposes. Borrower shall be
responsible for any and all fees, costs and expenses associated with Permitted
Investments.
(e) Interest on Accounts. All interest paid or other earnings
on the Permitted Investments made hereunder shall be deposited into the Cash
Collateral Account and shall be subject to allocation and distribution like any
other monies deposited therein.
(f) Payment of Basic Carrying Costs, Debt Service, Capital
Improvement Costs, Deferred Maintenance Costs and Operating Expenses.
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(i) Payment of Basic Carrying Costs. At least five
(5) Business Days prior to the due date of any Basic Carrying
Cost, and not more frequently than once each Interest Accrual
Period, Borrower shall notify, Lender in writing and request
that Lender pay such Basic Carrying Cost on behalf of Borrower
on or prior to the due date thereof. Together with each such
request, Borrower shall furnish Lender with copies of bills
and other documentation as may be reasonably required by
Lender to establish that such Basic Carrying Cost is then due.
Lender shall make such payments out of the Basic Carrying Cost
Sub-Account before the same shall be delinquent to the extent
that there are funds available in the Basic Carrying Cost
Sub-Account and Lender has received appropriate documentation
to establish the amount(s) due and the due date(s) as and when
provided above.
(ii) Payment of Debt Service. At or before 12:00
noon, New York City time, on each Payment Date during the term
of the Loan, Lender shall transfer to Lender's own account
from the Debt Service Payment Sub-Account an amount equal to
the Required Debt Service Payment for the Payment Date.
Borrower shall be deemed to have timely made the Required Debt
Service Payment pursuant to Section 2.9 regardless of the time
Lender makes such transfer as long as sufficient funds are on
deposit in the Debt Service Payment Sub-Account at 12:00 noon,
New York City time on the applicable Payment Date.
(iii) Payment of Capital Improvement Costs. Not more
frequently than once each Interest Accrual Period and provided
that no Event of Default has occurred and is continuing,
Borrower may notify Lender in writing and request that Lender
release to Borrower or its designee funds out of the Capital
Reserve Sub-Account to the extent funds are available therein
for payment of Capital Improvement Costs. Together with each
such request, Borrower shall furnish Lender with copies of
bills and other documentation as may be reasonably required by
Lender to establish that such Capital Improvement Costs are
reasonable, including, but not limited to, an Officer's
Certificate stating that (i) the work relating thereto has
been completed and that such amounts are then due (or have
been paid) and (ii) the released funds shall be used solely
for the purpose of payment of such Capital Improvement Costs.
Upon Lender's approval (which shall not be unreasonably
withheld), which approval, if granted by Lender, shall be
delivered within ten (10) Business Days of Lender's receipt of
such request, Lender shall release the funds to Borrower or
its designee within ten (10) days of Lender's approval.
Lender's failure to approve or disapprove such request within
such ten (10) day period shall be deemed to be the approval of
Lender.
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(iv) Payment of Deferred Maintenance Costs. Not more
frequently than once each Interest Accrual Period and provided
that no Event of Default has occurred and is continuing,
Borrower may notify Lender in writing and request that Lender
release to Borrower or its designee funds out of the Deferred
Maintenance Sub-Account to the extent funds are available
therein for payment of Deferred Maintenance Costs. Together
with each such request, Borrower shall furnish Lender with a
certificate stating that an item of deferred maintenance
listed on Exhibit C has been completed and stating the cost to
complete such item. If Lender's approval is granted, Lender
shall release the funds to Borrower or its designee within ten
(10) days of Lender's approval. Upon satisfactory completion
of the repairs identified on Exhibit C attached hereto, as
determined by Lender in its reasonable discretion, and
provided no Event of Default has occurred and is continuing,
Lender shall release to Borrower all amounts remaining in the
Deferred Maintenance Sub-Account.
(v) Intentionally omitted.
(vi) Intentionally omitted.
(vii) Intentionally omitted.
(viii) Payment of Operating Expenses. On and after
the Optional Prepayment Date, not more frequently than once
each Interest Accrual Period and provided that no Default or
Event of Default has occurred and is continuing Lender shall
direct the Cash Collateral Account Bank to, within five (5)
Business Days of Lender's receipt of an Operating Expense
Certificate from Borrower, such Operating Expense Certificate
to be delivered by Borrower not more frequently than once each
Interest Accrual Period, transfer funds to Borrower or its
designee out of the Operating Expense Sub-Account to the
extent that there are funds available therein in an amount not
to exceed the amount stated in the Operating Expense
Certificate up to the Operating Expense Monthly Installment.
Together with each such Operating Expense Certificate,
Borrower shall furnish Lender with an Officer's Certificate
stating that all operating expenses from previous periods have
been paid in full and that such amounts are then due or have
been paid.
(ix) Extra Funds for Operating Expenses. On and after
the Optional Prepayment Date, not more frequently than once
each Interest Accrual Period and provided that no Default or
Event of Default has occurred and is continuing if in a given
Interest Accrual Period, the Borrower requires amounts in
excess of the Operating Expense Monthly Installment ("Extra
Funds"), Borrower, at the time it delivers the
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Operating Expense Certificate, may deliver a written request
to Lender for a disbursement of Extra Funds stating the amount
of such Extra Funds and the purpose for which such amount is
intended with attachments of copies of bills and other
documentation as may be required by Lender to establish that
such Operating Expenses are reasonable and that such amounts
are then due or expected to become due in that month. Within
ten (10) days after Lender's approval, which approval, if
granted by Lender (such approval not to be unreasonably
withheld or delayed), shall be delivered within ten (10)
Business Days of Lender's receipt of such request, Lender
shall release the funds to Borrower or its designee.
(x) Reconciliation. On and after the Optional
Prepayment Date, Borrower shall furnish Lender monthly, on
each Payment Date, a budget variance report reconciling the
Operating Expenses shown on the Annual Operating Budget with
requested disbursements for payment of Operating Expenses
pursuant to Section 2.12(f).
(xi) Remaining Amounts. All remaining amounts shall
be remitted to Borrower for Borrower's account on each Payment
Date.
(g) Monthly Funding of Sub-Accounts. During each Interest
Accrual Period and except as provided below, during the term of the Loan
commencing with the Interest Accrual Period in which the Closing Date occurs
(each, the "Current Interest Accrual Period"), Lender shall allocate all funds
then on deposit in the Cash Collateral Account among the Sub-Accounts as follows
and in the following priority:
(i) first, to the Basic Carrying Costs Sub-Account,
until an amount equal to the Basic Carrying Costs Monthly
Installment for the Current Interest Accrual Period has been
allocated to the Basic Carrying Costs Sub-Account, provided,
that as of the Closing Date Borrower shall deposit into the
Cash Collateral Account for funding of the Basic Carrying
Costs Sub-Account an amount agreed to by Lender and Borrower;
(ii) second, to the Debt Service Payment Sub-Account,
until an amount equal to the Required Base Debt Service
Payment for the Payment Date immediately after the Current
Interest Accrual Period has been allocated to the Debt Service
Payment Sub-Account;
(iii) third, to the Capital Reserve Sub-Account, until
an amount equal to the Capital Reserve Monthly Installment for
the Current Interest Accrual Period has been allocated to the
Capital Reserve Sub-Account;
(iv) fourth, during each of the following periods: on
and after the Optional Prepayment Date, or at Lender's sole
election, upon the occurrence and during the continuation of
an Event of Default to the Operating Expense Sub-Account,
until an amount equal to the Operating
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Expense Monthly Installment for the Current Interest Accrual
Period has been allocated to the Operating Expense
Sub-Account;
(v) fifth, during each of the following two periods:
(i) on and after the Optional Prepayment Date and (ii) at
Lender's sole election, upon the occurrence of a Default or an
Event of Default hereunder which is continuing, any amounts
deposited into or remaining in the Cash Collateral Account
after (A) the minimum amounts set forth in clauses (i), (ii),
(iii) and (iv) above have been satisfied with respect to the
Current Interest Accrual Period and any periods prior thereto
and (B) the funding of additional reserves at levels
determined by Borrower to be prudent for working capital,
Capital Improvement Costs and other Borrower costs, which
levels shall be satisfactory to Lender, in Lender's sole
discretion (the "Excess Cash Flow"), shall be allocated to the
Debt Service Sub-Account and be applied by Lender on each
Payment Date in accordance with Section 2.8 and shall not be
disbursed to Borrower; and further provided, however, that if
an Event of Default has occurred and is continuing any amounts
deposited into or remaining in the Cash Collateral Account
shall be for the account of Lender and may be withdrawn by
Lender to be applied in any manner as Lender may elect in
Lender's sole discretion; and
(vi) sixth, provided that (i) no Default or Event of
Default has occurred and is continuing and Lender has received
all financial information described in Section 5.1(Q) for the
most recent periods for which the same are due, Lender agrees
that in each Current Interest Accrual Period any amounts
deposited into or remaining in the Cash Collateral Account
after (A) the minimum amounts set forth in clauses (i), (ii),
(iii), (iv), and (v) (if applicable) above have been satisfied
with respect to the Current Interest Accrual Period and any
periods prior thereto and (B) the funding of additional
reserves at levels determined by Borrower to be prudent for
working capital, Capital Improvement Costs and other Borrower
costs, which levels shall be satisfactory to Lender, in
Lender's sole discretion, shall be disbursed by Lender on the
first Payment Date after the end of the then Current Interest
Accrual Period, at Borrower's expense, to such account that
Borrower may request in writing. Lender and its agents shall
not be responsible for monitoring Borrower's use of any funds
disbursed from the Cash Collateral Account or any of the
Sub-Accounts.
If an Event of Default has occurred and is continuing or if on
any Payment Date the balance in any Sub-Account is insufficient to make the
required payment due from such Sub-Account, Lender may, in its sole discretion,
in addition to any other rights and remedies available hereunder, withdraw funds
from any other Sub-Account to pay such deficiency. In the event that Lender
elects to apply funds of any such Sub-Account to pay any Required Base Debt
Service
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Payment, Borrower shall, upon demand, repay to Lender the amount of such
withdrawn funds to replenish such Sub-Account, and if Borrower shall fail to
repay such amounts within three (3) Business Days after notice of such
withdrawal, an Event of Default shall exist hereunder. Notwithstanding the
foregoing, on the Closing Date Borrower shall deposit (i) the Initial Basic
Carrying Costs Amount into the Basic Carrying Costs Sub-Account and (ii) the
Deferred Maintenance Amount into the Deferred Maintenance Sub-Account.
(h) Condemnation Proceeds and Insurance Proceeds. In the event
of a Taking with respect to the Facility, Borrower shall cause all the proceeds
in respect of any Taking ("Condemnation Proceeds") to be paid to the Lender who
shall, except as otherwise provided in the second succeeding sentence or in
Section 2.12(c) of the Mortgage, apply such Condemnation Proceeds to reduce the
Indebtedness in accordance with Section 2.7 and Section 2.8. In the event of a
casualty with respect to the Facility, except as otherwise provided in the next
sentence or in Section 2.5 of the Mortgage, Borrower shall cause all Proceeds of
any insurance policy ("Insurance Proceeds") to be paid to the Lender who shall
apply such Insurance Proceeds to reduce the Indebtedness in accordance with
Section 2.7 and Section 2.8. All Insurance Proceeds received by Borrower or
Lender in respect of business interruption coverage and all Condemnation
Proceeds received in respect of a temporary Taking shall be maintained in the
Cash Collateral Account, to be applied by Lender in the same manner as Rents
(other than security deposits) received from Borrower with respect to the
operation of the Facility; provided, further, that in the event that the
Insurance Proceeds of any such business interruption insurance policy or
Condemnation Proceeds of such temporary Taking are paid in a lump sum in
advance, Lender shall hold such Insurance Proceeds or Condemnation Proceeds in a
segregated interest-bearing escrow account at the Cash Collateral Account Bank,
and Lender shall estimate the number of months required for Borrower to restore
the damage caused by the casualty to the Facility or that the Facility will be
affected by such temporary Taking, as the case may be, shall divide the
aggregate business interruption Insurance Proceeds or Condemnation Proceeds in
connection with such casualty or temporary Taking by such number of months, and
shall disburse from such escrow account into the Cash Collateral Account each
month during the performance of such restoration or pendency of such temporary
Taking such monthly installment of said Insurance Proceeds or Condemnation
Proceeds. Any Insurance Proceeds or Condemnation Proceeds made available to
Borrower for restoration or repair in accordance with the Mortgage, to the
extent not used by Borrower in connection with, or to the extent they exceed the
cost of, such restoration, shall be paid to Borrower.
(i) Payment of Basic Carrying Costs. Except to the extent that
Lender is obligated to pay Basic Carrying Costs from the Basic Carrying Costs
Sub-Account pursuant to the terms of Section 2.12(f), Borrower shall pay all
Basic Carrying Costs with respect to itself and the Facility in accordance with
the provisions of the Mortgage, subject, however, to Borrower's rights to
contest payment of same in accordance with the Mortgage. Borrower's obligation
to pay (or cause Lender to pay) Basic Carrying Costs pursuant to this Agreement
shall include, to the extent permitted by applicable law, Impositions resulting
from future changes in law which impose upon Lender or any Deed of Trust Trustee
an obligation to pay any property taxes or other Impositions or which otherwise
adversely affect Lender's or the Deed of Trust Trustee's interests. (In the
event such a change in law prohibits Borrower from assuming liability
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for payment of any such Imposition, the outstanding Indebtedness shall, at the
sole option of Lender, become due and payable on the date that is 120 days after
such change in law (and failure to pay such amounts on the date due shall be an
Event of Default)). Should an Event of Default have occurred and be continuing,
the proceeds on deposit in the Basic Carrying Costs Sub-Account may be applied
by Lender in any manner as Lender in its sole discretion may determine.
Section 2.13. Security Agreement. (a) Pledge of Accounts. To
secure the full and punctual payment and performance of all of the Indebtedness,
Borrower hereby sells, assigns, conveys, pledges and transfers to Lender and
grants to Lender a first and continuing security interest in and to, the
following property, whether now owned or existing or hereafter acquired or
arising and regardless of where located (collectively, the "Account
Collateral"):
(i) all of Borrower's right, title and interest in
the Cash Collateral Account (including all Sub-Accounts) and
all Money and Permitted Investments, if any, from time to time
deposited or held in the Cash Collateral Account;
(ii) all of Borrower's right, title and interest in
the Collection Account and all Money, if any, from time to
time deposited or held in the Collection Account;
(iii) all interest, dividends, Money, Instruments and
other property from time to time received, receivable or
otherwise payable in respect of, or in exchange for, any of
the foregoing; and
(iv) to the extent not covered by clauses (i), (ii),
or (iii) above, all Proceeds and products of any or all of the
foregoing.
(b) Covenants. Borrower covenants that (i) all Rents, Money
and other items of Gross Revenue shall be deposited directly into the Collection
Account as applicable, in accordance with Section 2.12(a) and (ii) so long as
any portion of the Indebtedness is outstanding, Borrower shall not open (nor
permit Manager or any Person to open) any other account for the collection of
Rents, Money or other items of Gross Revenue, other than such replacement
Collection Accounts as may be approved by Lender in Lender's sole discretion.
(c) Instructions and Agreements. On or before the Closing
Date, Borrower will submit to the Collection Account Bank for the Facility a
Collection Account Agreement to be executed by the Collection Account Bank. On
or before the Closing Date, Borrower and the Cash Collateral Account Bank will
execute and deliver a Cash Collateral Account Agreement in form and substance
satisfactory to Lender in Lender's sole discretion (the "Cash Collateral Account
Agreement"). Borrower agrees that prior to the payment in full of the
Indebtedness, the Cash Collateral Account Agreement shall be irrevocable by
Borrower without the prior written consent of Lender.
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(d) Financing Statements: Further Assurances. Borrower will
execute and deliver to Lender for filing a financing statement or statements in
connection with the Account Collateral in the form required to properly perfect
Lender's security interest in the Account Collateral to the extent that it may
be perfected by such a filing. Borrower agrees that at any time and from time to
time, at the expense of Borrower, Borrower shall promptly execute and deliver
all further instruments, and take all further action, that Lender may request,
in order to perfect and protect the pledge and security interest granted or
purported to be granted hereby, or to enable Lender to exercise and enforce
Lender's rights and remedies hereunder with respect to, the Account Collateral.
(e) Transfers and Other Liens. Borrower agrees that it will
not sell or otherwise dispose of any of the Account Collateral other than
pursuant to the terms hereof and of the other Loan Documents, or create or
permit to exist any Lien upon or with respect to all or any of the Account
Collateral, except for the Lien granted to Lender under this Agreement.
(f) Lender's Reasonable Care. Beyond the exercise of
reasonable care in the custody thereof, Lender shall not have any duty as to any
Account Collateral or any income thereon in its possession or control or in the
possession or control of any agents for, or of Lender, or the preservation of
rights against any Person or otherwise with respect thereto. Lender shall be
deemed to have exercised reasonable care in the custody of the Account
Collateral in its possession if the Account Collateral is accorded treatment
substantially equal to that which Lender accords its own property, it being
understood that Lender shall not be liable or responsible for (i) any loss or
damage to any of the Account Collateral, or for any diminution in value thereof
from a loss of, or delay in Lender's acknowledging receipt of, any wire transfer
from the Collection Account Bank or (ii) any loss, damage or diminution in value
by reason of the act or omission of Lender, or Lender's agents, employees or
bailees.
(g) Lender Appointed Attorney-In-Fact. Borrower hereby
irrevocably constitutes and appoints Lender as Borrower's true and lawful
attorney-in-fact, with full power of substitution, at any time after the
occurrence and during the continuation of an Event of Default to execute,
acknowledge and deliver any instruments and to exercise and enforce every right,
power, remedy, option and privilege of Borrower with respect to the Account
Collateral, and do in the name, place and stead of Borrower, all such acts,
things and deeds for and on behalf of and in the name of Borrower with respect
to the Account Collateral, which Borrower could or might do or which Lender may
deem necessary or desirable to more fully vest in Lender the rights and remedies
provided for herein with respect to the Account Collateral and to accomplish the
purposes of this Agreement. The foregoing powers of attorney are irrevocable and
coupled with an interest.
(h) Continuing Security Interest: Termination. This Section
2.13 shall create a continuing pledge of and security interest in the Account
Collateral and shall remain in full force and effect until payment in full of
the Indebtedness. Upon payment in full of the Indebtedness, Borrower shall be
entitled to the return, at its expense, of such of the Account Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof, and
Lender shall execute such instruments and documents as may be reasonably
requested by
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Borrower to evidence such termination and the release of the pledge and Lien
hereof, provided, however, that Borrower shall pay on demand all of Lender's
reasonable expenses in connection therewith.
(i) Replacement of Collection Account Bank. So long as no Default or
Event of Default shall have occurred and be continuing, Borrower shall have the
right at any time to designate a successor Collection Account Bank to hold the
Collection Account upon thirty (30) days prior written notice to Lender, and
Lender's reasonable approval of the successor. No such designation shall become
effective until Borrower has delivered to Lender an executed collection account
agreement substantially equivalent to Collection Account Agreement and financing
statements as may be necessary or appropriate have been prepared, executed and
delivered to a filing agency.
Section 2.14. Securitization. Borrower hereby acknowledges that
Lender, its successors or assigns, may sell or securitize the Loan or portions
thereof in one or more transactions through the issuance of securities, which
may be rated by the Rating Agencies (each, a "Securitization"; collectively, the
"Securitizations"). Borrower agrees that at its sole cost and expense, it shall
reasonably cooperate with Lender and use its best efforts to facilitate the
consummation of each Securitization including, but not limited to, by (a)
amending or causing the amendment of this Agreement and the other Loan
Documents, and executing such additional documents including amendments to
Borrower's organizational documents and preparing financial statements as
reasonably requested by the Rating Agencies to conform the terms of the Loan to
the terms of similar loans underlying completed or pending securitized
transactions having or seeking ratings the same as those then being sought in
connection with the relevant Securitization, provided, however, that any such
amendment or additional documents shall not change the economic terms of the
Loan; (b) promptly and reasonably providing such information as may be
reasonably requested in connection with the preparation of a private placement
memorandum or a registration statement required to privately place or publicly
distribute the securities in a manner which does not conflict with federal or
state securities laws; (c) providing in connection with each of (i) a
preliminary and a private placement memorandum or (ii) a preliminary and final
prospectus, as applicable, an indemnification certificate (x) certifying that
Borrower has carefully examined such memorandum or prospectus, as applicable,
including, without limitation, the sections entitled "Special Considerations",
"Description of the Mortgage Loan and "The Underlying Mortgaged Property", "The
Manager", "Borrower" and "Certain Legal Aspects of the Mortgage Loan", and such
sections (and any other sections reasonably requested) insofar as they relate to
Borrower, its Affiliates, the Loan or the Facility do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not misleading, provided, however, that Borrower shall not be
required to indemnify Lender for any losses relating to untrue statements or
omissions which Borrower identified to Lender in writing at the time of
Borrower's examination of such memorandum or prospectus as applicable, and (y)
indemnifying Lender (and its officers, directors, partners, employees,
affiliates and agents and each other person, if any, controlling Lender or any
of its affiliates within the meaning of either Section 15 of the Securities Act
of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended), the Issuer and the Advisor for any losses, claims, damages, expenses
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or liabilities (including, without limitation, all liabilities under all
applicable federal and state securities laws) (collectively, the "Liabilities")
to which any of them may become subject (i) insofar as the Liabilities arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact relating to Borrower, its Affiliates, the Loan, the Facility, the
Manager or any aspect of the subject financing or the parties directly involved
therein contained in such sections or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated in such sections or necessary in order to make the statements in such
sections, in light of the circumstances under which they were made, not
misleading or (ii) as a result of any untrue statement of material fact in any
of the financial statements of Borrower incorporated into any placement
memorandum, prospectus, registration statement or other document connected with
the issuance of securities or the failure to include in such financial
statements or in any placement memorandum, prospectus, registration statement or
other document connected with the issuance of securities any material fact
relating to Borrower, its Affiliates, the Facility, the Loan, the Manager and
any aspect of the subject financing necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided that Borrower shall have had an opportunity to review and
comment upon the relevant portions of such documents; and (z) agreeing to
reimburse Lender, the Issuer and the Advisor for any legal or other expenses
reasonably incurred by Lender, the Issuer and the Advisor in connection with
investigating or defending the Liabilities; (d) causing to be rendered such
customary opinion letters as shall be reasonably requested by the Rating
Agencies for other securitizations having or seeking ratings comparable to that
then being sought for the relevant Securitization; (e) making such
representations, warranties and covenants, as may be reasonably requested by the
Rating Agencies and comparable to those required in other securitized
transactions having or seeking the same rating as is then being sought for the
Securitization; (f) providing such information regarding the Collateral as may
be reasonably requested by the Rating Agencies or otherwise required in
connection with the formation of a REMIC and (g) providing any other information
and materials required in the Securitization process. Borrower acknowledges and
agrees that the Lender may, at any time on or after the Closing Date, assign its
duties, rights or obligations hereunder or under any Loan Document in whole, or
in part, to a servicer and/or a trustee in Lender's discretion. Nothing herein
shall in any way limit Lender's right to sell all or a portion of the Loan in a
transaction which is not a Securitization.
Section 2.15. Supplemental Mortgage Affidavits. The Liens to be
created by the Mortgage are intended to encumber the Facility described therein
to the full extent of Borrower's obligations under the Loan Documents. As of the
Closing Date, Borrower shall have paid all state, county and municipal recording
and all other taxes imposed upon the execution and recordation of the Mortgage.
Section 2.16. Transfer of Mortgaged Property.
(a) Borrower acknowledges that Lender has examined and relied on the
creditworthiness and experience of Borrower, its partners and their principals
in owning and operating properties such as the Facility in agreeing to make the
Loan, and that Lender will continue to rely on Borrower's ownership of the
Facility as a means of maintaining the value of
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the Facility as security for repayment of the Indebtedness. Borrower
acknowledges that Lender has a valid interest in maintaining the value of the
Facility so as to ensure that, should Borrower default in the repayment of the
Indebtedness, Lender can recover the Indebtedness by a sale of the Facility.
Borrower shall not, without the prior written consent of Lender, which consent
may be granted or withheld in the sole and absolute discretion of Lender, sell,
convey, alienate, mortgage, encumber, pledge or otherwise transfer the Facility
or any part thereof, or permit the Facility or any part thereof to be sold,
conveyed, mortgaged, encumbered, pledged or otherwise transferred except as
permitted by this Agreement.
(b) Notwithstanding the prohibition contained in Section 2.16(a),
Lender's consent to the sale or transfer of the Mortgaged Property will not be
unreasonably withheld after consideration of the relevant factors, provided that
the following conditions are satisfied in Lender's sole determination:
(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event of Default
shall have occurred and remain uncured;
(ii) the proposed transferee ("Transferee") and its principals
shall be at least as creditworthy and shall have substantially
similar experience operating retail properties as Borrower and its
principals, as evidenced by financial statements and other
information reasonably requested by Lender;
(iii) the property manager selected by the Transferee shall
have sufficient experience in the ownership and management of
properties similar to the Facility, Lender shall be provided with
evidence thereof satisfactory to Lender, and such manager shall
execute and deliver a Manager's Subordination;
(iv) Lender shall have received a Non-Consolidation Opinion
reasonably satisfactory to Lender in form and substance and counsel
reasonably satisfactory to Lender and containing assumptions,
limitation and qualifications customary for opinions of such type;
(v) if a Securitization has occurred, written confirmation
from the Rating Agencies rating the Securities that such sale or
transfer will not result in a qualification, downgrade or withdrawal
of the ratings then applicable to such Securities together with
evidence reasonably satisfactory to Lender that the single purpose
nature and bankruptcy remoteness of Borrower and its shareholders or
partners following such sale or transfer are in accordance with the
standards of such Rating Agencies; or if a Securitization has not
occurred, evidence reasonably satisfactory to Lender that the single
purpose nature and bankruptcy remoteness of Borrower and its
shareholders or partners following such
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transfer are in accordance with the standards of the Rating Agencies
selected by Lender;
(vi) Borrower and the Transferee shall have executed and
delivered to Lender an assumption agreement and such other documents
as Lender may request (collectively, the "Assumption Agreement")
under which the Transferee shall be obligated to Lender for the
entire Loan Amount then outstanding; such Assumption Agreement shall
(A) release Borrower (but not the Facility) from the Lien of the
Mortgage, and (B) release Borrower from the Indebtedness and the
obligations under the Loan Documents thereafter arising with respect
to the Mortgaged Property. The Assumption Agreement shall be in form
and substance acceptable to Lender in its sole discretion;
(vii) the Assumption Agreement shall state the Transferee's
agreement to abide by and be bound by the terms in the Note, the
Mortgage, this Agreement and the other Loan Documents, and Borrower
and/or the Transferee shall deliver such legal opinions and title
insurance endorsements as may be reasonably requested by Lender;
(viii) upon execution of a contract for the sale of the
Facility and not less than thirty (30) days prior to the date of
such sale Borrower shall submit notice of such sale to Lender.
Borrower shall submit to Lender, not less than twenty (20) days
prior to the date of such sale, the Assumption Agreement for the
Facility for execution by Lender. Such documents shall be in a form
appropriate in the jurisdiction in which the Facility is located and
satisfactory to Lender in its sole discretion. In addition, Borrower
shall provide all other documentation Lender reasonably requires to
be delivered by Borrower in connection with such assumption,
together with an Officer's Certificate certifying that such
documentation (i) is in compliance with all Legal Requirements, (ii)
will effect such assumption in accordance with the terms of this
Agreement, and (iii) will not impair or otherwise adversely affect
the validity or priority of the Lien of the Mortgage;
(ix) Borrower shall have paid to Lender the Transfer Fee; and
(xii) the Transferee shall not be an Affiliate of Borrower.
(c) Without limitation of the conditions set forth in
Section 2.16(b) hereof, if the Cross-Collateralization has occurred, the
following additional conditions shall be satisfied, as determined by Lender in
its reasonable discretion, prior to a sale or transfer of the Mortgaged
Property:
(i) There shall be no continuing "Default" or "Event of
Default" as defined in the Puente Loan Agreement.
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(ii) Borrower shall have defeased the Loan in accordance with
the terms of Sections 2.6 and 2.11 hereof in an amount (if any)
sufficient to cause the Debt Service Coverage Ratio (calculated on
the basis of Adjusted Net Operating Income and calculated as if such
amount were actually applied to reduce the Principal Indebtedness
upon which Debt Service was paid and calculated as if the Principal
Indebtedness were reamortized on a straight-line basis (as if the
reduction had occurred) over the remaining number of months until
the Maturity Date) of the Facility, computed on the basis of the
twelve (12) calendar months most recently concluded, to be at least
equal to the greater of (x) 1.70 and (y) the Combined Debt Service
Coverage Ratio for the twelve (12) calendar months most recently
concluded.
(iii) The Puente Hills Entity shall have satisfied the
requirements of Section 2.16(c) of the Puente Loan Agreement.
(iv) Lender shall have received, at Borrower's sole cost and
expense, such endorsements to the Title Insurance Policy reflecting
the termination of the Guaranty and the elimination of the
effectiveness of Section 7.1(xviii) hereof as Lender shall
reasonably require.
Upon satisfaction of the conditions precedent to a transfer of the Mortgaged
Property set forth in this Section 2.16, Lender agrees that it shall release the
Guaranty and all of Lender's claims thereunder, and Section 7.1(xviii) hereof
shall be deemed deleted from this Agreement.
(d) Borrower hereby agrees to indemnify and defend and hold Lender
harmless against documentary stamp and intangible taxes, if any, imposed on
Lender by virtue of its execution or recordation of the Assumption Agreement,
including any penalties, interest and attorneys' fees incurred by Lender in
connection therewith, and all such charges shall be secured by the Lien of the
Mortgage and bear interest at the Default Rate until paid.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to the Making of the Loan. (a) As
a condition precedent to the making of the Loan, Borrower shall have satisfied
the following conditions (unless waived by Lender in accordance with Section
8.4) with respect to the Facility on or before the Closing Date:
(A) Loan Documents.
(i) Loan Agreement. Borrower shall have executed and delivered
this Agreement to Lender.
(ii) Note. Borrower shall have executed and delivered to
Lender the Note.
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(iii) Mortgage. Borrower shall have executed and delivered to
Lender the Mortgage and such Mortgage shall have been filed of
record in the appropriate filing offices in the jurisdiction in
which the Facility is located or irrevocably delivered to a title
agent for such recordation.
(iv) Assignment of Leases. Borrower shall have executed and
delivered to Lender the Assignment of Leases and the Assignment of
Leases shall have been filed of record in the appropriate filing
offices in the jurisdiction in which the Facility is located or
irrevocably delivered to a title agent for such recordation.
(v) Assignment of Agreements. Borrower shall have executed and
delivered to Lender the Assignment of Agreements and the Assignment
of Agreements shall, to the extent prudent pursuant to local
practice, have been filed of record in the appropriate filing
offices in the jurisdiction in which the Facility is located or
irrevocably delivered to a title agent for such recordation.
(vi) Financing Statements. Borrower and its partners or
members (and their shareholders), as applicable, shall have executed
and delivered to Lender all financing statements required by Lender
and such financing statements shall have been filed of record in the
appropriate filing offices in each of the appropriate jurisdictions
or irrevocably delivered to a title agent for such recordation.
(vii) Intentionally omitted.
(viii) Cash Collateral Account Agreement. Borrower and Cash
Collateral Account Bank shall have executed and delivered the Cash
Collateral Account Agreement and shall have delivered an executed
copy of such agreement to Lender.
(ix) Intentionally omitted.
(x) Intentionally omitted.
(xi) Collection Account Agreement. Borrower and the Collection
Account Bank shall have executed and delivered the Collection
Account Agreement and shall have delivered an executed copy of such
agreement to Lender.
(B) Opinions of Counsel. Lender shall have received from counsel
satisfactory to Lender, legal opinions in form and substance satisfactory to
Lender in Lender's sole discretion (including without limitation, a bankruptcy
opinion). All such legal opinions will be addressed to Lender and the Rating
Agencies, dated as of the Closing Date, and in form and substance satisfactory
to Lender, the Rating Agencies and their counsel. Borrower hereby
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instructs any of the foregoing counsel, to the extent that such counsel
represents Borrower, to deliver to Lender such opinions addressed to Lender and
the Rating Agencies.
(C) Secretary's Certificates and SPE Equity Owner's Certificate.
Lender shall have received a Secretary's Certificate with respect to Borrower's
managing equity owner and the SPE Equity Owner's Certificate with respect to
Borrower.
(D) Insurance. Lender shall have received certificates of insurance
demonstrating insurance coverage in respect of the Facility of types, in
amounts, with insurers and otherwise in compliance with the terms, provisions
and conditions set forth in the Mortgage. Such certificates shall indicate that
Lender is an additional insured as its interests may appear and shall contain a
loss payee endorsement in favor of Lender with respect to the property policies
required to be maintained under the Mortgage. All insurance policies required to
be maintained hereunder shall be maintained from the Closing Date throughout the
term of this Agreement in the types and amounts required under the Mortgage.
(E) Lien Search Reports. Lender shall have received satisfactory
reports of UCC (collectively, the "UCC Searches"), federal tax Lien, bankruptcy,
state tax lien, judgment and pending litigation searches conducted by a search
firm reasonably acceptable to Lender. Such searches shall have been received in
relation to Borrower and each equity owner in Borrower. Such searches shall have
been conducted in each of the locations designated by Lender in Lender's
reasonable discretion and shall have been dated not more than fifteen (15) days
prior to the Closing Date.
(F) Title Insurance Policy. Lender shall have received (i) a Title
Insurance Policy or a marked up commitment (in form and substance reasonably
satisfactory to Lender in Lender's reasonable discretion) from Title Insurer to
issue the Title Insurance Policy and (ii) a fully executed copy of the Title
Instruction Letter from the Title Insurer.
(G) Environmental Matters. Lender shall have received an
Environmental Report with respect to the Facility, addressed to Lender, which
Environmental Report shall be (i) prepared by a firm approved by Lender in
Lender's sole discretion, (ii) prepared based on a scope of work determined by
Lender in Lender's sole discretion and (iii) in form and content acceptable to
Lender in Lender's sole discretion, such Environmental Report to be conducted by
an Independent environmental Engineer.
(H) Consents, Licenses, Approvals. Lender shall have received copies
of all consents, licenses and approvals, if any, required in connection with the
execution, delivery and performance by Borrower under, and the validity and
enforceability of the Loan Documents, and such consents, licenses and approvals
shall be in full force and effect.
(I) Additional Matters. Lender shall have received such other
Permits, certificates (including certificates of occupancy reflecting the use of
the Facility as of the Closing Date), opinions, documents and instruments
(including without limitation, written proof from the appropriate Governmental
Authority regarding the zoning of the Facility in form and substance
satisfactory to Lender in Lender's sole discretion) relating to the Loan as may
have been
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requested by Lender and all other documents and all legal matters in connection
with the Loan shall be satisfactory in form and substance to Lender. Borrower
shall provide Lender with information reasonably satisfactory to Lender
regarding the Basic Carrying Costs on or before the Closing Date.
(J) Representations and Warranties. The representations and
warranties herein and in the other Loan Documents shall be true and correct in
all material respects.
(K) Accounting and Regulatory Review. Lender shall have received an
accounting and regulatory review satisfactory to Lender in Lender's sole
discretion showing no anticipated decrease in cash flow. Such review shall be
(i) prepared by a firm approved by Lender in Lender's sole discretion, (ii)
prepared based on a scope of work determined by Lender in Lender's sole
discretion and (iii) in form and content acceptable to Lender in Lender's sole
discretion.
(L) No Injunction. No law or regulation shall have been adopted, no
order, judgment or decree of any Governmental Authority shall have been issued,
and no litigation shall be pending or threatened, which in the good faith
judgment of Lender would enjoin, prohibit or restrain, or impose or result in an
adverse effect upon the making or repayment of the Loan or the consummation of
the Transactions.
(M) Survey. Lender shall have received a Survey with respect to the
Facility which Survey shall be (i) prepared by a firm approved by Lender in
Lender's sole discretion, (ii) prepared based on a scope of work determined by
Lender in Lender's sole discretion and (iii) in form and content acceptable to
Lender in Lender's sole discretion.
(N) Engineering Report. Lender shall have received an Engineering
Report (which shall include, among other things, a seismic study) with respect
to the Facility prepared by an Engineer (addressed to Lender) and which reports
shall be (i) prepared by a firm approved by Lender in Lender's sole discretion,
(ii) prepared based on a scope of work determined by Lender in Lender's sole
discretion and (iii) in form and content acceptable to Lender in Lender's sole
discretion.
(O) Appraisal. Lender shall have received an Appraisal satisfactory
to Lender with respect to the Facility which shall be (i) prepared by a firm
approved by Lender in Lender's sole discretion, (ii) prepared based on a scope
of work determined by Lender in Lender's sole discretion and (iii) in form and
content acceptable to Lender in Lender's sole discretion.
(P) Security Deposits. Borrower shall be in compliance with all
applicable Legal Requirements relating to all security deposits with respect to
Facility.
(Q) Service Contracts and Permits. Borrower shall have delivered to
Lender a copy of all material contracts and Permits relating to the Facility.
(R) Site Inspection. Unless waived by Lender in accordance with
Section 8.4, Lender shall have performed, or caused to be performed on its
behalf, an on-site due diligence
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review of the Facility to be acquired with the Loan satisfactory to Lender in
Lender's sole discretion.
(S) Use. The Facility shall be operating only as an anchored
shopping center.
(T) Financial Information. Lender shall have received all financial
information (which financial information shall be satisfactory to Lender in
Lender's sole discretion) relating to the Facility including, without
limitation, audited financial statements of Borrower and other financial reports
requested by Lender in Lender's sole discretion. Such financial information
shall be (i) prepared by a firm approved by Lender in Lender's sole discretion,
(ii) prepared based on a scope of work determined by Lender in Lender's sole
discretion and (iii) in form and content acceptable to Lender in Lender's sole
discretion.
(U) Intentionally omitted.
(V) Leases: Tenant Estoppels; Subordination, Nondisturbance and
Attornment Agreements. With respect to the Facility, Borrower shall have
delivered a true, complete and correct rent roll and a copy of each of the
Leases identified in such rent roll, and each Lease shall be satisfactory to
Lender in Lender's sole discretion. Borrower shall, among other things and
without limitation, provide (i) evidence that each Lease is in full force and
effect and (ii) originally executed tenant estoppel certificates and
subordination, nondisturbance and attornment agreements from tenants with leases
which in the aggregate account for at least 100% of the total square footage of
the Facility in form and substance satisfactory to Lender in Lender's sole
discretion.
(W) Subdivision. Evidence satisfactory to Lender (including title
endorsements) that the Land with respect to the Facility constitutes a separate
lot for real estate tax and assessment purposes.
(X) Transaction Costs and Fees. Borrower shall have paid or caused
to be paid all Transaction Costs. Borrower shall also pay on the Closing Date
all of Lender's structuring expenses with respect to the Transactions, which
expenses shall be in amount equal to one percent (1.0%) of the Loan Amount. Such
expenses may be deducted by Lender from the proceeds of the Loan.
(Y) Intentionally omitted.
(Z) Utilities. Evidence that all utility services required for the
Facility are available.
(b) Lender shall not make the Loan unless and until each of the
applicable conditions precedent set forth in Section 3.1 is satisfied and until
Borrower provides any other information reasonably required by Lender.
(c) In connection with the Loan, Borrower shall execute and/or
deliver to Lender all additions, amendments, modifications and supplements to
the items set forth in this
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Article III, including without limitation, amendments, modifications and
supplements to the Note, Mortgage, Assignment of Leases, and Assignment of
Agreements, if reasonably requested by Lender to effectuate the provisions
hereof, and to provide Lender with the full benefit of the security intended to
be provided under the Loan Documents. Without in any way limiting the foregoing,
such additions, modifications and supplements shall include those deemed
reasonably desirable by Lender's counsel in the jurisdiction in which the
Facility is located.
(d) The making of the Loan shall constitute, without the necessity
of specifically containing a written statement to such effect, a confirmation,
representation and warranty by Borrower to Lender that all of the applicable
conditions to be satisfied in connection with the making of the Loan have been
satisfied (unless waived by Lender in accordance with Section 8.4,) and that all
of the representations and warranties of Borrower set forth in the Loan
Documents are true and correct in all material respects as of the date of the
making of the Loan.
Section 3.2. Form of Loan Documents and Related Matters. The Loan
Documents and all of the certificates, agreements, legal opinions and other
documents and papers referred to in this Article III, unless otherwise
specified, shall be delivered to Lender, and shall be reasonably satisfactory in
form and substance to Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of Borrower. (a) Closing
Date Representations and Warranties of Borrower. Borrower represents and
warrants that, as of the Closing Date:
(A) Organization. Borrower (i) is a duly organized and validly
existing Entity in good standing under the laws of the State of its formation,
(ii) has the requisite Entity power and authority to carry on its business as
now being conducted, and (iii) has the requisite Entity power to execute and
deliver, and perform its obligations under, the Loan Documents.
(B) Authorization. The execution and delivery by Borrower of the
Loan Documents, Borrower's performance of its obligations thereunder and the
creation of the security interests and Liens provided for in the Loan Documents
(i) have been duly authorized by all requisite Entity action on the part of
Borrower, (ii) will not violate any provision of any applicable Legal
Requirements, any order of any court or other Governmental Authority, any
organizational document of Borrower or any indenture or agreement or other
instrument to which Borrower is a party or by which Borrower is bound, (iii)
will not be in conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, or result in the creation or
imposition of any Lien of any nature whatsoever upon any of the property or
assets of Borrower pursuant to, any such indenture or agreement or instrument
and (iv) have been duly executed and delivered by Borrower. Other than those
obtained or filed on or prior to the Closing Date Borrower is not required to
obtain any consent, approval or authorization from, or to file any declaration
or statement with, any Governmental Authority or other agency in
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connection with or as a condition to the execution, delivery or performance of
the Loan Documents.
(C) Single-Purpose Entity.
(i) Borrower has been, and will continue to be, a duly formed
and existing Entity, and a Single-Purpose Entity.
(ii) The SPE Equity Owner at all times since its formation has
been, and will continue to be, a duly formed and existing
corporation in good standing and a Single-Purpose Entity, and
Borrower will take no action to cause such SPE Equity Owner not to
be a duly formed and existing corporation in good standing and a
Single-Purpose Entity.
(iii) Borrower at all times since its formation has complied,
and will continue to comply, with the provisions of all of its
organizational documents, and the laws of the state in which
Borrower was formed relating to the Entity.
(iv) All customary formalities regarding the Entity existence
of Borrower have been observed at all times since its formation and
will continue to be observed.
(v) Borrower has been at all times since its formation and
will continue to be adequately capitalized in light of the nature of
its business.
(b) Additional Closing Date Borrower Representations and Warranties.
Borrower represents and warrants that, as of the Closing Date:
(A) Litigation. There are no actions, suits or proceedings at law or
in equity by or before any Governmental Authority or other agency now pending
and served or, to the knowledge of Borrower, threatened against Borrower or the
Facility.
(B) Agreements. Borrower is not a party to any agreement or
instrument or subject to any restriction which is likely to have a Material
Adverse Effect. Borrower is not in material default in any respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material agreement or instrument to which it is a
party or by which Borrower or the Facility is bound.
(C) No Bankruptcy Filing. Borrower is not contemplating either the
filing of a petition by it under any state or federal bankruptcy or insolvency
laws or the liquidation of all or a major portion of Borrower's assets or
property, and Borrower has no knowledge of any Person contemplating the filing
of any such petition against it.
(D) Full and Accurate Disclosure. No statement of fact made by or on
behalf of Borrower in the Loan Documents or in any other document or certificate
delivered to Lender
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by Borrower contains any untrue statement of a material fact or omits to state
any material fact necessary to make statements contained herein or therein not
misleading. There is no fact presently known to Borrower which has not been
disclosed to Lender which materially adversely affects, nor as far as Borrower
can foresee, might materially adversely affect the business, operations or
condition (financial or otherwise) of Borrower.
(E) Location of Chief Executive Offices. The location of Borrower's
principal place of business and the location of Borrower's chief executive
office is: c/o Burnham Pacific Properties, Inc., 610 West Ash Street, San Diego,
CA 92101.
(F) Compliance. Borrower, the Facility and Borrower's use thereof
and operations thereat comply in all material respects with all applicable Legal
Requirements, including without limitation, building and zoning ordinances and
codes. Borrower is not in default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority, the default or violation of
which is reasonably likely to have a Material Adverse Effect.
(G) Other Debt and Obligations. Borrower has no financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which Borrower is a party, or by which Borrower or its Facility
is bound, and other than unsecured trade payables incurred in the ordinary
course of business relating to the ownership and operation of its Facility which
do not exceed, at any time, a maximum amount of $250,000 and are paid within
sixty (60) days of the date incurred, and other than obligations under the
Mortgage and the other Loan Documents, and other than the Permitted
Encumbrances. Borrower has not borrowed or received other debt financing that
has not been heretofore repaid in full and Borrower has no known material
contingent liabilities.
(H) ERISA. Each Plan and, to the knowledge of Borrower, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, its terms and the
applicable provisions of ERISA, the Code and any other federal or state law, and
no event or condition has occurred as to which Borrower would be under an
obligation to furnish a report to Lender under Section 5.1(T).
(I) Solvency. Borrower (i) has not entered into this Loan Agreement
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor, and (ii) has received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the transactions
contemplated hereby, the fair saleable value of Borrower's assets exceeds and
will, immediately following the execution and delivery of this Agreement, exceed
Borrower's total liabilities, including, without limitation, subordinated,
unliquidated, or disputed liabilities or Contingent Obligations. The fair
saleable value of Borrower's assets is and will, immediately following the
execution and delivery of this Agreement, be greater than Borrower's probable
liabilities, including the maximum amount of its Contingent Obligations or its
debts as such debts become absolute and matured. Borrower's assets do not and,
immediately following the execution and delivery of this Agreement, will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to,
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and does not believe that it will, incur debts and liabilities (including,
without limitation, Contingent Obligations and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of Borrower).
(J) Not Foreign Person. Borrower is not a "foreign person" within
the meaning of Section 1445(f)(3) of the Code.
(K) Enforceability. The Loan Documents are the legal, valid and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms, subject to bankruptcy, insolvency and other limitations on
creditors' rights generally and to equitable principles.
(L) Investment Company Act, Public Utility Holding Company Act.
Borrower is not (i) an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended, (ii) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.
(M) No Defaults. No Default or Event of Default exists under or with
respect to any Loan Document.
(N) Labor Matters. Borrower is not a party to any collective
bargaining agreements.
(O) Title to the Mortgaged Property. Borrower owns good,
indefeasible, marketable and insurable fee simple title to the Facility free and
clear of all Liens, other than the Permitted Encumbrances applicable to the
Facility. There are no outstanding options to purchase or rights of first
refusal affecting the Facility. The Permitted Encumbrances do not and will not
materially and adversely affect (i) the ability of Borrower to pay in full all
sums due under the Note or any of its other obligations in a timely manner or
(ii) the use of Borrower's Facility for the use currently being made thereof,
the operation of the Facility as currently being operated or the value of the
Facility.
(P) Use of Proceeds: Margin Regulations. Borrower will use the
proceeds of the Loan for the purposes described in Section 2.2. No part of the
proceeds of the Loan will be used for the purpose of purchasing or acquiring any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System or for any other purpose which would be inconsistent
with such Regulation U or any other Regulations of such Board of Governors, or
for any purposes prohibited by applicable Legal Requirements.
(Q) Financial Information. All historical financial data concerning
Borrower and its Facility that has been delivered by Borrower to Lender is true,
complete and correct in all material respects. Since the delivery of such data,
except as otherwise disclosed in writing to
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Lender, there has been no material adverse change in the financial position of
Borrower or the Facility, or in the results of operations of Borrower. Borrower
has not incurred any obligation or liability, contingent or otherwise, not
reflected in such financial data which might materially adversely affect its
business operations or the Facility.
(R) Condemnation. No Taking has been commenced or, to Borrower's
knowledge, is contemplated with respect to all or any portion of the Facility or
for the relocation of roadways providing access to the Facility.
(S) Intentionally omitted.
(T) Utilities and Public Access. The Facility has adequate rights of
access to public ways and are served by adequate water, sewer, sanitary sewer
and storm drain facilities as are adequate for full utilization of the Facility
for their current purposes. Except as otherwise disclosed by the Surveys, all
public utilities necessary to the continued use and enjoyment of the Facility as
presently used and enjoyed are located in the public right-of-way abutting the
premises, and all such utilities are connected so as to serve the Facility
either (i) without passing over other property or, (ii) if such utilities pass
over other property, pursuant to valid easements. All roads necessary for the
utilization of the Facility for their current purposes have been completed and
dedicated to public use and accepted by all Governmental Authorities or are the
subject of access easements for the benefit of the Facility.
(U) Environmental Compliance. Borrower represents, warrants and
covenants, as to itself and its Facility:
(i) Borrower and the Facility is in compliance with all
applicable Environmental Laws, which compliance includes, but is not
limited to, the possession by Borrower of and compliance with all
environmental, health and safety Permits, licenses and other
governmental authorizations required in connection with the
ownership and operation of the Facility under all Environmental
Laws, except where the failure to comply with such laws is not
reasonably likely to result in a Material Adverse Effect.
(ii) There is no Environmental Claim pending or, to Borrower's
knowledge, threatened, and no penalties arising under Environmental
Laws have been assessed, against Borrower, the Facility or against
any Person whose liability for any Environmental Claim Borrower has
or may have retained or assumed either contractually or by operation
of law, and no investigation or review is pending or, to the
knowledge of Borrower, threatened by any Governmental Authority,
citizens group, employee or other Person with respect to any alleged
failure by Borrower, or the Facility to have any environmental,
health or safety permit, license or other authorization required
under, or to otherwise comply with, any Environmental Law or with
respect to any alleged liability of Borrower for any Use or Release
of any Hazardous Substances or the presence, Use, or
52
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Release of any Hazardous Substances at, on, in, under, or from the
Facility.
(iii) To the knowledge of Borrower after due inquiry, there have
been and are no past or present Releases or threats of Release of
any Hazardous Substance that are likely to form the basis of any
Environmental Claim against Borrower, the Facility or, to Borrower's
knowledge, against any Person whose liability for any Environmental
Claim Borrower has or may have retained or assumed either
contractually or by operation of law.
(iv) To the knowledge of Borrower after due inquiry and except
as disclosed in the Environmental Reports, without limiting the
generality of the foregoing, there is not present at, on, in or
under the Facility, PCB-containing equipment, asbestos or asbestos
containing materials, underground or aboveground storage tanks or
surface impoundments for Hazardous Substances, lead in drinking
water (except in concentrations that comply with all Environmental
Laws), or lead-based paint (nor have there been any underground
storage tanks present at, on, in, or under the Facility).
(v) No Liens are presently recorded with the appropriate land
records under or pursuant to any Environmental Law with respect to
Borrower's Facility and, to Borrower's knowledge, no Governmental
Authority has been taking or is in the process of taking any action
that could subject the Facility to liens under any Environmental
Law.
(vi) There have been no environmental investigations, studies,
audits, reviews or other analyses conducted by or on behalf of
Borrower that are in the possession or control of Borrower in
relation to the Facility which have not been provided to Lender.
(vii) No conditions exist which would require Borrower under any
Environmental Laws to place a notice on any deed to the Facility
with respect to the presence, Use or Release of Hazardous Substances
at, on, in, under or from the Facility and the Facility has no such
notices in their deeds.
(V) No Joint Assessment, Separate Lots. Borrower has not and shall
not suffer, permit or initiate the joint assessment of the Facility (i) with any
other real property constituting a separate tax lot, and (ii) with any portion
of the Facility which may be deemed to constitute personal property, or any
other procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to the Facility as a
single Lien. The Facility is comprised of one or more parcels, each of which
constitutes a separate tax lot and none of which constitutes a portion of any
other tax lot.
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(W) Assessments. Except as disclosed in the Title Insurance Policy,
there are no pending or, to the knowledge of Borrower, proposed special or other
assessments for public improvements or otherwise affecting the Facility, nor, to
the knowledge of Borrower, are there any contemplated improvements to the
Facility that may result in such special or other assessments.
(X) Mortgage and Other Liens. The Mortgage creates a valid and
enforceable first mortgage lien on the Facility as security for the repayment of
the Indebtedness, subject only to the Permitted Encumbrances applicable to the
Facility. Each Collateral Security Instrument establishes and creates a valid,
subsisting and enforceable Lien on and a security interest in, or claim to, the
rights and property described therein. All property covered by such Collateral
Security Instrument is subject to a UCC financing statement filed and/or
recorded, as appropriate, (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid first priority
Lien with respect to the rights and property that are the subject of such
Collateral Security Instrument to the extent governed by the UCC. All
continuations and any assignments of any such financing statements have been or
will be timely filed or refiled, as appropriate, in the appropriate recording
offices.
(Y) Enforceability. The Loan Documents executed by Borrower in
connection with the Loan, including, without limitation, any Collateral Security
Instrument, are the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their terms, subject to
bankruptcy, insolvency and other limitations on creditors' rights generally and
to equitable principles. Such Loan Documents are, as of the Closing Date, not
subject to any right of rescission, set-off, counterclaim or defense by
Borrower, including the defense of usury, nor will the operation of any of the
terms of the Note, the Mortgage, or such other Loan Documents, or the exercise
of any right thereunder, render the Mortgage unenforceable against Borrower, in
whole or in part, or subject to any right of rescission, set-off, counterclaim
or defense by Borrower, including the defense of usury, and Borrower has not
asserted any right of rescission, set-off, counterclaim or defense with respect
thereto.
(Z) No Liabilities. Borrower has no liabilities or obligations
including without limitation Contingent Obligations, (and including, without
limitation, liabilities or obligations in tort, in contract, at law, in equity,
pursuant to a statute or regulation, or otherwise) other than those liabilities
and obligations expressly permitted by this Agreement.
(AA) No Prior Assignment. As of the Closing Date, (i) Lender is the
assignee of Borrower's interest under the Leases, and (ii) there are no prior
assignments of the Leases or any portion of the Rent due and payable or to
become due and payable which are presently outstanding.
(AB) Certificate of Occupancy. Borrower has obtained all Permits
necessary to use and operate Borrower's Facility for the use described in
Section 3.1(S), and all such Permits are in full force and effect. The use being
made of the Facility is in conformity in all respects with the certificates of
occupancy and/or Permits for the Facility and any other restrictions, covenants
or conditions affecting the Facility.
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(AC) Flood Zone. Except as shown on the Survey, the Facility is not
located in a flood hazard area as defined by the Federal Insurance
Administration.
(AD) Physical Condition. Except as disclosed in the Engineering
Reports, the Facility is free of material structural defects and all building
systems contained therein are in good working order in all material respects
subject to ordinary wear and tear.
(AE) Intellectual Property. All trademarks, trade names and service
marks that Borrower owns or has pending, or under which it is licensed, are in
good standing and uncontested. There is no right under any trademark, trade name
or service mark necessary to the business of Borrower as presently conducted or
as Borrower contemplates conducting its business. Borrower has not infringed, is
not infringing, and has not received notice of infringement with respect to
asserted trademarks, trade names and service marks of others. To Borrower's
knowledge, there is no infringement by others of trademarks, trade names and
service marks of Borrower.
(AF) Security Deposits. Borrower is in compliance with all
applicable Legal Requirements relating to all security deposits with respect to
Facility.
(AG) Conduct of Business. Borrower does not conduct its business
"also known as", "doing business as" or under any other name.
(AI) Title Insurance. The Facility is covered by either an American
Land Title Association (ALTA) mortgagee's title insurance policy, or a
commitment to issue such a title insurance policy, insuring a valid first lien
on the Facility, which is in full force and effect and is freely assignable to
and will inure to the benefit of Lender and any successor or assignee of Lender,
including but not limited to the trustee in a Securitization, subject only to
the Permitted Encumbrances.
(AK) Tax Fair Market Value. The Loan Amount with respect to the
Facility does not exceed the Tax Fair Market Value of the Facility. If a Note
with respect to the Facility is significantly modified prior to the closing date
of a Securitization so as to result in a taxable exchange under Code Section
1001, Borrower will, if requested by Lender, represent that the amount of such
Note does not exceed the Tax Fair Market Value of the Facility as of the date of
such significant modification.
(AL) Leases. Except as disclosed in the tenant estoppel certificates
or in the rent roll statement delivered to Lender prior to the Closing Date, (a)
Borrower is the sole owner of the entire lessor's interest in the Leases; (b)
the Leases are valid and enforceable, subject to bankruptcy, insolvency,
moratium and other laws limiting or affecting the rights of creditors generally;
(c) the material terms of all alterations, modifications and amendments to the
Leases are reflected in the certified rent roll statement delivered to and
approved by Lender; (d) none of the Rents reserved in the Leases have been
assigned or otherwise pledged or hypothecated; (e) none of the Rents have been
collected for more than one (1) month in advance; (f) the premises demised under
the Leases have been completed and the tenants under the Leases have accepted
the same and have taken possession of the same on a rent-paying basis; (g) to
Borrower's
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knowledge, there exist no offsets or defenses to the payment of any portion of
the Rents; (h) no Lease contains an option to purchase, right of first refusal
to purchase, or any other similar provision; (i) no Person has any possessory
interest in, or right to occupy, the Facility except under and pursuant to a
Lease; (j) each Lease is subordinate to the Loan Documents, either pursuant to
its terms or a recorded subordination agreement; and (k) no Lease has the
benefit of a non-disturbance agreement that would be considered unacceptable to
prudent institutional lenders.
Section 4.2. Survival of Representations and Warranties. Borrower
agrees that (i) all of the representations and warranties of Borrower set forth
in this Agreement and in the other Loan Documents delivered on the Closing Date
are made as of the Closing Date (except as expressly otherwise provided) and
(ii) all representations and warranties made by Borrower shall survive the
delivery of the Note and continue for so long as any amount remains owing to
Lender under this Agreement, the Note or any of the other Loan Documents;
provided, however, that the representations, warranties and covenants set forth
in Section 4.1(b)(U) and Sections 5.1(D) through 5.1(I) inclusive shall survive
in perpetuity and shall not be subject to the exculpation provisions of Section
8.14. All representations, warranties, covenants and agreements made in this
Agreement or in the other Loan Documents shall be deemed to have been relied
upon by Lender notwithstanding any investigation heretofore or hereafter made by
Lender or on its behalf.
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.1. Borrower Covenants. Borrower covenants and agrees that,
from the date hereof and until payment in full of the Indebtedness:
(A) Existence; Compliance with Legal Requirements; Insurance.
Borrower shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its Entity existence, rights, licenses,
Permits and franchises necessary for the conduct of its business and comply in
all respects with all applicable Legal Requirements and Insurance Requirements
applicable to it and the Facility. Borrower shall notify Lender promptly of any
written notice or order that Borrower receives from any Governmental Authority
relating to Borrower's failure to comply with such applicable Legal Requirements
relating to Borrower's Facility and promptly take any and all actions necessary
to bring its operations at the Facility into compliance with such applicable
Legal Requirements (and shall fully comply with the requirements of such Legal
Requirements that at any time are applicable to its operations at the Facility)
provided, that Borrower at its expense may, after prior notice to the Lender,
contest by appropriate legal, administrative or other proceedings conducted in
good faith and with due diligence, the validity or application, in whole or in
part, of any such applicable Legal Requirements as long as (i) neither the
applicable Collateral nor any part thereof or any interest therein, will be
sold, forfeited or lost if Borrower pays the amount or satisfies the condition
being contested, and Borrower would have the opportunity to do so, in the event
of Borrower's failure
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to prevail in the contest, (ii) Lender would not, by virtue of such permitted
contest, be exposed to any risk of any civil liability for which Borrower has
not furnished additional security as provided in clause (iii) below, or to any
risk of criminal liability, and neither the applicable Collateral nor any
interest therein would be subject to the imposition of any lien as a result of
the failure to comply with such Legal Requirement or of such proceeding and
(iii) Borrower shall have furnished to the Lender additional security in respect
of the claim being contested or the loss or damage that may result from
Borrower's failure to prevail in such contest in an amount equal to 125 percent
of the amount of such claim. Borrower shall at all times maintain, preserve and
protect all franchises and trade names and preserve all the remainder of its
property necessary for the continued conduct of its business and keep the
Facility in good repair, working order and condition, except for reasonable wear
and use, and from time to time make, or cause to be made, all necessary repairs,
renewals, replacements, betterments and improvements thereto, all as more fully
provided in the Mortgage. Borrower shall keep the Facility insured at all times,
by financially sound and reputable insurers, to such extent and against such
risks, and maintain liability and such other insurance, as is more fully
provided herein and in the Mortgage.
(B) Impositions, and Other Claims. Borrower shall pay and discharge
or cause to be paid and discharged all Impositions, as well as all lawful claims
for labor, materials and supplies or otherwise, which could become a Lien, all
as more fully provided in, and subject to any rights to contest contained in,
the Mortgage.
(C) Litigation. Borrower shall give prompt written notice to Lender
of any litigation or governmental proceedings pending or threatened (in writing)
against Borrower which is reasonably likely to have a Material Adverse Effect.
(D) Environmental Remediation.
(i) If any investigation, site monitoring, cleanup, removal,
abatement, restoration remedial work or other response action of any
kind or nature is required pursuant to an order or directive of any
Governmental Authority or under any applicable Environmental Law
(collectively, the "Remedial Work"), because of or in connection
with the (x) past, present or future presence, suspected presence,
Release or threatened Release of a Hazardous Substance at, on, in,
under or from the Facility or any portion thereof or (y) violation
of or compliance with applicable Environmental Laws, Borrower shall
promptly commence and diligently prosecute to completion all such
Remedial Work. In all events, such Remedial Work shall be commenced
within the time period ordered or directed by such Governmental
Authority or such shorter period as may be required under any
applicable Environmental Law; provided, however, that Borrower shall
not be required to commence such Remedial Work within the above
specified time periods: (x) if prevented from doing so by any
Governmental Authority, (y) if commencing such Remedial Work within
such time periods would result in Borrower or such Remedial Work
violating any Environmental Law or (z) if Borrower, at its expense
and
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after prior notice to Lender, is contesting by appropriate legal,
administrative or other proceedings, conducted in good faith and
with due diligence, the need to perform Remedial Work, as long as
(1) Borrower is permitted by the applicable Environmental Laws to
delay performance of the Remedial Work pending such proceedings, (2)
neither Borrower's Facility nor any part thereof or interest therein
win be sold, forfeited or lost if Borrower performs the Remedial
Work being contested, and Borrower would have the opportunity to do
so, in the event of Borrower's failure to prevail in the contest,
(3) Lender would not, by virtue of such permitted contest, be
exposed to any risk of any civil liability for which Borrower has
not furnished additional security as provided in clause (4) below,
or to any risk of criminal liability, and neither the Facility nor
any interest therein would be subject to the imposition of any Lien
for which Borrower has not furnished additional security as provided
in clause (4) below, as a result of the failure to perform such
Remedial Work and (4) Borrower shall have furnished to Lender
additional security in respect of the Remedial Work being contested
and the loss or damage that may result from Borrower's failure to
prevail in such contest in an amount equal to 125 percent of the
cost of such Remedial Work and any loss or damage that may result
from Borrower's failure to prevail in such contest.
(ii) All Remedial Work under clause (i) above shall be
performed by contractors, and under the supervision of a consulting
environmental Engineer, each approved in advance by Lender which
approval will not be unreasonably withheld or delayed. All costs and
expenses incurred in connection with such Remedial Work shall be
paid by Borrower. If Borrower does not timely commence and
diligently prosecute to completion the Remedial Work, Lender may
(but shall not be obligated to), upon sixty (60) days prior written
notice to Borrower of its intention to do so, cause such Remedial
Work to be performed. Borrower shall pay or reimburse Lender on
demand for all Advances (as defined in the Mortgage) and expenses
(including reasonable attorneys' fees and disbursements) relating to
or incurred by Lender in connection with monitoring, reviewing or
performing any Remedial Work in accordance herewith.
(iii) Unless otherwise required by law, Environmental Laws or
any Governmental Authority, Borrower shall not commence any Remedial
Work under clause (i) above, nor enter into any settlement
agreement, consent decree or other compromise relating to any
Hazardous Substances or Environmental Laws which is reasonably
likely to have a Material Adverse Effect. Notwithstanding the
foregoing, if the presence or threatened presence or Release of
Hazardous Substances at, on, in, under, from or about Borrower's
Facility poses an immediate threat to the health, safety or welfare
of any Person or the environment, or is of such a nature
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that an immediate response is necessary, Borrower may complete all
necessary Remedial Work. In such events, Borrower shall notify
Lender as soon as practicable and, in any event, within three
Business Days, of any action taken.
(E) Environmental Matters: Inspection.
(i) Borrower shall not cause, allow or authorize a Hazardous
Substance to be present at, on, in, under or to emanate from the
Facility, or migrate from adjoining property controlled by Borrower
onto or into the Facility, except under conditions permitted by
applicable Environmental Laws and, in the event that such Hazardous
Substances are present at, on, in, under or emanate from the
Facility, or migrate onto or into the Facility, Borrower shall cause
the performance of Remedial Work, removal or remediation of such
Hazardous Substances, in accordance with this Agreement and
Environmental Laws. Borrower shall use best efforts to prevent, and
to seek the remediation of, any migration of Hazardous Substances
onto or into Borrower's Facility from any adjoining property.
(ii) Upon prior written notice to Borrower, Lender shall have
the right at all reasonable times to enter upon and inspect all or
any portion of the Facility. If Lender has reason to believe that
Remedial Work may be required, Lender may select or may require
Borrower to select a consulting environmental Engineer reasonably
satisfactory to Lender to conduct and prepare environmental reports
assessing the environmental condition of the Facility. Lender shall
be given a reasonable opportunity to review any reports, data and
other documents or materials reviewed or prepared by the
environmental Engineer. The inspection rights granted to Lender in
this Section 5.1(E) shall be in addition to, and not in limitation
of any other inspection rights granted to Lender in the Loan
Documents, and shall expressly include the right (if Lender suspects
that Remedial Work may be required) to conduct or require Borrower
to conduct soil borings, establish ground water monitoring wells and
conduct other customary environmental tests, assessments and audits.
(iii) Borrower agrees to bear and shall pay or reimburse
Lender promptly on demand for all sums advanced and expenses
incurred (including reasonable attorneys' fees and disbursements,
but excluding internal overhead, administrative and similar costs of
Lender) relating to, or incurred by Lender in connection with, the
inspections and reports described in this Section 5.1(E) in the
following situations:
(x) If Lender has grounds to believe, at the time any such
inspection is ordered, that there exists an occurrence or condition that could
lead to an Environmental Claim;
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(y) If any such inspection reveals an occurrence or condition that
could lead to an Environmental Claim; or
(z) If an Event of Default with respect to the Facility exists at
the time any such inspection is ordered, and such Event of Default relates to
any representation, covenant or other obligation pertaining to Hazardous
Substances, Environmental Laws or any other environmental matter.
(F) Environmental Notices,. Borrower shall promptly provide notice
to Lender of:
(i) any Environmental Claim asserted or threatened (in
writing) by any Governmental Authority or other Person with respect
to any Hazardous Substance at, on, in, under or emanating from
Borrower's Facility, which could reasonably be expected to impair
the value of Lender's interests hereunder or have a Material Adverse
Effect;
(ii) any Environmental Claim or proceeding, investigation or
inquiry commenced or threatened in writing by any Person or
Governmental Authority, against Borrower, with respect to the
presence, suspected presence, Release or threatened Release of
Hazardous Substances from or onto, in or under any property not
owned by Borrower, including, without limitation, proceedings under
the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, 42 U.S.C. Section 9601, et seq., which
could reasonably be expected to impair the value of Lender's
security interests hereunder or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened (in
writing) against Borrower, against any other party occupying the
Facility or any portion thereof which become known to Borrower, or
against the Facility, which could reasonably be expected to impair
the value of Lender's security interests hereunder or have a
Material Adverse Effect;
(iv) the discovery by Borrower of any occurrence or condition
on the Facility or on any real property adjoining or in the vicinity
of the Facility which could reasonably be expected to lead to an
Environmental Claim against Borrower or Lender which such
Environmental Claim is reasonably likely to have a Material Adverse
Effect; and
(v) the commencement or completion of any Remedial Work.
(G) Copies of Notices. Borrower shall immediately transmit to Lender
copies of any citations, orders, notices or other written communications
received from any Person or any Governmental Authority and any notices, reports
or other written communications submitted to any Governmental Authority with
respect to the matters described in Section 5.1(F).
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(H) Environmental Claims. Lender and/or, to the extent authorized by
Lender if applicable, the Deed of Trust Trustee may join and participate in, as
a party if Lender so determines, any legal or administrative proceeding or
action concerning the Facility or any portion thereof under any Environmental
Law, if, in Lender's reasonable judgment, the interests of Lender or the Deed of
Trust Trustee, will not be adequately protected by Borrower. Borrower agrees to
bear and shall pay or reimburse Lender and the Deed of Trust Trustee on demand
for all reasonable sums advanced and reasonable expenses incurred (including
reasonable attorneys' fees and disbursements) and the Deed of Trust Trustee,
incurred by Lender and the Deed of Trust Trustee in connection with any such
action or proceeding.
(I) Indemnification. Borrower agrees to indemnify, reimburse, defend
(with counsel satisfactory to Lender, at Lender's election) and hold harmless
Lender and any Deed of Trust Trustee, for, from, and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest, penalties,
consequential damages, attorneys' fees, disbursements and expenses, and
consultants' fees, disbursements and expenses, including costs of Remedial Work
(collectively, "Losses") asserted against, resulting to, imposed on, or incurred
by Lender or any Deed of Trust Trustee, directly or indirectly, in connection
with any of the following:
(i) events, circumstances, or conditions which are alleged to,
or do, form the basis for an Environmental Claim;
(ii) the presence, Use or Release of Hazardous Substances at,
on, in, under or from the Facility, which presence, Use or Release
requires or could require Remedial Work;
(iii) any Environmental Claim against Borrower, Lender, Deed
of Trust Trustee or any Person whose liability for such
Environmental Claim Borrower has or may have assumed or retained
either contractually or by operation of law; or
(iv) the breach of any representation, warranty or covenant
set forth in Section 4.1(b)(U) and Sections 5.1(D) through 5.1(I),
inclusive.
The indemnity provided in this Loan Agreement shall not be included
in any exculpation of Borrower from personal liability provided in this Loan
Agreement or in any of the other Loan Documents. Nothing in this Section 5.1(I)
shall be deemed to deprive Lender of any rights or remedies provided to it
elsewhere in this Agreement or the other Loan Documents or otherwise available
to it under law. Borrower waives and releases Lender and any Deed of Trust
Trustee from any rights or defenses Borrower may have under common law or
Environmental Laws for liability arising from or resulting from the presence,
Use or Release of Hazardous Substances except to the extent directly and solely
caused by the fraud or willful misconduct of Lender or Deed of Trust Trustee.
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(J) Access to Facility. Borrower shall permit agents,
representatives and employees of Lender to inspect the Facility or any part
thereof at such reasonable times as may be requested by Lender upon advance
notice.
(K) Notice of Default. Borrower shall promptly, upon learning of
such occurrence, advise Lender of any material adverse change in Borrower's
condition, financial or otherwise, or of the occurrence of any Default or Event
of Default.
(L) Cooperate in Legal Proceedings. Except with respect to any claim
by Borrower against Lender, Borrower shall cooperate with Lender with respect to
any proceedings before any Governmental Authority which may in any way affect
the rights of Lender hereunder or any rights obtained by Lender under any of the
Loan Documents and, in connection therewith, not prohibit Lender, at its
election, from participating in any such proceedings.
(M) Perform Loan Documents. Borrower shall observe, perform and
satisfy all the terms, provisions, covenants and conditions required to be
observed, performed or satisfied by it, and shall pay when due all costs, fees
and expenses required to be paid by it, under the Loan Documents executed and
delivered by Borrower.
(N) Insurance Benefits. Borrower shall cooperate with Lender in
obtaining for Lender the benefits of any Insurance Proceeds lawfully or
equitably payable to Lender in connection with the Facility, and Lender shall be
reimbursed for any expenses incurred in connection therewith (including
reasonable attorneys' fees and disbursements and the payment by Borrower of the
expense of an Appraisal on behalf of Lender in case of a fire or other casualty
affecting the Facility or any part thereof out of such Insurance Proceeds, all
as more specifically provided in the Mortgage.
(O) Further Assurances. Borrower shall, at Borrower's sole cost and
expense:
(i) upon Lender's request therefor given from time to time
after the occurrence of any Event of Default pay for (a) reports of
UCC, federal tax lien, state tax lien, judgment and pending
litigation searches with respect to Borrower and (b) searches of
title to the Facility, each such search to be conducted by search
firms reasonably designated by Lender in each of the locations
reasonably designated by Lender.
(ii) furnish to Lender all instruments, documents, boundary
surveys, footing or foundation surveys, certificates, plans and
specifications, Appraisals, title and other insurance reports and
agreements, and each and every other document, certificate,
agreement and instrument required to be furnished pursuant to the
terms of the Loan Documents;
(iii) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts
necessary, to evidence, preserve and/or protect the Collateral at
any time
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securing or intended to secure the Note, as Lender may require in
Lender's discretion; and
(iv) do and execute all and such further lawful acts,
conveyances and assurances for the better and more effective
carrying out of the intents and purposes of this Agreement and the
other Loan Documents, as Lender shall require from time to time in
its discretion.
(P) Management of Mortgaged Property. At Lender's request upon
thirty (30) days prior written notice to Borrower, Borrower will be required to
appoint a manager, acceptable to Lender at its sole discretion, to manage the
Facility: (i) upon the occurrence of an Event of Default, (ii) intentionally
omitted, (iii) in the event that, as of the last day of a calendar quarter, the
Debt Service Coverage Ratio for the Facility, computed on the basis of the prior
twelve (12) calendar months, is less than 1.15, (iv) intentionally omitted,
provided, however, that from and after two years after the Start-Up Day (but
only before the Optional Prepayment Date), Lender shall not have the right to
require Borrower to appoint a manager pursuant to clause (iii) above, if on the
first Payment Date after Lender made the determination that Lender had the right
to require Borrower to appoint a manager pursuant to clause (iii) above,
Borrower defeases the Loan in accordance with the terms of Sections 2.6 and 2.11
in an amount sufficient to cause the Debt Service Coverage Ratio (calculated as
if such amount was actually applied to reduce the Principal Indebtedness upon
which Debt Service was paid and calculated as if the Principal Indebtedness was
reamortized on a straight-line basis (as if the reduction had occurred) over the
remaining number of months until the Maturity Date) for the Facility, computed
on the basis of the prior twelve (12) calendar months, to be at least equal to
1.25. Pursuant to this Section 5.1(P), Borrower's failure to appoint such an
acceptable manager within thirty (30) days of Lender's request shall constitute
an immediate Event of Default. If such a manager is appointed by Borrower,
Borrower may from time to time appoint a successor manager to manage the
Facility, which successor manager shall be approved in writing by Lender in
Lender's sole discretion. Notwithstanding the foregoing, any successor manager
selected hereunder by Lender or Borrower to serve as manager shall be a
reputable management company having at least seven years' experience in the
management of commercial properties with similar uses as the Facility and in the
jurisdiction in which the Facility is located.
(Q) Financial Reporting.
(i) Borrower shall keep and maintain or shall cause to be kept
and maintained on a Fiscal Year basis, in accordance with GAAP,
books, records and accounts reflecting in reasonable detail all of
the financial affairs of Borrower and all items of income and
expense in connection with the operation of the Facility and in
connection with any services, equipment or furnishings provided in
connection with the operation of the Facility. Lender, at Lender's
cost and expense, whether such income or expense may be realized by
Borrower or by any other Person whatsoever, shall have the right
from time to time and at all times during normal business hours upon
reasonable prior written notice to Borrower to
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examine such books, records and accounts at the office of Borrower
or other Person maintaining such books, records and accounts and to
make such copies or extracts thereof as Lender shall desire. After
the occurrence of an Event of Default, Borrower shall pay any costs
and expenses incurred by Lender to examine any and all of Borrower's
books, records and accounts as Lender shall determine in Lender's
sole discretion to be necessary or appropriate in the protection of
Lender's interest.
(ii) Borrower shall furnish to Lender annually within ninety
(90) days following the end of each Fiscal Year, a true, complete
and correct copy of Borrower's financial statement (a) be in form
and substance acceptable to Lender in Lender's sole discretion, (b)
be prepared in accordance with GAAP, (c) include, without
limitation, a statement of operations (profit and loss), a statement
of cash flows, a calculation of Net Operating Income, a consolidated
balance sheet, an aged accounts receivable report and such other
information or reports as shall be reasonably requested by Lender or
any applicable Rating Agency, (d) be accompanied by an Officer's
Certificate from a senior executive of Borrower certifying as of the
date thereof (x) that such statement is true, correct, complete and
accurate and fairly reflects the results of operations and financial
condition of Borrower for the relevant period, and (y) notice of
whether there exists an Event of Default or Default, and if such
Event of Default or Default exists, the nature thereof the period of
time it has existed and the action then being taken to remedy same
and (e) be accompanied by an opinion from an Independent certified
public accountant acceptable to Lender in Lender's sole discretion.
(iii) Borrower shall furnish to Lender annually within forty
(40) days following the end of each Fiscal Year, a true, complete
and correct copy of Borrower's unaudited financial statement which
shall (a) be in form and substance acceptable to Lender in Lender's
sole discretion, (b) be prepared in accordance with GAAP, (c)
include, without limitation, a statement of operations (profit and
loss), a statement of cash flows, a calculation of Net Operating
Income, a consolidated balance sheet, an aged accounts receivable
report and such other information or reports as shall be reasonably
requested by Lender or any applicable Rating Agency and (d) be
accompanied by an Officer's Certificate from a senior executive of
Borrower certifying as of the date thereof (x) that such statement
is true, correct, complete and accurate and fairly reflects the
results of operations and financial condition of Borrower for the
relevant period, and (y) notice of whether there exists an Event of
Default or Default, and if such Event of Default or Default exists,
the nature thereof, the period of time it has existed and the action
then being taken to remedy same.
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(iv) Borrower shall furnish to Lender within twenty-five (25)
days following the end of each calendar month, a true, correct and
complete monthly unaudited financial statement which shall (a) be in
form and substance acceptable to Lender in Lender's sole discretion,
(b) be prepared in accordance with GAAP, (c) include, without
limitation, a statement of operations (profit and loss), a statement
of cash flows, a calculation of Net Operating Income, a consolidated
balance sheet, an aged accounts receivable report and such other
information or reports as shall be reasonably requested by Lender or
any applicable Rating Agency and (d) be accompanied by an Officer's
Certificate from a senior executive of Borrower certifying as of the
date thereof (x) that such statement is true, correct, complete and
accurate and fairly reflects the results of operations and financial
condition of Borrower for the relevant period, and (y) notice of
whether there exists an Event of Default or Default, and if such
Event of Default or Default exists, the nature thereof, the period
of time it has existed and the action then being taken to remedy
same.
(v) Borrower shall furnish to Lender, within twenty-five (25)
days following the end of each calendar month, a true, complete and
correct rent roll and occupancy report (including statistics
concerning tenant sales) and such other occupancy and rate
statistics as Lender shall request in Lender's discretion. Each such
document shall (a) be in form and substance acceptable to Lender in
Lender's sole discretion, and (b) be accompanied by an Officer's
Certificate from a senior executive of Borrower certifying as of the
date thereof (x) that such statement is true, correct, complete and
accurate and (y) notice of whether there exists an Event of Default
or Default, and if such Event of Default or Default exists, the
nature thereof, the period of time it has existed and the action
then being taken to remedy same.
(vi) Borrower shall furnish to Lender, within ten (10)
Business Days after request, such further information with respect
to the operation of the Facility and the financial affairs of
Borrower as may be requested by Lender, including without limitation
all business plans prepared for Borrower.
(vii) Borrower shall furnish to Lender, within ten (10)
Business Days after request, such further information regarding any
Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA as may be requested by Lender.
(viii) Borrower shall, concurrently with Borrower's delivery
to Lender, provide a copy of the items required to be delivered to
Lender under this Section 5.1(Q) to the Rating Agencies, the
trustee, and any servicer and/or special servicer that may be
retained in conjunction with
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the Loan or any Securitization. Borrower shall furnish to Lender
written notice, within two Business Days after receipt by Borrower,
of any Rents, Money or other items of Gross Revenue that Borrower is
not required by this Agreement to deposit in the Collection Account
or Cash Collateral Account, together with such other documents and
materials relating to such Rents, Money or other items of Gross
Revenue as Lender requests in Lender's discretion.
(ix) Borrower shall provide Lender with updated information
(satisfactory to Lender in Lender's discretion) concerning the Basic
Carrying Costs for the next succeeding Fiscal Year prior to the
termination of each Fiscal Year.
(x) Borrower shall furnish to Lender, within ten (10) Business
Days after request, such other financial information with respect to
Borrower or Manager as Lender may reasonably request.
(R) Conduct of Business. Borrower shall cause the operation of the
Facility to be conducted at all times in a manner consistent with at least the
level of operation of the Facility as of the Closing Date, including, without
limitation, the following:
(i) to maintain or cause to be maintained the standard of
operations at Borrower's Facility at all times at a level necessary
to insure a level of quality for the Facility consistent with
similar facilities in the same competitive market;
(ii) to operate or cause to be operated the Facility in a
prudent manner in compliance in all respects with applicable Legal
Requirements and Insurance Requirements relating thereto and cause
all licenses, Permits, and any other agreements necessary for the
continued use and operation of the Facility to remain in effect; and
(iii) to maintain or cause to be maintained sufficient
Inventory and Equipment of types and quantities at the Facility to
enable Borrower or Manager to operate the Facility.
(S) Intentionally omitted.
(T) ERISA. Borrower shall deliver to Lender as soon as possible, and
in any event within ten days after Borrower knows or has reason to believe that
any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of Borrower setting forth details respecting such event or
condition and the action, if any, that Borrower or its ERISA Affiliate proposes
to take with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by Borrower or an ERISA Affiliate with respect to
such event or condition):
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(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the
minimum funding standard of Section 412 of the Code or Section 302
of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of
the Code or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with Section
412(d) of the Code); and any request for a waiver under Section
412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by Borrower or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of or the appointment of a trustee
to administer, any Plan, or the receipt by Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by Borrower or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or
the receipt by Borrower or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA,
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days;
(vi) the adoption of an amendment to any Plan that, pursuant
to Section 401(a)(29) of the Code or Section 307 of ERISA, would
result in the loss of tax-exempt status of the trust of which such
Plan is a part if Borrower or an ERISA Affiliate fails to timely
provide security to the Plan in accordance with the provisions of
said Sections ; and
(vii) the imposition of a Lien or a security interest in
connection with a Plan.
(U) Purpose Entity. Borrower shall at all times be a Single Purpose
Entity.
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(V) Trade Indebtedness. Borrower will pay its trade payables, within
sixty (60) days of the date incurred, unless Borrower is in good faith
contesting Borrower's obligation to pay such trade payables in a manner
satisfactory to Lender (which may include Lender's requirement that Borrower
post security with respect to the contested trade payable).
(W) Capital Improvements and Environmental Remediation. Borrower
shall, within six months of the date hereof perform the repairs and
environmental remediation to the Facility itemized on Exhibit C hereto.
(X) Annual Operating Budgets. Borrower shall submit to Lender Annual
Operating Budgets at those times and in such form and substance as set forth in
the definition of "Annual Operating Budget" in this Agreement.
(Y) SPE Equity Owner Filings. Borrower shall deliver to Lender
within fifteen (15) days after filing with the SEC copies of any filings made
with the SEC by the SPE Equity Owner.
ARTICLE VI
NEGATIVE COVENANTS
Section 6.1. Borrower Negative Covenants. Borrower covenants and
agrees that, until payment in full of the Indebtedness, it will not do, directly
or indirectly, any of the following unless Lender consents thereto in writing:
(A) Liens on the Mortgaged Property. Incur, create, assume, become
or be liable in any manner with respect to, or permit to exist, any Lien with
respect to Borrower's Facility, except: (i) Liens in favor of Lender, and (ii)
the Permitted Encumbrances.
(B) Transfer. Except as expressly permitted by or pursuant to this
Agreement or the Mortgage, or except as otherwise approved by Lender in writing
in Lender's sole discretion, allow any Transfer to occur, terminate or modify
the Management Agreement, or enter into a Management Agreement with respect to
Borrower's Facility.
(C) Other Borrowing. Incur, except for unsecured trade payables
incurred in the ordinary course of business relating to the ownership and
operation of Borrower's Facility which do not exceed, at any time, a maximum
amount of $250,000 and are paid within sixty (60) days of the date incurred,
create, assume, become or be liable in any manner with respect to Other
Borrowings.
(D) Leases. Enter into any Leases with all or any portion of the
Facility which grant the lessee thereunder any option to purchase or right of
first refusal to purchase all or any portion of the Facility.
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(E) Change In Business. Cease to be a Single-Purpose Entity or make
any material change in the scope or nature of its business objectives, purposes
or operations, or undertake or participate in activities other than the
continuance of its present business.
(F) Debt Cancellation. Cancel or otherwise forgive or release any
material claim or debt owed to Borrower by any Person, except for adequate
consideration or in the ordinary course of Borrower's business.
(G) Affiliate Transactions. Enter into, or be a party to, any
transaction with an Affiliate of Borrower, except in the ordinary course of
business and on terms which are no less favorable to Borrower or such Affiliate
than would be obtained in a comparable arm's length transaction with an
unrelated third party, and, if the amount to be paid to the Affiliate pursuant
to the transaction or series of related transactions is greater than $50,000
(determined annually on an aggregate basis) fully disclosed to Lender in
advance.
(H) Creation of Easements. Create, or permit Borrower's Facility or
any part thereof to become subject to, any easement, license or restrictive
covenant, other than a Permitted Encumbrance.
(I) Misapplication of Funds. Distribute any Rents or Money received
from Accounts in violation of the provisions of Section 2.12.
(J) Certain Restrictions. Enter into any agreement which expressly
restricts the ability of Borrower to enter into amendments, modifications or
waivers of any of the Loan Documents.
(K) Issuance of Equity Interests. Issue or allow to be created any
stocks or shares or partnership or membership interests, as applicable, or other
ownership interests other than the stocks, shares, partnership or membership
interests and other ownership interests which are outstanding or exist on the
Closing Date or any security or other instrument which by its terms is
convertible into or exercisable or exchangeable for Borrower's ownership
interests in Borrower. Borrower shall not allow to be issued or created any
stock in Borrower's general partner or managing member, as applicable, other
than the stock which is outstanding or existing on the Closing Date or any
security or other instrument which by its terms is convertible into or
exercisable or exchangeable for. any stock in Borrower's general partner or
managing member, as applicable.
(L) Assignment of Licenses and Permits. Assign or transfer any of
its interest in any Permits pertaining to Borrower's Facility, or assign,
transfer or remove or permit any other Person to assign, transfer or remove any
records pertaining to the Facility without Lender's prior written consent which
consent may be granted or refused in Lender's sole discretion.
(M) Place of Business. Change its chief executive office or its
principal place of business or place where its books and records are kept
without giving Lender at least thirty (30) days prior written notice thereof and
promptly providing Lender such information as Lender may reasonably request in
connection therewith.
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(N) Property Management. Borrower shall not engage any party
(whether or not such party is an Affiliate of Borrower) to manage the Facility
without the prior written consent of Lender, which consent shall not be withheld
if such Manager is an Affiliate of Borrower, except if such Manager is appointed
pursuant to Section 5.1(P) above. In determining whether to grant or withhold
such consent, Lender shall consider, among other things, the experience and
expertise of the proposed manager in managing properties similar to the
Facility, the financial capability of the proposed manager, and the reputation
of the proposed manager. Lender may condition its approval of any proposed
manager upon the review and approval by Lender of the proposed management
agreement between Borrower and such proposed manager, and upon the execution and
delivery by such proposed manager of a Manger's Subordination in form and
substance satisfactory to Lender in Lender's sole discretion.
ARTICLE VII
DEFAULTS
Section 7.1. Event of Default. The occurrence of one or more of the
following events shall be an "Event of Default" hereunder:
(i) if on any Payment Date the funds in the Debt Service
Payment Sub-Account are insufficient to pay the Required Debt
Service Payment due on such Payment Date, unless Borrower pays the
Required Debt Service Payment due on such Payment Date;
(ii) intentionally omitted;
(iii) if Borrower falls to pay the outstanding Indebtedness on
the Maturity Date;
(iv) if on any Payment Date Borrower fails to pay the Basic
Carrying Costs Monthly Installment or the Capital Reserve Monthly
Installment due on such Payment Date;
(v) if on the date any payment of a Basic Carrying Cost would
become delinquent, the funds in the Basic Carrying Costs Sub-Account
required to be reserved pursuant to Section 2.12(g) together with
any funds in the Cash Collateral Account not allocated to another
Sub-Account are insufficient to make such payment;
(vi) the occurrence of the events identified elsewhere in the
Loan Documents as constituting an "Event of Default" hereunder or
thereunder;
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(vii) a Transfer, unless the prior written consent of Lender
is obtained (which consent may be withheld with or without cause in
Lender's discretion);
(viii) if Borrower fails to pay any other amount payable
pursuant to this Agreement or any other Loan Document;
(ix) if any representation or warranty made herein or in any
other Loan Document, or in any report, certificate, financial
statement or other Instrument, agreement or document furnished by
Borrower in connection with this Agreement, the Note or any other
Loan Document executed and delivered by Borrower, shall be false in
any material respect as of the date such representation or warranty
was made or remade, and such falsity or incorrectness shall not have
been cured within thirty (30) days after the date on which the
Borrower has knowledge of such falsity or incorrectness, or if the
Borrower is diligently pursuing such cure in such thirty (30) day
period and, in the Lender's judgment such falsity or incorrectness
can be cured with reasonable diligence in an additional sixty (60)
days, then such thirty (30) day limited cure period shall be
extended an additional sixty (60) days for a total of ninety (90)
days;
(x) if Borrower, any of Borrower's partners or members, as
applicable, or the SPE Equity Owner makes an assignment for the
benefit of creditors;
(xi) if a receiver, liquidator or trustee shall be appointed
for Borrower, any of Borrower's partners or members, as applicable,
or the SPE Equity Owner or if Borrower, any of Borrower's partners
or members, as applicable, or the SPE Equity Owner shall be
adjudicated as bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed
by or against, consented to, or acquiesced in by Borrower, any of
Borrower's partners or members, as applicable, or the SPE Equity
Owner or if any proceeding for the dissolution or liquidation of
Borrower, any of Borrower's partners or members, as applicable, or
the SPE Equity Owner shall be instituted; provided, however, that if
such appointment, adjudication, petition or proceeding was
involuntary and not consented to by Borrower, any of Borrower's
partners or members, as applicable, or the SPE Equity Owner as the
case may be, upon the same not being discharged, stayed or dismissed
within 90 days, or if Borrower, any of Borrower's partners or
members, as applicable, or the SPE Equity Owner shall generally not
be paying its debts as they become due;
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(xii) if Borrower attempts to delegate its obligations or assign
its rights under this Agreement, any of the other Loan Documents or
any interest herein or therein, except as specifically permitted
herein;
(xiii) if any provision of any organizational document of
Borrower is amended or modified in any respect which may adversely
affect Lender, or if Borrower or any of its partners or members, as
applicable, fails to perform or enforce the provisions of such
organizational documents or attempts to dissolve Borrower; or if
Borrower or any of its partners or members, as applicable, breaches
any of its covenants set forth in Sections 5.1(U), or 6.1(E);
(xiv) if Borrower fails to (A) notify Lender of the occurrence
of a Default under any of the Loan Documents within ten (10) days of
the day on which Borrower first has knowledge of such Default or (B)
give any notice due to any Person under any Loan Document (a) within
two (2) days after such notice was due or (b) in accordance with the
applicable procedural requirements set forth in the Loan Documents;
(xv) if Borrower shall be in default under any of the other
obligations, agreements, undertakings, terms, covenants, provisions
or conditions of this Agreement, the Note, the Mortgage or the other
Loan Documents, not otherwise referred to in this Section 7.1, for
ten (10) days after written notice to Borrower from Lender or its
successors or assigns, in the case of any default which can be cured
by the payment of a sum of money or for thirty (30) days after
written notice from Lender or its successors or assigns, in the case
of any other default (unless otherwise provided herein or in such
other Loan Document); provided, however, that if such non-monetary
default under this subparagraph is susceptible of cure but cannot
reasonably be cured within such thirty (30) day period and provided
further that Borrower shall have commenced to cure such default
within such thirty (30) day period and thereafter diligently and
expeditiously proceeds to cure the same, such thirty (30) day period
shall be extended for such time as is reasonably necessary for
Borrower in the exercise of due diligence to cure such default, but
in no event shall such period exceed ninety (90) days after the
original notice from Lender;
(xvi) if an event or condition specified in Section 5.1(T) shall
occur or exist with respect to any Plan or Multiemployer Plan and,
as a result of such event or condition, together with all other such
events or conditions, Borrower or any ERISA Affiliate shall incur or
in the opinion of Lender shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or PBGC (or any
combination of the foregoing) which would constitute, in the
determination of Lender, a Material Adverse Effect;
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(xvii) if without Lender's prior written consent (A) any Manager
resigns or is removed, (B) the management or control of such Manager
is transferred or (C) any Management Agreement is entered into for
the Facility or (D) there is any change in or termination of any
Management Agreement for the Facility;
(xviii) if the Cross-Collateralization has occurred and remains,
the occurrence of any "Event of Default" under any document
evidencing, securing or relating to the Puente Hills Loan.
Section 7.2. Remedies. (a) Upon the occurrence and during the
continuation of an Event of Default, all or any one or more of the rights,
powers and other remedies available to Lender against Borrower under this
Agreement, the Note, the Mortgage or any of the other Loan Documents, or at law
or in equity may be exercised by Lender at any time and from time to time
(including, without limitation, the right to accelerate and declare the
outstanding principal amount, unpaid interest, Default Rate interest, Late
Charges, Yield Maintenance Premium and any other amounts owing by Borrower to be
immediately due and payable), without notice or demand, whether or not all or
any portion of the Indebtedness shall be declared due and payable, and whether
or not Lender shall have commenced any foreclosure proceeding or other action
for the enforcement of its rights and remedies under any of the Loan Documents
with respect to the Facility or all or any portion of the Collateral. Any such
actions taken by Lender shall be cumulative and concurrent and may be pursued
independently, singly, successively, together or otherwise, at such time and in
such order as Lender may determine in its sole discretion, to the fullest extent
permitted by law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by law, equity or contract or as set forth herein
or in the other Loan Documents. Notwithstanding anything contained to the
contrary herein, the outstanding principal amount, unpaid interest, Default Rate
interest, Late Charges, Yield Maintenance Premium and any other amounts owing by
Borrower shall be accelerated and immediately due and payable, without any
election by Lender upon the occurrence of an Event of Default described in
Section 7.1(x) or Section 7.1(xi). Notwithstanding that this Agreement may refer
to a continuing Event of Default, and without limiting Borrower's right to cure
a Default which may, with the passage of time, become an Event of Default,
Borrower shall have no right pursuant to this Agreement to cure any Event of
Default unless this Agreement is amended by Borrower and Lender in writing.
Section 7.3. Remedies Cumulative. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower pursuant to this
Agreement or the other Loan Documents executed by or with respect to Borrower,
or existing at law or in equity or otherwise. Lender's rights, powers and
remedies may be pursued singly, concurrently or otherwise, at such time and in
such order as Lender may determine in Lender's sole discretion. No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof but any such remedy, right or power may be exercised from time to
time and as often as may be deemed expedient. A waiver of any Default or Event
of Default shall not be construed to be a waiver of any
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subsequent Default or Event of Default or to impair any remedy, right or power
consequent thereon. Any and all of Lender's rights with respect to the
Collateral shall continue unimpaired, and Borrower shall be and remain obligated
in accordance with the terms hereof, notwithstanding (i) the release or
substitution of Collateral at any time, or of any rights or interest therein or
(ii) any delay, extension of time, renewal, compromise or other indulgence
granted by Lender in the event of any Default or Event of Default with respect
to the Collateral or otherwise hereunder. Notwithstanding any other provision of
this Agreement, Lender reserves the right to seek a deficiency judgment or
preserve a deficiency claim, in connection with the foreclosure of the Mortgage
on the Facility, to the extent necessary to foreclose on other parts of the
Mortgaged Property.
Section 7.4. Lender's Right to Perform. If Borrower fails to perform
any covenant or obligation contained herein and such failure shall continue for
a period of five Business Days after Borrower's receipt of written notice
thereof without in any way limiting Section 7.1 hereof, from Lender, Lender may,
but shall have no obligation to, itself perform, or cause performance of such
covenant or obligation, and the expenses of Lender incurred in connection
therewith shall be payable by Borrower to Lender upon demand. Notwithstanding
the foregoing, Lender shall have no obligation to send notice to Borrower of any
such failure.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival. Subject to Section 4.2, this Agreement and
all covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the execution and delivery
of this Agreement and the execution and delivery by Borrower to Lender of the
Note, and shall continue in full force and effect so long as any portion of the
Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All covenants, promises and agreements in
this Agreement contained, by or on behalf of Borrower, shall inure to the
benefit of the respective successors and assigns of Lender. Nothing in this
Agreement or in any other Loan Document, express or implied, shall give to any
Person other than the parties and the holder(s) of the Note, the Mortgage and
the other Loan Documents, and their legal representatives, successors and
assigns, any benefit or any legal or equitable right, remedy or claim hereunder.
Section 8.2. Lender's Discretion. Whenever pursuant to this
Agreement, Lender exercises any right given to it to approve or disapprove, or
any arrangement or term is to be satisfactory to Lender, the decision of Lender
to approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender.
Section 8.3. Governing Law. (a) The proceeds of the Note delivered
pursuant hereto were disbursed from New York, which State the parties agree has
a substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects,
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including, without limitation, matters of construction, validity and
performance, this Agreement and the obligations arising hereunder shall be
governed by, and construed in accordance with, the laws of the State of New York
applicable to contracts made and performed in such State and any applicable law
of the United States of America. To the fullest extent permitted by law,
Borrower hereby unconditionally and irrevocably waives any claim to assert that
the law of any other jurisdiction governs this Agreement and the Note, and this
Agreement and the Note shall be governed by and construed in accordance with the
laws of the State of New York pursuant to Section 5-1401 of the New York General
Obligations Law.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER ARISING
OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE
COURT IN NEW YORK, NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW OR IN ANY FEDERAL OR STATE COURT IN THE JURISDICTION IN WHICH
THE COLLATERAL IS LOCATED AND BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING,
AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN
ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT C/O
CSC NETWORKS, 500 CENTRAL AVENUE, ALBANY, NEW YORK 12206-2290 AS ITS AUTHORIZED
AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS
WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR
STATE COURT AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS
(OR AT SUCH OTHER OFFICE AS MAY BE DESIGNATED BY BORROWER FROM TIME TO TIME IN
ACCORDANCE WITH THE TERMS HEREOF) WITH A COPY TO BORROWER AT ITS PRINCIPAL
EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL AND WRITTEN NOTICE OF SAID SERVICE
OF BORROWER MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL
BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY
SUCH SUIT, ACTION OR PROCEEDING. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER
OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME
AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT (WHICH OFFICE
SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 8.4. Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, the Note or any other Loan Document, or consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given. Except as otherwise expressly provided herein, no
notice to or
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demand on Borrower shall entitle Borrower to any other or future notice or
demand in the same, similar or other circumstances.
Section 8.5. Delay Not a Waiver. Neither any failure nor any delay
on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Note, or of any other Loan Document, or any
other instrument given as security therefor, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Note or any
other Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
Section 8.6. Notices. All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand delivered or sent by
(a) hand delivery, with proof of attempted delivery, (b) certified or registered
United States mail, postage prepaid, (c) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of attempted
delivery, or (d) by telecopier (with answerback acknowledged) provided that such
telecopied notice must also be delivered by one of the means set forth in (a),
(b) or (c) above, addressed if to Lender at its address set forth on the first
page hereof, and if to Borrower at its designated address set forth on the first
page hereof or at such other address and Person as shall be designated from time
to time by any party hereto, as the case may be, in a written notice to the
other parties hereto in the manner provided for in this Section 8.6. A copy of
all notices, consents, approvals and requests directed to Lender shall be
delivered concurrently to each of the following: William Lindsay, Esquire,
Gibson, Dunn & Crutcher, LLP, 333 South Grand Avenue, Los Angeles, CA
90071-3197, Telefax Number (213) 229-7520; Two World Financial Center, Building
B, New York, NY 10281-1198, Attention Sheryl McAfee, Telefax Number (212)
667-1206; and Two World Financial Center, Building B, New York, NY 10281-1198,
Attention: Legal Counsel, Telefax Number (212) 667-1022. A notice shall be
deemed to have been given: (a) in the case of hand delivery, at the time of
delivery; (b) in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; (c) in the case of expedited prepaid
delivery upon the first attempted delivery on a Business Day; or (d) in the case
of telecopier, upon receipt of answerback confirmation, provided that such
telecopied notice was also delivered as required in this Section 8.6. A party
receiving a notice which does not comply with the technical requirements for
notice under this Section 8.6 may elect to waive any deficiencies and treat the
notice as having been properly given.
SECTION 8.7. TRIAL BY JURY. BORROWER AND LENDER, TO THE FULLEST
EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY
HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.
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Section 8.8. Headings. The Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 8.9. Assignment. Lender shall have the right to assign in
whole or in part this Agreement and/or any of the other Loan Documents and the
obligations hereunder or thereunder to any Person and to participate all or any
portion of the Loan evidenced hereby, including without limitation, any servicer
or trustee in connection with a Securitization. Lender shall provide Borrower
with written notice of any such assignment; provided, however, that such notice
shall not be a condition of Lender's right to assign this Agreement and/or any
of the Loan Documents and the failure to deliver such notice shall not
constitute a default under this Loan Agreement.
Section 8.10. Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
Section 8.11. Preferences. Lender shall have no obligation to
marshal any assets in favor of Borrower or any other party or against or in
payment of any or all of the obligations of Borrower pursuant to this Agreement,
the Note or any other Loan Document. Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by Borrower
to any portion of the obligations of Borrower hereunder. To the extent Borrower
makes a payment or payments to Lender for Borrower's benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.
Section 8.12. Waiver of Notice. Borrower shall not be entitled to
any notices of any nature whatsoever from Lender except with respect to matters
for which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrower and except with respect
to matters for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which
this Agreement or the other Loan Documents does not specifically and expressly
provide for the giving of notice by Lender to Borrower.
Section 8.13. Remedies of Borrower. In the event that a claim or
adjudication is made that Lender or its agents, has acted unreasonably or
unreasonably delayed acting in any case where by law or under this Agreement,
the Note, the Mortgage or the other Loan Documents, Lender or such agent, as the
case may be, has an obligation to act reasonably or promptly, Borrower agrees
that neither Lender nor its agents, shall be liable for any monetary
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damages, and Borrower's sole remedies shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. The parties hereto agree that
any action or proceeding to determine whether Lender has acted reasonably shall
be determined by an action seeking declaratory judgment.
Section 8.14. Exculpation. Except as otherwise set forth in this
Section 8.14 and Section 4.2 to the contrary, Lender shall not enforce the
liability and obligation of Borrower to perform and observe the obligations
contained in this Agreement, the Note, the Mortgage or any of the other Loan
Documents executed and delivered by Borrower except that Lender may pursue any
power of sale, bring a foreclosure action, action for specific performance,
action for money judgment, or other appropriate action or proceeding (including,
without limitation, to obtain a deficiency judgment) against Borrower or any
other Person solely for the purpose of enabling Lender to realize upon (i) the
Collateral, and (ii) the Rents and Accounts arising from Borrower's Facility to
the extent (x) received by Borrower or the Manager (or any of their affiliates),
after and during the continuation of the occurrence of an Event of Default or
(y) distributed to Borrower or the Manager, or their respective shareholders, or
partners or members, as applicable, or affiliates during or with respect to any
period for which Lender did not receive the full amounts it was entitled to
receive as prepayments of the Loan pursuant to Section 2.7 (all Rents and
Accounts covered by clauses (x) and (y) being hereinafter referred to as the
"Recourse Distributions") and (iii) any other collateral given to Lender under
the Loan Documents ((i), (ii), and (iii) collectively, the "Default
Collateral"); provided, however, that any judgment in any such action or
proceeding shall be enforceable only to the extent of any such Default
Collateral. The provisions of this Section 8.14 shall not, however, (a) impair
the validity of the Indebtedness evidenced by the Loan Documents or in any way
affect or impair the Liens of the Mortgage or any of the other Loan Documents or
the right of Lender to foreclose the Mortgage following an Event of Default; (b)
impair the right of Lender to name any Person as a party defendant in any action
or suit for judicial foreclosure and sale under the Mortgage; (c) affect the
validity or enforceability of the Note, the Mortgage or the other Loan
Documents; (d) impair the right of Lender to obtain the appointment of a
receiver; (e) impair the right of Lender to bring suit for any damages, losses,
expenses, liabilities or costs resulting from fraud, intentional
misrepresentation, physical waste of all or any portion of the Facility, or
wrongful removal or disposal of all or any portion of the Facility by any Person
in connection with this Agreement, the Note, the Mortgage or the other Loan
Documents; (f) impair the right of Lender to obtain the Recourse Distributions
received by any Person; (g) impair the right of Lender to bring suit with
respect to any misappropriation of security deposits or Rents collected more
than one month in advance; (h) impair the right of Lender to obtain Insurance
Proceeds or Condemnation Proceeds due to Lender pursuant to the Mortgage; (i)
impair the right of Lender to enforce the provisions of Sections 4.1(b)(U) or
5.1(D)-(I) of this Agreement, Section 2.8 of the Mortgage even after repayment
in full by Borrower of the Indebtedness; (j) prevent or in any way hinder Lender
from exercising, or constitute a defense, or counterclaim, or other basis for
relief in respect of the exercise of, any other remedy against any or all of the
Collateral securing the Note as provided in the Loan Documents; (k) impair the
right of Lender to bring suit with respect to any misapplication of any funds;
or (l) impair the right of Lender to sue for, seek or demand a deficiency
judgment against any Person solely for the purpose of foreclosing the Mortgaged
Property or any part thereof or realizing upon the Default Collateral; provided,
however, that any such deficiency judgment
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referred to in this clause (l) shall be enforceable only to the extent of any of
the Default Collateral. The provisions of this Section 8.14 shall be
inapplicable to any Person if (i) any petition for bankruptcy, reorganization or
arrangement pursuant to federal or state law against Borrower shall be filed by
or against Borrower or consented to or acquiesced to by Borrower, (ii) if
Borrower shall institute any proceeding for the dissolution or liquidation of
Borrower, (iii) if Borrower shall make an assignment for the benefit of
creditors or (iv) if Borrower shall breach the representation and warranty in
Section 4.1(b)(Z).
Section 8.15. Exhibits Incorporated. The information set forth on
the cover, heading and recitals hereof, and the Exhibits attached hereto, are
hereby incorporated herein as a part of this Agreement with the same effect as
if set forth in the body hereof.
Section 8.16. Offsets, Counterclaims and Defenses. Any assignee of
Lender's interest in and to this Agreement, the Note, the Mortgage and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to the Loan, this Agreement, the Note, the
Mortgage and the other Loan Documents which Borrower may otherwise have against
any assignor, and no such unrelated counterclaim or defense shall be interposed
or asserted by Borrower in any action or proceeding brought by any such assignee
upon this Agreement, the Note, the Mortgage and other Loan Documents and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by Borrower.
Section 8.17. No Joint Venture or Partnership. Borrower and Lender
intend that the relationship created hereunder be solely that of borrower and
lender. Nothing herein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor
to grant Lender any interest in the Mortgaged Property other than that of
mortgagee or lender.
Section 8.18. Waiver of Marshalling of Assets Defense. To the
fullest extent that Borrower may legally do so, Borrower waives all rights to a
marshalling of the assets of Borrower, and others with interests in Borrower,
and of the Mortgaged Property, or to a sale in inverse order of alienation in
the event of foreclosure of the interests hereby created, and agrees not to
assert any right under any laws pertaining to the marshalling of assets, the
sale in inverse order of alienation, homestead exemption, the administration of
estates of decedents, or any other matters whatsoever to defeat, reduce or
affect the right of Lender under the Loan Documents to a sale of the Facility
for the collection of the Indebtedness without any prior or different resort for
collection, or the right of Lender or Deed of Trust Trustee to the payment of
the Indebtedness in preference to every other claimant whatsoever.
Section 8.19. Waiver of Counterclaim. Borrower hereby waives the
right to assert a counterclaim, other than compulsory counterclaim, in any
action or proceeding brought against Borrower by Lender or Lender's agents.
Section 8.20. Conflict: Construction of Documents. In the event of
any conflict between the provisions of this Agreement and the provisions of the
Note, the Mortgage or any of the other Loan Documents, the provisions of this
Agreement shall prevail. The parties hereto
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acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Loan Documents and that the Loan Documents shall
not be subject to the principle of construing their meaning against the party
which drafted same.
Section 8.21. Brokers and Financial Advisors. Borrower and Lender
hereby represent that they have dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement except Advisor. Borrower hereby
agrees to indemnify and hold Lender harmless from and against any and all
claims, liabilities, costs and expenses of any kind in any way relating to or
arising from a claim by any Person (other than Advisor), that such. Person acted
on behalf of Borrower in connection with the transactions contemplated herein.
The provisions of this Section shall survive the expiration and termination of
this Agreement and the repayment of the Indebtedness.
Section 8.22. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument.
Section 8.23. Estoppel Certificates. Borrower and Lender each hereby
agree at any time and from time to time upon not less than fifteen (15) days
prior written notice by Borrower or Lender to execute, acknowledge and deliver
to the party specified in such notice, a statement, in writing, certifying that
this Agreement is unmodified and in full force and effect (or if there have been
modifications, that the same, as modified, is in full force and effect and
stating the modifications hereto), and stating whether or not, to the knowledge
of such certifying party, any Default or Event of Default has occurred, and, if
so, specifying each such Default or Event of Default; provided, however, that it
shall be a condition precedent to Lender's obligation to deliver the statement
pursuant to this Section , that Lender shall have received, together with
Borrower's request for such statement, an Officer's Certificate stating that no
Default or Event of Default exists as of the date of such certificate (or
specifying such Default or Event of Default).
Section 8.24. Payment of Expenses. Borrower shall, whether or not
the Transactions are consummated, pay all Transaction Costs, which shall
include, without limitation, reasonable out-of-pocket fees, costs, expenses, and
disbursements of Lender and its attorneys, local counsel, accountants and other
contractors in connection with (i) the negotiation, preparation, execution and
delivery of the Loan Documents and the documents and instruments referred to
therein, (ii) the creation, perfection or protection of Lender's liens in the
Collateral (including, without limitation, fees and expenses for title and lien
searches and filing and recording fees, intangibles taxes, personal property
taxes, mortgage recording taxes, due diligence expenses, travel expenses,
accounting firm fees, costs of the Appraisals, Environmental Reports (and an
environmental consultant), Surveys and the Engineering Reports), (iii) the
negotiation, preparation, execution and delivery of any amendment, waiver or
consent relating to any of the Loan Documents, and (iv) the preservation of
rights under and enforcement of the Loan Documents and the documents and
instruments referred to therein, including any restructuring or rescheduling of
the Indebtedness.
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Section 8.25. Bankruptcy Waiver. Borrower hereby agrees that, in
consideration of the recitals and mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, in the event Borrower shall (i) file with any bankruptcy
court of competent jurisdiction or be the subject of any petition under Title 11
of the U.S. Code, as amended, (ii) be the subject of any order for relief issued
under Title 11 of the U.S. Code, as amended, (iii) file or be the subject of any
petition seeking any reorganization, arrangement composition, readjustment,
liquidation, dissolution or similar relief under any present or law relating to
bankruptcy, insolvency or other relief of debtors, (iv) have sought or consented
to or acquiesced in the appointment of any trustee, receiver, conservator or
liquidator or (v) be the subject of any order, judgment or decree entered by any
court of competent jurisdiction approving a petition filed against such party
for any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency or other relief for debtors, the
automatic stay provided by the Federal Bankruptcy Code shall be modified and
annulled as to Lender, so as to permit Lender to exercise any and all of its
remedies, upon request of Lender made on notice to Borrower and any other party
in interest but without the need of further proof or hearing. Neither Borrower
nor any Affiliate of Borrower shall contest the enforceability of this Section
8.25.
Section 8.26 Entire Agreement. This Agreement, together with the
Exhibits hereto and the other Loan Documents constitutes the entire agreement
among the parties hereto with respect to the subject matter contained in this
Agreement, the Exhibits hereto and the other Loan Documents and supersedes all
prior agreements, understandings and negotiations between the parties.
Section 8.27 Dissemination of Information. If Lender determines at
any time to sell, transfer or assign the Note, this Loan Agreement and any other
Loan Document and any or all servicing rights with respect thereto, or to grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement, Lender may forward to each purchaser, transferee,
assignee, servicer, participant or investor in such securities (collectively,
the "Investor") or any Rating Agency rating such securities and each prospective
Investor, all documents and information which Lender now has or may hereafter
acquire relating to the Loan, Borrower, any guarantor, any Indemnitor and the
Facility, which shall have been furnished by Borrower, any guarantor, any
Indemnitor, or any party to any Loan Document, or otherwise furnished in
connection with the Loan, as Lender in its sole discretion determines necessary
or desirable.
Section 8.28. Limitation of Interest. It is the intention of
Borrower and Lender to conform strictly to applicable usury laws. Accordingly,
if the transactions contemplated hereby would be usurious under applicable law,
then, in that event, notwithstanding anything to the contrary in any Loan
Document, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under applicable law that is taken, reserved, contracted
for, charged or received under any Loan Document or otherwise in connection with
the Loan shall under no circumstances exceed the maximum amount of interest
allowed by applicable law, and any excess shall be credited to principal by
Lender (or if the Loan shall have been paid in full,
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refunded to Borrower); and (ii) in the event that maturity of the Loan is
accelerated by reason of an election by Lender resulting from any default
hereunder or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest may never include more than
the maximum amount of interest allowed by applicable law, and any interest in
excess of the maximum amount of interest allowed by applicable law, if any,
provided for in the Loan Documents or, otherwise shall be canceled automatically
as of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited to principal (or if the principal portion of the Loan and any
other amounts not constituting interest shall have been paid in full, refunded
to Borrower).
In determining whether or not the interest paid or payable under any
specific contingency exceeds the maximum amount allowed by applicable law,
Lender shall, to the maximum extent permitted under applicable law (a) exclude
voluntary prepayments and the effects thereof, and (b) amortize, prorate,
allocate and spread, in equal parts, the total amount of interest throughout the
entire contemplated term of the Loan so that the interest rate is uniform
throughout the entire term of the Loan; provided, that if the Loan is paid and
performed in full prior to the end of the full contemplated term hereof, and if
the interest received for the actual period of existence thereof exceeds the
maximum amount allowed by applicable law, Lender shall refund to Borrower the
amount of such excess, and in such event, Lender shall not be subject to any
penalties provided by any laws for contracting for, charging or receiving
interest in excess of the maximum amount allowed by applicable law.
Section 8.29. Indemnification. Subject to Section 8.14, Borrower
shall indemnify and hold Lender and each of its affiliates (including its
officers, directors, partners, employees and agents and each other person, if
any, controlling Lender or any of its affiliates within the meaning of either
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Securities Exchange Act of 1934, as amended) (each, including Lender, an
"Indemnified Party") harmless against any and all losses, claims, damages,
costs, expenses (including the fees and disbursements of outside counsel
retained by any such person) or liabilities in connection with, arising out of
or as a result of the transactions and matters referred to or contemplated by
this Agreement, except to the extent that it is finally judicially determined
that any such loss, claim, damage, cost, expense or liability resulted solely
from the fraud or willful misconduct of such Indemnified Party. In the event
that any Indemnified Party becomes involved in any action, proceeding or
investigation in connection with any transaction or matter referred to or
contemplated in this Agreement, Borrower shall periodically reimburse any
Indemnified Party upon demand therefor in an amount equal to its reasonable
legal and other expenses (including the costs of any investigation and
preparation) incurred in connection therewith to the extent such legal or other
expenses are the subject of indemnification hereunder.
Section 8.30. Borrower Acknowledgments. Borrower hereby acknowledges
to and agrees with Lender that (i) the scope of Lender's business is wide and
includes, but is not limited to, financing, real estate financing, investment in
real estate and other real estate transactions which may be viewed as adverse to
or competitive with the business of Borrower or its Affiliates and (ii) Borrower
has been represented by competent legal counsel and has
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consulted with such counsel prior to executing this Loan Agreement and any of
the other Loan Documents.
Section 8.31. Publicity. Lender and Borrower shall have the right,
with each other's consent (not to be unreasonably withheld), to issue press
releases, advertisements and other promotional materials describing Lender's
participation in the origination of the Loan or the Loan's inclusion in any
Securitization effectuated or to be effectuated by Lender.
[Signatures on the following pages]
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IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
LENDER:
NOMURA ASSET CAPITAL
CORPORATION, a Delaware corporation
By:________________________________________
Name:
Title:
BORROWER:
BPP/VALLEY CENTRAL, L.P.,
a California limited partnership
By: BPP/VALLEY CENTRAL, INC.,
a Delaware corporation,
its general partner
By:________________________________________
Name:
Title:
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<PAGE> 1
Exhibit 10.3
PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT ("Agreement"), is made and entered
into this 26th day of March, 1997 by and between BRE PROPERTIES, INC., a
Maryland corporation ("Seller"), and BURNHAM PACIFIC PROPERTIES, INC., a
California corporation ("Buyer"). This Agreement shall be effective on the
"Effective Date", which is the date on which the last person signing this
Agreement shall have signed this Agreement.
R E C I T A L S:
This Agreement is entered into on the basis of the following facts,
understandings and intentions of the parties:
A. Seller is the owner of the following real properties: that certain
real property located at the intersection of Mowry Avenue and Fremont Boulevard
in the City of Fremont in Alameda County, California, commonly known as the
Fremont Hub, and more particularly described in Exhibit A-1 attached hereto (the
"Fremont Property"), that certain real property located at the intersection of
Telephone and Petit Roads in the City and County of Ventura, California,
commonly known as the Central Shopping Center, and more particularly described
in Exhibit A-2 attached hereto (the "Ventura Property"), and that certain real
property located at the intersection of Telegraph and Carmelita Roads in the
City of Santa Fe Springs in Los Angeles County, California, commonly known as
the Santa Fe Springs Plaza, and more particularly described in Exhibit A-3
attached hereto (the "Santa Fe Property") (collectively, these real properties
shall constitute the "Real Property").
B. Buyer desires to purchase all of the Property, defined below, from
Seller and Seller desires to sell all of the Property to Buyer, upon the terms
and conditions stated in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants of the parties
herein contained and other valuable consideration, the parties agree as follows:
1. Sale and Purchase
1.1 Sale of Property. Subject to the terms, covenants and conditions of
this Agreement, Seller shall sell to Buyer, and Buyer shall purchase from
Seller, all of the Property.
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1.2 The Property. In addition to the Real Property, the term "Property"
includes all of the items referred in Sections 1.2.1 - 1.2.4 below.
1.2.1 Improvements and Personal Property. The buildings and all
other improvements, structures, foundation, parking areas, sidewalks, utilities
and fixtures of every kind and nature presently situated on, in or under or
hereafter erected, installed or used in, on or about the Real Property (the
"Improvements"), all furniture and personal property located on or used in
connection with the operation of the Real Property (the "Tangible Personal
Property"), all as-built plans, drawings and specifications for the
Improvements, and all architectural, structural, mechanical, electrical, and
landscaping plans and specifications, surveys, engineering studies and reports
and applicable flood plain maps relating to the Property (collectively, the
"Plans") and all of Seller's right, title and interest in any intangible
personal property now or hereafter owned by Seller or used in connection with
the ownership, use and operation of the Improvements, Real Property or Tangible
Personal Property, including, without limitation, the right to use any trade
name now used in connection with the Improvements, all warranties or guarantees
received by Seller from any contractors, subcontractors, suppliers or
materialmen in connection with any construction, repairs or alterations of the
Improvements, licenses, franchises, permits, tenant lists, advertising materials
and other similar property and rights relating to the ownership, use and
operation of the Improvements, Real Property and Tangible Personal Property
(collectively, "Intangible Property"). The Tangible Personal Property,
Intangible Property, and the Plans shall be collectively referred to as the
"Personal Property".
1.2.2 Rights and Privileges. All rights, privileges, tenements,
hereditaments, rights of way, easements, appendages, appurtenances, mineral
rights, development rights, air rights, and riparian or littoral rights
belonging or in anyway appertaining to the Real Property, and any easements,
rights-of-way or appurtenances used in connection with the beneficial use and
enjoyment of the Real Property.
1.2.3 Contracts and Leases. All of Seller's right, title and
interest in (i) all service, maintenance, construction, management and other
contracts, and all guarantees, warranties, licenses, permits and other documents
affecting the Real Property or the Improvements, which Buyer agrees in writing
to assume (collectively, "Contracts"), and (ii) all leases, tenancy and
occupancy agreements (including, without limitation, all amendments,
modifications, agreements, records, substantive correspondence and other
documents affecting in any way a right to occupy any portion of the Real
Property or Improvements, and all security deposits and prepaid rent and all
lease guaranties) affecting the Property (collectively, "Leases"). The tenants
under the Leases shall be referred to in this Agreement as the "Tenants".
1.2.4 Awards. All right, title and interest of Seller in and to any
condemnation award or other awards now pending or made after Closing, defined
below, by any municipal, county, state or federal authority or board with
respect to the Real Property and Improvements.
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2. Purchase Price
The purchase price (the "Purchase Price") to be paid by Buyer to Seller
for the Property is Sixty-Nine Million Six Hundred Thousand Dollars
($69,600,000.00). The Purchase Price shall be payable, in full, in cash, at
Closing.
3. Deposit
3.1 Deposit. Upon full execution of this Agreement, Buyer shall deliver
to Chicago Title Company, 925 B Street, San Diego, California ("Title Company")
as escrow agent, the cash sum of Seven Hundred Fifty Thousand Dollars
($750,000.00), as an earnest money deposit on account of the Purchase Price (the
"Deposit"). If Buyer terminates this Agreement for failure of the conditions
precedent specified under Article 4 below, or by reason of a default by Seller
under any term of this Agreement, then the Deposit shall immediately be returned
to Buyer by Title Company. At Buyer's sole election, any Deposit shall be
deposited by Title Company in an interest-bearing account, in a bank or other
financial institution approved in writing by Buyer, and the term "Deposit" as
used in this Agreement shall include any interest earned thereon. The Deposit
shall be applied to the Purchase Price at Closing. Concurrent with execution of
this Agreement, Seller shall execute irrevocable escrow instructions prepared by
Buyer, instructing Title Company to deliver the Deposit to Buyer immediately
upon receipt by the Title Company of a certificate executed by Buyer stating
that the Deposit is payable to Buyer pursuant to this Agreement.
3.2 Liquidated Damages. THE PARTIES ACKNOWLEDGE THAT IN THE EVENT OF A
MATERIAL DEFAULT BY BUYER OF ITS OBLIGATION TO PURCHASE THE PROPERTY UNDER THIS
AGREEMENT, SELLER'S DAMAGES WOULD BE DIFFICULT OR IMPOSSIBLE TO COMPUTE AND THAT
THE DEPOSIT MADE BY BUYER UNDER SECTION 3.1 REPRESENTS THE REASONABLE ESTIMATE
OF SUCH DAMAGES ESTABLISHED BY THE PARTIES THROUGH GOOD FAITH CONSIDERATION OF
THE FACTS AND CIRCUMSTANCES SURROUNDING THE TRANSACTION CONTEMPLATED UNDER THIS
AGREEMENT AS OF THE EFFECTIVE DATE. IN THE EVENT OF SUCH MATERIAL DEFAULT BY
BUYER UNDER THIS AGREEMENT, SELLER SHALL RETAIN SUCH AMOUNT AS LIQUIDATED
DAMAGES IN LIEU OF ANY OTHER CLAIM SELLER MAY HAVE AT LAW OR IN EQUITY
(INCLUDING, WITHOUT LIMITATION, SPECIFIC PERFORMANCE) ARISING BY REASON OF SUCH
DEFAULT. THE PARTIES HAVE INITIALED THIS SECTION 3.2 TO ESTABLISH THEIR INTENT
SO TO LIQUIDATE DAMAGES.
Seller:_____________; Buyer: _____________.
4. Conditions Precedent
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4.1 General. Buyer's obligation to purchase the Property shall be
subject to the fulfillment of the conditions precedent enumerated in Section 4.2
below within the time limits and in accordance with the procedures set forth in
this Article 4. The provisions of Sections 4.2.2, 4.2.3, 4.2.5, 4.2.6, 4.2.7 and
4.2.8 of this Agreement also constitute covenants by Seller.
4.2 Specific Conditions. The specific conditions precedent shall be as
follows:
4.2.1 Inspection. Buyer shall have approved, by noon on March 24,
1997 ("Due Diligence Expiration Date"), all inspections, tests and analyses of
the Property desired by Buyer, including, without limitation, discussions with
tenants of the Property and representatives of the Cities of Fremont, Ventura
and Santa Fe Springs, and all other local, state and federal agencies,
concerning the Property, and all tests, borings and samplings desired by Buyer
to determine whether any Hazardous Materials, defined below, are present on the
Property.
4.2.2 Title. Buyer shall have reviewed and approved the condition of
title to the Property pursuant to Article 5, and Seller shall be in a position
to fulfill the covenants concerning title set forth in Article 5, including but
not limited to delivery of the Title Policy, defined below.
4.2.3 Execution of Agreements. Seller shall have executed and
delivered to Title Company in accordance with instructions reasonably approved
by Buyer, on or before the Closing Date, the Deed, the Assignment, the
Assignment of Intangibles and the Bill of Sale, all defined below. Seller shall
have performed and complied in all respects with all of its obligations under
this Agreement which are to be performed or complied with by Seller on or before
the Closing.
4.2.4 Representations and Warranties. All of Seller's
representations and warranties set forth in this Agreement shall be true and
correct in all material respects as of the Closing Date.
4.2.5 Property Documents. Seller shall have delivered or otherwise
made readily available to Buyer for Buyer's approval within twenty-one (21) days
after Seller's full satisfaction of the foregoing obligation, the following:
4.2.5.1 [Intentionally deleted.]
4.2.5.2 General Due Diligence Matters. To the extent in
Seller's possession or control, or the possession or control of
Seller's property manager, copies of all of the documents described in
Exhibit H attached to this Agreement.
4.2.5.3 Contracts. Copies of all Contracts.
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4.2.5.4 Miscellaneous Reports. To the extent in Seller's
possession or control, or the possession or control of Seller's
property manager, the Plans, hazardous material assessments, and
maintenance records for the roof and the major mechanical and
electrical systems of the Improvements.
4.2.5.5 Additional Documents. To the extent in Seller's
possession or control, or the possession or control of Seller's
property manager, all other material documents relating in any way to
the use, ownership or operation of the Property, including, without
limitation, all correspondence to and from Tenants, Seller's
delinquency reports, and Seller's cash receipts journals or ledger
cards indicating the payment history for the Tenants.
4.2.6 Contract Termination. Termination, on or before the Closing Date,
of all Contracts disapproved by Buyer pursuant to Section 4.2.5, and assumption
by Buyer, on the Closing Date, of all Contracts approved by Buyer pursuant to
Section 4.2.5.
4.2.7 Estoppels. Seller's delivery to Buyer and Buyer's approval of
estoppel certificates from each tenant under each Lease in exactly the form
attached to this Agreement as Exhibit B (the "Estoppels"). The Estoppels shall
be dated no earlier than February 18, 1997. In the event that Seller obtains
Estoppels from all tenants under each Lease whose premises contain at least
3,000 square feet of floor area, and from eighty percent (80%) of all remaining
tenants, Seller may delivery its own estoppel regarding the remaining twenty
percent (20%) of the Leases. Notwithstanding anything to the contrary in this
Agreement, Buyer shall have at least ten (10) days to review and accept or
reject any Estoppel delivered to Buyer after March 14, 1997, and shall not be
required to Close until ten (10) days after the approval of all such Estoppels
(including any estoppel supplied by Seller as permitted above).
4.2.8 Subordination Agreements. Seller's delivery to Buyer and Buyer's
approval of Subordination, Non-Disturbance and Attornment Agreements
("Subordination Agreements") from each Tenant under each Lease whose premises
contain at least 3,000 square feet of floor area in exactly the form attached to
this Agreement as Exhibit I. Notwithstanding anything to the contrary in this
Agreement, buyer shall have at least ten (10) days to review and accept or
reject any Subordination Agreement delivered to Buyer after March 14, 1997, and
shall not be required to Close until ten (10) days after the approval of all
such Subordination Agreements.
4.2.8 Subordination Agreements. Seller's delivery to Buyer, not less
than thirty (30) days before the Closing Date, of Subordination, Non-disturbance
and Attornment Agreements ("Subordination Agreements") from each Tenant under
each Lease whose premises contain at least 3,000 square feet of floor area in
exactly the form attached to this Agreement as Exhibit I.
4.2.9 Board of Directors. Buyer shall have obtained, by the Due
Diligence Expiration Date, approval of this Agreement by Buyer's Board of
Directors.
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4.2.10 Damage to Property. The physical condition of the
Property, including without limitation, the HVAC, plumbing and electrical
systems, shall be in the same condition as on the date of this Agreement,
ordinary wear and tear excepted; provided, however, that in the event that prior
to Closing any one of the three properties comprising the Property suffers
damage in excess of $250,000, Buyer shall not be obligated to purchase any of
the properties, whereas in the event that none of the properties comprising the
Property suffers damages in excess of $250,000, Buyer shall be obligated to
acquire the Property, but shall be entitled to full reimbursement from Buyer of
the amounts suffered as a result of such damages, including consequential
damages and lost rents, either through a deduction from the Purchase Price,
assignment of insurance proceeds or other means acceptable to Buyer in its sole
discretion.
4.2.11 Completion of Construction. Except as provided in
Section 6.6, Seller shall have completed all construction of the Property in
accordance with its plans and specifications, complied with all ordinances,
regulations and governmental requirements in connection therewith, satisfied all
governmental proffers made by it or any predecessor, and completed all
improvements required to be completed under the Leases to the satisfaction of
the Tenants or shall credit to Buyer at Closing an amount sufficient to satisfy
such unfulfilled obligations.
4.2.12 Reciprocal Easement Estoppels. Buyer shall have
received all Reciprocal Easement Estoppels, defined below, if any, required by
Section 6.7, which shall have been duly executed and dated not earlier than
fifteen (15) days before the Closing.
4.2.13 No Condemnation. There shall be no pending or
threatened condemnation or taking of any part of the Real Property or any means
of ingress or egress to the Real Property, other than a minor street widening,
or other immaterial taking, which, in Buyer's judgment, does not adversely
affect the Real Property.
4.2.14 Concurrent Closing. On the Closing Date, Buyer shall
purchase and Seller shall sell all those certain real properties constituting
the Real Property together with all their Improvements and Personal Property
situated, erected, installed, located or used thereon.
4.3 Time For Fulfillment. Seller shall cooperate with Buyer and Buyer's
efforts to fulfill the conditions precedent set forth in Section 4.2. Buyer
shall diligently attempt in good faith to fulfill the conditions precedent set
forth in Section 4.2 above within the time periods set forth in Section 4.2. If
any of the conditions precedent have not been fulfilled within the applicable
period, Buyer shall have the right to terminate this Agreement by written notice
to Seller given on or before the date specified in Section 4.2 for satisfaction
of such condition precedent. If Buyer has not either given written notice of
fulfillment or waived in writing fulfillment of the applicable condition
precedent on or before the date specified in Section 4.2 for satisfaction of
such condition precedent, then this Agreement shall terminate, the Deposit shall
immediately be returned to Buyer and neither Seller nor Buyer shall have any
further obligations under this Agreement. In approving the items set forth in
Section 4.2, Buyer shall have the right to approve such matters within its sole
and absolute discretion; provided that Buyer's notice to Seller that it has
elected to proceed with the purchase, given on or before the last date specified
in Section 4.2
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for satisfaction of the conditions precedent, shall be deemed an acceptance of
all such matters; provided, however, that if any Estoppels or Subordination
Agreements are not received prior to the Due Diligence Expiration Date, Buyer
shall be entitled to make its decision as to whether to proceed with the
consummation of the contemplated transaction conditioned upon its timely receipt
of any missing Estoppels or Subordination Agreements; and provided further that
if any other documents or information to have been provided to Buyer by Seller
are delivered after the Effective Date, the Due Diligence Expiration Date shall
be extended by such reasonable period of time as Buyer and Seller agree is
necessary to evaluate such documents or information.
4.4 [Intentionally deleted.]
4.5 Right of Entry; Indemnification. Seller shall allow Buyer (and its
authorized representatives and agents) reasonable access to the Property at any
reasonable time, to the documents, permits and agreements maintained in
connection therewith, and to all Tenants and governmental authorities connected
therewith, for the purpose of making such appraisals, examination, tests,
analyses, investigations, borings, surveys, inquiries, building permit
applications, conditional use permit applications, applications for other
entitlements, or other inspections as may be required or necessary, at Buyer's
election, in connection with fulfillment of the conditions precedent set forth
in Section 4.2. Seller acknowledges that Buyer is a publicly traded company and
is obligated to comply with the rules and regulations of the Security and
Exchange Commission. Seller agrees during Buyer's investigation period, at no
expense to Seller, to cooperate with Buyer and/or Buyer's auditors (i) by
providing financial data pertaining to the Property required by the Securities
and Exchange Commission, including each of the documents listed on Exhibit J-1
(but without requiring duplication of any of the documents listed in Exhibit H
which are delivered or otherwise made available to Buyer pursuant to Section
4.2.5 above), and (ii) by delivering a certificate to Buyer's auditors in the
form of Exhibit J-2. Buyer shall indemnify, defend and hold Seller harmless from
any and all loss, cost, damage, injury, claim, liability or expense arising out
of claims of injury to or death of persons, damage to property, or claims of
lien for work or labor performed, materials or supplies furnished as a result of
the exercise of Buyer's right of entry hereunder.
4.6. Consideration. Notwithstanding anything in this Agreement to the
contrary, to induce Buyer to enter into this Agreement and to expend the time
and resources necessary to evaluate the Property and possibly forego other
opportunities while doing so, Seller hereby grants to Buyer certain express
rights to terminate this Agreement as specifically provided in this Agreement.
Such expenditures of time and resources and possible loss of opportunity by
Buyer constitute adequate consideration for Seller's remaining bound by this
Agreement notwithstanding such termination rights in Buyer.
5. Conditions of Title
5.1 Property.
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5.1.1 Conditions of Title. Title to the Real Property and the
Improvements shall be conveyed from Seller to Buyer by a separate grant deed in
fee simple absolute for each of the Fremont Property, the Ventura Property and
Santa Fe Property (collectively, the "Deed"), in the forms attached to this
Agreement as Exhibits F-1, F-2, F-3, subject to no exceptions to title of any
kind or character other than: (i) a lien to secure payment of real estate taxes
and assessments not delinquent; and (ii) exceptions which are approved by Buyer
in writing as provided below. The foregoing exceptions to title are referred to
in the aggregate as the "Conditions of Title".
5.1.2 Title Procedure. Prior to full execution of this
Agreement: (i) Buyer shall have caused Title Company to prepare and issue to
Buyer a preliminary title report, evidencing the current condition of title to
the Property, including all matters shown by an ALTA survey of the Real Property
and the Improvements, prepared for Buyer and Buyer's designees, showing all
boundaries, improvements, utility locations and sizes, easements and
encroachments on the Property ( the "Survey"); and (ii) Buyer shall commission
the Survey. Buyer shall promptly review the preliminary title report and Survey
and shall notify Seller in writing on or before ten (10) days after Buyer's
receipt of the preliminary title report and Survey, and copies of all exceptions
described in such preliminary title report, of any exceptions to title noted
thereon which are unacceptable to Buyer. Seller shall, at Seller's sole cost and
expense, before Closing, cause removal of all monetary title exceptions,
including, but not limited to, deeds of trust, and mechanic's and other liens.
Unless, within ten (10) days of Seller's receipt of Buyer's disapproval of any
non-monetary title exception, Seller advises Buyer in writing that Seller
intends to cure such disapproved title exception before Closing, taking such
action, at Seller's sole cost and expense, as may be necessary so to do (a "Cure
Notice"), Seller shall not cause removal of such disapproved exceptions from
title. If Seller does not deliver a Cure Notice to Buyer, then at Buyer's sole
election, to be made within ten (10) days of Buyer's delivery of its objection
to the title exceptions, either (i) this Agreement shall automatically terminate
as provided in Section 4.3, or (ii) Buyer shall agree to purchase the Property
subject to the disapproved title exception(s). If Seller does not remove or
provide to the satisfaction of Buyer for removal of monetary exceptions to title
or the exceptions set forth in the Cure Notice before Closing, Buyer shall have
the right (i) to terminate this Agreement as provided in Section 4.3, (ii) to
proceed with consummation of this transaction notwithstanding such objectionable
items, or (iii) to exercise any of Buyer's rights or remedies at law or in
equity arising out of Seller's breach of its covenant to convey title.
5.1.3 Title Policy. Conclusive evidence of delivery of title
in accordance with the foregoing shall be the willingness of Title Company to
issue, upon payment of its regularly scheduled premium, its owner's extended
ALTA Form 1970(B) coverage policy of title insurance for each of the real
properties comprising the Real Property, with the endorsements described below,
excluding all bankruptcy exceptions, in the amount of the Purchase Price,
showing title to each of the real properties comprising the Property vested of
record in Buyer or its assignee, subject to no exceptions, conditions,
easements, reservations or encumbrances of any kind or character, other than the
Conditions of Title (collectively, the "Title Policy"). The Title Policy
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shall provide full coverage against mechanics' and materialmen's liens and shall
contain the following endorsements: (i) a contiguity endorsement insuring that
each of the parcels constituting each of the real properties comprising the
Property is fully contiguous to the immediately adjacent parcel, (ii) a
subdivision map act endorsement insuring that each of the parcels constituting
each of the real properties comprising the Property may be transferred
individually by Buyer, (iii) an owner's CLTA 100 and 101.4 endorsement, (iv) a
103.3 endorsement with respect to any easements that are subject to
encroachments, and (v) CLTA endorsements 103.7, 116 and 116.1. The Title Policy
shall also affirmatively insure any reciprocal easement agreement encumbering
each of the real properties comprising the Property.
5.2 Personal Property. The Personal Property shall be conveyed to Buyer
by three bills of sale (collectively, the "Bill of Sale") in the form attached
to this Agreement as Exhibits C-1, C-2, C-3, free of all security interests,
liens and encumbrances.
5.3 Leases. The Leases shall be assigned to Buyer by three assignment
of leases (collectively, the "Assignment") in the forms attached to this
Agreement as Exhibits D-1, D-2, D-3,, free of all security interests, liens and
encumbrances.
5.4 Contracts. The Contracts and certain intangible property shall be
assigned to Buyer by three instruments of assignment (collectively, the
"Assignment of Intangibles") in the forms attached to this Agreement as Exhibits
E-1, E-2, E-3.
6. Seller's Covenants From and after the Effective Date, Seller agrees
with Buyer as follows:
6.1. Estoppel Certificates and Subordination Agreements. Not
later than five (5) days after the Effective Date, Seller shall request all
Tenants in the Property to provide Estoppels and Subordination Agreements to
Buyer in order to satisfy the condition to Buyer's obligation to close set forth
in Sections 4.2.7 and 4.2.8. Thereafter, Seller shall use its best efforts to
obtain all of the Estoppels and Subordination Agreements at the earliest
possible date. Simultaneously with submitting the Estoppels and Subordination
Agreements to the Tenants, Seller shall furnish copies of the Estoppels and
Subordination Agreements to Buyer. Seller shall promptly deliver to Buyer from
time to time all Estoppels and Subordination Agreements which were returned to
Seller.
6.2. Completion of Construction. Seller shall either (i) at
Seller's sole cost and expense, complete all construction of the Property in
accordance with its plans and specifications, comply with all ordinances,
regulations and governmental requirements in connection therewith, satisfy all
governmental proffers made by it or any predecessor, and complete all
improvements required to be completed under the Leases to the satisfaction of
the
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Tenants; or (ii) agree to a holdback in escrow of funds from the Purchase Price
sufficient to complete such improvements.
6.3. [Intentionally deleted]
6.4. Operation of Property. Seller agrees that:
6.4.1. Ordinary Operation. Seller shall manage and
operate the Property in the ordinary and usual manner and use best efforts to
keep available the services of its present employees and preserve its relations
with all Tenants, suppliers and others having business dealings with it.
6.4.2. Maintenance. Seller shall maintain the
Property in its present order and condition and make all necessary repairs and
replacements consistent with a reasonably prudent maintenance and repair program
followed by owners of similar property in the vicinity of the Property, and
shall deliver the Property on the date of Closing free of all active roof leaks,
parking lot repairs requiring immediate attention and otherwise in substantially
the same condition it is in on the date of this Agreement, reasonable wear and
tear excepted. Without limiting the foregoing, no fixtures, equipment, or other
tangible Personal Property shall be removed from the Property unless prior to
Closing the same are replaced with similar items of at least equal quality and
value.
6.4.3. Labor. Seller shall not make any commitment or
incur any liability to any labor union, through negotiations or otherwise.
6.4.4. Permits. Seller shall keep in effect all
building permits, certificates of occupancy, licenses, conditional use permits
and other specific entitlements and approvals issued with respect to the
Property by any applicable public authority and required for the continued use
and operation of the Improvements, and shall undertake in a timely manner all
actions necessary to extend and/or renew the same.
6.5. Liens. Seller shall keep the Property free and clear of
all liens, claims or demands, including, but not limited to, mechanics' liens,
in connection with work performed and materials provided before the Closing, and
if any such lien is filed or levied, Seller shall secure its release within ten
(10) days after it is notified of the filing or levy. Seller shall not cause or
allow any encumbrance, lien, mortgage, deed of trust or similar financial lien
(whether or not recorded) to be placed against the Property without the prior
written consent of Buyer.
6.6. Leases. Without Buyer's prior written consent, which may
not be unreasonably withheld, Seller shall not enter into a Lease, amend or
extend any Lease, or accept any rent from any Tenant more than one month in
advance of its due date. Notwithstanding the foregoing, Buyer may
unconditionally withhold its consent to the termination or cancellation of
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any Lease or to Seller's acceptance of the surrender of a Tenant's premises
prior to the Closing Date. If Buyer and Seller agree to the execution of any new
Lease of any leasable vacant unit which involves concessions, commissions, or
the construction of tenant improvements, any costs relating to such Lease shall
be allocated to Buyer at Closing.
6.7. Reciprocal Easements. If there are any reciprocal
easement agreements or similar agreements affecting the Property and adjoining
property or properties, Seller agrees to obtain from the owner(s) of such
adjacent property or properties a statement (the "Reciprocal Easement Estoppel")
reasonably satisfactory to Buyer that there are no defaults by Seller thereunder
and that the easements are in full force and effect.
6.8. New Contracts. Without Buyer's prior written consent,
Seller shall not become a party to any new Contracts that will be the obligation
of Buyer on or after the Closing with respect to all or any portion of the
Property.
6.9. Tax Proceedings. Seller shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which Closing is to
occur or any subsequent fiscal period without the prior written consent of
Buyer, which consent shall not be unreasonably withheld. Real estate tax refunds
and credits received after the Closing Date ("Refunds") shall be paid to Buyer
and shall be apportioned and distributed as follows. Buyer shall first determine
whether any Tenant has the right to receive any portion of any Refunds. After
payment to any Tenants of any applicable portion of the Refunds, Buyer shall pay
to Seller any portion of any Refunds which are attributable to a fiscal tax year
before the Closing Date. Buyer shall then equitably apportion between Buyer and
Seller any Refunds which are attributable to the fiscal tax year during which
the Closing Date occurs. Buyer shall have the absolute right to retain any
Refunds which are attributable to any fiscal tax year after the Closing Date.
6.10. Copies of Notices. Promptly upon receipt, Seller shall
provide Buyer with copies of all material notices and correspondence received
from any Tenant under the Leases, and notices and correspondence received from
any insurance company which carries insurance on the Property or Board of Fire
Underwriters, or from any governmental authority.
6.11. Prohibition on Marketing. Seller shall withdraw the
Property from the market and refrain from offering the Property for sale to any
other party and terminate all negotiations for any such sale with any party
other than Buyer; provided that Seller shall be entitled to keep Developers'
Diversified Realty and Summit Commercial informed as to the status, but not the
terms, of this transaction.
6.12. Personal Property. Seller shall not alter or remove any
Personal Property from the Real Property unless the same is replaced with
Personal Property of the same or similar quality and quantity.
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7. Representations and Warranties of Seller
7.1 Representations and Warranties. Seller covenants, represents and
warrants to Buyer that:
7.1.1 Copies of Documents and Records. Seller has or shall, in
accordance with Section 4.2.5, provide Buyer with, or make available to Buyer,
true, complete and correct copies of all executed documents, plans,
specifications, reports, warranties, governmental consents, permits and
approvals, Leases, Contracts, and all other agreements entered into by Seller or
outstanding with respect to the Property which are in Seller's possession or
control. Buyer acknowledges Seller has provided Buyer copies of only a portion
of the plans in Seller's possession, but has provided Buyer access to all such
plans. Seller shall deliver all such plans to Buyer at Closing.
7.1.2 Leases. There are and will be no oral or written
agreements with respect to any Lease allowing the tenant any reduction,
abatement, concession, allowance or subsidy of rent under its Lease or allowing
the payment of any portion of the rent in any form other than in cash except as
may be fully noted on the rent roll delivered to Buyer; and no rentals or other
payments for periods in excess of one month have been received under any Lease
except as reflected on the rent roll. Seller is not in violation of any Lease.
There is no prohibition set forth in any Lease with respect to the landlord's
assignment of such Lease; subject to the provisions of Section 6.2, all
painting, repairs, alterations, and other work to be performed by the landlord
under each Lease has been fully performed by the Landlord under each Lease and
has been fully paid or will be fully performed and paid on or before the Closing
Date; and no brokerage or leasing commission or other compensation will be due
and payable to any person, firm, corporation or other entity with respect to or
on account of any such Lease (Seller shall fully pay any such commissions or
compensation as they come due and Seller shall indemnify, defend and hold Buyer
harmless from any and all such commissions or compensation).
7.1.3 Service Contracts. No portion of the Property shall be
subject to any Contract after the Closing Date except for those Contracts
approved by Buyer in writing pursuant to Section 4.2.5 of this Agreement. All
Contracts are valid and in full force and effect and unmodified, and (i) no
party has breached any material condition or provision of any Contract, (ii) no
party is in default in any material respect under the terms of any Contract, and
(iii) no event has occurred which with the giving of notice or the passage of
time, or both, would constitute a material default.
7.1.4 Hazardous Substances. Except as disclosed in written
materials and environmental reports previously provided by Seller to Buyer, to
Seller's actual knowledge, no governmental authority has notified Seller of the
need to take corrective action regarding elimination or control of Hazardous
Materials, defined below, on or about the Property. To Seller's actual
knowledge, neither Seller nor any other tenant, occupant or user of the Property
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used, generated, manufactured, installed, released, discharged, stored or
disposed of any Hazardous Materials on, under, in or about the Property, or
transported any Hazardous Materials to or from the Property, and there are no
Hazardous Materials (other than Hazardous Materials lawfully held for retail
sale or used in the normal maintenance and cleaning of the Property, provided
such items are being sold, stored, disposed of, transported and otherwise
handled in compliance with all laws) or underground storage tanks located on,
under, in or about the Property. The term "Hazardous Materials" shall mean any
substance, material or waste which is regulated by any local governmental
authority, the State of California, or the United States Government, including,
but not limited to, any material or substance which is (i) petroleum, (ii)
asbestos, (iii) polychlorinated biphenyls, (iv) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. 1251 et
seq. (33 U.S.C. 1321) or listed pursuant to Section 307 of the Clean Water Act
(33 U.S.C. 1317), (v) defined as a "hazardous waste" pursuant to Section 1004 of
the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. (42 U.S.C.
6903) or (vi) defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
9601 et seq. (42 U.S.C. 9601).
7.1.5 Legal Actions. Except as disclosed in written materials
and reports previously provided by Seller to Buyer, to Seller's actual knowledge
there are no condemnation, environmental, zoning or other land-use regulation
proceedings, either instituted, or planned to be instituted, or any other
litigation, actions, suits or proceedings pending or threatened which would
affect the use, occupancy or operation of the Property for its intended purpose
or Seller's ability to perform hereunder or the value of the Property, nor has
Seller received notice of any pending or threatened special assessment
proceedings affecting the Property. In addition, Seller warrants, to Seller's
actual knowledge, no violations of zoning ordinances or building codes exist on
the Property.
7.1.6 Documents. All the documents executed by Seller which
are to be delivered to Buyer at the Closing are and at the time of Closing will
be duly authorized, executed, and delivered by Seller.
7.1.7 Flood and Earthquake Zones. To Seller's actual
knowledge, no portion of the Property is located within the flood plain, mud
slide or flood hazard, earthquake zone or any special studies zone, as
designated on any map prepared or issued for such purpose by any governmental
authority.
7.1.8 Taxes. All employee, business, sales, rent or other
occupancy taxes due with respect to the Property through the Closing Date have
been or will be paid by Seller.
7.1.9 Other Rights. No person, firm or entity has any right to
acquire or lease all or any part of the Property, other than the rights of the
Tenants under the Leases approved by Buyer to lease portions of the Property
pursuant to the terms of such Leases.
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7.1.10 Accuracy of Information. Seller has furnished Buyer
with access to or true and complete copies of all financial statements,
operating summaries, and supporting ledgers and journals relating to the
Property, the Leases and Contracts and all other agreements or instruments
affecting in any way (i) the operation of the business of the Property, or (ii)
the value of the Property, or in any way relating to the Property provided that
Seller shall not be obligated to provide Buyer with any of its internal
determinations of fair market value of the Property. No representation or
warranty of Seller in this Agreement, or any information, statement or
certificate furnished or to be furnished by or on behalf of Seller pursuant to
this Agreement or in connection with the transactions contemplated hereby,
contains or shall contain any untrue statement of a material fact or omits or
shall omit to state a material fact necessary to make the statements contained
therein not misleading. All copies of contracts, agreements and other documents
delivered by Seller in connection with the transactions contemplated hereby are
complete and accurate, and have not been amended or modified by any oral
agreements.
7.1.11 Government Reports and Returns. Seller has filed in a
timely manner all reports and returns relating to the Property required to be
filed by any applicable law or governmental regulation.
7.1.12 Permits. To Seller's actual knowledge, Seller has
obtained all consents, approvals, entitlements, waivers, certificates of
occupancy, licenses, and building permits, conditional use permits and other
approvals required in connection with Seller's ownership of the Property and the
operation of the Property as heretofore conducted by Seller, all of which are in
full force and effect. To Seller's actual knowledge, valid and final
certificates of occupancy, or their equivalent, have been issued for each space
in the Improvements by the City or County Building Department, and no space has
been leased in violation of any such certificates. To Seller's actual knowledge,
the Real Property is presently zoned for the buildings, businesses and parking
included in the Property. There is no pending or proposed change in the zoning
classification of the Property.
7.1.13 Employees. Seller has no knowledge of any labor
grievances, picketing, or similar overt labor problems pending in connection
with the Property.
7.1.14 Compliance with Laws. To Seller's actual knowledge, in
connection with the conduct of the business of the Property, Seller has complied
in all material respects with all applicable laws, ordinances, rules and
regulations (including without limitation those relating to zoning and the
requirements of Title III of the Americans with Disabilities Act of 1990 (42
U.S.C. 12181, et seq., The Provisions Governing Public Accommodations and
Services Operated by Private Entities), and all regulations promulgated
thereunder, and all amendments, revisions or modifications thereto), and Seller
has not been informed of a violation of any such laws, rules or regulations.
Seller has no notice or knowledge that any government agency or any employee or
official considers the construction of the Property or its operation or use to
have failed to comply with any law, ordinance, regulation or order or that any
investigation has been
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commenced or is contemplated respecting any such possible failure of compliance.
There are no unsatisfied requirements for repairs, restorations or improvements
from any person, entity or authority, including, but not limited to, any tenant,
lender, insurance carrier or governmental authority. All driveway entrances and
exits to the Real Property are permanent and no special access or other permits
are required to maintain same. All existing streets and other improvements,
including water lines, sewer lines, sidewalks, curbing and streets at the Real
Property have been paid for and either enter the Real Property through adjoining
public streets, or, if they enter through adjoining private lands, do so in
accordance with valid, irrevocable easements running to the benefit of the owner
of the Property. Seller has not received from any insurance company or Board of
Fire Underwriters any notice, which remains uncured, of any defect or inadequacy
in connection with the Property or its operation.
7.1.15 Non-Foreign Person. Seller is not a "foreign person" as
such term is defined in Section 1445(f) of the Internal Revenue Code of 1986, as
amended, and Seller is not subject to withholding under Section 26131 of the
California Revenue and Taxation Code.
7.1.16 Physical Condition. To Seller's actual knowledge, there
are no material defects in the Improvements, including, without limitation, the
structure or roof of the Improvements. To Seller's actual knowledge, the
Improvements and tangible Personal Property (including without limitation
plumbing equipment, HVAC, electric wiring and fixtures, gas distribution system,
and water and sewage systems presently on or in the Property) are in good
working order and condition.
7.1.17 Mechanic's Liens. All bills and claims for labor
performed and materials furnished to or for the benefit of the Property have
been paid in full, and there are no mechanic's, or materialmen's liens (whether
or not perfected) on or affecting the Property.
7.1.18 Seller's Authority. Seller has been duly authorized to
execute and perform its obligations under this Agreement. The persons signing
this Agreement on behalf of Seller have the power and authority to do so and to
bind Seller to this Agreement. All the instruments, agreements and other
documents executed by Seller which are to be delivered to Buyer at the Closing
are and at the time of the Closing will be duly authorized, executed and
delivered by Seller. This Agreement and all documents executed by Seller that
are to be delivered to Buyer at Closing are, or at the time of Closing will be,
legal, valid and binding obligations of Seller, and do not, and at the time of
Closing will not, violate any provisions of any agreement or judicial order to
which Seller is a party or to which Seller or the Property is subject.
7.1.19 Bankruptcy. Neither Seller nor any Tenant has either
filed or been the subject of any filing of a petition under any federal or state
bankruptcy or insolvency laws.
7.2 Warranty of Performance. Seller shall promptly disclose to Buyer,
before the
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<PAGE> 16
Closing Date, in writing (a "Warranty Disclosure"), any fact or circumstance
known to or subsequently learned by Seller which would make any such warranty or
representation untrue, or which, without such disclosure, makes any such
warranty or representation misleading. Buyer shall have until the later of
fifteen (15) days after the Effective Date or five (5) business days after the
receipt of a Warranty Disclosure to either approve or disapprove such Warranty
Disclosure. If Buyer either disapproves such Warranty Disclosure within such
period, or fails to approve or disapprove such Warranty Disclosure within such
period, then this Agreement shall automatically terminate, the Deposit shall
immediately be returned to Buyer, and Buyer and Seller shall have no further
obligations under this Agreement. Subject to the provisions of this Section 7.2
and Section 7.3, Seller shall indemnify, defend and hold Buyer harmless from any
and all loss, damage, injury, cost or expense (including without limitation
reasonable attorney's fees) arising out of or relating directly or indirectly to
any breach of the foregoing obligation or any other obligation under this
Article 7.
7.3 Limitations of Representations and Warranties. The parties
acknowledge that Buyer is performing its own due diligence and investigations
regarding the Property. Except as specifically set forth in this Agreement,
Seller has made no representations or warranties to Buyer regarding the physical
or economic condition of the Property, or otherwise, it being understood that
the Property is being sold to Buyer as-is.
7.4 Actual Knowledge. The term "actual knowledge" as used in this
Article 7 means the actual knowledge of Jay Pauly, Patricia Smith, John Nunn,
Bill Dobner and Thomas Fall.
8. Closing
8.1 Closing. The sale and purchase transaction contemplated by this
Agreement ("Closing") shall be consummated through escrow established at Title
Company ten (10) days after the Due Diligence Expiration Date, or such earlier
date as Buyer may specify on five (5) days' prior written notice to Seller
("Closing Date").
8.2 Instruments Delivered by Seller at Closing. At Closing, Seller
shall deliver or cause to be delivered to Buyer, at Seller's sole cost and
expense, each of the following items:
8.2.1 Deed. The Deed, duly executed and acknowledged by
Seller, except that the amount of any transfer tax shall not be shown on the
Deed, but shall be set forth on a separate affidavit or instrument, which after
recordation of the Deed, shall be attached to the Deed so that the amount of
such transfer tax is not of record.
8.2.2 Leases. The Assignment, duly executed and acknowledged
by Seller.
8.2.3 Bill of Sale and Intangibles. The Bill of Sale and
Assignment of Intangibles, both duly executed by Seller.
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8.2.4 Keys and Documents. All keys to all locks on the
Property (to the extent that such are available) and an accounting for keys in
possession of others. Copies of all books and records pertaining to the Property
(but expressly excluding information tax returns of Seller) and originals of all
documents in the possession or control of the Seller pertaining to the Tenants,
including, without limitation, all applications, correspondence and credit
reports relating to each such Tenant.
8.2.5 Permits. To the extent in Seller's possession or
control, the necessary permits issued by the appropriate governmental
authorities and utility companies when the Improvements were completed, a
complete set of all architectural, structural, mechanical and electrical plans
and specifications used in the construction of the Improvements including,
without limitation, the Plans and site surveys, and all of the documents
described in Section 4.2.5 of this Agreement.
8.2.6 Leases. Executed originals of all Leases and Contracts.
8.2.7 Deposits. All damage, escrow and security deposits and
advance rental deposits held by Seller under the Leases.
8.2.8 Letter. A separate letter addressed to each tenant under
the Leases, executed by Seller, advising the Tenants of the sale of the Property
to Buyer and directing that rents and other payments thereafter be sent or
delivered to Buyer, which letter may be delivered by Buyer to the Tenants or
posted in a conspicuous place in the Improvements.
8.2.9 Other Instruments. Such other duly executed and/or
acknowledged instruments as may be reasonably required to consummate this
transaction in accordance with the terms and conditions contained in this
Agreement, such as appropriate escrow instructions to Title Company and the
documents described in Section 7.1.15 of this Agreement.
8.3 Items to be Delivered by Buyer at Closing. At Closing, Buyer shall
execute and/or deliver to Seller the following items:
8.3.1 Cash. Except as provided in Section 6.6, the applicable
cash portion of the Purchase Price, and Buyer's share of any closing costs or
prorations, minus the cost, if any, of incomplete tenant improvements, rent
abatements and other tenant concessions and the cost of unpaid commissions.
8.3.2 Documents. The Assignment and Assignment of Intangibles,
duly executed and acknowledged by Buyer.
8.3.3 Other Instruments. Such other documents and instruments,
duly executed and/or acknowledged, as may be reasonably required, in order to
consummate this transaction in
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accordance with the terms and conditions of this Agreement, such as appropriate
escrow instructions to Title Company.
8.4 Adjustment and Proration. At Closing the following items shall be
adjusted and prorated between Seller and Buyer on the basis of the actual number
of days in the month of Closing:
8.4.1 Rents. Seller shall pay to Buyer in cash the amount of
any rents received by Seller from the Tenants and applicable to any period of
time from and after the Closing Date. If any tenant is in arrears in the payment
of rent on the Closing Date, rents received by Buyer from such tenant after the
Closing Date shall be applied in the following order of priority:
8.4.1.1 First, to the costs of collection, if any,
incurred in collecting such rent;
8.4.1.2 Then to rent due for the current period;
8.4.1.3 Then to any month or months following the
Closing Date for which any amounts are due at the time of receipt of such rent
payment;
8.4.1.4 Then to the month in which the Closing
occurred; and
8.4.1.5 Then to any month or months preceding the
month in which the Closing occurred; provided, however, that Seller shall have
the right to pursue independently (without initiating an unlawful detainer
proceeding), for its own account, any tenant for payment of rent for any month
preceding the month in which Closing occurs.
8.4.2 Taxes. Real and personal property taxes and assessments
upon the Property for the current calendar or fiscal year shall be prorated as
of the Closing Date.
8.4.3 Utilities and Contracts. All costs, if any, of utilities
furnished to the Property and all payments under any Contracts approved in
writing by Buyer shall be prorated at Closing.
8.4.4 Credits to Buyer. Except as provided in Section 6.6,
Buyer shall be entitled to a credit against the Purchase Price for any unpaid
commissions, costs or allowances due after the Closing but incurred in
connection with any Lease executed on or before the Closing Date, including any
such commissions, costs or allowances due in connection with any option or
extended term under any such Lease. Buyer shall also be entitled to a credit
against the Purchase Price for any free rent, abatements, or other unexpired
concessions under any Leases executed on or before the Closing Date to the
extent they apply to any period after the Closing Date, including any such free
rent, abatements or other unexpired concessions due in connection with
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any option or extended term under any such Lease.
8.5 Possession. Sole and exclusive possession of the Property shall be
delivered to Buyer by Seller at the Closing.
8.6 Closing Costs. At Closing, Seller shall pay the following costs of
the Closing: All fees and costs for releasing all encumbrances, liens and
security interests of record which are not Conditions of Title; the premium for
a CLTA owner's policy of title insurance in the amount of the Purchase Price and
all endorsements thereto specified in this Agreement; and all documentary or
other transfer taxes and recording fees. At Closing, Buyer shall pay the
following costs of the Closing: the additional premium, if any, for obtaining an
ALTA, rather than a CLTA, owner's policy of title insurance in connection with
this transaction and the recording costs. Each party shall pay one-half (1/2) of
all escrow fees in connection with the Closing and one-half (1/2) of any escrow
cancellation fee. Buyer shall pay all sales and use taxes imposed as a result of
this transaction, if any.
8.7 Procedure for Close. Title Company shall close escrow when it is in
a position to issue the Title Policy.
8.8 Indemnification by Seller. Except for those matters described in
the third sentence below, as of the Closing Date, Seller shall indemnify, defend
and hold Buyer harmless of and from any and all liabilities, claims, demands and
expenses, of any kind or nature (except those items which by this Agreement
specifically become the obligation of the Buyer) accruing on or before the
Closing Date and which are in any way related to the ownership or operation of
the Property, and all expenses related thereto including, without limitation,
court costs and attorneys' fees. Any claims under the preceding sentence must be
made no later than twelve months from Closing. As to any and all liabilities,
claims, demands and expenses, of any kind or nature (including, without
limitation, all expenses related thereto, including, without limitation, court
costs and attorneys fees, penalties, fines, clean-up costs, mitigation costs and
liens) which are in any way related to or arise out of the presence of Hazardous
Materials in, on, under or about the Property, Seller shall indemnify Buyer in
accordance with the terms of a separate agreement (the "Environmental Indemnity
Agreement") to be negotiated by March 28, 1997, and executed by Buyer and Seller
at Closing. In no event shall the Environmental Indemnity Agreement in any way
limit any rights which Buyer would otherwise have under applicable state,
federal or local laws against Seller.
8.9 Indemnification by Buyer. As of the Closing Date, Buyer shall
indemnify, defend and hold the Seller harmless of and from any and all
liabilities, claims, demands and expenses, of any kind or nature (except those
items which by this Agreement specifically remain the obligation of the Seller)
accruing subsequent to the Closing Date and which are in any way related to the
ownership or operation of the Property, and all expenses related thereto
including, without limitation, court costs and attorneys' fees.
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8.10. Escrow. Upon mutual execution of this Agreement, Buyer and Seller
shall deposit an executed counterpart of this Agreement with the Title Company
and this Agreement shall serve as instructions to the Title Company for
consummation of the purchase and sale contemplated hereby. Seller and Buyer
shall execute such supplemental escrow instructions as may be appropriate to
enable the Title Company to comply with the terms of this Agreement, provided
such supplemental escrow instructions are not in conflict with this Agreement.
In the event of any conflict between the provisions of this Agreement and any
supplementary escrow instructions signed by Buyer and Seller, the terms of this
Agreement shall control.
8.11. Compliance. The Title Company shall comply with all applicable
federal, state and local reporting and withholding requirements relating to the
close of the transactions contemplated herein. Without limiting the generality
of the foregoing, to the extent the transactions contemplated by this Agreement
involve a real estate transaction within the purview of Section 6045 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), Title
Company shall have sole responsibility to comply with the requirements of
Section 6045 of the Internal Revenue Code (and any similar requirements imposed
by state or local law). For purposes of this Section 8.11, Seller's tax
identification number is 94-1722214. Title Company shall hold Buyer, Seller and
their counsel free and harmless from and against any and all liability, claims,
demands, damages and costs, including reasonable attorney's fees and other
litigation expenses, arising or resulting from the failure or refusal of Title
Company to comply with such reporting requirements.
9. Brokers and Others
Seller shall be responsible for a brokerage commission payable to CB
Commercial on the sale of Santa Fe Springs Plaza. Each party warrants and
represents to the other that no person, firm or entity is in a position to claim
a real estate brokerage commission, other than the foregoing, due diligence fee
or finder's fee as a procuring cause of this transaction based upon contacts
with such party or the Property, and each party shall indemnify, defend and hold
the other harmless from and against any and all claims, causes of action,
liability or costs, including reasonable attorney's fees, arising as a result of
a breach of the foregoing warranty and representation. If closing does not occur
for any reason whatsoever, including a default by Buyer or Seller, then Seller
shall have no obligation to pay the Commissions. Buyer hereby discloses to
Seller that Buyer is a licensed California real estate broker.
10. Miscellaneous
10.1 Notices. All notices, demands or other communications of any type
(collectively "Notices") given by Seller to Buyer or by Buyer to Seller, whether
required by this Agreement or in any way related to this transaction, shall be
sufficient if in writing and delivered by hand or Federal Express or similar
courier service to the person to whom the Notice is directed or mailed to such
person by United States Mail, as a Registered or Certified item, Return Receipt
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Requested, at or to the addresses specified in this Section . Notices delivered
by mail shall be deposited in a Post Office or other depository under the care
or custody of the United States Postal Service, enclosed in a wrapper with
proper postage affixed, addressed, if to the Buyer, as follows:
Burnham Pacific Properties, Inc.
610 West Ash Street, Ste. 1600
San Diego, CA 92101
Attention: John Waters
with a copy to:
Cassidy & Verges
20 California Street, Suite 500
San Francisco, CA 94111
Attention: Scott C. Verges
and if to the Seller, as follows:
BRE Properties, Inc.
One Montgomery Street, Suite 2500
San Francisco, CA 94104
Attention: Jay W. Pauly
Senior Vice President
Chief Operating Officer
with a copy to:
Farella, Braun & Martel, LLP
Russ Building, 30th Floor
235 Montgomery Street
San Francisco, CA 94104
Attention: Jon F. Hartung
Any notice so deposited in the United States Mail shall be deemed to be
delivered three (3) calendar days after the date of such deposit, and any time
periods provided for herein during which a party may act shall not commence
until such notice is deemed to be so delivered. Either party to this Agreement
may change the address for Notice specified above by notice given as provided
herein to the other party.
10.2 Survival of Provisions and No Merger. Any representation,
warranty, covenant or agreement set forth in this Agreement of either party to
this Agreement whether to be performed
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before or after the time of Closing shall not be deemed to be merged into or
waived by the instruments of Closing, but shall expressly survive Closing and
shall be binding on the party obligated thereby.
10.3 Governing Law; Plurality; Gender. This Agreement shall be
construed and interpreted in accordance with the laws of the State of
California. Where required for proper interpretation, words in the singular
shall include the plural; the masculine gender shall include the neuter and the
feminine, and vice versa.
10.4 Amendment. This Agreement may not be modified or amended, except
by an agreement in writing signed by the parties to this Agreement. The parties
may waive any of the conditions contained in this Agreement or any of the
obligations of the other party under this Agreement, but any such waiver shall
be effective only if in writing and signed by the party waiving such conditions
or obligations.
10.5 Authorization. Each person executing this Agreement warrants and
represents that he is fully authorized to do so.
10.6 Time of Essence. Time is of the essence of this Agreement.
10.7 Attorney's Fees. If it becomes necessary for either party to file
a suit to enforce this Agreement or any provisions contained in this Agreement,
or to seek damages for a breach, the prevailing party shall be entitled to
recover, in addition to all other remedies or damages, reasonable attorney's
fees incurred in such suit.
10.8 Captions. The description headings of the several Articles,
Sections and Paragraphs contained in this Agreement are inserted for convenience
only and shall not control or effect the meaning or construction of any of the
provisions of this Agreement.
10.9 Entire Agreement. This Agreement, including the Exhibits attached
to this Agreement, constitutes the entire agreement among the parties pertaining
to the subject matter of this Agreement and supersedes all prior and
contemporaneous agreements and understandings of the parties in connection
therewith. No representation, warranty, covenant, agreement or condition not
expressed in this Agreement shall be binding upon the parties to this Agreement
or shall affect or be effective to interpret, change or restrict the provisions
of this Agreement.
10.10 Counterparts. A counterpart of this Agreement with separate but
fully executed signature pages attached thereto shall have the full force and
effect of an original executed instrument.
10.11 Successors and Assigns. This Agreement, and the terms, covenants
and conditions contained in this Agreement, shall be binding upon and inure to
the benefit of the parties hereto
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and their respective successors, heirs and assigns. Without limiting the
foregoing, Buyer specifically reserves the right to take title to the Property
in a name or assignee other than that of Buyer and Buyer may at any time prior
to close of escrow assign part or all of its rights hereunder, and Seller shall
be bound thereby provided further that said assignee assumes all of Buyer's
obligations hereunder as if such assignee were the original Buyer.
10.12 Exhibits. Any exhibits, to which reference is made in this
Agreement, are deemed incorporated into this Agreement in their entirety:
<TABLE>
<S> <C>
Exhibit A-1, A-2, A-3 Property Description
Exhibit B Estoppel Certificate
Exhibit C-1, C-2, C-3 Bills of Sale
Exhibit D-1, D-2, D-3 Assignment of Leases
Exhibit E-1, E-2, E-3 Assignment of Intangibles
Exhibit F-1, F-2, F-3 Grant Deed
Exhibit G Tenant Letter
Exhibit H Due Diligence Materials
Exhibit I Subordination Agreements
Exhibit J Buyer's Auditor's Documentation and Certificate
</TABLE>
10.13. Exchange. At the option of either party, such party may elect to
consummate the transaction hereunder in whole or in part as a like-kind exchange
pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended. If
either party (the "Exchanging Party") so elects, the other party (the
"Cooperating Party") shall cooperate with the Exchanging Party, executing such
documents and taking such action as may be reasonably necessary in order to
effectuate this transaction as a like-kind exchange; provided, however, that (i)
the Cooperating Party's cooperation hereunder shall be without cost, expense or
liability to the Cooperating Party of any kind or character, including, without
limitation, any attorneys' fees, costs or expense incurred in connection with
the review or preparation of documentation in order to effectuate such like-kind
exchange, and the Cooperating Party shall have no obligation to take title to
any real property; (ii) the Exchanging Party shall assume all risks in
connection with the designation, selection and setting of terms of the purchase
or sale of any exchange property; (iii) the Exchanging Party shall bear all
costs and expenses in connection with any such exchange transaction in excess of
the costs and expenses which would have otherwise been incurred in acquiring or
selling the Property by means of a straight purchase, so that the net effect to
the Cooperating Party shall be identical to that which would have resulted had
this Agreement closed on a purchase and sale; (iv) any documents to effectuate
such exchange transaction are consistent with the terms and conditions contained
in this Agreement; and (v) the Exchanging Party shall indemnify, defend and hold
the Cooperating Party harmless from any and all claims, demands, penalties,
loss, causes of action, suits, risks, liability, costs or expenses of any kind
or nature (including, without limitation, reasonable attorneys' fees) which the
Cooperating Party may incur or sustain, directly or indirectly, related to or in
connection with, or arising out of, the consummation of this
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transaction as a like-kind exchange as contemplated hereunder.
10.14. REIT. Buyer hereby advises Seller that Buyer is qualified as a
real estate investment trust under the provisions of the Internal Revenue Code
of 1986, as amended, and that, by reason thereof, the maintaining of such status
and the avoiding of any activity which might cause a penalty tax to be applied
is of material concern to Buyer. Accordingly, Seller agrees, at no cost or
expense to Seller, to make any reasonable modifications or amendments to this
Agreement requested by Buyer prior to Closing that may be necessary for Buyer to
maintain its status as a real estate investment trust or in order for it to
avoid a penalty tax; provided, however, that Seller shall have no obligation to
enter into any such modification or amendment that would in any way adversely
alter or affect, in Seller's sole judgment, Seller's rights, duties, or
obligations under this Agreement, or extend the Closing Date. If Seller declines
to modify or amend this Agreement for any reason in a manner which Buyer
determines, in the good faith exercise of its reasonable business judgment, is
necessary to maintain its status as a real estate investment trust or avoid a
penalty tax, Buyer shall have the right to terminate this Agreement by written
notice delivered to Seller prior to Closing. If Buyer exercises such termination
right, neither party shall have any further rights or obligations hereunder
(except with respect to provisions of this Agreement which recite that they
survive termination), the Deposit shall be returned to Buyer and all other funds
and documents deposited in escrow shall be returned to the party depositing the
same.
10.15. Confidentiality. Buyer and Seller agree that until the earlier
of (i) the Closing and (ii) termination of this Agreement pursuant to its terms,
neither Buyer nor Seller shall disclose or discuss the terms and conditions, nor
the existence, of the transaction contemplated hereby, except with those
employees, agents, servants and contractors of each that are providing services
with respect to this transaction, and to or with such other parties as both
Buyer and Seller agree are parties necessary to the consummation of this
transaction; provided that either Buyer or Seller may make such disclosures as
may be required under their normal securities reporting practices.
10.16. Seller's Post-Closing Covenant of Cooperation. Seller hereby
agrees to cooperate with Buyer or Buyer's auditors, at no expense or substantial
accounting time to Seller, after the Closing (i) by providing financial data
pertaining to the Property required by the Securities and Exchange Commission,
including the documentation requested on Exhibit J-1 (but without duplication of
any of the documents listed in Exhibit H which are delivered or otherwise made
available to Buyer pursuant to Section 4.2.5 above), and (ii) in delivering to
Buyer's auditors a certificate in the form of Exhibit J-2. Seller shall provide
such documentation and deliver such certificate in each instance within ten (10)
days after receipt of Buyer's request to do so.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SELLER: BRE PROPERTIES, INC.,
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a Maryland corporation
By: __________________ By:________________
Its: ___________________ Its:________________
Date: ____________, 1997 Date:__________, 1997
BUYER: BURNHAM PACIFIC PROPERTIES, INC.,
a California corporation
By: _______________________
Its: _______________________
Date: ____________, 1997
By: _______________________
Its: _______________________
Date: ____________, 1997
We acknowledge receipt of this Agreement; and we agree to act as escrow agent in
this transaction in accordance with the foregoing instructions:
TITLE COMPANY: CHICAGO TITLE COMPANY
By: _______________________
Its: _______________________
Date: ______________________
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<PAGE> 1
EXHIBIT 10.4
FIRST AMENDMENT TO REVOLVING LOAN AGREEMENT
THIS FIRST AMENDMENT TO REVOLVING LOAN AGREEMENT (this "Amendment") is
dated as of April 3, 1997 and entered into by and between BURNHAM PACIFIC
PROPERTIES, INC., a California corporation ("Borrower"), and NOMURA ASSET
CAPITAL CORPORATION, a Delaware corporation ("Lender"), with reference to the
following:
RECITALS
A. Borrower and Lender are parties to that certain Revolving Loan
Agreement dated as of November 18, 1996 (the "Loan Agreement"), pursuant to
which Lender agreed to make available to Borrower Secured Advances and Unsecured
Advances upon the terms and subject to the conditions set forth in the Loan
Agreement. Capitalized terms used herein and not otherwise defined have the
respective meanings ascribed to such terms in the Loan Agreement.
B. Borrower has requested that Lender make a one-time Unsecured Advance
to Borrower in the principal amount of $28,000,000.00 and a one-time Secured
Advance to Borrower in the principal amount of $42,000,000.00; and Lender has
agreed to make such Special Advances (as hereinafter defined) upon the terms and
subject to the conditions set forth herein. The Special Advances are not, and
shall not be deemed to be, included in the Commitment.
C. Lender and Borrower desire to amend the Loan Agreement to reflect
the Special Advances and to reaffirm the terms and provisions of the Loan
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree
as follows:
AGREEMENT
1. SPECIAL ADVANCES AMENDMENTS TO LOAN AGREEMENT. Effective as of the
Special Advances Effective Date (as hereinafter defined), the Loan Agreement is
hereby amended and modified as follows:
1.1 DEFINITIONS, ETC.
1.1.1 The definition of "Applicable LIBO Rate" set forth in
the Loan Agreement is hereby deleted in its entirety and replaced with the
following definition:
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"'APPLICABLE LIBO RATE' means, for any Interest Period, the
rate per annum of interest equal to the sum of (i) (x) 1.65% in the
case of Secured Advances, and (y) 1.75% in the case of Unsecured
Advances, plus (ii) LIBOR for such Interest Period."
1.1.2 The definition of "Rate Reduction Date" is hereby
deleted in its entirety.
1.1.3 In addition to the other "Events of Default" as defined
and described in the Loan Agreement, Borrower's failure to repay the Special
Advances on or before the later of (i) the Special Advances Maturity Date (as
hereinafter defined), or (ii) if the date for repayment of the Special Advances
is extended pursuant to the terms of Section 1.2.7 hereof, the Special Secured
Advance Maturity Date or the Special Unsecured Advance Maturity Date, as
applicable, without notice, grace or cure rights of any kind, shall constitute
an "Event of Default" under the Loan Agreement.
1.1.4 The definition of "Loan Documents" set forth in the Loan
Agreement is hereby amended to include the Special Advances Notes (as
hereinafter defined), and each reference in the Loan Agreement or this Amendment
to "Loan Documents" shall be deemed to include, without limitation, a reference
to the Special Advances Notes.
1.1.5 Section 2.3.3 of the Loan Agreement is hereby deleted in
its entirety and replaced with the following language:
"2.3.3 PAYMENT OF INTEREST. Accrued interest shall be due and
payable in arrears on each Interest Payment Date and on the Maturity
Date."
1.2 AMOUNT AND TERMS OF SPECIAL ADVANCES.
1.2.1 SPECIAL SECURED ADVANCE AND SPECIAL UNSECURED ADVANCE.
Upon the terms and subject to the conditions set forth in this Amendment and
notwithstanding anything to the contrary set forth in the Loan Agreement, Lender
hereby agrees to make available to Borrower on or after the Special Advances
Effective Date until the Special Advances Outside Closing Date (as hereinafter
defined), a one-time Secured Advance in the aggregate principal sum of Forty-Two
Million Dollars ($42,000,000.00) (the "Special Secured Advance") and a one-time
Unsecured Advance in the aggregate principal sum of Twenty-Eight Million Dollars
($28,000,000.00) (the "Special Unsecured Advance" and collectively with the
Special Secured Advance, the "Special Advances"). The Special Advances shall be
repaid as set forth herein, and once repaid may not be re-borrowed.
Notwithstanding Lender's agreement to make the Special Advances set forth
herein, neither the Secured Revolving Commitment nor the Unsecured Revolving
Commitment shall be increased or decreased as a result of this Amendment, nor
shall the availability under the Secured Revolving Commitment or the Unsecured
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Revolving Commitment be affected by the Special Advances. Except as set forth
herein to the contrary, the Special Secured Advance shall be for all purposes a
Secured Advance under the Loan Agreement, and the Special Unsecured Advance
shall be for all purposes an Unsecured Advance under the Loan Agreement.
1.2.2 NO PARTIAL SPECIAL ADVANCES. Borrower shall borrow the
Special Advances, if at all, in the aggregate amount thereof, but shall have no
right to request a partial borrowing of the Special Advances. Borrower shall
have no right to borrow the Special Secured Advance unless Borrower
simultaneously borrows the Special Unsecured Advance; and Borrower shall have no
right to borrow the Special Unsecured Advance unless Borrower simultaneously
borrows the Special Secured Advance.
1.2.3 FUNDING. Subject to and upon satisfaction of the
applicable conditions set forth in Section 2 hereof, Lender shall make the
proceeds of the Special Advances available to Borrower in Dollars by
transferring immediately available funds to the account(s) designated by
Borrower.
1.2.4 USE OF PROCEEDS. The proceeds of the Special Advances
shall be used by Borrower to purchase the fee interest in the real properties
described on Schedule 1 attached hereto (collectively, the "Acquisition
Properties").
1.2.5 INTEREST. (a) So long as no Event of Default exists, the
unpaid principal amount of the Special Secured Advance shall bear interest at
the rate per annum of interest (the "Special Secured Advance Interest Rate")
equal to the sum of (i) 1.65% plus (ii) LIBOR for the applicable Interest
Period. During such time as an Event of Default exists (whether or not the
Obligations have then become due and payable by acceleration) and from and after
the Special Advances Maturity Date (as such date may be extended pursuant to
Section 1.2.7 hereof), the unpaid principal amount of the Special Secured
Advance shall bear interest at the rate per annum equal to the sum of (i) the
Special Secured Advance Interest Rate plus (ii) 5%.
(b) So long as no Event of Default exists, the unpaid
principal amount of the Special Unsecured Advance shall bear interest at the
rate per annum of interest (the "Special Unsecured Advance Interest Rate") equal
to the sum of (i) 2.50% plus (ii) LIBOR for the applicable Interest Period.
During such time as an Event of Default exists (whether or not the Obligations
have then become due and payable by acceleration) and from and after the Special
Advances Maturity Date (as such date may be extended pursuant to Section 1.2.7
hereof), the unpaid principal amount of the Special Unsecured Advance shall bear
interest at the rate per annum equal to the sum of (i) the Special Unsecured
Advance Interest Rate plus (ii) 5%.
(c) The interest rates for each Interest Period under
the Special Advances Notes shall be determined by Lender as set forth in the
Loan Agreement.
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Accrued interest shall be due and payable in arrears on each Interest Payment
Date and on the Special Advances Maturity Date.
1.2.6 SPECIAL ADVANCES NOTES. The Special Secured Advance made
by Lender shall be evidenced by the special secured advance note in the
principal amount of $42,000,000.00, executed by Borrower and payable to the
order of Lender, in substantially the form of Exhibit A hereto (as amended from
time to time, the "Special Secured Advance Note"); and the Special Unsecured
Advance made by Lender shall be evidenced by the special unsecured advance note
in the principal amount of $28,000,000.00, executed by Borrower and payable to
the order of Lender, in substantially the form of Exhibit B hereto (as amended
from time to time, the "Special Unsecured Advance Note" and collectively with
the Special Secured Advance Note, the "Special Advances Notes").
1.2.7 REPAYMENT. (a) The unpaid principal amount of the
Special Advances shall be paid in full on the date (the "Special Advances
Maturity Date") which is sixty (60) days following the date (the "Special
Advances Funding Date") on which the Special Advances are made by Lender to
Borrower or, if such day is not a Business Day, on the next succeeding Business
Day, as such date may be extended as hereinafter provided.
(b) Borrower may, by written notice to Lender not
less than ten (10) days nor more than twenty-five (25) days before the Special
Advances Maturity Date, request that the Special Advances Maturity Date be
extended to the date that is ninety (90) days following the Special Advances
Maturity Date; provided that the Special Advances Maturity Date may be so
extended only one time. If Borrower shall so request such an extension, the
Special Advances Maturity Date shall be automatically extended to the date that
is ninety (90) days following the Special Advances Maturity Date; provided that
no such extension shall be effective unless (i) no Default or Event of Default
shall exist either on the date of the notice requesting such extension or on the
Special Advances Maturity Date then in effect, (ii) each of the representations
and warranties of Borrower set forth in the Loan Documents shall be true and
complete in all material respects on and as of each such date with the same
force and effect as if made on and as of each such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date) and (iii) Borrower shall have paid to
Lender an extension fee in immediately available funds in an amount equal to the
difference between (x) 0.25% of the Special Advances minus (y) Fifty Thousand
Dollars ($50,000.00).
(c) If the Special Advances Maturity Date has been
extended in accordance with subparagraph (b) above, then, Borrower may, by
written notice to Lender not less than thirty (30) days before the extended
Special Advances Maturity Date, request that (or, if Borrower has not timely
delivered such notice, Borrower shall be deemed to have requested that):
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(i) the Acquisition Properties be removed from the Collateral
Pool and the Special Secured Advance be converted into a long-term
mortgage loan to a special purpose entity secured by the Acquisition
Properties, which shall be due and payable in full on the date (the
"Special Secured Advance Maturity Date") which is ten (10) years
following the effective date of conversion of the Special Unsecured
Advance, shall bear interest and otherwise be upon other economic terms
to be determined by Lender, and shall be evidenced and secured by
documents and instruments substantially similar to the documents and
instruments evidencing and securing (x) the loan made by Lender to
Borrower on January 30, 1997 in the original principal amount of
$25,400,000.00 and (y) the loan made by Lender to Borrower on February
21, 1997 in the original principal amount of $33,100,000.00; and
(ii) the Special Unsecured Advance (and any portion of the
Special Secured Advance not converted to a long-term mortgage loan due
to a reduction of the amount of such loan by Lender as a result of its
underwriting) be converted into a loan, the principal of which shall
fully amortize in sixty (60) equal monthly payments and which shall be
due and payable in full on the date (the "Special Unsecured Advance
Maturity Date") which is five (5) years following the effective date of
conversion of the Special Unsecured Advance, shall be upon terms
substantially similar to standard mezzanine financing terms then being
quoted by Lender for similar unsecured loans (or if Lender is not then
quoting such terms, on such terms as may be determined by Lender in its
sole and absolute discretion), and shall be evidenced by documents
mutually acceptable to Borrower and Lender.
It shall be a condition precedent to Lender's agreement to convert the Special
Secured Advance and the Special Unsecured Advance as provided in this
subparagraph (c) that (i) no Default or Event of Default shall exist either on
the date of the notice requesting such conversion, on the extended Special
Advances Maturity Date then in effect or upon the conversion of the Special
Advances as contemplated hereby; (ii) each of the representations and warranties
of Borrower set forth in the Loan Documents shall be true and complete in all
material respects on and as of each such date with the same force and effect as
if made on and as of each such date (or, if any such representation or warranty
is expressly stated to have been made as of a specific date, as of such specific
date); (iii) Borrower (and, in the case of the Special Secured Advance, the
special purpose entity created by Borrower) shall have satisfied all of Lender's
customary conditions precedent to the extension of such long-term and/or
mezzanine financing, as the case may be, on or prior to the Special Advances
Maturity Date, including without limitation posting such reserves for deferred
maintenance, capital expenditures, taxes and insurance, securitization costs and
tenant improvements as Lender may reasonably require; (iv) Borrower (and, in the
case of the Special Secured Advance, the special purpose entity created by
Borrower) shall have executed and delivered to Lender all documents and
instruments reasonably requested by Lender in connection with the transactions
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contemplated hereby, (v) Borrower shall have paid all reasonable costs and
expenses incurred by Lender in connection with the proposed conversion of the
Special Advances, whether or not such conversion actually is consummated; (vi)
Borrower shall have paid to Lender a structuring fee in an amount equal to 1% of
the Special Advances; and (vii) Lender shall have completed its underwriting of
such long-term and mezzanine loans and agreed to make such loans. Nothing set
forth herein is intended as, nor shall it be deemed under any circumstances to
be, a commitment by Lender to make the permanent loan and/or the mezzanine loan
referred to herein.
1.2.8 PREPAYMENT. Notwithstanding anything to the contrary set
forth in Section 2.7.4 of the Loan Agreement, in the event Borrower issues and
sells any shares of Capital Stock, Borrower shall prepay the entire outstanding
principal amount of, and all accrued interest on, the Special Advances, from the
net cash proceeds of such issuance of Capital Stock. Such prepayment shall be
made not later than one (1) Business Day following the date of issuance of the
Capital Stock.
1.2.9 MANNER OF PAYMENT. Payments on the Special Advances
shall be made in the manner set forth in Section 2.8 of the Loan Agreement.
2. CONDITIONS PRECEDENT TO SPECIAL ADVANCES. The agreement of Lender to
make the Special Advances and to amend the Loan Agreement as set forth in
Section 1 above shall be subject to the satisfaction of the following conditions
precedent:
2.1 SPECIAL ADVANCES OUTSIDE CLOSING DATE. The Special Advances
Effective Date shall occur on or prior to April 3, 1997 (the "Special Advances
Outside Closing Date").
2.2 NOTICE OF BORROWING. Lender shall have received a Notice of
Borrowing, duly executed by a Responsible Officer of Borrower, which shall
request that the Special Advances be made as of a date not later than the
Special Advances Outside Closing Date.
2.3 CERTAIN DOCUMENTS. Lender shall have received and recorded, where
applicable, the following documents (collectively with this Amendment, the
"Amendment Documents"), duly executed and, if applicable, acknowledged, by
Borrower, and in form and substance satisfactory to Lender:
2.3.1 the Special Secured Advance Note;
2.3.2 the Special Unsecured Advance Note; and
2.3.3 an amendment to each of the Mortgages, the Assignment of
Leases, and the other Loan Documents, in each case reflecting that such Loan
Documents secure the repayment of the Special Secured Advance.
2.4 FEES AND EXPENSES PAID.
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2.4.1 Borrower shall have paid to Lender a structuring fee in an
amount equal to Fifty Thousand Dollars ($50,000.00) with respect to the Special
Advances, which fee shall be fully earned when paid and shall be non-refundable:
2.4.2 Borrower shall have paid all reasonable costs and expenses
incurred by Lender in connection with the transactions contemplated by this
Amendment or with respect to prior proposed amendments to the Loan Agreement,
prior, pending and abandoned additions to the Collateral Pool, and other
proposed secured loans by Lender to Borrower, whether or not consummated.
2.5 TITLE ENDORSEMENTS. Lender shall have received an endorsement, or
the irrevocable commitment of the Title Company to issue an endorsement, to each
title insurance policy insuring the Lien of a Mortgage, which endorsement shall
insure the continued priority of the Liens created under the Mortgage insured
thereby notwithstanding the amendments to the Loan Agreement contemplated
hereby, increasing the aggregate liability by the Secured Special Advance,
subject only to the Permitted Encumbrances, and otherwise in form and substance
satisfactory to Lender; and Borrower shall have paid to the Title Company (and
shall have delivered to Lender evidence of such payment) all expenses of the
Title Company in connection with the issuance of such endorsements and an amount
equal to the recording taxes payable in connection with the recording of the
amendments to the Mortgages and the Assignment of Leases in the appropriate
county land offices.
2.6 COUNSEL OPINION. Lender shall have received one or more favorable
legal opinions from counsel to Borrower stating that the Loan Documents, as
modified by the Amendment Documents, remain enforceable, that the Amendment
Documents have been duly authorized, executed and delivered and are valid and
binding obligations of Borrower, enforceable in accordance with their respective
terms, and with regard to such other matters as Lender may request.
2.7 CORPORATE AUTHORIZATION. Borrower shall have delivered to Lender
copies of the articles of incorporation and bylaws of Borrower, and all
amendments thereto, all certified by the relevant government officials or the
Secretary of Borrower, as appropriate, and certified copies of all corporate
action taken by Borrower approving the execution and delivery of this Amendment
and the other Amendment Documents, and the transactions contemplated thereby and
hereby.
2.8 REPRESENTATIONS AND WARRANTIES. All representations and warranties
made by Borrower under the Loan Agreement shall be true and correct in all
material respects as of the Special Advances Effective Date as if made on such
date, and Borrower shall have delivered to Lender a certificate of a Responsible
Officer of Borrower, dated as of the Special Effective Date, to the effect that
all representations and warranties of Borrower under the Loan Agreement were
true and correct in all material respects as of the date made and are true and
correct in all material respects as of the Special Advances
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Effective Date, as though made on and as of such date (except to the extent that
such representations and warranties expressly were made only as of a specific
date).
2.9 NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing under Loan Agreement, and Borrower shall
have delivered to Lender (i) a certificate of a Responsible Officer of Borrower,
dated as of the Special Advances Effective Date, to the effect that no Default
and no Event of Default shall have occurred and be continuing as of such date
under the Loan Documents and (ii) a Compliance Certificate, executed by a
Responsible Officer of Borrower.
2.10 NO MATERIAL ADVERSE CHANGE. There shall have occurred no Material
Adverse Change since September 30, 1996, and Borrower shall have delivered to
Lender a certificate of a Responsible Officer of Borrower, dated as of the
Special Advances Effective Date, to the effect that no such Material Adverse
Change shall have occurred.
2.11 DESIGNATION OF COLLATERAL PROPERTIES. Borrower shall have
delivered to Lender the information and documents required to be delivered under
Section 3.4 of the Loan Agreement as to each of the Acquisition Properties, and
each of the Acquisition Properties shall have been approved by Lender, in its
sole discretion, as eligible for inclusion in the Collateral Pool in accordance
with Section 3.4 of the Loan Agreement.
2.12 GENERAL. All other documents and legal matters in connection with
the Special Advances shall have been delivered or executed or recorded in form
and substance reasonably satisfactory to Lender and Lender shall have received
all such counterpart originals or certified copies thereof as Lender may
request.
2.13 SPECIAL ADVANCES EFFECTIVE DATE. The earliest date upon which all
of the conditions to (i) the making of the Special Advances and (ii) the
amendment of the Loan Agreement are either satisfied or waived by Lender in its
sole and absolute discretion is referred to herein as the "Special Advances
Effective Date."
3. CERTAIN AGREEMENTS OF LENDER. During the period (the "Special
Advances Term") from the Special Advances Funding Date through the Special
Advances Maturity Date, Borrower shall have the right to make borrowing requests
pursuant to Section 2.1 of the Loan Agreement. Lender hereby agrees that,
notwithstanding anything to the contrary set forth herein or in the Loan
Agreement, during the Special Advances Term, the Special Advances shall not be
included in the definition of "Debt" of Borrower for purposes of determining
whether Borrower has satisfied the financial conditions set forth in the Loan
Agreement, including without limitation the financial conditions set forth in
Section 3.2.4 (Pro Forma Debt Service Coverage Ratio) and/or Section 3.2.5 (Pro
Forma Consolidated Total Debt to Total Capitalization of the Borrower), and/or
whether Borrower is in compliance with the financial covenants set forth in the
Loan Agreement, including without limitation the financial covenants set forth
in Section 6.2.1 (Maximum Consolidated Total Debt to
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Total Capitalization of the Borrower) and/or Section 6.2.2 (Debt Service
Coverage Ratio) of the Loan Agreement. In addition, Lender and Borrower hereby
agree that, for purposes of determining the Available Amount under the Loan
Agreement, the Acquisition Properties shall not be included as Collateral
Properties.
4. REAFFIRMATION OF LOAN AGREEMENT. Borrower and Lender intend hereby
to amend the Loan Agreement only as set forth herein, and Borrower and Lender
hereby agree that, except as expressly amended hereby, all other terms and
conditions of the Loan Agreement are hereby confirmed and shall remain in full
force and effect.
5. INCORPORATION BY REFERENCE. All terms and provisions of the Loan
Agreement, unless specifically amended by this Amendment, are hereby deemed
incorporated by reference herein.
6. COUNTERPARTS. This Amendment may be executed in counterpart, each of
which shall constitute an original and all of which, when taken together, shall
constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
BORROWER:
BURNHAM PACIFIC PROPERTIES,
INC., a California corporation
By: ______________________________
Name:
Title:
LENDER:
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By: ______________________________
David S. Walker, Vice President
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS'
THE BOARD OF DIRECTORS
BURNHAM PACIFIC PROPERTIES, INC.:
We consent to the incorporation by reference in the registration statement (No.
33-68712) on Form S-3 of Burnham Pacific Properties, Inc. of our report dated
January 31, 1997, with respect to the combined statements of revenue and direct
operating expenses of The Downey Porfolio for each of the years in the
three-year period ended December 31, 1996, which report appears in the Form
8-K/A of Burnham Pacific Properties, Inc. dated January 31, 1997, filed on April
15, 1997 and to the reference to KPMG Peat Marwick LLP under the heading
"Experts" in the Prospectus. Such report contains a paragraph that states that
the combined statements of revenue and direct operating expenses were prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission as described in note 1. It is not intended to be a
complete presentation of The Downey Portfolio's combined revenue and expenses.
//KPMG Peat Marwick LLP//
San Diego, California
April 15, 1997
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EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS'
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus Supplement of Burnham
Pacific Properties, Inc. for the registration of 5,500,000 shares of its common
stock and to the incorporation by reference therein of our report dated March 9,
1997, with respect to the combined statements of gross income and direct
operating expenses of the BRE Portfolio for the three years in the period ended
December 31, 1996, included in Burnham Pacific Properties, Inc.'s Current Report
on Form 8-K dated January 31, 1997, filed with the Securities and Exchange
Commission.
//Ernst & Young LLP//
San Francisco, California
April 15, 1997
