SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended June 30, 1999.
___ Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
________________ to _______________.
Commission File Number 1-12222
BEDFORD PROPERTY INVESTORS, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 68-0306514
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
270 Lafayette Circle, Lafayette, CA 94549
(Address of principal executive offices)
Registrant's telephone number, including area code (925) 283-8910
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months or for such shorter period
that Registrant was required to file such reports and (2) has been
subject to such filing requirements for the past 90 days. Yes x No___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Outstanding as of July 30, 1999
Common Stock, $0.02 par value 21,813,247
BEDFORD PROPERTY INVESTORS, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Statement 1
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998 2
Consolidated Statements of Income for the three and six months ended
June 30, 1999 and 1998 3
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1998 and the six months ended June 30, 1999 4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION 14-18
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES
ABOUT MARKET RISK 19
PART II. OTHER INFORMATION
ITEMS 1 - 6 20-21
SIGNATURES 21
Exhibit 27 22
BEDFORD PROPERTY INVESTORS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENT
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. The information furnished
reflects all adjustments which are, in the opinion of management,
necessary for a fair presentation of results of operations for the
interim periods presented. Such adjustments are of a normal recurring
nature. These consolidated financial statements should be read in
conjunction with the notes to consolidated financial statements appearing
in the annual report to stockholders for the year ended December 31,
1998.
When used in the discussion in this Form 10-Q, the words "believes,"
"expects," "intends," "anticipates" and similar expressions are intended
to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties which could cause actual results to
differ materially from those discussed, including, but not limited to,
those set forth in the section entitled "Potential Factors Affecting
Future Operating Results," below. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as
of the date hereof. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements
which may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998 (Unaudited)
(in thousands, except share and per share amounts)
June 30, 1999 December 31, 1998
Assets:
Real estate investments:
Industrial buildings $309,633 $312,911
Office buildings 278,714 258,479
Operating properties held for sale 22,334 -
Properties under development 23,625 24,686
Land held for development 4,584 3,905
638,890 599,981
Less accumulated depreciation 22,954 18,523
615,936 581,458
Cash 1,314 1,286
Other assets 19,856 15,580
$637,106 $598,324
Liabilities and Stockholders' Equity:
Bank loan payable $ 93,984 $147,443
Mortgage loans payable 182,358 80,116
Accounts payable and accrued expenses 7,296 7,574
Dividend and distributions payable 8,554 8,191
Other liabilities 5,075 6,042
Total liabilities 297,267 249,366
Minority interest in consolidated
partnership 1,369 1,369
Stockholders' equity:
Common stock, par value $0.02 per share;
authorized 50,000,000 shares; issued and
outstanding 21,819,738 shares in 1999 and
22,666,856 shares in 1998 436 453
Additional paid-in capital 390,936 407,760
Accumulated dividends in
excess of net income (52,902) (60,624)
Total stockholders' equity 338,470 347,589
$637,106 $598,324
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (Unaudited)
(in thousands, except share and per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Six Months
1999 1998 1999 1998
Property operations:
Rental income $22,346 $17,118 $43,705 $32,479
Rental expenses:
Operating expenses 3,312 2,476 6,892 4,603
Real estate taxes 1,872 1,390 3,780 2,689
Depreciation and amortization 2,933 2,313 5,905 4,368
Income from property operations 14,229 10,939 27,128 20,819
General and administrative expenses (1,141) (879) (1,963) (1,714)
Interest income 51 46 81 93
Interest expense (4,583) (2,210) (8,416) (3,816)
Income before gain on sale of real estate
investments and minority interest 8,556 7,896 16,830 15,382
Gain on sale of real estate investments 7,043 - 7,611 -
Minority interest (34) (28) (65) (57)
Income before extraordinary item $15,565 $ 7,868 $24,376 $15,325
Loss on early extinguishment of debt (298) - (298) -
Net Income $15,267 $ 7,868 $24,078 $15,325
Earnings per share - basic:
Income before extraordinary item $ 0.71 $ 0.35 $ 1.10 $ 0.68
Extraordinary item-loss on early extinguishment of debt (0.01) - (0.01) -
Net Income $ 0.70 $ 0.35 $ 1.09 $ 0.68
Weighted average number of shares-basic 21,784,185 22,615,685 22,138,529 22,599,864
Earnings per share - assuming dilution:
Income before extraordinary item $ 0.71 $ 0.34 $ 1.09 $ 0.67
Extraordinary item-loss on early extinguishment of debt (0.01) - (0.01) -
Net Income $ 0.70 $ 0.34 $ 1.08 $ 0.67
Weighted number of shares - assuming dilution 21,940,644 22,930,761 22,286,907 22,944,806
</TABLE>
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
THE SIX MONTHS ENDED JUNE 30, 1999 (Unaudited)
(in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Accumulated Total
Additional dividends stock-
Common paid-in in excess of holders'
stock capital net income equity
Balance, December 31, 1997 $ 452 $408,209 $(62,235) $ 346,426
Issuance of common stock 1 1,366 - 1,367
Repurchase and retirement of common stock - (1,815) - (1,815)
Net income - - 31,496 31,496
Dividends to common stockholders
($1.32 per share) - - (29,885) (29,885)
Balance, December 31, 1998 $ 453 $407,760 $(60,624) $347,589
Issuance of common stock 5 1,082 - 1,087
Repurchase and retirement of common stock (22) (17,906) - (17,928)
Net income - - 24,078 24,078
Dividends to common stockholders
($0.75 per share) - - (16,356) (16,356)
Balance, June 30, 1999 $ 436 $390,936 $(52,902) $338,470
</TABLE>
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (Unaudited)
(in thousands)
1999 1998
Operating Activities:
Net income $ 24,078 $ 15,325
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest 65 57
Depreciation and amortization 6,823 4,983
Gain on sale of real estate investments (7,611) -
Change in other assets (3,296) (4,827)
Change in accounts payable and
accrued expenses (676) 162
Change in other liabilities (863) (1,591)
Net cash provided by operating activities 18,520 14,109
Investing Activities:
Investments in real estate (47,051) (129,543)
Proceeds from sale of real estate investments 15,334 -
Net cash used by investing activities (31,717) (129,543)
Financing Activities:
Proceeds from bank loan payable 62,511 126,544
Repayments of bank loan payable (116,298) (18,189)
Proceeds from mortgage loans payable 105,669 21,110
Repayments of mortgage loans payable (5,758) (470)
Issuance of common stock 1,087 350
Redemption of partnership units - (159)
Payment of dividends and distributions (16,058) (13,608)
Repurchase and retirement of common stock (17,928) -
Net cash provided by financing activities 13,225 115,578
Net increase in cash 28 144
Cash at beginning of period 1,286 1,361
Cash at end of period $ 1,314 $ 1,505
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, net of amounts
capitalized of
$912 in 1999 and $1,310 in 1998 $ 7,349 $ 2,644
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. The Company and Basis of Presentation
The Company
Bedford Property Investors Inc. (the Company) is a Maryland real estate
investment trust with investments primarily in industrial and suburban
office properties concentrated in the Western United States. The
Company's Common Stock trades under the symbol "BED" on both the New York
Stock Exchange and the Pacific Exchange.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the requirements of Form 10-Q and,
therefore, do not include all information and footnotes necessary for a
presentation of financial condition, results of operations and cash flows
in conformity with generally accepted accounting principles. The
unaudited interim consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
presentation of results for the interim periods presented in compliance
with the instructions to Form 10-Q. All such adjustments are of a
normal, recurring nature.
Per Share Data
Per share data are based on the weighted average number of common shares
outstanding during the year. Stock options issued under the Company's
stock option plans are also included in the calculation of diluted per
share data if, upon assumed exercise, they would have a dilutive effect.
The diluted earnings per share calculation also assumes conversion of the
limited partnership units of Bedford Realty Partners, L.P., if such
conversion would have a dilutive effect, as of the beginning of the year.
Recent Accounting Pronouncements
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, Reporting on the Costs of Start-up
Activities. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The adoption of this statement did not have a
material impact on the Company's financial statements.
In June 1998, the FASB issued Financial Accounting Standard No. 133,
Accounting for Derivatives Instruments and Hedging Activities. SFAS 133
is effective for all fiscal quarters of fiscal years beginning after June
15, 2000. Management believes that the adoption of this statement will
not have a material impact on the Company's financial statements.
Note 2. Real Estate Investments
As of June 30, 1999, the Company's real estate investments were
diversified by property type as follows (dollars in thousands):
Number of Percent
Properties Cost of Total
Industrial buildings 66 $309,633 48%
Office buildings 25 278,714 44%
Operating properties held for sale 5 22,334 3%
Properties under development 8 23,625 4%
Land held for development 5 4,584 1%
Total 109 638,890 100%
Note 2 - Real Estate Investments
The following table sets forth the Company's real estate investments as
of June 30, 1999 (in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C>
Less
Development Accumulated
Land Building In-Progress Depreciation Total
INDUSTRIAL BUILDINGS
Northern California $ 44,238 $105,944 $ - $ 6,989 $143,193
Arizona 16,998 43,710 - 1,851 58,857
Southern California 15,434 36,861 - 2,640 49,655
Greater Kansas City Area 2,773 13,083 - 1,422 14,434
Texas 2,981 11,114 - 276 13,819
Greater Portland Area 2,652 8,651 - 955 10,348
Denver, Colorado 1,911 3,283 - 297 4,897
Total Industrial 86,987 222,646 - 14,430 295,203
SUBURBAN OFFICE BUILDINGS
Northern California 6,023 17,760 - 863 22,920
Arizona 9,149 17,260 - 755 25,654
Southern California 9,362 21,404 - 1,043 29,723
Greater Kansas City Area 3,330 5,451 - 394 8,387
Texas 2,766 7,093 - 327 9,532
Denver, Colorado 5,560 45,469 - 1,264 49,765
Greater Seattle Area 21,153 94,211 - 2,567 112,797
Reno, Nevada 2,102 10,621 - 538 12,185
Total Suburban Office 59,445 219,269 - 7,751 270,963
PROPERTIES HELD FOR SALE
Northern California 4,153 8,282 - 526 11,909
Southern California 1,558 3,475 - 144 4,889
Greater Kansas City Area 1,144 3,722 - 103 4,763
Total Operating Properties Held
for Sale 6,855 15,479 - 773 21,561
PROPERTIES UNDER DEVELOPMENT
Northern California - - 2,534 - 2,534
Arizona - - 15,615 - 15,615
Colorado - - 3,188 - 3,188
Greater Seattle Area - - 2,288 - 2,288
Total Properties Under Development - - 23,625 - 23,625
LAND HELD FOR DEVELOPMENT
Northern California 2,664 - - - 2,664
Southern California 701 - - - 701
Texas 188 - - - 188
Colorado 1,031 - - - 1,031
Total Land Held for Development 4,584 - - - 4,584
Total $157,871 $457,394 $23,625 $22,954 $615,936
</TABLE>
Company personnel directly manage all but eleven of the Company's
properties from regional offices in Lafayette, CA; Tustin, CA; Phoenix,
AZ; Lenexa, KS; and Seattle, WA. For the eleven properties located in
markets not served by one of the Company's regional offices, the Company
has subcontracted management to local firms. All financial record-
keeping is centralized at the Company's corporate office in Lafayette,
CA.
The Company has contractual construction commitments of $4.8 million at
June 30, 1999 relating to seven of its properties under development.
Note 3. Debt
Bank Loan Payable
In June 1998, the Company amended and restated its secured revolving
credit facility with Bank of America. Under this facility, which matures
June 15, 2001, the Company can borrow up to $175 million on a secured
basis. The facility contains an unsecured sub-line of $50 million.
Secured loans bear interest at a floating rate equal to either the
lender's published "reference rate" or LIBOR plus a margin ranging from
1.10% to 1.35% depending on the Company's leverage level. The interest
rate on the unsecured loans is either the lender's published "reference
rate" or LIBOR plus a margin of 1.50%. The credit facility contains
various restrictive covenants including, among other things, a covenant
limiting quarterly dividends to 95% of average Funds From Operations.
As of June 30, 1999, the Company was in compliance with the covenants and
requirements of its revolving credit facility, which had an outstanding
balance of $93,984,000. The credit facility is secured by mortgages on
44 properties (which properties collectively accounted for approximately
46% of the Company's Annualized Base Rent and approximately 41% of the
Company's total assets as of June 30, 1999), together with the rental
proceeds from such properties.
In February 1999, the credit facility was restructured to include a $30
million bridge facility which bore the same interest rate as the $175
million facility. In May 1999, the Company obtained a total of $108
million of new first mortgage financing from Teachers Insurance and
Annuity Association of America (TIAA). The proceeds from the mortgage
loans were used to pay off and retire the $30 million bridge facility and
pay down the outstanding balance on its $175 million line of credit.
The daily weighted average amount owing to the bank was $104,813,000 and
$48,342,000 for the six months ended June 30, 1999 and 1998,
respectively. The weighted average interest rates in each of these
periods was 6.69% and 7.28%, respectively. The effective interest rate
at June 30, 1999 was 6.38%.
Mortgage Loans Payable
In May 1999, the Company obtained a total of $108 million of new first
mortgage financing from Teachers Insurance and Annuity Association of
America (TIAA). The financing consists of a $43.45 million 10-year loan,
a $37.20 million 8-year loan, and a $27.35 million 6-year loan. The
mortgage financing is secured by 16 properties (which properties
collectively accounted for approximately 25% of the Company's Annualized
Base Rent and approximately 22% of the Company's total assets as of June
30, 1999), together with the rental proceeds from such properties. These
mortgage loans bear interest at a fixed rate of 7.17%.
Mortgage loans payable at June 30, 1999 consist of the following (in
thousands):
Floating rate note due December 15, 1999,
current rate of 8.00% $ 1,783
7.5% note due January 1, 2002 24,097
7.02% note due March 15, 2003 19,419
8.9% note due July 31, 2006 8,596
6.91% note due July 31, 2006 20,463
7.17% note due June 1, 2005 27,350
7.17% note due June 1, 2007 37,200
7.17% note due June 1, 2009 43,450
$182,358
The mortgage loans are collaterized by 36 properties (which properties
collectively accounted for approximately 46% of the Company's
Annualized Base Rent and approximately 40% of the Company's total assets
as of June 30, 1999).
The following table presents scheduled principal payments on mortgage
loans as of June 30, 1999 (in thousands):
Twelve month period ending June 30, 2000 $ 4,671
Twelve month period ending June 30, 2001 3,104
Twelve month period ending June 30, 2002 26,062
Twelve month period ending June 30, 2003 21,009
Twelve month period ending June 30, 2004 2,851
Thereafter 124,661
$182,358
Note 4. Comprehensive Income
There are no adjustments necessary to net income as presented in the
accompanying consolidated statements of income to derive comprehensive
income in accordance with FASB Statement No. 130, Reporting Comprehensive
Income.
Note 5. Segment Disclosure
The Company has five reportable segments organized by the region in which
they operate: Northern California (Northern California, Utah and Nevada),
Southwest (Arizona and greater Austin, Texas), Southern California,
Northwest (greater Portland, Oregon and greater Seattle, Washington), and
Midwest (greater Kansas City, Kansas/Missouri, greater Dallas, Texas and
Colorado).
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based upon income from real estate from the combined
properties in each segment.
Note 5. Segment Disclosure (continued)
For the six months ended June 30, 1999 (in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Northern Southern Corporate
California Southwest California Northwest Midwest & Other Consolidated
Rental income(2) $ 16,698 $ 7,442 $ 5,812 $ 6,897 $ 6,852 $ 4 $ 43,705
Operating expenses and real estate taxes 3,528 1,873 1,124 1,837 2,111 199 10,672
Depreciation and amortization 2,057 990 793 1,078 987 - 5,905
Income from property operations $ 11,113 $ 4,579 $ 3,895 $ 3,982 $ 3,754 $ (195) $ 27,128
Percent of income from property operations 41% 17% 14% 15% 14% (1%) 100%
Interest income(1) 12 - - 2 - 67 81
Interest expense - - - - - (8,416) (8,416)
General and administrative expenses - - - - - (1,963) (1,963)
Income before minority interest and
gain on sale 11,125 4,579 3,895 3,984 3,754 (10,507) 16,830
Minority interest - - - - - (65) (65)
Gain on sale of real estate investments 7,566 - 45 - - - 7,611
Income before extraordinary item 18,691 4,579 3,940 3,984 3,754 (10,572) 24,376
Loss on early extinguishment of debt (298) - - - - - (298)
Net income $ 18,393 $ 4,579 $ 3,940 $ 3,984 $ 3,754 $(10,572) $ 24,078
Real estate investments $204,322 $123,900 $ 88,795 $128,954 $ 92,919 $ - $638,890
Additions/dispositions of
real estate investments $ (5,267) $ 14,468 $ 11,397 $ 15,704 $ 2,607 $ - $ 38,909
Total assets $210,499 $115,021 $ 94,379 $117,931 $ 90,832 $ 8,444 $637,106
</TABLE>
(1) The interest income in the Northern California and Northwest segments
represents interest earned from tenant notes receivable.
(2) $4 in Corporate rental income represents rental income and expense
reimbursement for Mariner Court (sold 7/97).
Note 5. Segment Disclosure (continued)
For the six months ended June 30, 1998 (in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Northern Southern Corporate
California Southwest California Northwest Midwest & Other Consolidated
Rental income(1)(2) $ 14,479 $ 5,372 $ 4,960 $ 3,018 $ 4,666 $ (16) $ 32,479
Operating expenses and real estate taxes 3,264 1,304 1,014 288 1,155 267 7,292
Depreciation and amortization 1,806 725 686 509 642 - 4,368
Income from property operations $ 9,409 $ 3,343 $ 3,260 $ 2,221 $ 2,869 $ (283) $ 20,819
Percent of income from property operations 45% 16% 16% 10% 14% (1%) 100%
Interest income - - - - - 93 93
Interest expense - - - - - (3,816) (3,816)
General and administrative expenses - - - - - (1,714) (1,714)
Income before minority interest and
gain on sale 9,409 3,343 3,260 2,221 2,869 (5,720) 15,382
Minority interest - - - - - (57) (57)
Gain on sale of real estate investments - - - - - - -
Net income $ 9,409 $ 3,343 $ 3,260 $ 2,221 $ 2,869 $ (5,777) $ 15,325
Real estate investments $194,386 $ 93,268 $ 76,924 $106,846 $ 89,436 $ - $560,860
Additions to real estate investments $ 8,979 $ 25,256 $ 5,875 $ 50,448 $ 38,231 $ - $128,789
Total assets $195,609 $ 90,683 $ 80,765 $104,935 $ 86,190 $ 4,927 $563,109
</TABLE>
(1) Rental income in the Northern California and Northwest segments
includes interest earned from tenant notes receivable of $5 and $4,
respectively.
(2) ($16) in Corporate rental income represents rental refund and prior
year expense reimbursement for Academy Place (sold 10/97).
Note 6. Fair Value of Financial Instruments
The carrying value of trade accounts payable and receivable approximate
fair value due to the short-term maturity of these instruments.
Management has determined that the market value of the $180,575,000 fixed
rate debt is approximately $176,602,000 based on the terms of existing
debt compared to those available in the marketplace. Variable rate debt
bears interest at current market rates.
Note 7. Earnings per Share
Following is a reconciliation of earnings per share:
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
Basic:
Income before extraordinary item $ 15,565 $ 7,868 $ 24,376 $ 15,325
Extraordinary item-loss on early extinguishment of debt (298) - (298) -
Net income $ 15,267 $ 7,868 $ 24,078 $ 15,325
Weighted average number of shares - basic 21,784,185 22,615,685 22,138,529 22,599,864
Income before extraordinary item $ 0.71 $ 0.35 $ 1.10 $ 0.68
Extraordinary item-loss on early extinguishment of debt (0.01) - (0.01) -
Net income $ 0.70 $ 0.35 $ 1.09 $ 0.68
Diluted:
Income before extraordinary item $ 15,565 $ 7,868 $ 24,376 $ 15,325
Add: Minority interest 34 28 65 57
Extraordinary item-loss on early extinguishment of debt (298) - (298) -
Net income for diluted earnings per share $ 15,301 $ 7,896 $ 24,143 $ 15,382
Weighted average number of shares (from above) 21,784,185 22,615,685 22,138,529 22,599,864
Weighted average shares of dilutive stock
options using average period stock price
under the treasury stock method 69,571 225,267 61,490 252,527
Weighted average shares issuable upon the
conversion of operating partnership units 86,888 89,809 86,888 92,415
Weighted average number of shares -
assuming dilution 21,940,644 22,930,761 22,286,907 22,944,806
Income before extraordinary item $ 0.71 $ 0.34 $ 1.09 $ 0.67
Extraordinary item-loss on early extinguishment of debt (0.01) - (0.01) -
Net income for diluted earnings per share $ 0.70 $ 0.34 $ 1.08 $ 0.67
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The Company's operations consist of developing, owning and operating
industrial and suburban office properties located primarily in the
Western United States.
Increases in revenues, expenses and net income in the three and six
months ended June 30, 1999 when compared with the same periods in 1998
were due primarily to property additions during 1999 and 1998, offset
in part by the sale of operating properties as follows:
<TABLE>
<S> <C> <C> <C> <C>
Activities from January 1, 1998 Activities from July 1, 1998
to June 30, 1998 to June 30, 1999
Number of Square Number of Square
Operating Properties Feet Operating Properties Feet
Acquisitions
Industrial 8 442,000 10 691,000
Office 3 318,000 4 397,000
11 760,000 14 1,088,000
Sales
Industrial - - 1 25,000
Office - - 1 114,000
- - 2 139,000
</TABLE>
Three Months Ended June 30, 1999 Compared with Three Months Ended June 30, 1998
Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $3,290,000 or 30% in 1999 compared with 1998.
This is due to an increase in rental income of $5,228,000 partially
offset by an increase in rental expenses (which include operating
expenses, real estate taxes and depreciation and amortization) of
$1,938,000.
The increase in rental income and expenses is primarily attributable
to properties acquired and, to a lesser extent, properties developed
during 1999 and 1998. These activities increased rental income and
rental expenses in 1999 by $4,378,000 and $2,194,000, respectively, as
compared to 1998. This was partially offset by the sale of one
industrial property in March 1999 and one office property in June 1999
which resulted in a reduction in rental income and rental expenses of
$194,000 and $188,000, respectively. The remaining increase in rental
income is due to increased occupancy in 1999 as compared to 1998, as
well as an overall increase in rental rates.
Expenses
Interest expense, which includes amortization of loan fees, increased
$2,373,000 or 107% in 1999 compared with 1998. The increase is
attributable to the Company's higher level of borrowings and related
costs to finance the property additions during 1998 and 1999 and the
repurchase of shares since December 1998. The amortization of loan
fees was $466,000 and $259,000 in the second quarter of 1999 and 1998,
respectively. General and administrative expenses increased $262,000
or 30% in 1999 compared with 1998. The increase is attributable to
the Company's use of an outside investor relations firm in 1999.
Gain on sale
In March 1999, the Company sold 417 Eccles in South San Francisco,
California, for a net sales price of $1,789,000, which resulted in a
gain of approximately $568,000. In June 1999, the Company sold
Woodlands Tower II in Salt Lake City, Utah, for a net sales price of
$13,122,000, which resulted in a gain of approximately $6,998,000. This
sale was completed as part of a tax-deferred exchange, under Section
1031 of the Internal Revenue Code, in which the Company acquired three
properties. In June 1999, the Company also sold Oak Ridge Land in
Vista, California, for a net sales price of $423,000, which resulted
in a gain of approximately $45,000.
Six Months Ended June 30, 1999 Compared with Six Months Ended June 30, 1998
Income from Property Operations
Income from property operations increased $6,309,000 or 30% in 1999
compared with 1998. This is due to an increase in rental income of
$11,226,000 partially offset by an increase in rental expenses (which
include operating expenses, real estate taxes and depreciation and
amortization) of $4,917,000.
The increase in rental income and expenses is primarily attributable
to properties acquired and, to a lesser extent, properties developed
during 1999 and 1998. These activities increased rental income and
rental expenses in 1999 by $9,583,000 and $4,923,000, respectively, as
compared to 1998. This was partially offset by the sale of one
industrial property in March 1999 and one office property in June 1999
which resulted in a reduction in rental income and rental expenses of
$158,000 and $136,000, respectively. The remaining increase in rental
income and expense is due to increased occupancy in 1999 as compared
to 1998, as well as an overall increase in rental rates.
Expenses
Interest expense, which includes amortization of loan fees, increased
$4,600,000 or 121% in 1999 compared with 1998. The increase is
attributable to the Company's higher level of borrowings and related
costs to finance the property additions during 1998 and 1999 and the
repurchase of shares since December 1998. The amortization of loan
fees was $767,000 and $512,000 in the first six months of 1999 and
1998, respectively. General and administrative expenses increased
$249,000 or 15% in 1999 compared with 1998. The increase is
attributable to the Company's use of an outside investor relations
firm in 1999.
Gain on sale
In March 1999, the Company sold 417 Eccles in South San Francisco,
California, for a net sales price of $1,789,000, which resulted in a
gain of approximately $568,000. In June 1999, the Company sold
Woodlands Tower II in Salt Lake City, Utah, for a net sales price of
$13,122,000, which resulted in a gain of approximately $6,998,000.
This sale was completed as part of a tax-deferred exchange, under
Section 1031 of the Internal Revenue Code, in which the Company
acquired three properties. In June 1999, the Company also sold Oak
Ridge Land in Vista, California, for a net sales price of $423,000,
which resulted in a gain of approximately $45,000.
Liquidity and Capital Resources
In June 1998, the Company amended and restated its secured revolving
credit facility with Bank of America. Under this facility, which
matures June 15, 2001, the Company can borrow up to $175 million on a
secured basis. The facility contains an unsecured sub-line of $50
million. Secured loans bear interest at a floating rate equal to
either the lender's published "reference rate" or LIBOR plus a margin
ranging from 1.10% to 1.35% depending on the Company's leverage level.
The interest rate on the unsecured loans is either the lender's
published "reference rate" or LIBOR plus a margin of 1.50%. As of
June 30, 1999, the Company was in compliance with the covenants and
requirements of its revolving credit facility, which had an
outstanding balance of $93,984,000 and remaining availability of
$77,958,000.
In February 1999, the credit facility was restructured to include a
$30 million bridge facility which bore the same interest rate as the
$175 million facility. In May 1999, the Company obtained a total of
$108 million of new first mortgage financing from Teachers Insurance
and Annuity Association of America (TIAA). The proceeds from the
mortgage loans were used to pay off and retire the $30 million bridge
facility and pay down the outstanding balance on its $175 million line
of credit.
The financing of the TIAA Mortgage consists of a $43.45 million 10-
year loan, a $37.20 million 8-year loan, and a $27.35 million 6-year
loan. The mortgage financing is secured by 16 properties, together
with the rental proceeds from such properties. These mortgage loans
bear interest at a fixed rate of 7.17%.
The Company anticipates that the cash flow generated by its real
estate investments and funds available under the above credit facility
will be sufficient to meet its short-term liquidity requirements.
During the six months ended June 30, 1999, the Company's operating
activities provided cash flow of $18,520,000. Investing activities
utilized cash of $47,051,000 for real estate acquisitions, offset by
proceeds from real estate sales of $15,334,000. Financing activities
provided net cash flow of $13,225,000 consisting of the net proceeds
from bank borrowings and mortgage loans of $168,180,000 and net
proceeds from the exercise of stock options of $1,087,000, offset by
repayment of bank borrowings and mortgage loans of $122,056,000,
payment of dividends and distributions of $16,058,000, and the
repurchase of 1,126,125 shares of common stock for $17,928,000.
The Company expects to fund the cost of acquisitions, capital
expenditures, costs associated with lease renewals and reletting of
space, repayment of indebtedness, and development of properties from
(i) cash flow from operations, (ii) borrowings under the credit
facility and, if available, other indebtedness (which may include
indebtedness assumed in acquisitions), (iii) the sale of certain real
estate investments, and (iv) the sale of equity securities and,
possibly, the issuance of equity securities in connection with
acquisitions.
The ability to obtain mortgage loans on income producing property is
dependent upon the ability to attract and retain tenants and the
economics of the various markets in which the properties are located,
as well as the willingness of mortgage-lending institutions to make
loans secured by real property. The ability to sell real estate
investments is partially dependent upon the ability of purchasers to
obtain financing at commercially reasonable rates.
Potential Factors Affecting Future Operating Results
At the present time, borrowings under the Company's bank credit
facility bear interest at a floating rate. The Company recognizes
that its results from operations may be impacted negatively by future
increases in interest rates and any additional borrowings to finance
additional property acquisitions.
While the Company has historically been successful in renewing and
reletting space, the Company is subject to the risk that certain
leases expiring in 1999 and beyond may not be renewed or the terms of
renewal may be less favorable to the Company than current lease terms.
The Company expects to incur costs in making improvements or repairs
to its portfolio of properties required by new or renewing tenants and
expects to incur expenses associated with brokerage commissions
payable in connection with the reletting of space.
Many other factors affect the Company's actual financial performance
and may cause the Company's future results to be markedly outside of
the Company's current expectations. These factors include the
following:
Inflation
Most of the leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing the Company's exposure to increases in
costs and operating expenses resulting from inflation. Inflation,
however, could result in an increase in the Company's borrowing and
other operating expense.
Dividends
Common stock dividends declared for the first and second quarters of
1999 were $0.36 and $0.39 per share, respectively. Distributions
declared for the first and second quarters of 1999 were $0.36 and
$0.39 per OP Unit, respectively. Consistent with the Company's
policy, dividends and distributions were paid in the quarter after the
quarter in which they were declared.
Government Regulations
The Company's properties are subject to various federal, state and
local regulatory requirements such as local building codes and other
similar regulations. The Company believes its properties are
currently in substantial compliance with all applicable regulatory
requirements, although expenditures at its properties may be required
to comply with changes in these laws. No material expenditures are
contemplated at this time in order to comply with any such laws or
regulations.
Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real estate is liable for the
costs of removal or remediation of certain hazardous or toxic
substances released on, above, under, or in such property. Such laws
often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The costs of such removal or remediation could be
substantial.
Additionally, the presence of such substances or the failure to
properly remediate such substances may adversely affect the owner's
ability to borrow using such real estate as collateral.
The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any
of its present or former properties. The Company does not anticipate
that compliance with federal, state and local environmental protection
regulations will have any material adverse impact on the financial
position, results of operations or liquidity of the Company. There
can be no assurance, however, that future discoveries or events at the
Company's properties, or changes to current environmental regulations,
will not result in such a material adverse impact.
Financial Performance
Management considers Funds From Operations (FFO) to be one measure of
the performance of an equity REIT. FFO during the three and six
months ended June 30, 1999 amounted to $11,489,000 and $22,735,000,
respectively. During the same periods in 1998, FFO amounted to
$10,209,000 and $19,750,000, respectively. FFO is used by financial
analysts in evaluating REITs and can be one measure of a REIT's
ability to make cash distributions. Presentation of this information
provides the reader with an additional measure to compare the
performance of REITs. FFO is generally defined by the National
Association of Real Estate Investment Trusts as net income (loss)
(computed in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructurings, sales
of property and non-recurring items, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships
and joint ventures. FFO was computed by the Company in accordance
with this definition. FFO does not represent cash generated by
operating activities in accordance with generally accepted accounting
principles; it is not necessarily indicative of cash available to fund
cash needs and should not be considered as an alternative to net
income (loss) as an indicator of the Company's operating performance
or as an alternative to cash flow as a measure of liquidity.
Further, FFO as disclosed by other REITs may not be comparable to the
Company's presentation.
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Funds From Operations
(in thousands):
Net Income $15,267 $ 7,868 $24,078 $15,325
Add Back:
Depreciation and Amortization 2,933 2,313 5,905 4,368
Minority Interest 34 28 65 57
Extraordinary Item 298 - 298 -
Less Gain on Sale (7,043) - (7,611) -
Funds From Operations $11,489 $10,209 $22,735 $19,750
Year 2000 Compliance
In 1997 the Company purchased and put in place new information system
hardware and software to accommodate the rapid growth of its real
estate portfolio. The Company believes the new information system
hardware and software is Year 2000 compliant. In addition, the
Company has evaluated Year 2000 compliance risk relative to operations
of its rental properties, and retained the services of a team of
consultants. These consultants have been conducting a survey of the
Company's outside relationships (e.g., tenants, vendors and creditors)
to assess their state of readiness in regards to Year 2000 compliance.
The survey indicates that a majority of these parties' information
systems are or will be Year 2000 compliant. In addition, the Company
is performing a detailed Information Technology review of its key
outside relationships. As of June 30, 1999, the Company has spent
approximately $25,000 on surveys and systems reviews and expects to
spend approximately $60,000 during the third quarter of 1999. The
Company is in the process of developing a contingency plan in the
event of non-compliance. The Company believes that Year 2000
compliance will not have a material impact on the Company's financial
statements.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate changes primarily as a result
of its line of credit and long-term debt used to maintain liquidity
and fund capital expenditures and expansion of the Company's real
estate investment portfolio and operations. The Company's interest
rate risk management objective is to limit the impact of interest rate
changes on earnings and cash flows and to lower its overall borrowing
costs. To achieve its objectives the Company balances its borrowings
between fixed and variable rate debt. The Company does not enter into
derivative or interest rate transactions for speculative purposes.
The Company's interest rate risk is monitored using a variety of
techniques. The table below presents the principal amounts, weighted
average interest rates, fair values and other terms required by year
of expected maturity to evaluate the expected cash flows and
sensitivity to interest rate changes (in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
Fixed rate debt $2,888 $ 3,104 $26,062 $21,009 $2,851 $124,661 $180,575 $176,602
Average interest rate 7.27% 7.27% 7.47% 7.05% 7.27% 7.24% 7.25% 7.75%
Variable rate LIBOR debt - $93,984 - - - - $ 93,984 $ 93,984
Average interest rate - 6.38% - - - - 6.38% 6.38%
Variable rate prime debt $1,783 - - - - - $ 1,783 $ 1,783
Average interest rate 8.00% - - - - - 8.00% 8.00%
</TABLE>
As the table incorporates only those exposures that exist as of June
30, 1999, it does not consider those exposures or positions which
could arise after that date. Moreover, because firm commitments are
not presented in the table above, the information presented therein
has limited predictive value. As a result, the Company's ultimate
realized gain or loss with respect to interest rate fluctuations will
depend on the exposures that arise during the period, the Company's
hedging strategies at that time, and interest rates.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The Company held its annual stockholders' meeting on May 13, 1999, to
consider the following proposals:
1. Election of seven directors by the holders of
the Common Stock for the ensuing year.
2. To ratify the appointment by the Board of
Directors of the Company's independent public
accountants for the year ending December 31,
1999.
All proposals were approved. Following are the results of the voting
for proposals 1 and 2:
For Withheld Abstain
1. To elect seven directors to serve until the
next annual meeting of stockholders
Claude M. Ballard 20,725,121 25,731
Peter B. Bedford 20,727,795 24,057
Anthony M. Downs 20,722,665 29,187
Thomas G. Eastman 20,724,295 27,557
Anthony M. Frank 20,724,865 26,987
Thomas H. Nolan 20,724,295 27,557
Martin I. Zankel 20,567,189 184,663
2. To ratify the appointment by the Board of
Directors of the Company's independent
public accountants 20,719,106 15,224 17,520
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit No. Exhibit
3.1 Charter of the Company, as amended, is incorporated
herein by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997.
3.2 Amended and Restated Bylaws of the Company are
incorporated herein by reference to Exhibit 3.2 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.
10.22* Promissory Note made as of May 28, 1999, by and
between Bedford Property Investors, Incorporated and
Teachers Insurance and Annuity Association of
America.
10.23* Promissory Note made as of May 28, 1999, by and
between Bedford Property Investors, Incorporated and
Teachers Insurance and Annuity Association of
America.
10.24* Promissory Note made as of May 28, 1999, by and
between Bedford Property Investors, Incorporated and
Teachers Insurance and Annuity Association of
America.
27* Financial Data Schedules
* Filed herewith
B. Reports on Form 8-K
The Company filed on May 11, 1999, a report on Form 8-K dated
May 11, 1999, reporting items 5 and 7.
The following financial statements were filed: (i) Historical
Summary of Gross Income and Direct Operating Expenses for
Cabrillo Executive Center, Parkpoint Business Center,
Cimarron Business Park and Texaco Building for the year ended
December 31, 1997, and (ii) pro forma income statement
showing the effect resulting from all the Company's
acquisitions through December 31, 1998.
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 of the undersigned, hereunto duly authorized.
Dated: July 30, 1999
BEDFORD PROPERTY INVESTORS, INC.
(Registrant)
By: /s/ HANH KIHARA
Hanh Kihara
Senior Vice President and
Chief Financial Officer
By: /s/ KRISTA K. ROWLAND
Krista K. Rowland
Vice President Controller
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> $ 1,314
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,079
<PP&E> 638,890
<DEPRECIATION> (22,954)
<TOTAL-ASSETS> 637,106
<CURRENT-LIABILITIES> 18,050
<BONDS> 276,342
<COMMON> 436
0
0
<OTHER-SE> 338,034
<TOTAL-LIABILITY-AND-EQUITY> 637,106
<SALES> 0
<TOTAL-REVENUES> 43,786
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,540
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,416
<INCOME-PRETAX> 24,376
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,376
<DISCONTINUED> 0
<EXTRAORDINARY> 298
<CHANGES> 0
<NET-INCOME> 24,078
<EPS-BASIC> $ 1.09
<EPS-DILUTED> $ 1.08
</TABLE>
EXHIBIT 10.22
TIAA Appl. # VR-5
M - 000462300
PROMISSORY NOTE
Bedford Portfolio #1
$43,450,000 Date: May
____, 1999
FOR VALUE RECEIVED, BEDFORD PROPERTY INVESTORS, INC., a
Maryland corporation ("Borrower"), having its principal place of
business at 270 Lafayette Circle, Lafayette, California 94549,
promises to pay to TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
AMERICA, a New York corporation ("Lender"), or order, at Lender's
offices at 730 Third Avenue, New York, New York 10017 or at such
other place as Lender designates in writing, the principal sum of
FORTY THREE MILLION FOUR HUNDRED AND FIFTY THOUSAND AND NO/100 DOLLARS
($43,450,000) (the principal sum or so much of the principal sum as
may be advanced and outstanding from time to time, the "Principal"),
in lawful money of the United States of America, with interest on the
Principal from the date of this Promissory Note (this "Note") through
and including June 1, 2009 (the "Maturity Date") at the fixed rate of
seven and seventeen one-hundredths percent (7.17%) per annum (the
"Fixed Interest Rate").
This Note is secured by, among other things, the Deed of
Trust, Assignment of Leases and Rents, Security Agreement, and Fixture
Filing Statement (Bedford Portfolio #1 - Colorado Properties) and the
Deed of Trust, Assignment of Leases and Rents, Security Agreement, and
Fixture Filing Statement (Bedford Portfolio #1 - Arizona Properties)
(collectively referred to as the "Deed of Trust") dated the date of
this Note made by Borrower for the benefit of Lender as security for
the Loan. All capitalized terms not expressly defined in this Note
will have the definitions set forth in the Deed of Trust.
Section 1. Payments of Principal and Fixed Interest.
a. Borrower will make monthly installment payments ("Debt
Service Payments") as follows:
(i) On June 1, 1999, a payment of accrued interest
on the Principal at the Fixed Interest Rate; and
(ii) On July 1, 1999 and on the first day of each
succeeding calendar month through and including June 1, 2009,
payments in the amount of Three Hundred and Eleven Thousand
Eight Hundred and Twenty Three and 62/100ths Dollars
($311,823.62), each of which will be applied first to interest
on the Principal at the Fixed Interest Rate and then to the
Principal.
b. On the Maturity Date, Borrower will pay the Principal
in full together with accrued interest at the Fixed Interest Rate and
all other amounts due under the Loan Documents.
Section 2. Prepayment Provisions.
a. The following definitions apply:
"Discount Rate" means the yield on a U.S. Treasury issue
selected by Lender, as published in the Wall Street Journal, two weeks
prior to prepayment, having a maturity date corresponding (or most
closely corresponding, if not identical) to the Maturity Date, and, if
applicable, a coupon rate corresponding (or most closely
corresponding, if not identical) to the Fixed Interest Rate.
"Default Discount Rate" means the Discount Rate less 300
basis points.
"Discounted Value" means the Discounted Value of a Note
Payment based on the following formula:
NP
(1 + R/12)n = Discounted Value
NP = Amount of Note Payment
R = Discount Rate or Default Discount Rate as
the case may be.
n = The number of months between the date of
prepayment and the scheduled date of the
Note Payment being discounted rounded to
the nearest integer.
"Note Payments" means (i) the scheduled Debt Service
Payments for the period from the date of prepayment through the
Maturity Date and (ii) the scheduled repayment of Principal, if any,
on the Maturity Date.
"Prepayment Date Principal" means the Principal on the date
of prepayment.
b. This Note may not be prepaid in full or in part before
June 1, 2001. Commencing on June 1, 2001, provided there is no Event
of Default that is not cured within the applicable cure period and
provided that either (i) Borrower has prepaid in full or (ii)
Borrower will simultaneously prepay in full, the Promissory Note -
Bedford Portfolio #3 in the original principal amount of $27,350,000
dated the date of this Note executed by Borrower pursuant to Loan
Application and Commitment Agreement # VR-6 for Lender's Mortgage
Number M-000462400, Borrower may prepay this Note in full, but not in
part, on the first day of any calendar month, upon 90 days prior
notice to Lender and upon payment in full of the Debt which will
include a payment (the "Prepayment Premium") equal to the greater of
(i) an amount equal to 1% (the "Prepayment Percentage") times the
Prepayment Date Principal or (ii) the amount by which the sum of the
Discounted Values of Note Payments, calculated at the Discount Rate
plus 50 basis points, exceeds the Prepayment Date Principal. Provided
there is no Event of Default that is not cured within the applicable
cure period, this Note may be prepaid in full without payment of the
Prepayment Premium during the last 90 days of the Term. This Note may
not be prepaid without simultaneous prepayment in full of any other
notes secured by the Loan Documents.
c. After an Event of Default or upon any prepayment not
permitted by the Loan Documents, any tender of payment of the amount
necessary to satisfy all or any part of the Debt, any decree of
foreclosure, any statement of the amount due at the time of
foreclosure (including foreclosure by power of sale) and any tender of
payment during any redemption period after foreclosure, will include
an amount (the "Evasion Premium") equal to the greater of (i) an
amount equal to the product of the Prepayment Premium plus 300 basis
points times the Prepayment Date Principal, or (ii) the amount by
which the sum of the Discounted Values of the Note Payments,
calculated at the Default Discount Rate, exceeds the Prepayment Date
Principal.
d. Borrower acknowledges that:
(i) a prepayment will cause damage to Lender;
(ii) the Evasion Premium is intended to compensate
Lender for the loss of its investment and the expense incurred
and time and effort associated with making the Loan, which will
not be fully repaid if the Loan is prepaid;
(iii) it will be extremely difficult and
impractical to ascertain the extent of Lender's damages caused
by a prepayment after an Event of Default or any other
prepayment not permitted by the Loan Documents; and
(iv) the Evasion Premium represents Lender and
Borrower's reasonable estimate of Lender's damages for the
prepayment and is not a penalty.
e. BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT LENDER
WOULD NOT LEND TO BORROWER THE LOAN EVIDENCED BY THIS NOTE WITHOUT
BORROWER'S AGREEMENT, AS SET FORTH ABOVE, TO PAY LENDER A PREPAYMENT
PREMIUM UPON THE SATISFACTION OF ALL OR ANY PORTION OF THE PRINCIPAL
INDEBTEDNESS EVIDENCED FOLLOWING THE ACCELERATION OF THE MATURITY DATE
HEREOF BY REASON OF A DEFAULT HEREUNDER OR UNDER THE DEED OF TRUST
INCLUDING, WITHOUT LIMITATION, A DEFAULT ARISING FROM THE CONVEYANCE
OF ANY RIGHT, TITLE OR INTEREST IN THE PROPERTY ENCUMBERED BY THE DEED
OF TRUST AND BORROWER ACKNOWLEDGES THAT (I) THE GENERAL PARTNERS,
PRINCIPALS OR MEMBERS, AS THE CASE MAY BE, OF BORROWER ARE
KNOWLEDGEABLE REAL ESTATE DEVELOPERS OR INVESTORS, (II) BORROWER FULLY
UNDERSTANDS THE EFFECT OF THE ABOVE WAIVER, (III) THE MAKING OF THE
LOAN BY LENDER AT THE RATE SET FORTH ABOVE IS SUFFICIENT CONSIDERATION
FOR SUCH WAIVER, AND (IV) LENDER WOULD NOT MAKE THE LOAN WITHOUT SUCH
WAIVER, AND BORROWER HAS CAUSED THOSE PERSONS SIGNING THIS NOTE ON
BORROWER'S BEHALF TO SEPARATELY INITIAL THE AGREEMENT CONTAINED IN
THIS PARAGRAPH BY PLACING THEIR INITIALS BELOW.
INITIALS:____________
Section 3. Events of Default:
a. It is an "Event of Default" under this Note:
(i) if Borrower fails to pay any amount due, as and
when required, under this Note or any other Loan Document and
the failure continues for a period of 5 days; or
(ii) if an Event of Default occurs under any other
Loan Document.
b. If an Event of Default occurs, Lender may declare all
or any portion of the Debt immediately due and payable
("Acceleration") and exercise any of the other Remedies.
Section 4. Interest on the Principal will accrue at the
Default Interest Rate from the date an Event of Default occurs.
Section 5. Late Charges.
a. If Borrower fails to pay any Debt Service Payment when
due and the failure continues for a period of 5 days or more or fails
to pay any amount due under the Loan Documents on the Maturity Date,
Borrower agrees to pay to Lender an amount (a "Late Charge") equal to
five cents ($.05) for each one dollar ($1.00) of the delinquent
payment.
b. Borrower acknowledges that:
(i) a delinquent payment will cause damage to
Lender;
(ii) the Late Charge is intended to compensate Lender
for loss of use of the delinquent payment and the expense
incurred and time and effort associated with recovering the
delinquent payment;
(iii) it will be extremely difficult and
impractical to ascertain the extent of Lender's damages caused
by the delinquency; and
(iv) the Late Charge represents Lender and Borrower's
reasonable estimate of Lender's damages from the delinquency and
is not a penalty.
Section 6. Limitation of Liability. This Note is subject
to the limitations on liability set forth in the Article of the Deed
of Trust entitled "Limitation of Liability."
Section 7. WAIVERS. IN ADDITION TO THE WAIVERS SET FORTH
IN THE ARTICLE OF THE DEED OF TRUST ENTITLED "WAIVERS," BORROWER
WAIVES PRESENTMENT FOR PAYMENT, DEMAND, DISHONOR AND, EXCEPT AS
EXPRESSLY SET FORTH IN THE LOAN DOCUMENTS, NOTICE OF ANY OF THE
FOREGOING. BORROWER FURTHER WAIVES ANY PROTEST, LACK OF DILIGENCE OR
DELAY IN COLLECTION OF THE DEBT OR ENFORCEMENT OF THE LOAN DOCUMENTS.
BORROWER AND ALL INDORSERS, SURETIES AND GUARANTORS OF THE OBLIGATIONS
CONSENT TO ANY EXTENSIONS OF TIME, RENEWALS, WAIVERS AND MODIFICATIONS
THAT LENDER MAY GRANT WITH RESPECT TO THE OBLIGATIONS AND TO THE
RELEASE OF ANY SECURITY FOR THIS NOTE AND AGREE THAT ADDITIONAL
BORROWERS MAY BECOME PARTIES TO THIS NOTE AND ADDITIONAL INDORSERS,
GUARANTORS OR SURETIES MAY BE ADDED WITHOUT NOTICE AND WITHOUT
AFFECTING THE LIABILITY OF THE ORIGINAL BORROWER OR ANY ORIGINAL
INDORSER, SURETY OR GUARANTOR.
Section 8. Commercial Loan. The Loan is made for the
purpose of carrying on a business or commercial activity or acquiring
real or personal property as an investment or carrying on an
investment activity and not for personal or household purposes.
Section 9. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.
Section 10. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to the parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.
Section 11. Time of the Essence. Time is of the essence
with respect to the payment and performance of the Obligations.
Section 12. Cross-Default. A default under any other note
now or hereafter secured by the Loan Documents or under any loan
document related to such other note constitutes a default under this
Note and under the other Loan Documents. When the default under the
other note constitutes an Event of Default under that note or the
related loan document, an Event of Default also will exist under this
Note and the other Loan Documents.
Section 13. Construction. Unless expressly provided
otherwise in this Note, this Note will be construed in accordance with
the Exhibit attached to the Deed of Trust entitled "Rules of
Construction."
Section 14. Deed of Trust Provisions Incorporated. To the
extent not otherwise set forth in this Note, the provisions of the
Articles of the Deed of Trust entitled "Expenses and Duty to Defend,"
"Waivers," "Notices," and "Miscellaneous" are applicable to this Note
and deemed incorporated by reference as if set forth at length in this
Note.
Section 15. Joint and Several Liability; Successors and
Assigns. If Borrower consists of more than one entity, the
obligations and liabilities of each such entity will be joint and
several. This Note binds Borrower and successors, assigns, heirs,
administrators, executors, agents and representatives and inures to
the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives.
Section 16. Absolute Obligation. Except for the Section of
this Note entitled "Limitation of Liability," no reference in this
Note to the other Loan Documents and no other provision of this Note
or of the other Loan Documents will impair or alter the obligation of
Borrower, which is absolute and unconditional, to pay the Principal,
interest at the Fixed Interest Rate and any other amounts due and
payable under this Note, as and when required.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Note as of the date first set forth above.
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By: /s/Hanh Kihara
Hanh Kihara, Senior Vice
President
<PAGE>
TIAA Appl. #VR-5
M-000462300
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT
Bedford Portfolio #1 - Colorado Properties
by
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
as Borrower
to
the Public Trustee of Denver County, Colorado
as Trustee
for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation
as Lender
Properties Known As
6501 East Belleview Avenue, Denver, Colorado 80237
and
4601 DTC Boulevard, Denver, Colorado 80111
After Recordation This Deed of Trust Should Be Returned To:
Beverly J. Quail, Esquire
c/o Ballard Spahr Andrews & Ingersoll LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
TABLE OF CONTENTS
Page
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION. . . . . . . . . . . . . .1
Section 1.1. Definitions. . . . . . . . . . . . . . . . .1
Section 1.2. Rules of Construction. . . . . . . . . . . .2
ARTICLE II
GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.1. Encumbered Property. . . . . . . . . . . . .2
Section 2.2. Habendum Clause. . . . . . . . . . . . . . .4
Section 2.3. Security Agreement . . . . . . . . . . . . .4
Section 2.4. Conditions to Grant. . . . . . . . . . . . .5
ARTICLE III
OBLIGATIONS SECURED. . . . . . . . . . . . . . . . . . . . . . .5
Section 3.1. The Obligations. . . . . . . . . . . . . . .5
ARTICLE IV
TITLE AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . .5
Section 4.1. Title to the Property. . . . . . . . . . . .5
Section 4.2. Authority. . . . . . . . . . . . . . . . . .6
Section 4.3. No Foreign Person. . . . . . . . . . . . . .6
Section 4.4. Litigation . . . . . . . . . . . . . . . . .6
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES. . . . . . . . . . . . .6
Section 5.1. Status of the Property . . . . . . . . . . .6
Section 5.2. Maintenance of the Property. . . . . . . . .7
Section 5.3. Change in Use. . . . . . . . . . . . . . . .7
Section 5.4. Waste. . . . . . . . . . . . . . . . . . . .7
Section 5.5. Inspection of the Property . . . . . . . . .7
Section 5.6. Leases and Rents . . . . . . . . . . . . . .8
Section 5.7. Parking. . . . . . . . . . . . . . . . . . .8
Section 5.8. Separate Tax Lot . . . . . . . . . . . . . .8
Section 5.9. Changes in Zoning or Restrictive Covenants .8
Section 5.10. Lender's Right to Appear . . . . . . . . . .9
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS. . . . . . . . . . . . . . . . . .9
Section 6.1. Impositions. . . . . . . . . . . . . . . . .9
Section 6.2. Accumulations. . . . . . . . . . . . . . . 10
Section 6.3. Changes in Tax Laws. . . . . . . . . . . . 12
Section 6.4. Reserves . . . . . . . . . . . . . . . . . 12
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION AND RESTORATION. . . . . . . 13
Section 7.1. Insurance Coverages. . . . . . . . . . . . 13
Section 7.2. Casualty and Condemnation. . . . . . . . . 14
Section 7.3. Application of Proceeds. . . . . . . . . . 15
Section 7.4. Conditions to Availability of Proceeds for
Restoration. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.5. Restoration. . . . . . . . . . . . . . . . 16
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS . . . . . . . . . . . . . . 18
Section 8.1. Compliance with Law. . . . . . . . . . . . 18
Section 8.2. Compliance with Agreements . . . . . . . . 18
Section 8.3. ERISA Compliance . . . . . . . . . . . . . 19
Section 8.4. Section 6045(e) Filing . . . . . . . . . . 19
ARTICLE IX
ENVIRONMENTAL. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.1. Environmental Representations and Warranties20
Section 9.2. Environmental Covenants. . . . . . . . . . 20
ARTICLE X
FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . 21
Section 10.1. Financial Reporting. . . . . . . . . . . . 21
Section 10.2. Annual Budget. . . . . . . . . . . . . . . 22
ARTICLE XI
EXPENSES AND DUTY TO DEFEND. . . . . . . . . . . . . . . . . . 22
Section 11.1. Payment of Expenses. . . . . . . . . . . . 22
Section 11.2. Duty to Defend . . . . . . . . . . . . . . 23
ARTICLE XII
TRANSFERS LIENS AND ENCUMBRANCES . . . . . . . . . . . . . . . 23
Section 12.1. Prohibitions on Transfers, Liens and
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.2. Permitted Transfers. . . . . . . . . . . . 24
Section 12.3. Right to Contest Liens . . . . . . . . . . 26
Section 12.4. Right to Partial Release of Deed of Trust. 26
Section 12.5. Substitution. . . . . . . . . . . . . . . . . . 28
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . 30
Section 13.1. Further Assurances . . . . . . . . . . . . 30
Section 13.2. Estoppel Certificates. . . . . . . . . . . 30
ARTICLE XIV
DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 31
Section 14.1. Events of Default. . . . . . . . . . . . . 31
Section 14.2. Remedies . . . . . . . . . . . . . . . . . 32
Section 14.3. General Provisions Pertaining to Remedies. 33
Section 14.4. Foreclosure by Power of Sale . . . . . . . 34
Section 14.5. General Provisions Pertaining to Mortgagee-in-
Possession or Receiver . . . . . . . . . . . . . . . . . . . . 35
Section 14.6. General Provisions Pertaining to Foreclosures
and the Power of Sale. . . . . . . . . . . . . . . . . . . . . 37
Section 14.7. Application of Foreclosure Sale and Other
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 14.8. Power of Attorney. . . . . . . . . . . . . 38
Section 14.9. Tenant at Sufferance . . . . . . . . . . . 38
ARTICLE XV
LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . 38
Section 15.1. Limitation of Liability. . . . . . . . . . 38
ARTICLE XVI
WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS . . . . . 40
Section 16.2. WAIVER OF NOTICE . . . . . . . . . . . . . 40
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS. . 40
Section 16.4. WAIVER OF TRIAL BY JURY. . . . . . . . . . 41
Section 16.5. WAIVER OF COUNTERCLAIM . . . . . . . . . . 41
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING. . . 41
Section 16.7. WAIVER OF SUBROGATION. . . . . . . . . . . 41
Section 16.8. GENERAL WAIVER . . . . . . . . . . . . . . 41
ARTICLE XVII
NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 17.1. Notices. . . . . . . . . . . . . . . . . . 42
Section 17.2. Change in Borrower's Name or Place of Business 43
ARTICLE XVIII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 18.1. Applicable Law . . . . . . . . . . . . . . 43
Section 18.2. Usury Limitations. . . . . . . . . . . . . 44
Section 18.3. Lender's Discretion. . . . . . . . . . . . 44
Section 18.4. Unenforceable Provisions . . . . . . . . . 44
Section 18.5. Survival of Borrower's Obligations . . . . 44
Section 18.6. Relationship Between Borrower and Lender; No
Third Party Beneficiaries
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 18.7. Partial Releases, Extensions, Waivers. . . 45
Section 18.8. Service of Process . . . . . . . . . . . . 45
Section 18.9. Entire Agreement . . . . . . . . . . . . . 45
Section 18.10. No Oral Amendment. . . . . . . . . . . . . 45
Section 18.11. Severability . . . . . . . . . . . . . . . 46
Section 18.12. Covenants Run with the Land. . . . . . . . 46
Section 18.13. Time of the Essence. . . . . . . . . . . . 46
Section 18.14. Subrogation. . . . . . . . . . . . . . . . 46
Section 18.15. Joint and Several Liability. . . . . . . . 46
Section 18.16. Successors and Assigns . . . . . . . . . . 46
Section 18.17. Duplicates and Counterparts. . . . . . . . 46
Exhibit A
LEGAL DESCRIPTION. . . . . . . . . . . . . . . . . . . . . . . 48
Exhibit B
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 50
Exhibit C
RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . 56
TIAA Appl. #VR-5
M-000462300
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Bedford Portfolio #1 - Colorado Properties
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT made this ____ day of
May, 1999, by BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
("Borrower"), having its principal place of business at 270 Lafayette
Circle, Lafayette, California 94549, to the Public Trustee of the City
and County of Denver, State of Colorado ("Trustee") for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, a New York
corporation ("Lender"), having an address at 730 Third Avenue, New
York, New York 10017.
RECITALS:
A. Lender agreed to make and Borrower agreed to accept a loan
(the "Loan") in the maximum principal amount of FORTY THREE MILLION
FOUR HUNDRED AND FIFTY THOUSAND AND NO/100 DOLLARS ($43,450,000).
B. To evidence the Loan, Borrower executed and delivered to
Lender a promissory note (the "Note"), dated the date of this Deed of
Trust, in the principal amount of FORTY THREE MILLION FOUR HUNDRED AND
FIFTY THOUSAND AND NO/100 DOLLARS ($43,450,000) (that amount or so
much as is outstanding from time to time is referred to as the
"Principal"), promising to pay the Principal with interest thereon to
the order of Lender as set forth in the Note and with the balance, if
any, of the Debt being due and payable on June 1, 2009 (the "Maturity
Date").
C. To secure the Note and the Obligations, this Deed of Trust
conveys, among other things, Borrower's fee interest in the real
property located in the City of Denver, County of Denver, State of
Colorado more particularly described in Exhibit A (the "Land").
Section 17.
DEFINITIONS AND RULES OF CONSTRUCTION
a. Definitions. Capitalized terms used in this Deed of
Trust are defined in Exhibit B or in the text with a cross-reference
in Exhibit B.
b. Rules of Construction. This Deed of Trust will be
interpreted in accordance with the rules of construction set forth in
Exhibit C.
Section 18.
GRANTING CLAUSES
a. Encumbered Property. Borrower irrevocably grants,
mortgages, warrants, sells, conveys, assigns and pledges to Trustee in
trust, WITH POWER OF SALE, and grants to Lender a security interest in
any and all of the following property, rights, interests and estates
now or in the future owned or held by Borrower (the "Property") for
the uses and purposes set forth in this Deed of Trust:
(1) the Land;
(2) all buildings and improvements located on the
Land (the "Improvements");
(3) all easements; rights of way or use, including
any rights of ingress and egress; streets,
roads, ways, sidewalks, alleys and passages;
strips and gores; sewer rights; water, water
rights, water courses, riparian rights and
drainage rights; air rights and development
rights; oil and mineral rights; and tenements,
hereditaments and appurtenances, in each
instance adjoining or otherwise appurtenant to
or benefitting the Land or the Improvements;
(4) all materials intended for construction, re-
construction, alteration or repair of the
Improvements, such materials to be deemed
included in the Land and the Improvements
immediately on delivery to the Land; all
fixtures and personal property that are attached
to, contained in or used in connection with the
Land or the Improvements (excluding personal
property owned by tenants), including:
furniture; furnishings; machinery; motors;
elevators; fittings; microwave ovens;
refrigerators; office systems and equipment;
plumbing; heating, ventilating and air
conditioning systems and equipment; maintenance
and landscaping equipment; lighting, cooking,
laundry, dry cleaning, refrigerating,
incinerating and sprinkler systems and
equipment; telecommunications systems and
equipment; computer or word processing systems
and equipment; security systems and equipment;
and equipment leases for any of the property
described in this subsection (the "Fixtures and
Personal Property");
(5) all agreements, ground leases, grants of
easements or rights-of-way, permits,
declarations of covenants, conditions and
restrictions, disposition and development
agreements, planned unit development agreements,
cooperative, condominium or similar ownership or
conversion plans, management, leasing, brokerage
or parking agreements or other material
documents affecting Borrower or the Land, the
Improvements or the Fixtures and Personal
Property, but expressly excluding the Leases
(the "Property Documents");
(6) all inventory (including all goods, merchandise,
raw materials, incidentals, office supplies and
packaging materials) held for sale, lease or
resale or furnished or to be furnished under
contracts of service, or used or consumed in the
ownership, use or operation of the Land, the
Improvements or the Fixtures and Personal
Property, all documents of title evidencing any
part of any of the foregoing and all returned or
repossessed goods arising from or relating to
any sale or disposition of inventory;
(7) all intangible personal property relating to the
Land, the Improvements or the Fixtures and
Personal Property, including choses in action
and causes of action (except those personal to
Borrower), corporate and other business records,
inventions, designs, promotional materials,
blueprints, plans, specifications, patents,
patent applications, trademarks, trade names,
trade secrets, goodwill, copyrights,
registrations, licenses, franchises, claims for
refunds or rebates of taxes, insurance
surpluses, refunds or rebates of taxes and any
letter of credit, guarantee, claim, security
interest or other security held by or granted to
Borrower to secure payment by an account debtor
of any of the accounts of Borrower arising out
of the ownership, use or operation of the Land,
the Improvements or the Fixtures and Personal
Property, and documents covering all of the
foregoing; all accounts, accounts receivable,
documents, instruments, money, deposit accounts,
funds deposited in accounts established with a
bank, savings and loan association, trust
company or other financial institution in
connection with the ownership, use or operation
of the Land, the Improvements or the Fixtures
and Personal Property, including any reserve
accounts or escrow accounts, and all investments
of the funds and all other general intangibles;
(8) all awards and other compensation paid after the
date of this Deed of Trust for any Condemnation
(the "Condemnation Awards");
(9) all proceeds of and all unearned premiums on the
Policies (the "Insurance Proceeds");
(10) all licenses, certificates of occupancy,
contracts, management agreements, operating
agreements, operating covenants, franchise
agreements, permits and variances relating to
the Land, the Improvements or the Fixtures and
Personal Property;
(11) all books, records and other information,
wherever located, which are in Borrower's
possession, custody or control or to which
Borrower is entitled at law or in equity and
which are related to the Property, including all
computer or other equipment used to record,
store, manage, manipulate or access the
information (the "Books and Records");
(12) all deposits and letters of credit held from
time to time by the Accumulations Depositary to
provide reserves for Taxes and Assessments
together with interest thereon, if any (the
"Accumulations") and the account or accounts in
which such deposits are or may be held;
(13) all after-acquired title to or remainder or
reversion in any of the property described in
this Section; all additions, accessions and
extensions to, improvements of and substitutions
or replacements for any of such property; all
products and all cash and non-cash proceeds,
immediate or remote, of any sale or other
disposition of any of such property, excluding
sales or other dispositions of inventory in the
ordinary course of the business of operating the
Land or the Improvements; and all additional
lands, estates, interests, rights or other
property acquired by Borrower after the date of
this Deed of Trust for use in connection with
the Land and Improvements, all without the need
for any additional mortgage, assignment, pledge
or conveyance to Lender but Borrower will
execute and deliver to Lender, upon Lender's
request, any documents reasonably requested by
Lender to further evidence the foregoing; and
(14) all deposits and letters of credit for reserves
held from time to time by an escrow holder or
Lender in accordance with Section 6.4 of this
Deed of Trust entitled "Reserves" and all
accounts established to maintain the deposits
together with investments thereof and interest
thereon.
b. Habendum Clause. The Property is conveyed to Trustee,
TO HAVE AND TO HOLD the Property IN TRUST, FOREVER, for the purpose of
securing the Note and the Obligations.
c. Security Agreement.
(i) This Deed of Trust is a real property deed of
trust and also a "security agreement" and a "financing statement"
within the meaning of the Uniform Commercial Code. The Property
includes both real and personal property and all of Borrower's
other right, title and interest, whether tangible or intangible,
in the Property. By executing and delivering this Deed of
Trust, Borrower grants to Lender, as security for the
Obligations, a security interest in the Property to the full
extent that any of the Property may be subject to the Uniform
Commercial Code.
(ii) Borrower desires and intends that this Deed of
Trust also constitute a Fixture Filing between Borrower as
debtor and Lender as secured party, as defined in the Uniform
Commercial Code. To this end, Borrower acknowledges that (i)
this Deed of Trust covers goods which are or are to become
fixtures on the Land; (ii) this financing statement is to be
recorded; (iii) Borrower is the record owner of such property;
(iv) products of collateral are also covered. Except as
otherwise provided in the Loan Documents, no financing statement
in favor of any secured party other than Lender covering the
personal property described herein or any portion thereof is on
file in any public office. Provided that obsolete and worn-out
articles may be removed concurrently with the replacement or
renewal thereof with property of at least equal value or
usefulness in the operation of the Property; Borrower will not
otherwise remove or permit the removal of the collateral or any
part thereof without the prior written permission of Lender.
d. Conditions to Grant. This Deed of Trust is made on
the express condition that if Borrower pays and performs the
Obligations in full in accordance with the Loan Documents, then unless
expressly provided otherwise in the Loan Documents, the Loan Documents
will be released at Borrower's expense.
Section 19.
OBLIGATIONS SECURED
a. The Obligations. This Deed of Trust secures the
Principal, the Interest, the Late Charges, the Prepayment Premiums,
the Expenses, any additional advances made by Lender in connection
with the Property or the Loan and all other amounts payable under the
Loan Documents (the "Debt") and also secures both the timely payment
of the Debt as and when required and the timely performance of all
other obligations and covenants to be performed under the Loan
Documents (the "Obligations").
Section 20.
TITLE AND AUTHORITY
a. Title to the Property.
(i) Subject to the conveyance effectuated by this
Deed of Trust, Borrower has and will continue to have good and
marketable title in fee simple absolute to the Land and the
Improvements and good and marketable title to the Fixtures and
Personal Property, in each case, free and clear of liens,
encumbrances and charges except the Permitted Exceptions. To
Borrower's knowledge, there are no facts or circumstances that
might give rise to a lien, encumbrance or charge on the
Property.
(ii) Borrower owns and will continue to own all of
the other Property free and clear of all liens, encumbrances and
charges except the Permitted Exceptions.
(iii) This Deed of Trust is and will remain a
valid and enforceable first lien on and security interest in the
Property, subject only to the Permitted Exceptions.
b. Authority.
(i) Borrower is and will continue to be (i) duly
organized, validly existing and in good standing under the Laws
of the state or commonwealth in which it was organized or
incorporated and (ii) duly qualified to conduct business, in
good standing, in the state or commonwealth where the Property
is located.
(ii) Borrower has and will continue to have all
approvals required by Law or otherwise and full right, power and
authority to (i) own and operate the Property and carry on
Borrower's business as now conducted or as proposed to be
conducted; (ii) execute and deliver the Loan Documents; (iii)
grant, mortgage, warrant the title to, convey, assign and pledge
the Property to Lender pursuant to the provisions of this Deed
of Trust; and (iv) perform the Obligations.
(iii) The execution and delivery of the Loan
Documents and the performance of the Obligations do not and will
not conflict with or result in a default under any Laws or any
Leases or Property Documents and do not and will not conflict
with or result in a default under any agreement binding upon any
party to the Loan Documents.
(iv) The Loan Documents constitute and will continue
to constitute legal, valid and binding obligations of all
parties to the Loan Documents enforceable in accordance with
their respective terms.
c. No Foreign Person. Borrower is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Code.
d. Litigation. There are no Proceedings or, to
Borrower's knowledge, investigations against or affecting Borrower or
the Property and, to Borrower's knowledge, there are no facts or
circumstances that might give rise to a Proceeding or an investigation
against or affecting Borrower or the Property. Borrower will give
Lender prompt notice of the commencement of any Proceeding or
investigation against or affecting the Property or Borrower which
could have a material adverse effect on the Property or on Lender's
interests in the Property or under the Loan Documents. Borrower also
will deliver to Lender such additional information relating to the
Proceeding or investigation as Lender may request from time to time.
Section 21.
PROPERTY STATUS, MAINTENANCE AND LEASES
a. Status of the Property.
(i) Borrower has obtained and will maintain in full
force and effect all certificates, licenses, permits and
approvals that are issued or required by Law or by any entity
having jurisdiction over the Property or over Borrower or that
are necessary for the Permitted Use, for occupancy and operation
of the Property for the conveyance described in this Deed of
Trust and for the conduct of Borrower's business on the Property
in accordance with the Permitted Use.
(ii) The Property is and will continue to be serviced
by all public utilities required for the Permitted Use of the
Property.
(iii) All roads and streets necessary for service
of and access to the Property for the current or contemplated
use of the Property have been completed and are and will
continue to be serviceable, physically open and dedicated to and
accepted by the Government for use by the public.
(iv) The Property is free from damage caused by a
Casualty.
(v) Except as disclosed in writing to Lender, all
costs and expenses of labor, materials, supplies and equipment
used in the construction of the Improvements have been paid in
full.
b. Maintenance of the Property. Borrower will maintain
the Property in thorough repair and good and safe condition, suitable
for the Permitted Use, including, to the extent necessary, replacing
the Fixtures and Personal Property with property at least equal in
quality and condition to that being replaced and free of liens.
Borrower will not erect any new buildings, building additions or other
structures on the Land or otherwise materially alter the Improvements
without Lender's prior consent which may be withheld in Lender's sole
discretion. Lender shall be deemed to have consented if it has not
responded within 30 days of receipt of Borrower's written request to
the Lender at the addresses set forth herein. In the event that
Borrower does not manage the Property itself, the Property will be
managed by a property manager satisfactory to Lender pursuant to a
management agreement satisfactory to Lender and terminable by Borrower
upon 30 days notice to the property manager.
c. Change in Use. Borrower will use and permit the use
of the Property for the Permitted Use and for no other purpose.
d. Waste. Borrower will not commit or permit any waste
(including economic and non-physical waste), impairment or
deterioration of the Property or any alteration, demolition or removal
of any of the Property, excluding any tenant alterations of a non-
structural nature, without Lender's prior consent which may be
withheld in Lender's sole discretion. Lender shall be deemed to have
consented if it has not responded within 30 days of receipt of
Borrower's written request to the Lender at the addresses set forth
herein.
e. Inspection of the Property. Subject to the rights of
tenants under the Leases, Lender has the right to enter and inspect
the Property on reasonable prior notice, except during the existence
of an Event of Default, when no prior notice is required. Lender has
the right to engage an independent expert to review and report on
Borrower's compliance with Borrower's obligations under this Deed of
Trust to maintain the Property, comply with Law and refrain from
waste, impairment or deterioration of the Property and the alteration,
demolition or removal of any of the Property except as may be
permitted by the provisions of this Deed of Trust. If the independent
expert's report discloses material failure to comply with such
obligations or if Lender engages the independent expert after the
occurrence of an Event of Default, then the independent expert's
review and report will be at Borrower's expense, payable within 3 days
after demand.
f. Leases and Rents.
(i) Borrower assigns the Leases and the Rents to
Lender absolutely and unconditionally and not merely as
additional collateral or security for the payment and
performance of the Obligations, but subject to a license back to
Borrower of the right to collect the Rents unless and until an
Event of Default occurs at which time the license will terminate
automatically, all as more particularly set forth in the
Assignment, the provisions of which are incorporated in this
Deed of Trust by reference.
(ii) Borrower appoints Lender as Borrower's attorney-
in-fact to execute unilaterally and record, at Lender's
election, a document subordinating this Deed of Trust to the
Leases, provided that the subordination will not affect (i) the
priority of Lender's entitlement to Insurance Proceeds or
Condemnation Awards or (ii) the priority of this Deed of Trust
over intervening liens or liens arising under or with respect to
the Leases.
g. Parking. Borrower will provide, maintain, monitor and
light parking areas within the Property, including any sidewalks,
aisles, streets, driveways, sidewalk cuts and rights-of-way to and
from the adjacent public streets, in a manner consistent with the
Permitted Use and sufficient to accommodate the greatest of: (i) the
number of parking spaces required by Law; or (ii) the number of
parking spaces required by the Leases and the Property Documents. The
parking areas will be reserved and used exclusively for ingress,
egress and parking for Borrower and the tenants under the Leases and
their respective employees, customers and invitees and in accordance
with the Leases and the Property Documents.
h. Separate Tax Lot. The Property is and will remain
assessed for real estate tax purposes as one or more wholly
independent tax lots, separate from any property that is not part of
the Property.
i. Changes in Zoning or Restrictive Covenants. Borrower
will not (i) initiate, join in or consent to any change in any Laws
pertaining to zoning, any restrictive covenant or other restriction
which would restrict the Permitted Uses for the Property; (ii) permit
the Property to be used to fulfil any requirements of Law for the
construction or maintenance of any improvements on property that is
not part of the Property; (iii) permit the Property to be used for any
purpose not included in the Permitted Use; or (iv) impair the
integrity of the Property as a single, legally subdivided zoning lot
separate from all other property.
j. Lender's Right to Appear. If Lender determines, in
its sole discretion, that Borrower is not adequately protecting
Lender's interest in the Property, upon written notice to Borrower,
except in the case of an emergency, Lender has the right to appear in
and defend any Proceeding brought regarding the Property and to bring
any Proceeding, in the name and on behalf of Borrower or in Lender's
name.
Section 22.
IMPOSITIONS AND ACCUMULATIONS
a. Impositions.
(i) Borrower will pay each Imposition, unless the
Imposition is payable directly by the tenant, at least 15 days
before the date (the "Imposition Penalty Date") that is the
earlier of (i) the date on which the Imposition becomes
delinquent and (ii) the date on which any penalty, interest or
charge for non-payment of the Imposition accrues. If the
Imposition is to be paid directly by a tenant, Borrower shall
deliver to Lender proof, in form and content acceptable to
Lender, of tenant's payment of such Impositions 15 days before
the Imposition Penalty Date.
(ii) At least 10 days before each Imposition Penalty
Date, Borrower will deliver to Lender a receipted bill or other
evidence of payment.
(iii) Borrower, at its own expense, may contest
any Taxes or Assessments, provided that the following conditions
are met:
(1) not less than 30 days prior to the Imposition
Penalty Date, Borrower delivers to Lender notice
of the proposed contest;
(2) the contest is by a Proceeding promptly
initiated and conducted diligently and in good
faith;
(3) there is no Event of Default;
(4) the Proceeding suspends the collection of the
contested Taxes or Assessments;
(5) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Documents;
(6) the Proceeding precludes imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit; and
(7) Borrower either deposits with the Accumulations
Depositary reserves or furnishes a bond or other
security satisfactory to Lender, in either case
in an amount sufficient to pay the contested
Taxes or Assessments, together with all interest
and penalties, or Borrower pays all of the
contested Taxes or Assessments under protest.
(iv) Installment Payments. If any future Assessment
is payable in installments, Borrower will nevertheless pay the
Assessment in its entirety on the day the first installment
becomes due and payable or a lien, unless Lender, in its sole
discretion, approves payment of the Assessment in installments.
b. Accumulations.
(i) If required by Lender pursuant to Subsection 6.2
(j) hereof, Borrower will make an initial deposit with either
Lender or a mortgage servicer or financial institution
designated or approved by Lender from time to time to receive,
hold and disburse the Accumulations in accordance with this
Section (the "Accumulations Depositary"). On the first day of
each calendar month during the Term Borrower will deposit with
the Accumulations Depositary an amount equal to one-twelfth
(1/12) of the annual Taxes and Assessments as determined by
Lender or its designee. At least 45 days before each Imposition
Penalty Date, Borrower will deliver to the Accumulations
Depositary any bills and other documents that are necessary to
pay the Taxes and Assessments.
(ii) The Accumulations will be applied to the payment
of Taxes and Assessments. Any excess Accumulations after
payment of Taxes and Assessments will be returned to Borrower or
credited against future payments of the Accumulations, at
Lender's election or as required by Law. If the Accumulations
are not sufficient to pay Taxes and Assessments Borrower will
pay the deficiency to the Accumulations Depositary within 5 days
of demand. At any time after an Event of Default occurs, Lender
may apply the Accumulations as a credit against any portion of
the Debt selected by Lender in its sole discretion.
(iii) The Accumulations Depositary will hold the
Accumulations as additional security for the Obligations until
applied in accordance with the provisions of this Deed of Trust.
If Lender is not the Accumulations Depositary, the Accumulations
Depositary will deliver the Accumulations to Lender upon
Lender's demand at any time after an Event of Default.
(iv) If the Property is sold or conveyed, other than
by foreclosure or transfer in lieu of foreclosure, and the
Property remains subject to this Deed of Trust, all right, title
and interest of Borrower to the Accumulations will
automatically, and without necessity of further assignment, be
held for the account of the new owner, subject to the provisions
of this Section and Borrower will have no further interest in
the Accumulations.
(v) Borrower waives all right to demand, receive or
collect any interest or other return on the Accumulations which
will be held in a non-interest bearing account (except as
required by Law) and may be commingled with other monies held by
the Accumulations Depositary and will not be held in trust.
(vi) Lender has the right to pay, or to direct the
Accumulations Depositary to pay, any Taxes or Assessments unless
Borrower is contesting the Taxes or Assessments in accordance
with the provisions of this Deed of Trust, in which event any
payment of the contested Taxes or Assessments will be made under
protest in the manner prescribed by Law or, at Lender's
election, will be withheld.
(vii) If Lender assigns this Deed of Trust,
Lender will pay, or cause the Accumulations Depositary to pay,
the unapplied balance of the Accumulations to or at the
direction of the assignee. Simultaneously with the payment,
Lender and the Accumulations Depositary will be released from
all liability with respect to the Accumulations and Borrower
will look solely to the assignee with respect to the
Accumulations. When the Obligations have been fully satisfied,
any unapplied balance of the Accumulations will be returned to
Borrower.
(viii) Notwithstanding the requirements set forth
in subsections (a) through (g) of this Section 6.2 and provided
Borrower pays the Taxes and Assessments to the taxing authority
when due, as an alternative to the requirements set forth in
subsections (a) through (g), subject to the limitation in
subsection 6.2(j) hereof, at Closing, Borrower shall, at
Borrower's option, either (1) deposit an amount equal to the
annual real estate taxes for the Property next due in an
interest bearing account with an agent acceptable to Lender or
approved by Lender or (2) deposit a Letter of Credit equal to
such amount in a form satisfactory to Lender, which Letter of
Credit shall be renewed from time to time at least 30 days prior
to the expiration date thereof, pursuant to an agreement
satisfactory to Lender to be held by a depository, satisfactory
to Lender, in Lender's sole discretion. The amount deposited
pursuant to this Subsection 6.2(h) shall be held as additional
security for the Obligations for the term of the Loan. So long
as there is no default under the Loan Documents and so long as
Borrower has deposited the required amount or provided Lender
with an acceptable Letter of Credit, Borrower shall pay real
estate taxes for the Property directly to the appropriate tax
authority.
(ix) So long as there is no default under the Loan
Documents, real estate tax escrows will not be required for any
tenant with a credit rating equivalent to a Standard and Poors
rating of BBB- if the tenant's lease states that real estate
taxes are to be paid directly by the tenant and Borrower
provides Lender written evidence within 30 days after payment
verifying payment of real estate taxes.
(x) If there is an Event of Default, Lender may, in
Lender's sole discretion, in addition to all of its other rights
and remedies under the Loan Documents, draw down on the
deposited amount or Letter of Credit, as the case may be, to pay
the real estate taxes and require Borrower to comply with the
provisions set forth in subsections 6.2(a) through (g) hereof
rather than the provisions of Subsection 6.2(h) hereof, and the
requirement to make such deposits shall not relieve Borrower of
the obligation to remedy and cure the Event of Default.
c. Changes in Tax Laws. If a Law requires the deduction
of the Debt from the value of the Property for the purpose of taxation
or imposes a tax, either directly or indirectly, on the Debt, any Loan
Document or Lender's interest in the Property, Borrower will pay the
tax with interest and penalties, if any. If Lender determines that
Borrower's payment of the tax may be unlawful, unenforceable, usurious
or taxable to Lender, the Debt will become immediately due and payable
on 60 days' prior notice unless the tax must be paid within the 60-day
period, in which case, the Debt will be due and payable within the
lesser period in accordance with this Section 6.3. Notwithstanding
anything herein to the contrary, no Prepayment Premium or Evasion
Premium (as such terms are defined in the Note) shall be due or
payable in the event that all or any portion of the Debt is prepaid as
a result of the payment to Lender of the Debt pursuant to this Section
6.3.
d. Reserves. On or before July 31, 2002, which is the
date 30 months prior to the expiration of the initial lease term of
the Texaco Lease (defined below), Borrower shall provide Lender with a
Letter of Credit in the amount of Two Million Seven Hundred Thousand
and No/100 Dollars ($2,700,000) (the "Leasing Letter of Credit"). The
purpose of the Leasing Letter of Credit is to provide adequate funds
to relet the space occupied by Texaco, Inc. in the building located at
4601 DTC Boulevard, Denver, Colorado, and to pay debt service during a
projected vacancy period. The Leasing Letter of Credit shall be
renewed from time to time until, and shall be released when the Texaco
space (237,055 square feet as described in the Texaco Lease) is relet
at an average rental rate of $18.05 per square foot per year or
greater, for a minimum term of 5 years. The "Texaco Lease" shall mean
the Lease dated as of December 15, 1983, as amended, by and between
Dentex Associates, a Colorado general partnership as landlord, and
Texaco, Inc., a Delaware corporation as tenant, as described in the
certain Short Form of Lease Agreement recorded June 27, 1996 in the
real property records of Denver County, Colorado as Reception No.
9600089605. Failure of Borrower to provide Lender with the Leasing
Letter of Credit or failure of Borrower to renew the Leasing Letter of
Credit shall constitute an Event of Default under the Loan Documents
and shall constitute an event of default under the loan documents for
the following loans:
(1) Loan made by Lender to Borrower pursuant to TIAA
Application #VR-6 as evidenced by the Promissory Note -Bedford
Portfolio #2 in the original principal amount of $37,200,000,
executed by Borrower, dated the date of this Deed of Trust and
secured by the loan documents described therein, and
(2) Loan made by Lender to Borrower pursuant to TIAA
Application #VR-7 as evidenced by the Promissory Note -Bedford
Portfolio #3 in the original principal amount of $27,350,000,
executed by Borrower, dated the date of this Deed of Trust and
secured by the loan documents described therein.
Section 23.
INSURANCE, CASUALTY, CONDEMNATION AND RESTORATION
a. Insurance Coverages.
(i) Borrower will maintain such insurance coverages
and endorsements in form and substance and in amounts as Lender
may require in its sole discretion, from time to time. Until
Lender notifies Borrower of changes in Lender's requirements,
Borrower will maintain not less than the insurance coverages and
endorsements Lender required for closing of the Loan for all
insurance except earthquake insurance. Borrower will maintain
not less than a $20,000,000 earthquake insurance policy.
(ii) The insurance, including renewals, required
under this Section will be issued on valid and enforceable
policies and endorsements satisfactory to Lender (the
"Policies").
Each Policy will contain a standard waiver of subrogation
and a replacement cost endorsement and will provide that Lender will
receive not less than 30 days' prior written notice of any
cancellation, termination or non-renewal of a Policy or any material
change other than an increase in coverage and that Lender will be
named under a standard mortgage endorsement as loss payee.
(iii) The insurance companies issuing the
Policies (the "Insurers") must be authorized to do business in
the State or Commonwealth where the Property is located, must
have been in business for at least 5 years, must carry an A.M.
Best Company, Inc. policy holder rating of A or better and an
A.M. Best Company, Inc. financial category rating of Class X or
better and must be otherwise satisfactory to Lender. Lender may
select an alternative credit rating agency and may impose
different credit rating standards for the Insurers.
Notwithstanding Lender's right to approve the Insurers and to
establish credit rating standards for the Insurers, Lender will
not be responsible for the solvency of any Insurer.
(iv) Notwithstanding Lender's rights under this
Article, Lender will not be liable for any loss, damage or
injury resulting from the inadequacy or lack of any insurance
coverage.
(v) Borrower will comply with the provisions of the
Policies and with the requirements, notices and demands imposed
by the Insurers and applicable to Borrower or the Property.
(vi) Borrower will pay the Insurance Premiums for
each Policy not less than 5 days before the expiration date of
the Policy being replaced or renewed and will deliver to Lender
an original or, if a blanket policy, a certified copy of each
Policy marked "Paid" not less than 15 days prior to the
expiration date of the Policy being replaced or renewed.
(vii) Borrower will not carry separate insurance
concurrent in kind or form or contributing in the event of loss
with any other insurance carried by Borrower.
(viii) Borrower will not carry any of the
insurance required under this Section on a blanket or umbrella
policy without in each instance Lender's prior approval which
may be withheld in Lender's sole discretion. If Lender
approves, Borrower will deliver to Lender a certified copy of
the blanket policy which will allocate to the Property the
amount of coverage required under this Section and otherwise
will provide the same coverage and protection as would a
separate policy insuring only the Property. Lender shall be
deemed to have approved the policy if it has not responded
within 30 days of receipt of Borrower's written request to the
Lender at the addresses set forth herein.
(ix) Borrower will give the Insurers prompt notice of
any change in ownership or occupancy of the Property. This
subsection does not abrogate the prohibitions on transfers set
forth in this Deed of Trust.
(x) If the Property is sold at a foreclosure sale or
otherwise is transferred so as to extinguish the Obligations,
all of Borrower's right, title and interest in and to the
Policies then in force will be transferred automatically to the
purchaser or transferee.
b. Casualty and Condemnation.
(i) Borrower will give Lender notice of any Casualty
promptly after it occurs and will give Lender notice of any
Condemnation Proceeding promptly after Borrower receives notice
of commencement or notice that such a Condemnation Proceeding
will be commencing. Borrower promptly will deliver to Lender
copies of all documents Borrower delivers or receives relating
to the Casualty or the Condemnation Proceeding, as the case may
be.
(ii) Borrower authorizes Lender, at Lender's option,
to act on Borrower's behalf to collect, adjust and compromise
any claims for loss, damage or destruction under the Policies on
such terms as Lender determines in Lender's sole discretion. If
there is no Event of Default which remains uncured within the
applicable cure period, Lender shall consult with Borrower
before collecting, adjusting or compromising said claims.
Borrower authorizes Lender to act, at Lender's option, on
Borrower's behalf in connection with any Condemnation
Proceeding. Borrower will execute and deliver to Lender all
documents requested by Lender and all documents as may be
required by Law to confirm such authorizations. Nothing in this
Section will be construed to limit or prevent Lender from
joining with Borrower either as a co-defendant or as a co-
plaintiff in any Condemnation Proceeding.
(iii) If Lender elects not to act on Borrower's
behalf as provided in this Section, then Borrower promptly will
file and prosecute all claims (including Lender's claims)
relating to the Casualty and will prosecute or defend
(including defense of Lender's interest) any Condemnation
Proceeding. Borrower will have the authority to settle or
compromise the claims or Condemnation Proceeding, as the case
may be, provided that Lender has approved in Lender's sole
discretion any compromise or settlement that exceeds
$250,000.00. Any check for Insurance Proceeds or Condemnation
Awards, as the case may be (the "Proceeds") will be made payable
to Lender and Borrower. Borrower will endorse the check to
Lender immediately upon Lender presenting the check to Borrower
for endorsement or if Borrower receives, the check first, will
endorse the check immediately upon receipt and forward it to
Lender. If any Proceeds are paid to Borrower, Borrower
immediately will deposit the Proceeds with Lender, to be applied
or disbursed in accordance with the provisions of this Deed of
Trust. Lender will be responsible for only the Proceeds
actually received by Lender.
c. Application of Proceeds. After deducting any third
party and out-of-pocket costs incurred by Lender in collecting the
Proceeds, Lender may, in its sole discretion, (i) apply the Proceeds
as a credit against any portion of the Debt selected by Lender in its
sole discretion of the Debt; (ii) apply the Proceeds to restore the
Improvements, provided that Lender will not be obligated to see to the
proper application of the Proceeds and provided further that any
amounts released for Restoration will not be deemed a payment on the
Debt; or (iii) deliver the Proceeds to Borrower.
d. Conditions to Availability of Proceeds for
Restoration. Notwithstanding the preceding Section, after a Casualty
or a Condemnation (a "Destruction Event"), Lender will make the
Proceeds (less any third party and out-of-pocket costs incurred by
Lender in collecting the Proceeds) available for Restoration in
accordance with the conditions for disbursements set forth in the
Section entitled "Restoration", provided that the following conditions
are met:
(1) Bedford Property Investors, Inc. or the
transferee under a Permitted Transfer, if any,
continues to be Borrower at the time of the
Destruction Event and at all times thereafter
until the Proceeds have been fully disbursed;
(2) no monetary default under the Loan Documents
exists at the time of the Destruction Event and
no Event of Default has occurred during the 12
months prior to the Destruction Event;
(3) all Leases in effect immediately prior to the
Destruction Event and all Property Documents in
effect immediately prior to the Destruction
Event that are essential to the use and
operation of the Property continue in full force
and effect notwithstanding the Destruction
Event;
(4) if the Destruction Event is a Condemnation,
Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Improvements can
be restored to an economically and
architecturally viable unit;
(5) Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Proceeds are
sufficient to complete Restoration or if the
Proceeds are insufficient to complete
Restoration, Borrower first deposits with Lender
funds ("Additional Funds") that when added to
the Proceeds will be sufficient to complete
Restoration;
(6) if the Destruction Event is a Casualty, Borrower
delivers to Lender evidence reasonably
satisfactory to Lender that the Insurer under
each affected Policy has not denied liability
under the Policy as to Borrower or the insured
under the Policy;
(7) Lender is reasonably satisfied that the proceeds
of any business interruption insurance in effect
together with other available gross revenues
from the Property are sufficient to pay Debt
Service Payments after paying the Impositions,
Insurance Premiums, reasonable and customary
operating expenses and capital expenditures
until Restoration is complete;
(8) Lender is reasonably satisfied that Restoration
will be completed on or before the date (the
"Restoration Completion Date") that is the
earliest of: (A) 12 months prior to the
Maturity Date; (B) 12 months after the
Destruction Event; (C) the earliest date
required for completion of Restoration under any
Lease or any Property Document; or (D) any date
required by Law; and
(9) the annual Rents (excluding security deposits)
under Leases in effect on the date of the
Destruction Event are providing debt service
coverage for the annual Debt Service Payments of
1.15 after payment of annual Insurance Premiums,
Impositions and operating expenses of the
Property (including ground rent, if any),
provided that if the Rents do not provide such
debt service coverage then Borrower expressly
authorizes and directs Lender to apply an amount
from the Proceeds to reduction of Principal in
order to reduce the annual Debt Service Payments
sufficiently for such debt service coverage to
be achieved. The reduced debt service payments
will be calculated using the Fixed Interest Rate
and an amortization schedule that will achieve
the same proportionate amortization of the
reduced Principal over the then remaining Term
as would have been achieved if the Principal and
the originally scheduled Debt Service Payments
had not been reduced. Borrower will execute any
documentation that Lender deems reasonably
necessary to evidence the reduced Principal and
debt service payments.
e. Restoration.
(i) If the total Proceeds for any Destruction Event
are $250,000.00 or less and Lender elects or is obligated by Law
or under this Article to make the Proceeds available for
Restoration, Lender will disburse to Borrower the entire amount
received by Lender and Borrower will commence Restoration
promptly after the Destruction Event and complete Restoration
not later than the Restoration Completion Date.
(ii) If the Proceeds for any Destruction Event exceed
$250,000.00 and Lender elects or is obligated by Law or under
this Article to make the Proceeds available for Restoration,
Lender will disburse the Proceeds and any Additional Funds (the
"Restoration Funds") upon Borrower's request as Restoration
progresses, generally in accordance with normal construction
lending practices for disbursing funds for construction costs,
provided that the following conditions are met:
(1) Borrower commences Restoration promptly after
the Destruction Event and completes Restoration
on or before the Restoration Completion Date;
(2) if Lender requests, Borrower delivers to Lender
prior to commencing Restoration, for Lender's
approval, plans and specifications and detailed
budget for the Restoration;
(3) Borrower delivers to Lender reasonably
satisfactory evidence of the costs of
Restoration incurred prior to the date of the
request, and such other documents as Lender may
request including mechanics' lien, waivers and
title insurance endorsements;
(4) Borrower pays all costs of Restoration whether
or not the Restoration Funds are sufficient and,
if at any time during Restoration, Lender
determines that the undisbursed balance of the
Restoration Funds is insufficient to complete
Restoration, Borrower shall either: (1) deposit
with Lender, as part of the Restoration Funds,
an amount equal to the deficiency within 30 days
of receiving notice of the deficiency from
Lender or (2) provide Lender with a letter of
credit, in form and content satisfactory to
Lender, in an amount equal to the deficiency
within 30 days of receiving notice of the
deficiency from Lender ; and
(5) there is no default under the Loan Documents at
the time Borrower requests funds or at the time
Lender disburses funds.
(iii) If an Event of Default occurs at any time
after the Destruction Event, then Lender will have no further
obligation to make any remaining Proceeds available for
Restoration and may apply any remaining Proceeds as a credit
against any portion of the Debt selected by Lender in its sole
discretion.
(iv) Lender may elect at any time prior to
commencement of Restoration or while work is in progress to
retain, at Borrower's expense, an independent engineer or other
consultant to review the plans and specifications, to inspect
the work as it progresses and to provide reports. If any matter
included in a report by the engineer or consultant engaged by
Lender is not in compliance with approved plans and
specifications, Lender may suspend disbursement of the
Restoration Funds until the matters contained in the report are
resolved to Lender's satisfaction.
(v) If Borrower fails to commence and complete
Restoration in accordance with the terms of this Article, then
in addition to the Remedies, Lender may elect to restore the
Improvements on Borrower's behalf and reimburse itself out of
the Restoration Funds for costs and expenses incurred by Lender
in restoring the Improvements, or Lender may apply the
Restoration Funds as a credit against any portion of the Debt
selected by Lender in its sole discretion.
(vi) Lender may commingle the Restoration Funds with
its general assets and will not be liable to pay any interest or
other return on the Restoration Funds unless otherwise required
by Law. Lender will not hold any Restoration Funds in trust.
Lender may elect to deposit the Restoration Funds with a
depositary satisfactory to Lender under a disbursement and
security agreement satisfactory to Lender.
(vii) Borrower will pay all of Lender's out-of-
pocket and third party expenses incurred in connection with a
Destruction Event or Restoration. If Borrower fails to do so,
then in addition to the Remedies, Lender may from time to time
reimburse itself out of the Restoration Funds.
(viii) Any excess Proceeds, excluding any proceeds
from business interruption insurance maintained by Borrower,
remaining after Restoration less than $100,000, shall be
delivered to Borrower. If the excess Proceeds remaining after
Restoration are more than $100,000, Lender may elect, in its
sole discretion to apply any excess as a credit against any
portion of the Debt as selected by Lender in its sole discretion
or to deliver the excess to Borrower.
Section 24.
COMPLIANCE WITH LAW AND AGREEMENTS
a. Compliance with Law. Borrower, the Property and the
use of the Property comply and will continue to comply with Law and
with all agreements and conditions necessary to preserve and extend
all rights, licenses, permits, privileges, franchises and concessions
(including zoning variances, special exceptions and non-conforming
uses) relating to the Property or Borrower. Borrower will notify
Lender of the commencement of any investigation or Proceeding relating
to a possible violation of Law immediately after Borrower receives
notice thereof and, will deliver promptly to Lender copies of all
documents Borrower receives or delivers in connection with the
investigation or Proceeding. Borrower will not alter the Property in
any manner that would increase Borrower's responsibilities for
compliance with Law.
b. Compliance with Agreements. There are no defaults,
events of defaults or events which, with the passage of time or the
giving of notice, would constitute an event of default under the
Property Documents. Borrower will pay and perform all of its
obligations under the Property Documents as and when required by the
Property Documents. Borrower will cause all other parties to the
Property Documents to pay and perform their obligations under the
Property Documents as and when required by the Property Documents.
Borrower will not amend or waive any provisions of the Property
Documents; exercise any options under the Property Documents; give any
approval required or permitted under the Property Documents that would
adversely affect the Property or Lender's rights and interests under
the Loan Documents; cancel or surrender any of the Property Documents;
or release or discharge or permit the release or discharge of any
party to or entity bound by any of the Property Documents, without, in
each instance, Lender's prior approval (excepting therefrom all
service contracts or other agreements entered into in the normal
course of business that are cancelable upon not more than 30 days
notice). Lender shall be deemed to have approved the same if it has
not responded within 90 days of receipt of Borrower's written request
to the Lender at the addresses set forth herein. Borrower will
deliver promptly to Lender copies of any notices of default or of
termination that Borrower receives or delivers relating to any
Property Document.
c. ERISA Compliance.
(a) Borrower is not and will continue not to be an
"employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA") that is
subject to Title I of ERISA or a "plan" as defined in Section
4975(e)(1) of the Code that is subject to Section 4975 of the
Code, and Borrower's assets do not and will not constitute "plan
assets" of one or more such plans for purposes of Title I of
ERISA or Section 4975 of the Code.
(b) Borrower is not and will continue not to be a
"governmental plan" within the meaning of Section 3(32) of ERISA,
and transactions by or with Borrower are not and will not be
subject to any Laws regulating investments of and fiduciary
obligations with respect to governmental plans.
(c) Borrower will not engage in any transaction which
would cause any obligation or any action under the Loan
Documents, including Lender's exercise of the Remedies, to be a
non-exempt prohibited transaction under ERISA.
d. Section 6045(e) Filing. Borrower will supply or cause
to be supplied to Lender either (i) a copy of a completed Form 1099-B,
Statement for Recipients of Proceeds from Real Estate, Broker and
Barter Exchange Proceeds prepared by Borrower's attorney or other
person responsible for the preparation of the form, together with a
certificate from the person who prepared the form to the effect that
the form has, to the best of the preparer's knowledge, been accurately
prepared and that the preparer will timely file the form; or (ii) a
certification from Borrower that the Loan is a refinancing of the
Property or is otherwise not required to be reported to the Internal
Revenue Service pursuant to Section 6045(e) of the Code. Under no
circumstances will Lender or Lender's counsel be obligated to file the
reports or returns.
Section 25.
ENVIRONMENTAL
a. Environmental Representations and Warranties.
Except as disclosed in the Environmental Report and to
Borrower's knowledge as of the date of this Deed of Trust:
(1) no Environmental Activity has occurred or is
occurring on the Property other than the use,
storage, and disposal of Hazardous Substances
which (A) is in the ordinary course of business
consistent with the Permitted Use; (B) is in
compliance with all Environmental Laws and (C)
has not resulted in Material Environmental
Contamination of the Property; and
(2) no Environmental Activity has occurred or is
occurring on any property in the vicinity of the
Property which has resulted in Material
Environmental Contamination of the Property.
b. Environmental Covenants.
(i) Borrower will not cause or permit any Material
Environmental Contamination of the Property.
(ii) No Environmental Activity will occur on the
Property other than the use, storage and disposal of Hazardous
Substances which (A) is in the ordinary course of business
consistent with the Permitted Use; (B) is in compliance with all
Environmental Laws; and (C) does not create a risk of Material
Environmental Contamination of the Property.
(iii) Borrower will notify Lender promptly upon
Borrower becoming aware of (i) any Material Environmental
Contamination of the Property or (ii) any Environmental Activity
with respect to the Property that is not in accordance with the
preceding subsection (b). Borrower promptly will deliver to
Lender copies of all documents delivered to or received by
Borrower regarding the matters set forth in this subsection,
including notices of Proceedings or investigations concerning
any Material Environmental Contamination of the Property or
Environmental Activity or concerning Borrower's status as a
potentially responsible party (as defined in the Environmental
Laws). Borrower's notification of Lender in accordance with the
provisions of this subsection will not be deemed to excuse any
default under the Loan Documents resulting from the violation of
Environmental Laws or the Material Environmental Contamination
of the Property or Environmental Activity that is the subject of
the notice. If Borrower receives notice of a suspected
violation of Environmental Laws in the vicinity of the Property
that poses a risk of Material Environmental Contamination of the
Property, Borrower will give Lender notice and copies of any
documents received relating to such suspected violation.
(iv) From time to time at Lender's request, Borrower
will deliver to Lender any information known and documents
available to Borrower relating to the environmental condition of
the Property.
(v) Lender may perform or engage an independent
consultant to perform an assessment of the environmental
condition of the Property and of Borrower's compliance with this
Section on an annual basis or at any time for reasonable cause
or after an Event of Default. In connection with the
assessment: (i) Lender or consultant may enter and inspect the
Property and perform tests of the air, soil, ground water and
building materials; (ii) Borrower will cooperate and use best
efforts to cause tenants and other occupants of the Property to
cooperate with Lender or consultant; (iii) Borrower will receive
a copy of any final report prepared after the assessment, to be
delivered to Borrower not more than 10 days after Borrower
requests a copy and executes Lender's standard confidentiality
and waiver of liability letter; (iv) Borrower will accept
custody of and arrange for lawful disposal of any Hazardous
Substances required to be disposed of as a result of the tests;
(v) Lender will not have liability to Borrower with respect to
the results of the assessment; (vi) Lender will not be
responsible for any damage to the Property resulting from the
tests described in this subsection and Borrower will look solely
to the consultants to reimburse Borrower for any such damage;
and (vii) Borrower acknowledges that the results of the
assessment are to be solely for Lender's benefit and Borrower
may not rely on such results for any purpose. The consultant's
assessment and reports will be at Borrower's expense (i) if the
reports disclose any material adverse change in the
environmental condition of the Property from that disclosed in
the Environmental Report or any environmental report previously
ordered by Lender; (ii) if Lender engaged the consultant when
Lender had reasonable cause to believe Borrower was not in
compliance with the terms of this Article and, after written
notice from Lender, Borrower failed to provide promptly
reasonable evidence that Borrower is in compliance; or (iii) if
Lender engaged the consultant after the occurrence of an Event
of Default.
(vi) If Lender has reasonable cause to believe that
there is Environmental Activity at the Property, Lender may
elect in its sole discretion to release from the lien of this
Deed of Trust any portion of the Property affected by the
Environmental Activity and Borrower will accept the release.
Section 26.
FINANCIAL REPORTING
a. Financial Reporting.
(i) Borrower will deliver to Lender within 90 days
after the close of each Fiscal Year an annual financial
statement, certified by the chief financial officer of Borrower
(the "Annual Financial Statement") for the Property for the
Fiscal Year, which will include a comparative balance sheet, a
cash flow statement, an income and expense statement, a detailed
breakdown of all receipts and expenses and all supporting
schedules. Upon request of Lender, Borrower will also deliver
to Lender within 90 days after the close of each Fiscal Year the
Form 10-K Annual Report to the Security and Exchange Commission
for Borrower. The Annual Financial Statement for the Property
will be:
(1) accompanied by an opinion of the CPA that, in
all material respects, the Annual Financial
Statement fairly presents the financial position
of Borrower;
(2) accompanied by an opinion of the chief financial
officer of Borrower that, in all material
respects, the Annual Financial Statement fairly
presents the financial position of the Property;
(3) separate and distinct from any consolidated
statement or report for Borrower or any other
entity or any other property.
b. Annual Budget. Not less than 30 days prior to the end
of each Fiscal Year, Borrower will deliver to Lender a detailed
comparative budget (the "Budget") for the Property for the next
succeeding Fiscal Year showing anticipated operating expenses,
Insurance Premiums, Impositions, leasing commissions, capital
improvement costs, tenant improvement costs and any other information
Lender requests. Unless Lender notifies Borrower within 60 days after
Lender receives the Budget that Lender disputes information in the
Budget, the Budget as submitted will constitute the Budget for the
next succeeding Fiscal Year. If Lender concludes in good faith that a
Budget needs material revision, Borrower will submit a revised Budget
to Lender, together with a detailed explanation of the revisions.
Borrower waives any defense or right of offset to the Obligations, and
any claim or counterclaim against Lender, arising out of any
discussions between Borrower and Lender regarding any Budget or
revised Budget delivered to Lender or the resolution of any
disagreements relating to a Budget or revised Budget including any
defense, right of offset, claim or counterclaim alleging in substance,
that by virtue of such delivery, discussions or resolution, Lender has
interfered with, influenced or controlled Borrower or the operations
at the Property.
Section 27.
EXPENSES AND DUTY TO DEFEND
a. Payment of Expenses.
(i) Borrower is obligated to pay all fees and
expenses (the "Expenses") incurred by Lender or that are
otherwise payable in connection with the Loan, the Property or
Borrower, including attorneys' fees and expenses and any fees
and expenses relating to (i) the preparation, execution,
acknowledgment, delivery and recording or filing of the Loan
Documents; (ii) any Proceeding or other claim asserted against
Lender; (iii) any inspection, assessment, survey and test
permitted under the Loan Documents; (iv) any Destruction Event;
(v) the preservation of Trustee's title, Lender's security and
the exercise of any rights or remedies available at Law, in
equity or otherwise; and (vi) the Leases and the Property
Documents.
(ii) Borrower will pay the Expenses promptly on
demand, together with any applicable interest, premiums or
penalties. If Lender pays any of the Expenses, Borrower will
reimburse Lender the amount paid by Lender promptly upon demand,
together with interest on such amount at the Fixed Interest Rate
from the date Lender paid the Expenses through the fifth day
after demand. Interest on such amount will be at the Default
Interest Rate from the sixth day after demand through and
including the date Borrower reimburses Lender. The Expenses
together with any applicable interest, premiums or penalties
constitute a portion of the Debt secured by this Deed of Trust.
b. Duty to Defend. If Lender or any of its trustees,
officers, participants, employees or affiliates is a party in any
Proceeding relating to the Property, Borrower or the Loan, Borrower
will indemnify and hold harmless the party and will defend the party
with attorneys and other professionals retained by Borrower and
approved by Lender. Lender may elect to engage its own attorneys and
other professionals, at Borrower's expense, to defend or to assist in
the defense of the party. In all events, case strategy will be
determined by Lender if Lender so elects and no Proceeding will be
settled without Lender's prior approval which may be withheld in its
sole discretion. Lender shall be deemed to have approved if it has not
responded within 30 days of receipt of Borrower's written request to
the Lender at the addresses set forth herein, provided however, Lender
shall not incur any liability or costs relating to any settlement
pursuant to this Section 11.2.
Section 28.
TRANSFERS LIENS AND ENCUMBRANCES
a. Prohibitions on Transfers, Liens and Encumbrances.
(i) Borrower acknowledges that in making the Loan,
Lender is relying to a material extent on the business expertise
and net worth of Borrower and Borrower's general partners,
members or principals and on the continuing interest that each
of them has, directly or indirectly, in the Property.
Accordingly, except as specifically set forth in this Deed of
Trust, Borrower (i) will not, and will not permit its partners,
members or principals to, effect a Transfer without Lender's
prior approval, which may be withheld in Lender's sole
discretion and (ii) will keep the Property free from all liens
and encumbrances other than the lien of this Deed of Trust and
the Permitted Exceptions. Lender shall be deemed to have
approved a Transfer if it has not responded within 90 days of
receipt of Borrower's written request providing any information
required by Lender as to the proposed Transfer to the Lender at
the addresses set forth herein. A "Transfer" is defined as any
sale, grant, lease (other than bona fide third-party space
leases with tenants), conveyance, assignment or other transfer
of, or any encumbrance or pledge against, the Property, any
interest in the Property, any interest of Borrower's partners,
members or principals in the Property, or any change in
Borrower's composition, in each instance whether voluntary or
involuntary, direct or indirect, by operation of law or
otherwise and including the grant of an option or the execution
of an agreement relating to any of the foregoing matters. A
Transfer shall not include the public trading of shares of the
Borrower in accordance with applicable law.
(ii) Borrower represents, warrants and covenants
that:
(1) Borrower is a publically traded Maryland
corporation whose five largest shareholders as
of March 1999 (the "Existing Shareholders") are:
Bed Preferred No. 1 Limited Partnership, Lend
Lease Rosen Real Estate Securities LLC, PRA
Securities Advisors LP, Heitman PRA Securities
Advisors LLC and Peter B. Bedford.
b. Permitted Transfers.
(i) Notwithstanding the prohibitions regarding
Transfers, a Permitted Transfer (as defined in (b) below) may
occur, provided that the following conditions are met:
(1) at least 30 days prior to the proposed Permitted
Transfer, Borrower delivers to Lender a notice
that is sufficiently detailed to enable Lender
to determine that the proposed Permitted
Transfer complies with the terms of this
Section;
(2) there is no default under the Loan Documents
either when Lender receives the notice or when
the proposed Permitted Transfer occurs;
(3) the proposed Permitted Transfer will not result
in a violation of any of the covenants contained
in the Section entitled, "ERISA Compliance" and
Borrower will deliver to Lender such
documentation of compliance as Lender requests
in its sole discretion;
(4) when Lender receives the notice and when the
proposed Permitted Transfer occurs, the
transferee has never been an adverse party to
Lender in any litigation to which Lender was a
party; the transferee has never defaulted on a
loan from Lender or on any contract or other
agreement with Lender; the transferee has never
threatened litigation against Lender, and the
transferee is free from bankruptcy (for purposes
of this subsection "transferee" includes the
transferee's constituent entities at all levels
and "Lender" includes Lender's subsidiaries);
(5) Borrower pays all of Lender's expenses relating
to the Transfer including Lender's attorneys'
fees regardless of whether or not the proposed
Transfer is consummated; and
(6) Lender is satisfied that the Property will
continue to be managed by a manager satisfactory
to Lender.
(ii) Upon compliance with the conditions set forth in
the preceding subsection, the following Transfers (the "Permitted
Transfers") may occur without Lender's prior consent as provided
for in Section 12.1.
(1) Transfers of shares in Borrower among the
Existing Shareholders;
(2) Public trading of shares in Borrower in
accordance with applicable law (for public
trading of Borrower's shares, Borrower will not
be required to notify Lender in the event of
trading in its shares and Borrower shall not be
required to reimburse the Lender for the review
of trades); and
(3) A one-time sale of the Property together with
the Property as defined in the Deed of Trust,
Assignment of Leases and Rents, Security
Agreement and Fixture Filing (Bedford Portfolio
#1 - Arizona Properties) dated the date of this
Deed of Trust, executed by Borrower and which
also secures the Note ("Portfolio #1 Arizona
Property"), to one, unaffiliated, bona fide
purchaser, provided that the following
conditions are met:
(A) the transferee has a net worth of at least
$25,000,000;
(B) the transferee is (i) an Institutional
Investor or (ii) a developer or manager of first-class
commercial real estate comparable to the Property and
having a reputation in the industry at least equivalent to
that of Borrower as of the date of this Deed of Trust;
(C) the transferee has expressly assumed the
obligations of Borrower under the Property Documents and
under the Loan Documents; and
(D) subsequent to the Transfer, the Property is
managed by a property manager satisfactory to Lender; and
(E) Borrower pays to Lender a transfer fee of
one-half percent (0.5%) of the outstanding Principal;
provided, however, if, in a single transaction there is a
Transfer to the same third-party approved by Lender, of the
Property and the Portfolio #1 Arizona Property together
with the properties described in the Deeds of Trust,
Assignments of Leases and Rents, Security Agreements and
Fixture Filings which secure the Promissory Note - Bedford
Portfolio #2 in the original principal amount of
$37,200,000 dated the date of this Deed of Trust executed
by Borrower pursuant to Lender's Loan Application and
Commitment Agreement #VR-7 for Lender's Mortgage Number M-
000462600 ("Bedford Portfolio #2 Loan") and the properties
described in the Deeds of Trust, Assignment of Leases and
Rents, Security Agreements and Fixture Filings which secure
the Promissory Note - Bedford Portfolio #3 in the original
principal amount of $27,350,000 dated the date of this Deed
of Trust executed by Borrower pursuant to Lender's Loan
Application and Commitment Agreement #VR-6 for Lender's
Mortgage Number M-000462400 ("Bedford Portfolio #3 Loan"),
then Borrower pays to Lender a transfer fee of one-fourth
percent (.25%) of the combined outstanding principal for
the Loan, the Bedford Portfolio #2 Loan and the Bedford
Portfolio #3 Loan.
c. Right to Contest Liens. Borrower, at its own expense,
may contest the amount, validity or application, in whole or in part,
of any mechanic's, materialmen's or environmental liens in which event
Lender will refrain from exercising any of the Remedies, provided that
the following conditions are met:
(1) Borrower delivers to Lender notice of the
proposed contest not more than 30 days after the
lien is filed;
(2) the contest is by a Proceeding promptly
initiated and conducted in good faith and with
due diligence;
(3) there is no Event of Default other than the
Event of Default arising from the filing of the
lien;
(4) the Proceeding suspends enforcement of
collection of the lien, imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit;
(5) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Document;
(6) Borrower sets aside reserves or furnishes a bond
or other security satisfactory to Lender, in
either case, in an amount sufficient to pay the
claim giving rise to the lien, together with all
interest and penalties or Borrower pays the
contested lien under protest; and
(7) with respect to an environmental lien, Borrower
is using best efforts to mitigate or prevent any
deterioration of the Property resulting from the
alleged violation of any Environmental Laws or
the alleged Environmental Activity.
d. Right to Partial Release of Deed of Trust. Borrower
may obtain the partial release of deed of trust of either property
listed in Exhibit A-1 or Exhibit A-2 of this Deed of Trust and a
reconveyance of all four properties together listed in Exhibit A of
the Deed of Trust, Assignment of Leases and Rents, Security Agreement,
and Fixture Filing (Bedford Portfolio #1 - Arizona Properties) dated
the date of this Deed of Trust and which also secures the Note, at any
time more than 24 months after the execution of this Deed of Trust
(each property being referred to as a "Release Parcel"), provided that
the following conditions are met before effecting each partial release
of deed of trust:
(1) Borrower shall not be entitled to the release of
more than two Release Parcels; one release of a
Release Parcel shall be solely for the purpose
of a sale and a transfer of the Release Parcel
to a bona fide purchaser. The release of any
Release Parcel shall occur simultaneously with
the addition of one or more new properties to
secure the Loan, in accordance with the
provisions of Section 12.5 of this Deed of Trust
and the securing of the lien of the Lender's
mortgage to encumber the Substitution Property
as defined in Section 12.5; provided, however,
for the limited purpose of release of the
Phoenix Airport Business Center properties which
are the four properties that comprise the
Portfolio #1 Arizona Property as of the date of
this Deed of Trust, all of the properties of the
Phoenix Airport Business Center must be sold to
a single third party in a single sale under an
approved transfer, the release of all of such
properties shall be considered as one release of
one Release Parcel;
(2) not less than 60 days prior to the proposed date
of the partial release of deed of trust,
Borrower delivers to Lender a notice setting
forth (A) the proposed date of the partial
release of deed of trust; (B) the name of the
proposed transferee (if the Release Parcel is
adjacent to a property still covered by this
Deed of Trust); (C) the intended use of the
Release Parcel; and (D) any other information
reasonably necessary for Lender to analyze the
terms of the partial release of deed of trust.
Not less than 30 days prior to the proposed
release, Borrower will deliver to Lender a copy
of the contract of sale or ground lease;
(3) on the date Borrower delivers to Lender notice
of the proposed partial release of deed of trust
and on the date of the partial release of deed
of trust, there is no default under the Loan
Documents on either the notice date or the
release date;
(4) Borrower delivers to Lender evidence
satisfactory to Lender that Borrower has
complied with any requirements of the Property
Documents or the Leases applicable to the
partial release of deed of trust and the partial
release of deed of trust does not violate any of
the provisions of the Property Documents or the
Leases and to the extent necessary to comply
with the Property Documents or the Leases,
Borrower is released from all obligations
relating to the Release Parcel;
(5) Borrower delivers to Lender an endorsement to
Lender's title insurance policy satisfactory to
Lender that (A) extends the effective date of
the policy to the effective date of the release;
(B) confirms no change in the priority of the
lien of Lender's Deed of Trust on the balance of
the Property and on the Portfolio #1 Arizona
Property or in the amount of coverage; (C)
consents to the release; (D) waives any defense
resulting from the partial release of the deed
of trust; (E) to the extent of the value of the
Release Parcel, waives any right of subrogation;
and (F) includes the Substitution Property (as
defined in Section 12.5) or in the alternative a
separate title insurance policy that affects the
foregoing;
(6) not less than 10 days prior to the date of the
release, Borrower delivers to Lender consents to
the release and substitution by entities holding
liens affecting the Property or holding any
other interest in the Property that would be
affected by the release and substitution,
including parties to any Property Documents or
to any Leases;
(7) Borrower pays all expenses relating to the
release of the Release Parcel and the addition
of the Substitution Property, including Lender's
reasonable attorney's fees if outside counsel is
engaged by Lender;
(8) Borrower delivers to Lender copies of the
executed documents evidencing the transfer of
the Release Parcel as provided in subsection (i)
above;
(9) Borrower delivers to Lender any other
information, approvals and documents reasonably
required by Lender relating to the release and
the substitution;
(10) The remaining Property together with the
remaining Portfolio #1 Arizona Property together
with the Substitution Property must have a loan
to value ratio of no more than 70% and provide a
debt service coverage ratio of at least 1.50
times the debt service coverage (in a manner
reasonably determined by Lender); and
(11) Borrower must prepay 110% of the difference
between the Principal of the Loan allocable to
the Release Parcel that is being released and
70% of the appraised value for the Substitution
Property with a prepayment premium equal to the
Prepayment Percentage (as defined in the Note)
times the resulting difference. For purposes of
this Subsection 12.4(xi) only, if the prepayment
premium payable hereunder is calculated on the
Discounted Value (defined in the Note), then the
discount rate used to calculate the prepayment
premium shall equal the Discount Rate (defined
in the Note) plus 50 basis points. Allocation
of the original outstanding principal balance
will be determined by Lender's appraisal at
Closing. The additional 10% principal proceeds
from a prepayment pursuant to this
Subsection 12.4(xi) shall be applied at par to a
pro-rata reduction of the Principal balance of
the Loan allocated among the remaining Property,
the remaining Portfolio #1 Arizona Property and
the Substitution Property.
e. Substitution. In conjunction with the release of a
Release Parcel
(described in Section 12.4), Borrower shall provide to Lender, as
security for the Loan, the replacement and substitution of one or more
new properties to secure the Loan, as provided herein (the
"Substitution Property"). In connection with providing the
Substitution Property, Borrower shall, at Borrower's expense, execute
and deliver to Lender loan documents, including an additional deed of
trust or mortgage, an assignment of leases, a UCC-1 financing
statement, and any other document, including title policy, that Lender
may require, in form and content acceptable to Lender in Lender's sole
discretion, necessary in order to add the Substitution Property as
collateral for the Loan. Borrower shall also provide for the
Substitution Property all items required for the Property by the Loan
Application and Commitment Agreement dated February 26, 1999 by and
between Lender and Borrower for the Loan. Lender shall have the sole
and absolute discretion to either approve or disapprove any proposed
substitution, provided that such approval shall not be unreasonably
withheld so long as the Substitution Property is (i) of comparable
quality as the Release Parcel being replaced, and (ii) Borrower
demonstrates to Lender's satisfaction that the Substitution Property
has a fair market value of no less than 90% of the fair market value
of the Release Parcel immediately prior to substitution. Lender shall
be deemed to have approved the proposed substitution if it has not
responded within 90 days of Borrower's written request providing all
information required by Lender as to the proposed substitution at the
addresses set forth herein. In all cases, Lender shall have 90 days
to respond from the date of Lender's receipt of the last information
provided by Borrower. Any substitutions shall be on terms and
conditions acceptable to Lender and shall be subject to Lender's
internal approval process. The Substitution Property together with
the other properties comprising the Property and the Portfolio #1
Arizona Property shall be subject to a maximum loan-to-value ratio of
70%, have, at a minimum, a debt service coverage ratio equal to 1.50,
and a lease expiration profile acceptable to Lender. Furthermore,
Lender will not approve a substitution that would negatively impact
the loan portfolio with regard to its geographic diversity, credit
risk, leasing pro formas, tenant quality, lease expiration risk and
other similar factors, including the ability to legally cross-default
and cross-collateralize the Substitution Property with the remainder
of the portfolio, to be determined in Lender's sole discretion.
Borrower shall provide Lender with such information and documentation
(including leases and other property documents) as Lender shall deem
necessary to make an informed decision and properly evaluate the
proposed substitution. The Substitution Property will be required to
have a value of not less than 90% of the fair market value of the
Release Parcel to be released. Borrower shall be responsible for all
costs and expenses, including, without limitation, reasonable
attorney's fees (if outside counsel is engaged by Lender), incurred by
Lender in connection with any proposed transaction along with title
insurance premium and engineering, environmental and appraisal reports
associated with such substitution. For the limited purpose of
substitution of the Phoenix Airport Business Center properties, which
are the four properties that comprise the Portfolio #1 Arizona
Property, as of the date of this Deed of Trust, all of the properties
of the Phoenix Airport Business Center must be sold to a single third
party in a single sale under an approved transfer. Substitution of
new property for the four properties that comprise the Portfolio #1
Arizona Property shall be considered as one substitution event.
Section 29.
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
a. Further Assurances.
(i) Borrower will execute, acknowledge and deliver
to Lender or to any other entity Lender designates any
additional or replacement documents and perform any additional
actions that Lender determines are reasonably necessary to
evidence, perfect or protect Lender's first lien on and prior
security interest in the Property or to carry out the intent or
facilitate the performance of the provisions of the Loan
Documents.
(ii) Borrower appoints Lender as Borrower's attorney-
in-fact to perform, at Lender's election, any actions and to
execute and record any of the additional or replacement
documents referred to in this Section, in each instance only at
Lender's election and only to the extent Borrower has failed 3
days after written notice to Borrower to comply with the terms
of this Section.
b. Estoppel Certificates.
(i) Within 10 days of Lender's request, but in no
case more often that twice in any 18 month period, except where
Lender is selling all or part of the Loan Borrower will deliver
to Lender or to any entity Lender designates a certificate
certifying (i) the original principal amount of the Note; (ii)
the unpaid principal amount of the Note; (iii) the Fixed
Interest Rate; (iv) the amount of the then current Debt Service
Payments; (v) the Maturity Date; (vi) the date a Debt Service
Payment was last made; (vii) that, except as may be disclosed in
the statement, there are no defaults or events which, with the
passage of time or the giving of notice, would constitute an
Event of Default; and (viii) there are no offsets or defenses
against any portion of the Obligations except as may be
disclosed in the statement.
(ii) If Lender requests, Borrower promptly will
deliver to Lender or to any entity Lender designates a
certificate from each party to any Property Document, certifying
that the Property Document is in full force and effect with no
defaults or events which, with the passage of time or the giving
of notice, would constitute an event of default under the
Property Document and that there are no defenses or offsets
against the performance of its obligations under the Property
Document.
(iii) If Lender requests, Borrower promptly will
deliver to Lender, or to any entity Lender designates, a
certificate from each tenant under a Lease then affecting the
Property, certifying to any facts regarding the Lease as Lender
may require, including that the Lease is in full force and
effect with no defaults or events which, with the passage of
time or the giving of notice, would constitute an event of
default under the Lease by any party, that the rent has not been
paid more than one month in advance and that the tenant claims
no defense or offset against the performance of its obligations
under the Lease.
Section 30.
DEFAULTS AND REMEDIES
a. Events of Default. The term "Event of Default" means
the occurrence of any of the following events:
(1) if Borrower fails to pay any amount due, as and
when required, under any Loan Document and the
failure continues for a period of 5 days;
(2) if Borrower makes a general assignment for the
benefit of creditors or generally is not paying,
or is unable to pay, or admits in writing its
inability to pay, its debts as they become due;
or if Borrower or any other party commences any
Proceeding (A) relating to bankruptcy,
insolvency, reorganization, conservatorship or
relief of debtors, in each instance with respect
to Borrower; (B) seeking to have an order for
relief entered with respect to Borrower; (C)
seeking attachment, distraint or execution of a
judgment with respect to Borrower; (D) seeking
to adjudicate Borrower as bankrupt or insolvent;
(E) seeking reorganization, arrangement,
adjustment, winding-up, liquidation,
dissolution, composition or other relief with
respect to Borrower or Borrower's debts; or (F)
seeking appointment of a Receiver, trustee,
custodian, conservator or other similar official
for Borrower or for all or any substantial part
of Borrower's assets, provided that if the
Proceeding is commenced by a party other than
Borrower or any of Borrower's general partners
or members, Borrower will have 120 days to have
the Proceeding dismissed or discharged before an
Event of Default occurs;
(3) if Borrower is in default beyond any applicable
grace and cure period under any other mortgage,
deed of trust, deed to secure debt or other
security agreement encumbering the Property
whether junior or senior to the lien of this
Deed of Trust;
(4) if Borrower is in default beyond any applicable
grace and cure period under the loan documents
described in the Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture
Filing (Bedford Portfolio #1 - Arizona
Properties) evidencing and securing the Loan
made by Lender in favor of Borrower pursuant to
the Note and encumbering the Portfolio #1
Arizona Property;
(5) if a Transfer occurs except in accordance with
the provisions of this Deed of Trust;
(6) if Borrower abandons the Property or ceases to
conduct its business at the Property; or
(7) if there is a default in the performance of any
other provision of any Loan Document or if there
is any inaccuracy or falsehood in any
representation or warranty contained in any Loan
Document which is not remedied within 30 days
after Borrower receives notice thereof, provided
that if the default, inaccuracy or falsehood is
of a nature that it cannot be cured within the
30-day period and during that period Borrower
commences to cure, and thereafter diligently
continues to cure, the default, inaccuracy or
falsehood, then the 30-day period will be
extended for a reasonable period not to exceed
120 days after the notice to Borrower.
b. Remedies.
(i) If an Event of Default occurs, Lender may take
any of the following actions (the "Remedies") without notice to
Borrower:
(1) declare all or any portion of the Debt
immediately due and payable ("Acceleration");
(2) pay or perform any Obligation;
(3) institute a Proceeding for the specific
performance of any Obligation;
(4) apply for and obtain the appointment of a
Receiver to be vested with the fullest powers
permitted by Law, without bond being required,
which appointment may be made ex parte, as a
matter of right and without regard to the value
of the Property, the amount of the Debt or the
solvency of Borrower or any other person liable
for the payment or performance of any portion of
the Obligations;
(5) directly, by its agents or representatives or
through a Receiver appointed by a court of
competent jurisdiction, enter on the Land and
Improvements, take possession of the Property,
dispossess Borrower and exercise Borrower's
rights with respect to the Property, either in
Borrower's name or otherwise;
(6) institute a Proceeding for the foreclosure of
this Deed of Trust or, if applicable, sell by
power of sale all or any portion of the
Property, in any court of competent
jurisdiction;
(7) institute proceedings for the partial
foreclosure of this Deed of Trust for the
portion of the Debt then due and payable,
subject to the continuing lien of this Deed of
Trust for the balance of the Debt not then due;
(8) deliver to Trustee a declaration of default and
demand for sale and a notice of default and
election to cause Borrower's interest in the
Property to be sold, which notice Lender will
file in the official records of the county in
which the Property is located;
(9) exercise any and all rights and remedies granted
to a secured party under the Uniform Commercial
Code; and
(10) pursue any other right or remedy available to
Lender at Law, in equity or otherwise.
(ii) If an Event of Default occurs, the license
granted to Borrower in the Loan Documents to collect Rents will
terminate automatically without any action required of Lender.
c. General Provisions Pertaining to Remedies.
(i) The Remedies are cumulative and may be pursued
by Lender at such time and in such order as Lender may determine
in its sole discretion and without presentment, demand, protest
or further notice of any kind, all of which are expressly waived
by Borrower.
(ii) The enumeration in the Loan Documents of
specific rights or powers will not be construed to limit any
general rights or powers or impair Lender's rights with respect
to the Remedies.
(iii) If Lender exercises any of the Remedies,
Lender will not be deemed a mortgagee-in-possession unless
Lender has elected affirmatively to be a mortgagee-in-
possession.
(iv) Lender will not be liable for any act or
omission of Lender in connection with the exercise of the
Remedies.
(v) Lender's right to exercise any Remedy will not
be impaired by any delay in exercising or failure to exercise
the Remedy and the delay or failure will not be construed as
extending any cure period or constitute a waiver of the default
or Event of Default.
(vi) If an Event of Default occurs, Lender's payment
or performance or acceptance of payment or performance will not
be deemed a waiver or cure of the Event of Default.
(vii) Lender's acceptance of partial payment or
receipt of Rents will not extend or affect any grace period or
constitute a waiver of a default or Event of Default or
constitute a rescission of Acceleration.
d. Foreclosure by Power of Sale.
Without limiting the generality of the foregoing or the
provisions set forth below, if an Event of Default occurs, Lender may
at any time and from time to time:
(i) Enter, take possession of and sell or otherwise
dispose of all or any part of the Property and in connection
therewith elect to sell all of the Property as if it were real
property in accordance with subsection (b) below, or elect to
sell or otherwise dispose of any part of the Property which is
personal property in accordance with subsection (c) below,
separate and apart from the sale of real property.
(ii) Elect, without further notice, to file with the
Trustee, a Notice of Election and Demand for Sale, in writing,
as provided by Law. After such filing, the Trustee may lawfully
foreclose and will foreclose the lien of this Deed of Trust, and
sell and dispose of the Property en masse or in separate parcels
(as Lender may elect) and all the right, title, and interest of
the Borrower therein, at a public auction at any place then
authorized by Law as may be specified in the notice of such
sale, for the highest and best price (the "Trustee's Sale"), four
(4) weeks' public notice having previously been given of the
time and place of such sale by advertisement, weekly, in a
newspaper of general circulation at the time published in the
County of Denver, State of Colorado, or upon such other notice
as may then be required by Law. A copy of the notice of sale
will be given to Borrower at its address given in this Deed of
Trust, and to such person or persons appearing to have acquired
a subsequent record interest in the Property at the address
given in the recorded instrument evidencing such interest, any
such notice to be given in accordance with applicable Law,
provided, that where only the county and state are given as the
address then such notice will be mailed to the county seat.
Trustee will then make and give to the purchaser or purchasers
of such Property at such sale a certificate or certificates in
writing describing such Property purchased, and the sum or sums
paid therefor, and the time when the purchaser or purchasers (or
other persons entitled thereto) will be entitled to a deed or
deeds therefor, unless the same will be redeemed as provided by
Law, and Trustee will, upon demand by the person or persons
holding the certificate or certificates of purchase, when the
demand is made, or upon demand by the person entitled to a deed
to and for the Property purchased, at the time such demand is
made (the time for redemption having expired) make and execute
to such person or persons a deed or deeds to the Property
purchased, which shall be in the ordinary form of a conveyance,
and will be signed, acknowledged, and delivered by Trustee, as
grantor, and will convey and quitclaim to the person or persons
entitled to the deed, as grantee, the Property purchased as
aforesaid, and all the right, title, interest, benefit, and
equity of redemption of Borrower and its successors and assigns,
and shall recite the sum for which the Property was sold and
shall refer to the power of sale herein contained, and to the
sale or sales made by virtue thereof. In case of an assignment
of such certificate or certificates of purchase or in the case
of redemption of such Property by a subsequent encumbrancer,
such assignment or redemption will also be referred to in such
deed or deeds, but the notice of sale need not be set out in
such deed or deeds. Trustee will, out of the proceeds or avails
of such sale, after first paying and retaining all fees,
charges, and costs of making the sale, first pay to Lender all
moneys advanced by Lender for insurance, repairs, appraisals,
maintenance, inspection and testing fees, receivers' and
management fees, leasing and sales commissions, advertising
costs and expenses, taxes and assessments, environmental audits,
environmental studies and reports, environmental tests and
remediation costs, surveys, engineering studies and reports,
engineering fees and expenses, soils tests, space planning costs
and expenses, contractors' fees, expert witness fees and
expenses, copying charges, costs for title searches and
examinations, title insurance premiums and expenses, filing and
recording fees, all costs, fees and expenses incurred by Lender
to maintain, preserve and protect the Property, attorneys' fees,
and any other costs or fees authorized in the Loan Documents or
by statute, with interest thereon at the Default Interest Rate,
from the date incurred until paid, and then pay to the Lender
the Principal, Interest, any prepayment premium provided for in
the Note, and any other sums due on the Note or under the other
Loan Documents according to the tenor and effect thereof,
rendering the overplus, if any, to Borrower and its successors
or assigns. Such sale or sales and said deed or deeds so made
will be a perpetual bar, both in Law and equity, against
Borrower and its successors and assigns, and all other persons
claiming the Property, or any part thereof, by, through, from,
or under Borrower. The holder of the Note may purchase the
Property or any part thereof. It will not be obligatory upon
the purchaser or purchasers at any such sale to see to the
application of the purchase money. Nothing herein dealing with
foreclosure procedures or specifying particular actions to be
taken by Lender or by Trustee will be deemed to contradict or
add to the requirements and procedures (now or hereafter
existing) of Colorado Law applicable to this Deed of Trust at
the time of foreclosure, and any such conflict or inconsistency
shall be resolved in favor of Colorado law.
(iii) Should the Lender elect to cause any part
of the Property to be sold or otherwise disposed of as personal
property as permitted by subsection (a) above, such Property may
be sold or otherwise disposed of in any manner now or hereafter
permitted by the Uniform Commercial Code in effect in Colorado
or other applicable Law, and the Lender will have, and may
exercise, all of the rights, remedies and powers of a secured
party under such Uniform Commercial Code. Borrower agrees that
commercial reasonableness and good faith required Lender to give
to Borrower no more than then (10) days' prior written notice of
any public sale or other disposition of any part of the Property
to be sold pursuant to this subpart or of the time after which
any private sale or other disposition of such Property is to be
made.
e. General Provisions Pertaining to Mortgagee-in-
Possession or Receiver.
(i) If an Event of Default occurs, and without
notice to Borrower, any court of competent jurisdiction will,
upon application by Lender, appoint a Receiver as designated in
the application and issue an injunction prohibiting Borrower
from interfering with the Receiver, collecting Rents, disposing
of any Rents or any part of the Property, committing waste or
doing any other act that will tend to affect the preservation of
the Leases, the Rents and the Property and Borrower approves the
appointment of the designated Receiver or any other Receiver
appointed by the court. By execution of this Deed of Trust,
Borrower irrevocably consents to the appointment of a receiver
to be made ex parte and as a matter of right to Lender, either
before or after sale of the Property, without further notice,
and without regard to the solvency or insolvency, at the time of
application for the Receiver, of the person or persons, if any,
liable for the payment of any portion of the Debt and the
performance of any portion of the Obligations, and without
regard to the value of the Property or whether the Property is
occupied as a homestead and without bond being required of the
applicant.
(ii) The Receiver will be vested with the fullest
powers permitted by Law including all powers necessary or usual
in similar cases for the protection, possession and operation of
the Property and all the powers and duties of Lender as a
mortgagee-in-possession as provided in this Deed of Trust and
may continue to exercise all the usual powers and duties until
the Receiver is discharged by the court.
(iii) In addition to the Remedies and all other
available rights, Lender or the Receiver may take any of the
following actions:
(1) take exclusive possession, custody and control
of the Property and manage the Property so as to
prevent waste;
(2) require Borrower to deliver to Lender or the
Receiver all keys, security deposits, operating
accounts, prepaid Rents, past due Rents, the
Books and Records and all original counterparts
of the Leases and the Property Documents;
(3) collect, sue for and give receipts for the Rents
and, after paying all expenses of collection,
including reasonable receiver's, broker's and
attorney's fees, apply the net collections to
any portion of the Debt selected by Lender in
its sole discretion,
(4) enter into, modify, extend, enforce, terminate,
renew or accept surrender of Leases and evict
tenants except that in the case of a Receiver,
such actions may be taken only with the written
consent of Lender as provided in this Deed of
Trust and in the Assignment;
(5) enter into, modify, extend, enforce, terminate
or renew Property Documents except that in the
case of a Receiver, such actions may be taken
only with the written consent of Lender as
provided in this Deed of Trust and in the
Assignment;
(6) appear in and defend any Proceeding brought in
connection with the Property and bring any
Proceeding to protect the Property as well as
Borrower's and Lender's respective interests in
the Property (unless any such Proceeding has
been assigned previously to Lender in the
Assignment, or if so assigned, Lender has not
expressly assigned such Proceeding to the
Receiver and consented to such appearance or
defense by Receiver);
(7) perform any act in the place of Borrower that
Lender or the Receiver deems necessary (A) to
preserve the value, marketability or rentability
of the Property; (B) to increase the gross
receipts from the Property; or (C) otherwise to
protect Borrower's and Lender's respective
interests in the Property; and
(8) issue receiver's certificates for funds advanced
by Lender for the purpose of protecting the
value of the Property as security for the Debt;
the amounts evidenced by receiver's certificates
shall bear interest at the Default Interest Rate
and may be added to the cost of redemption if
the owners of the Property, Borrower, or a
junior lienholder redeems the Trustee's Sale.
(iv) Borrower appoints Lender as Borrower's attorney-
in-fact, at Lender's election, to perform any actions and to
execute and record any instruments necessary to effectuate the
actions described in this Section, in each instance only at
Lender's election and only to the extent Borrower has failed to
comply with the provisions of this Section.
f. General Provisions Pertaining to Foreclosures and the
Power of Sale. The following provisions will apply to any Proceeding
to foreclose and to any sale of the Property by power of sale or
pursuant to a judgment of foreclosure and sale:
(1) Lender's right to institute a Proceeding to
foreclose or to sell by power of sale will not
be exhausted by a Proceeding or a sale that is
defective or not completed or by conducting
separate sales of portions of the Property;
(2) any sale may be postponed or adjourned by Lender
by public announcement at the time and place
appointed for the sale without further notice;
(3) with respect to sale pursuant to a judgment of
foreclosure and sale, the Property may be sold
as an entirety or in parcels, at one or more
sales, at the time and place, on terms and in
the order that Lender deems expedient in its
sole discretion;
(4) if a portion of the Property is sold pursuant to
this Article, the Loan Documents will remain in
full force and effect with respect to any
unmatured portion of the Debt and this Deed of
Trust will continue as a valid and enforceable
first lien on and security interest in the
remaining portion of the Property, subject only
to the Permitted Exceptions, without loss of
priority and without impairment of any of
Lender's rights and remedies with respect to the
unmatured portion of the Debt;
(5) Lender may bid for and acquire the Property at a
sale and, in lieu of paying cash, may credit the
amount of Lender's bid against any portion of
the Debt selected by Lender in its sole
discretion after deducting from the amount of
Lender's bid the expenses of the sale, costs of
enforcement and other amounts that Lender is
authorized to deduct at Law, in equity or
otherwise; and
(6) Lender's receipt of the proceeds of a sale will
be sufficient consideration for the portion of
the Property sold and Lender will apply the
proceeds as set forth in this Deed of Trust.
g. Application of Foreclosure Sale and Other Proceeds.
Lender may apply the proceeds of any sale of the Property pursuant to
a judgment of foreclosure and sale and any other amounts collected by
Lender in connection with the exercise of the Remedies to payment of
the Debt in such priority and proportions as Lender may determine in
its sole discretion or in such priority and proportions as required by
Law.
h. Power of Attorney. Borrower appoints Lender as
Borrower's attorney-in-fact, to perform any actions necessary and
incidental to exercising the Remedies.
i. Tenant at Sufferance. If Lender or a Receiver enters
the Property in the exercise of the Remedies and Borrower is allowed
to remain in occupancy of the Property, Borrower will pay to Lender or
the Receiver, as the case may be, in advance, a reasonable rent for
the Property occupied by Borrower. If Borrower fails to pay the rent,
Borrower may be dispossessed by the usual Proceedings available
against defaulting tenants.
Section 31.
LIMITATION OF LIABILITY
a. Limitation of Liability.
(i) Notwithstanding any provision in the Loan
Documents to the contrary, except as set forth in subsections
(b) and (c), if Lender seeks to enforce the collection of the
Debt, Lender will foreclose this Deed of Trust instead of
instituting suit on the Note. If a lesser sum is realized from
a foreclosure of this Deed of Trust and sale of the Property
than the then outstanding Debt, Lender will not institute any
Proceeding against Borrower or Borrower's general partners, if
any, for or on account of the deficiency, except as set forth in
subsections (b) and (c).
(ii) The limitation of liability in subsection (a)
will not affect or impair (i) the lien of this Deed of Trust or
Lender's other rights and Remedies under the Loan Documents,
including Lender's right as mortgagee or secured party to
commence an action to foreclose any lien or security interest
Lender has under the Loan Documents; (ii) the validity of the
Loan Documents or the Obligations; (iii) Lender's rights under
any Loan Document that are not expressly non-recourse; or (iv)
Lender's right to present and collect on any letter of credit or
other credit enhancement document held by Lender in connection
with the Obligations.
(iii) The following are excluded and excepted
from the limitation of liability in subsection (a) and Lender
may recover personally against Borrower and its general
partners, if any, for the following:
(1) all losses suffered and liabilities and expenses
incurred by Lender relating to any fraud or
intentional misrepresentation or omission by
Borrower or any of Borrower's partners, members,
officers, directors, shareholders or principals
in connection with (A) the performance of any of
the conditions to Lender making the Loan; (B)
any inducements to Lender to make the Loan; (C)
the execution and delivery of the Loan
Documents; (D) any certificates, representations
or warranties given in connection with the Loan
(including, but not limited to, Estoppel
Certificates executed by Borrower and
representations made by Borrower related to
Property); or (E) Borrower's performance of the
Obligations;
(2) all Rents derived from the Property after a
default under the Loan Documents which default
is a basis of a Proceeding by Lender to enforce
collection of the Debt and all moneys that, on
the date such a default occurs, are on deposit
in one or more accounts used by or on behalf of
Borrower relating to the operation of the
Property, except to the extent properly applied
to payment of Debt Service Payments,
Impositions, Insurance Premiums and any
reasonable and customary expenses incurred by
Borrower in the operation, maintenance and
leasing of the Property or delivered to Lender;
(3) the cost of remediation of any Environmental
Activity affecting the Property, any diminution
in the value of the Property arising from any
Environmental Activity affecting the Property
and any other losses suffered and liabilities
and expenses incurred by Lender relating to a
default under the Article entitled
"Environmental";
(4) all security deposits collected by Borrower or
any of Borrower's predecessors and not refunded
to Tenants in accordance with their respective
Leases, applied in accordance with the Leases or
Law or delivered to Lender, and all advance
rents collected by Borrower or any of Borrower's
predecessors and not applied in accordance with
the Leases or delivered to Lender;
(5) the replacement cost of any Fixtures or Personal
Property removed from the Property after a
default occurs;
(6) all losses suffered and liabilities and expenses
incurred by Lender relating to any acts or
omissions by Borrower that result in waste
(including economic and non-physical waste) on
the Property;
(7) all protective advances and other payments made
by Lender pursuant to express provisions of the
Loan Documents to protect Lender's security
interest in the Property or to protect the
assignment of the property described in and
effected by the Assignment, but only to the
extent that the Rents would have been sufficient
to permit Borrower to make the payment and
Borrower failed to do so;
(8) all mechanics' or similar liens relating to work
performed on or materials delivered to the
Property prior to a foreclosure sale of the
Property, but only to the extent Lender had
advanced funds to pay for the work or materials;
(9) all Proceeds that are not applied in accordance
with this Deed of Trust or not paid to Lender as
required under this Deed of Trust;
(10) all losses suffered and liabilities and expenses
incurred by Lender relating to a Transfer that
is not permitted under the Section entitled
"Permitted Transfers";
(11) all losses suffered and liabilities and expenses
incurred by Lender relating to forfeiture or
threatened forfeiture of the Property to the
Government; and
(12) all losses suffered and liabilities and expenses
incurred by Lender relating to any default by
Borrower under any of the provisions of this
Deed of Trust relating to ERISA including the
prohibition on any Transfer that results in a
violation of ERISA.
(iv) Nothing under subsection (a) above will be
deemed to be a waiver of any right which Lender may have under
Section 506(a), 506(b), 1111(b) or any other provisions of the
Bankruptcy Code or under any other Law relating to bankruptcy or
insolvency to file a claim for the full amount of the Debt or to
require that all collateral will continue to secure all of the
Obligations in accordance with the Loan Documents.
Section 32.
WAIVERS
a. WAIVER OF STATUTE OF LIMITATIONS. BORROWER WAIVES THE
RIGHT TO CLAIM ANY STATUTE OF LIMITATIONS AS A DEFENSE TO BORROWER'S
PAYMENT AND PERFORMANCE OF THE OBLIGATIONS.
b. WAIVER OF NOTICE. BORROWER WAIVES THE RIGHT TO
RECEIVE ANY NOTICE FROM LENDER WITH RESPECT TO THE LOAN DOCUMENTS
EXCEPT FOR THOSE NOTICES THAT LENDER IS EXPRESSLY REQUIRED TO DELIVER
PURSUANT TO THE LOAN DOCUMENTS.
c. WAIVER OF MARSHALLING AND OTHER MATTERS. BORROWER
WAIVES THE BENEFIT OF ANY RIGHTS OF MARSHALLING OR ANY OTHER RIGHT TO
DIRECT THE ORDER IN WHICH ANY OF THE PROPERTY WILL BE (i) SOLD; OR
(ii) MADE AVAILABLE TO ANY ENTITY IF THE PROPERTY IS SOLD BY POWER OF
SALE OR PURSUANT TO A JUDGMENT OF FORECLOSURE AND SALE. BORROWER ALSO
WAIVES THE BENEFIT OF ANY LAWS RELATING TO APPRAISEMENT, VALUATION,
STAY, EXTENSION, REINSTATEMENT, MORATORIUM, HOMESTEAD AND EXEMPTION
RIGHTS OR A SALE IN INVERSE ORDER OF ALIENATION.
d. WAIVER OF TRIAL BY JURY. BORROWER WAIVES TRIAL BY
JURY IN ANY PROCEEDING BROUGHT BY, OR AGAINST, OR COUNTERCLAIM OR
CROSS-COMPLAINT ASSERTED BY OR AGAINST, LENDER RELATING TO THE LOAN,
THE PROPERTY DOCUMENTS OR THE LEASES.
e. WAIVER OF COUNTERCLAIM. BORROWER WAIVES THE RIGHT TO
ASSERT A COUNTERCLAIM OR CROSS-COMPLAINT, OTHER THAN COMPULSORY OR
MANDATORY COUNTERCLAIMS OR CROSS-COMPLAINTS, IN ANY PROCEEDING LENDER
BRINGS AGAINST BORROWER RELATING TO THE LOAN, INCLUDING ANY PROCEEDING
TO ENFORCE REMEDIES.
f. WAIVER OF JUDICIAL NOTICE AND HEARING. BORROWER
WAIVES ANY RIGHT BORROWER MAY HAVE UNDER LAW TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED
BY THE LOAN DOCUMENTS TO LENDER AND BORROWER WAIVES THE RIGHTS, IF
ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN
ACCORDANCE WITH THE PROVISIONS OF THE LOAN DOCUMENTS ON THE GROUND (IF
SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR
JUDICIAL HEARING.
g. WAIVER OF SUBROGATION. BORROWER WAIVES ALL RIGHTS OF
SUBROGATION TO LENDER'S RIGHTS OR CLAIMS RELATED TO OR AFFECTING THE
PROPERTY OR ANY OTHER SECURITY FOR THE LOAN UNTIL THE LOAN IS PAID IN
FULL AND ALL FUNDING OBLIGATIONS UNDER THE LOAN DOCUMENTS HAVE BEEN
TERMINATED.
h. GENERAL WAIVER. BORROWER ACKNOWLEDGES THAT (i)
BORROWER AND BORROWER'S PARTNERS, MEMBERS OR PRINCIPALS, AS THE CASE
MAY BE, ARE KNOWLEDGEABLE BORROWERS OF COMMERCIAL FUNDS AND
EXPERIENCED REAL ESTATE DEVELOPERS OR INVESTORS WHO UNDERSTAND FULLY
THE EFFECT OF THE ABOVE PROVISIONS; (ii) LENDER WOULD NOT MAKE THE
LOAN WITHOUT THE PROVISIONS OF THIS ARTICLE; (iii) THE LOAN IS A
COMMERCIAL OR BUSINESS LOAN UNDER THE LAWS OF THE STATE OR
COMMONWEALTH WHERE THE PROPERTY IS LOCATED NEGOTIATED BY LENDER AND
BORROWER AND THEIR RESPECTIVE ATTORNEYS AT ARMS LENGTH; AND (iv) ALL
WAIVERS BY BORROWER IN THIS ARTICLE HAVE BEEN MADE VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY, AFTER BORROWER FIRST HAS BEEN INFORMED
BY COUNSEL OF BORROWER'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE
RIGHTS, AND HAVE BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND
ABANDONMENT OF A KNOWN RIGHT AND PRIVILEGE. THE FOREGOING
ACKNOWLEDGMENT IS MADE WITH THE INTENT THAT LENDER AND ANY SUBSEQUENT
HOLDER OF THE NOTE WILL RELY ON THE ACKNOWLEDGMENT.
Section 33.
NOTICES
a. Notices. All acceptances, approvals, consents,
demands, notices, requests, waivers and other communications (the
"Notices") required or permitted to be given under the Loan Documents
must be in writing and (a) delivered personally by a process server
providing a sworn declaration evidencing the date of service, the
individual served, and the address where the service was made; (b)
sent by certified mail, return receipt requested; or (c) delivered by
nationally recognized overnight delivery service that provides
evidence of the date of delivery, with all charges prepaid (for next
morning delivery if sent by overnight delivery service), addressed to
the appropriate party at its address listed below:
If to Borrower:
Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, California 94549
Attn: Ms. Hanh Kihara
Chief Financial Officer
and Senior
Vice President
TIAA Appl. # VR-5
M - 000462300
with a courtesy copy to:
Sherman & Sterling
555 California Street, 20thfloor
San Francisco, California 94104
Attn: Emery Mitchell, Esq.
Barbara J.S. McKee, Esq.
TIAA Appl. # VR-5
M - 000462300
If to Lender: Teachers Insurance and
Annuity
Association
730 Third Avenue
New York, New York 10017
Attn: Director of Portfolio
Management
for Mortgage and Real Estate Division
Region: Midwest
TIAA Appl. # VR-5
M - 000462300
with a courtesy copy to: Teachers Insurance and
Annuity
Association
730 Third Avenue
New York, New York 10017
Attn: Vice President
and Chief
Counsel,
Mortgage and
Real Estate Law
TIAA Appl. # VR-5
M - 000462300
Lender and Borrower each may change from time to time the address to
which Notices must be sent, by notice given in accordance with the
provisions of this Section. All Notices given in accordance with the
provisions of this Section will be deemed to have been received on the
earliest of (i) actual receipt; (ii) Borrower's rejection of delivery;
or (iii) 3 Business Days after having been deposited in any mail
depository regularly maintained by the United States postal service,
if sent by certified mail, or 1 Business Day after having been
deposited with a nationally recognized overnight delivery service, if
sent by overnight delivery or on the date of personal service, if
served by a process server.
b. Change in Borrower's Name or Place of Business.
Borrower will immediately notify Lender in writing of any change in
Borrower's name or the place of business set forth in the beginning of
this Deed of Trust.
Section 34.
MISCELLANEOUS
a. Applicable Law. The Loan Documents shall be governed
by and will be construed in accordance with the Laws of the State of
New York, without regard to conflicts of laws principles, except as
set forth below. The parties acknowledge that the State of New York
is the principal place of business of Lender and has a substantial
relationship to the underlying transactions relating to the Loan and
to parties involved. Notwithstanding the foregoing, Borrower and
Lender agree that the laws of the State in which the Property is
located shall govern the creation and perfection of liens on the
Property and the procedures for enforcing remedies directly related to
the Property including the appointment of trustees, the foreclosure or
foreclosure sale of the Property, the appointment of receiver and any
other remedy with respect to the Property.
b. Usury Limitations. Borrower and Lender intend to
comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.
c. Lender's Discretion. Wherever under the Loan
Documents any matter is required to be satisfactory to Lender, Lender
has the right to approve or determine any matter or Lender has an
election, Lender's approval, determination or election will be made in
Lender's reasonable discretion unless expressly provided to the
contrary.
d. Unenforceable Provisions. If any provision in the
Loan Documents is found to be illegal or unenforceable or would
operate to invalidate any of the Loan Documents, then the provision
will be deemed expunged and the Loan Documents will be construed as
though the provision was not contained in the Loan Documents and the
remainder of the Loan Documents will remain in full force and effect.
e. Survival of Borrower's Obligations. Borrower's
representations, warranties and covenants contained in the Loan
Documents will continue in full force and effect and survive (i)
satisfaction of the Obligations; (ii) partial release of deed of trust
of the lien of this property by Trustee; (iii) assignment or other
transfer of all or any portion of Lender's interest in the Loan
Documents or the Property; (iv) Lender's exercise of any of the
Remedies or any of Lender's other rights under the Loan Documents; (v)
a Transfer; (vi) amendments to the Loan Documents; and (vii) any other
act or omission that might otherwise be construed as a release or
discharge of Borrower.
f. Relationship Between Borrower and Lender; No Third
Party Beneficiaries.
(i) Lender is not a partner of or joint venturer
with Borrower or any other entity as a result of the Loan or
Lender's rights under the Loan Documents; the relationship
between Lender and Borrower is strictly that of creditor and
debtor. Each Loan Document is an agreement between the parties
to that Loan Document for the mutual benefit of the parties and
no entities other than the parties to that Loan Document will be
a third party beneficiary or will have any claim against Lender
or Borrower by virtue of the Loan Document. As between Lender
and Borrower, any actions taken by Lender under the Loan
Documents will be taken for Lender's protection only, and Lender
has not and will not be deemed to have assumed any
responsibility to Borrower or to any other entity by virtue of
Lender's actions.
(ii) All conditions to Lender's performance of its
obligations under the Loan Documents are imposed solely for the
benefit of Lender. No entity other than Lender will have
standing to require satisfaction of the conditions in accordance
with their provisions or will be entitled to assume that Lender
will refuse to perform its obligations in the absence of strict
compliance with any of the conditions.
g. Partial Releases, Extensions, Waivers. Lender may:
(i) permit the partial release of deed of trust on any part of the
Property or release any entity obligated for the Obligations; (ii)
extend the time for payment or performance of any of the Obligations
or otherwise amend the provisions for payment or performance by
agreement with any entity that is obligated for the Obligations or
that has an interest in the Property; (iii) accept additional security
for the payment and performance of the Obligations; and (iv) waive any
entity's performance of an Obligation, release any entity or
individual now or in the future liable for the performance of the
Obligation or waive the exercise of any Remedy or option. Lender may
exercise any of the foregoing rights without notice, without regard to
the amount of any consideration given, without affecting the priority
of this Deed of Trust, without releasing any entity not specifically
released from its obligations under the Loan Documents, without
releasing any guarantor(s) or surety(ies) of the Obligations, without
effecting a novation of the Loan Documents and, with respect to a
waiver, without waiving future performance of the Obligation or
exercise of the Remedy waived.
h. Service of Process. Borrower irrevocably consents to
service of process by registered or certified mail, postage prepaid,
return receipt requested, to Borrower at its address set forth in the
Article entitled "Notices" or any other address to which such address
has been changed as permitted hereunder.
i. Entire Agreement. Oral agreements or commitments
between Borrower and Lender to lend money, to extend credit or to
forbear from enforcing repayment of a debt, including promises to
extend or renew the debt, are not enforceable. Any agreements among
Borrower and Lender relating to the Loan are contained in the Loan
Documents, which contain the complete and exclusive statement of the
agreements among Borrower and Lender, except as Borrower and Lender,
may later agree in writing to amend the Loan Documents. The language
of each Loan Document will be construed as a whole according to its
fair meaning and will not be construed against the draftsman.
j. No Oral Amendment. The Loan Documents may not be
amended, waived or terminated orally or by any act or omission made
individually by Borrower or Lender but may be amended, waived or
terminated only by a written document signed by the party against
which enforcement of the amendment, waiver or termination is sought.
k. Severability. The invalidity, illegality or
unenforceability of any provision of any of the Loan Documents will
not affect any other provisions of the Loan Documents, which will be
construed as if the invalid, illegal or unenforceable provision never
had been included.
l. Covenants Run with the Land. Subject to the
restrictions on transfer contained in the Article entitled "TRANSFERS,
LIENS AND ENCUMBRANCES", all of the covenants of this Deed of Trust
and the Assignment run with the Land, will bind all parties hereto and
all tenants and subtenants of the Land or the Improvements and their
respective heirs, executors, administrators, successors and assigns,
and all occupants and subsequent owners of the Property, and will
inure to the benefit of Lender and all subsequent holders of the Note
and this Deed of Trust.
m. Time of the Essence. Time is of the essence with
respect to Borrower's payment and performance of the Obligations.
n. Subrogation. If the Principal or any other amount
advanced by Lender is used directly or indirectly to pay off,
discharge or satisfy all or any part of an encumbrance affecting the
Property, then Lender is subrogated to the encumbrance and to any
security held by the holder of the encumbrance, all of which will
continue in full force and effect in favor of Lender as additional
security for the Obligations.
o. Joint and Several Liability. If Borrower consists of
more than one person or entity, the obligations and liabilities of
each such person or entity under this Deed of Trust are joint and
several.
p. Successors and Assigns. The Loan Documents bind the
parties to the Loan Documents and their respective successors,
assigns, heirs, administrators, executors, agents and representatives
and inure to the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives and to the
extent applicable inure to the benefit of Trustee and its successors,
assigns, heirs, administrators, executors, agents and representatives.
q. Duplicates and Counterparts. Duplicate counterparts
of any of the Loan Documents, other than the Note, may be executed and
together will constitute a single original document.
<PAGE>
IN WITNESS WHEREOF, Borrower has executed and delivered this
Deed of Trust as of the date first set forth above.
BEDFORD PROPERTY INVESTORS,
INC., a Maryland corporation
By: /s/Hanh Kihara
Hanh Kihara, Senior Vice
President
STATE OF _________ )
) SS.
COUNTY OF ________________ )
The foregoing instrument was acknowledged before me on this ____
day of ___________________ 19__, by __________________ as
____________________________ of Bedford Property Investors, Inc., a
Maryland corporation.
WITNESS my hand and official seal.
My commission expires ________________________________________.
(SEAL)
____________________________________
Notary Public
<PAGE>
Exhibit A
LEGAL DESCRIPTION
Exhibit A-1
Legal Description of Property #6
Known As 6501 East Belleview Avenue, Denver, Colorado
Exhibit A-2
Legal Description of Property #7
Known As 4601 DTC Boulevard, Denver, Colorado
Exhibit B
DEFINITIONS
"Acceleration" is defined in Section 14.2(a)(i).
"Accumulations" is defined in Section 2.1(xii).
"Accumulations Depositary" is defined in Section 6.2(a).
"Additional Funds" is defined in Section 7.4(v).
"Annual Financial Statement" is defined in Section 10.1(a).
"Assessments" is defined as all assessments now or hereafter levied,
assessed or imposed against the Property.
"Assignment" is defined as the Assignment of Leases and Rents dated of
even date with this Deed of Trust made by Borrower for the benefit of
Lender.
"Bankruptcy Code" means Title 11 of the United States Code.
"Books and Records" is defined in Section 2.1(xi).
"Borrower" is defined in the introductory paragraph.
"Budget" is defined in Section 10.2.
"Business Days" is defined as any day on which commercial banks are
not authorized or required by Law to close in New York, New York.
"Casualty" is defined as damage to or destruction of the Property by
fire or other casualty.
"Code" is defined as the Internal Revenue Code of 1986, as amended and
the regulations promulgated thereunder.
"Condemnation" is defined as the permanent or temporary taking of all
or any portion of the Property, or any interest therein or right
accruing thereto, by the exercise of the right of eminent domain
(including any transfer in lieu of or in anticipation of the exercise
of the right), inverse condemnation or any similar injury or damage to
or decrease in the value of the Property, including severance and
change in the grade of any streets
"Condemnation Awards" is defined in Section 2.1(viii).
"Condemnation Proceeding" is defined as a Proceeding that could result
in a Condemnation.
"CPA" is defined as an independent certified public accountant
satisfactory to Lender.
"Debt" is defined in Section 3.1.
"Debt Service Payments" is defined as the monthly installments of
principal and interest payable by Borrower to Lender as set forth in
the Note.
"Deed of Trust" is defined as this Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing Statement.
"Default Interest Rate" is defined as the lower of 5% per annum over
the Fixed Interest Rate or the Maximum Interest Rate, if any.
"Destruction Event" is defined in Section 7.4.
"Environmental Activity" is defined as any actual, suspected or
threatened abatement, cleanup, disposal, generation, handling,
manufacture, possession, release, remediation, removal, storage,
transportation, treatment or use of any Hazardous Substances. The
actual, suspected or threatened presence of any Hazardous Substances,
or the actual, suspected or threatened noncompliance with any
Environmental Laws, will be deemed Environmental Activity.
"Environmental Laws" is defined as all Laws pertaining to health,
safety, protection of the environment, natural resources,
conservation, wildlife, waste management, Environmental Activities and
pollution.
"Environmental Report" is defined as the report prepared by ICF
Kaiser, dated April 27, 1999, as amended, for Property described in
Exhibits A-1 and A-2.
"ERISA" is defined in Section 8.3(a).
"Event of Default" is defined in Section 14.1.
"Existing Shareholder" is defined in Section 12.1(b).
"Expenses" is defined in Section 11.1(a).
"Financial Books and Records" is defined as detailed accounts of the
income and expenses of the Property and of Borrower and all other
data, records and information that either are specifically referred to
in the Article entitled "FINANCIAL REPORTING" or are necessary to the
preparation of any of the statements, reports or certificates required
under such Article and includes all supporting schedules prepared or
used by the CPA in auditing the Annual Financial Statement or in
issuing its opinion.
"Fiscal Year" is defined as any calendar year or partial calendar year
during the Term.
"Fixed Interest Rate" is defined as 7.17% per annum.
"Fixtures and Personal Property" is defined in Section 2.1(iv).
"Government" is defined as any federal, state or municipal
governmental or quasi-governmental authority including executive,
legislative or judicial branch, division, any subdivision or agency of
any of them and any entity to which any of them has delegated
authority.
"Hazardous Substances" is defined as (i) any by product, chemical,
compound, material, mixture or substance that is now or hereafter
defined or listed in, or otherwise classified pursuant to, any
Environmental Laws, as a "hazardous substance", "hazardous material",
"hazardous waste", "extremely hazardous waste", infectious waste",
"toxic substance", "toxic pollutant", or any other formulation intended
to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, or "EP toxicity",
(ii) any petroleum, natural gas, natural gas liquid, liquified natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and
such synthetic gas), ash produced by a resource recovery facility
utilizing a municipal solid waste stream, and drilling fluids,
produced waters, and other wastes associated with the exploration,
development or production of crude oil, natural gas, or geothermal
resources, and (iii) any underground storage tanks.
"Imposition Penalty Date" is defined in Section 6.1(a).
"Impositions" is defined as all Taxes, Assessments, ground rent, if
any, water and sewer rents, fees and charges, levies, permit,
inspection and license fees and other dues, charges or impositions,
including all charges and license fees for the use of vaults, chutes
and similar areas adjoining the Land, maintenance and similar charges
and charges for utility services, in each instance whether now or in
the future, directly or indirectly, levied, assessed or imposed on the
Property or Borrower and whether levied, assessed or imposed as
excise, privilege or property taxes.
"Improvements" is defined in Section 2.1(ii).
"Individual Property" is defined in Recital D of the Assignment.
"Insurance Premiums" is defined as all present and future premiums and
other charges due and payable on policies of fire, rental value and
other insurance covering the Property and required pursuant to the
provisions of this Deed of Trust.
"Insurance Proceeds" is defined in Section 2.1(ix).
"Insurers" is defined in Section 7.1(c).
"Institutional Investor" is defined as any bank, savings institution,
charitable foundation, insurance company, real estate investment
trust, pension fund or investment advisor registered under the
Investment Advisors Act of 1940, as amended, and acting as trustee or
agent.
"Interest" is defined as the amount of fixed interest payable under
the Note at the Fixed Interest Rate and any other sums which could be
deemed to be interest under Law.
"Land" is defined in the Recitals.
"Late Charge" is defined in the Note.
"Law" is defined as all present and future codes, constitutions,
cases, opinions, rules, manuals, regulations, determinations, laws,
orders, ordinances, requirements and statutes, as amended, of any
Government that affect or that may be interpreted to affect the
Property, Borrower or the Loan, including amendments and all guidance
documents and publications promulgated thereunder.
"Leases" is defined as all present and future leases, subleases,
licenses and other agreements for the use and occupancy of the Land
and Improvements, any related guarantees and including any use and
occupancy arrangements created pursuant to Section 365 (h) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuation of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar Proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land and Improvements.
"Lender" is defined in the introductory paragraph.
"Loan" is defined in the Recitals.
"Loan Documents" is defined as the Note, this Deed of Trust, the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Bedford Portfolio #1 - Arizona Properties) dated the
date of this Deed of Trust and securing the Note, the Assignment, the
Assignment of Leases and Rents (Bedford Portfolio #1 - Arizona
Properties) dated the date of this Deed of Trust and securing the
Note, and all documents now or hereafter executed by Borrower or held
by Lender or Trustee relating to the Loan, including all amendments.
"Material Environmental Contamination" is defined as contamination of
the Property with Hazardous Substances (i) that constitutes a
violation of one or more Environmental Laws; (ii) for which there is a
significant possibility that remediation will be required under
Environmental Laws; (iii) that results in a material risk of liability
or expense to Lender; or (iv) that diminishes the value of the
Property.
"Maturity Date" is defined in the Recitals.
"Maximum Interest Rate" is defined as the maximum rate of interest, if
any, permitted by Law to be charged with respect to the Loan, as the
maximum rate may be increased or decreased from time to time.
"Note" is defined in the Recitals.
"Note Payments" is defined in the Note.
"Notices" is defined in Section 17.1.
"Obligations" is defined in Section 3.1.
"Permitted Exceptions" is defined as the matters shown in Schedule B,
Part 1 and 2 of the title insurance policy insuring the lien of this
Deed of Trust.
"Permitted Transfers" is defined in Section 12.2(b).
"Permitted Use" is defined as use as first-class commercial office
buildings and uses incidentally and directly related to such use.
"Policies" is defined in Section 7.1(b).
"Prepayment Premium" is defined in the Note.
"Principal" is defined in the Recitals.
"Proceeding" is defined as a pending or threatened action, claim or
litigation before a legal, equitable or administrative tribunal having
proper jurisdiction.
"Proceeds" is defined in Section 7.2(c).
"Property" is defined in Section 2.1.
"Property Documents" is defined in Section 2.1(v).
"Receiver" is defined as a receiver, custodian, trustee, liquidator or
conservator of the Property.
"Release Parcel" is defined in Section 12.4.
"Remedies" is defined in Section 14.2(a).
"Rents" is defined as all present and future rents, prepaid rents,
percentage, participation or contingent rents, issues, profits,
proceeds, parking fees, revenues and other consideration accruing
under the Leases or otherwise derived from the use and occupancy of
the Land or the Improvements, including tenant contributions to
expenses, security deposits, royalties and contingent rent, if any,
all other fees accounts, accounts receivable or payments paid to or
for the benefit of Borrower, including liquidated damages after a
default under a lease, any premium or other termination fee payable by
tenant after cancellation of a Lease and the proceeds of any rental
insurance and any payments received pursuant to Section 502(b) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land or the Improvements and all claims as a
creditor in connection with any of the foregoing.
"Restoration" is defined as the restoration of the Property after a
Destruction Event as nearly as possible to its condition immediately
prior to the Destruction Event, in accordance with the plans and
specifications, in a first-class workmanlike manner using materials
substantially equivalent in quality and character to those used for
the original improvements, in accordance with Law and free and clear
of all liens, encumbrances or other charges other than this Deed of
Trust and the Permitted Exceptions.
"Restoration Completion Date" is defined in Section 7.4(viii).
"Restoration Funds" is defined in Section 7.5(b).
"Substitution Property" is defined in Section 12.5.
"Taxes" is defined as all present and future real estate taxes levied,
assessed or imposed against the Property.
"Term" is defined as the scheduled term of this Deed of Trust
commencing on the date Lender makes the first disbursement of the Loan
and terminating on the Maturity Date.
"Transfer" is defined in Section 12.1(a).
"Trustee's Sale" is defined in Section 14.4(b).
"Uniform Commercial Code" is defined as the Uniform Commercial Code in
effect in the jurisdiction where the Land is located.
Exhibit C
RULES OF CONSTRUCTION
(a) References in any Loan Document to numbered Articles or
Sections are references to the Articles and Sections of that Loan
Document. References in any Loan Document to lettered Exhibits are
references to the Exhibits attached to that Loan Document, all of
which are incorporated in and constitute a part of that Loan Document.
Article, Section and Exhibit captions used in any Loan Document are
for reference only and do not describe or limit the substance, scope
or intent of that Loan Document or the individual Articles, Sections
or Exhibits of that Loan Document.
(b) The terms "include", "including" and similar terms are
construed as if followed by the phrase "without limitation".
(c) The terms "Land", "Improvements", "Fixtures and Personal
Property", "Condemnation Awards", "Insurance Proceeds" and "Property"
are construed as if followed by the phrase "or any part thereof".
(d) Any agreement by or duty imposed on Borrower in any Loan
Document to perform any obligation or to refrain from any act or
omission constitutes a covenant running with the ownership or
occupancy of the Land and the Improvements, which will bind all
parties hereto and their respective successors and assigns, and all
lessees, subtenants and assigns of same, and all occupants and
subsequent owners of the Property, and will inure to the benefit of
Lender and all subsequent holders of the Note and this Deed of Trust
and includes a covenant by Borrower to cause its partners, members,
principals, agents, representatives and employees to perform the
obligation or to refrain from the act or omission in accordance with
the Loan Documents. Any statement or disclosure contained in any Loan
Document about facts or circumstances relating to the Property,
Borrower or the Loan constitutes a representation and warranty by
Borrower made as of the date of the Loan Document in which the
statement or disclosure is contained.
(e) The term "to Borrower's knowledge" is construed as meaning
to the best of Borrower's knowledge after diligent inquiry.
(f) The singular of any word includes the plural and the plural
includes the singular. The use of any gender includes all genders.
(g) The terms "person", "party" and "entity" include natural
persons, firms, partnerships, limited liability companies and
partnerships, corporations and any other public or private legal
entity.
(h) The term "provisions" includes terms, covenants,
conditions, agreements and requirements.
(i) The term "amend" includes modify, supplement, renew,
extend, replace or substitute and the term "amendment" includes
modification, supplement, renewal, extension, replacement and
substitution.
(j) Reference to any specific Law or to any document or
agreement, including the Note, this Deed of Trust, any of the other
Loan Documents, the Leases and the Property Documents, includes any
future amendments to the Law, document or agreement, as the case may
be.
(k) No inference in favor of or against a party with respect to
any provision in any Loan Document may be drawn from the fact that the
party drafted the Loan Document.
(l) The term "certificate" means the sworn, notarized statement
of the entity giving the certificate, made by a duly authorized person
satisfactory to Lender affirming the truth and accuracy of every
statement in the certificate. Any document that is "certified" means
the document has been appended to a certificate of the entity
certifying the document that affirms the truth and accuracy of
everything in the document being certified. In all instances the
entity issuing a certificate must be satisfactory to Lender.
(m) Any appointment of Lender as Borrower's attorney-in-fact is
irrevocable and coupled with an interest. Lender may appoint a
substitute attorney-in-fact. Borrower ratifies all actions taken by
the attorney-in-fact but, nevertheless, if Lender requests, Borrower
will specifically ratify any action taken by the attorney-in-fact by
executing and delivering to the attorney-in-fact or to any entity
designated by the attorney-in-fact all documents necessary to effect
the ratification.
(n) Any document, instrument or agreement to be delivered by
Borrower will be in form and content satisfactory to Lender.
(o) All obligations, rights, remedies and waivers contained in
the Loan Documents will be construed as being limited only to the
extent required to be enforceable under the Law.
(p) The unmodified word "days" means calendar days.
TIAA Appl. #VR-5
M-000462300
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT
Bedford Portfolio #1 - Arizona Properties
by and between
BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
as Borrower
and
FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation
as Trustee
for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation
as Lender
Properties Known As
4602 E. University Drive, Phoenix, Arizona,
2617 South 46th Street, Phoenix, Arizona,
4602 E. Hammond Lane, Phoenix, Arizona,
4632 E. Hammond Lane, Phoenix, Arizona, and
4602 E. Hilton Avenue, Phoenix, Arizona
After Recordation This Deed of Trust Should Be Returned To:
Beverly J. Quail, Esquire
Ballard Spahr Andrews & Ingersoll LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
TABLE OF CONTENTS
Page
RECITALS:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION. . . . . . . . . . . . . .2
Section 1.1. Definitions . . . . . . . . . . . . . . .2
Section 1.2. Rules of Construction . . . . . . . . . .2
ARTICLE II
GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.1. Encumbered Property . . . . . . . . . . .2
Section 2.2. Habendum Clause . . . . . . . . . . . . .5
Section 2.3. Security Agreement. . . . . . . . . . . .5
Section 2.4. Conditions to Grant . . . . . . . . . . .5
ARTICLE III
OBLIGATIONS SECURED. . . . . . . . . . . . . . . . . . . . . . .6
Section 3.1. The Obligations . . . . . . . . . . . . .6
ARTICLE IV
TITLE AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . .6
Section 4.1. Title to the Property . . . . . . . . . .6
Section 4.2. Authority . . . . . . . . . . . . . . . .6
Section 4.3. No Foreign Person . . . . . . . . . . . .7
Section 4.4. Litigation. . . . . . . . . . . . . . . .7
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES. . . . . . . . . . . . .7
Section 5.1. Status of the Property. . . . . . . . . .7
Section 5.2. Maintenance of the Property . . . . . . .8
Section 5.3. Change in Use . . . . . . . . . . . . . .8
Section 5.4. Waste . . . . . . . . . . . . . . . . . .8
Section 5.5. Inspection of the Property. . . . . . . .8
Section 5.6. Leases and Rents. . . . . . . . . . . . .9
Section 5.7. Parking . . . . . . . . . . . . . . . . .9
Section 5.8. Separate Tax Lot. . . . . . . . . . . . .9
Section 5.9. Changes in Zoning or Restrictive Covenants9
Section 5.10. Lender's Right to Appear. . . . . . . . .9
Section 5.11. Community Facilities District . . . . . . . . . 10
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS. . . . . . . . . . . . . . . . . 10
Section 6.1. Impositions . . . . . . . . . . . . . . 10
Section 6.2. Accumulations . . . . . . . . . . . . . 11
Section 6.3. Changes in Tax Laws . . . . . . . . . . 13
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.1. Insurance Coverages . . . . . . . . . . 13
Section 7.2. Casualty and Condemnation . . . . . . . 14
Section 7.3. Application of Proceeds . . . . . . . . 15
Section 7.4. Conditions to Availability of
Proceeds for Restoration 15
Section 7.5. Restoration . . . . . . . . . . . . . . 17
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS . . . . . . . . . . . . . . 19
Section 8.1. Compliance with Law . . . . . . . . . . 19
Section 8.2. Compliance with Agreements. . . . . . . 19
Section 8.3. ERISA Compliance. . . . . . . . . . . . 20
Section 8.4. Section 6045(e) Filing. . . . . . . . . 20
Section 8.5. Ground Lease Provisions . . . . . . . . 20
ARTICLE IX
ENVIRONMENTAL. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.1. Environmental Representations and
Warranties 23
Section 9.2. Environmental Covenants . . . . . . . . 23
ARTICLE X
FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . 25
Section 10.1. Financial Reporting . . . . . . . . . . 25
Section 10.2. Annual Budget . . . . . . . . . . . . . 25
ARTICLE XI
EXPENSES AND DUTY TO DEFEND. . . . . . . . . . . . . . . . . . 26
Section 11.1. Payment of Expenses . . . . . . . . . . 26
Section 11.2. Duty to Defend. . . . . . . . . . . . . 26
ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES. . . . . . . . . . . . . . . 27
Section 12.1. Prohibitions on Transfers, Liens and Encumbrances27
Section 12.2. Permitted Transfers . . . . . . . . . . 27
Section 12.3. Right to Contest Lien . . . . . . . . . 29
Section 12.4. Reconveyance Rights . . . . . . . . . . 30
Section 12.5. Substitution. . . . . . . . . . . . . . 32
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . 34
Section 13.1. Further Assurances. . . . . . . . . . . 34
Section 13.2. Estoppel Certificates . . . . . . . . . 34
ARTICLE XIV
DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 35
Section 14.1. Events of Default . . . . . . . . . . . 35
Section 14.2. Remedies. . . . . . . . . . . . . . . . 36
Section 14.3. General Provisions Pertaining to Remedies37
Section 14.4. Foreclosure by Power of Sale. . . . . . 39
Section 14.5. General Provisions Pertaining to Receiver and other
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 14.6. General Provisions Pertaining to Foreclosures and the
Power of Sale. . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 14.7. Application of Proceeds . . . . . . . . 42
Section 14.8. Power of Attorney . . . . . . . . . . . 42
Section 14.9. Tenant at Sufferance. . . . . . . . . . 42
ARTICLE XV
LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . 42
Section 15.1. Limitation of Liability . . . . . . . . 42
ARTICLE XVI
WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. . . . 45
Section 16.2. WAIVER OF NOTICE. . . . . . . . . . . . 45
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS 45
Section 16.4. WAIVER OF TRIAL BY JURY . . . . . . . . 45
Section 16.5. WAIVER OF COUNTERCLAIM. . . . . . . . . 45
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING . 45
Section 16.7. WAIVER OF SUBROGATION . . . . . . . . . 46
Section 16.8. GENERAL WAIVER. . . . . . . . . . . . . 46
ARTICLE XVII
NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 17.1. Notices . . . . . . . . . . . . . . . . 46
Section 17.2. Change in Borrower's Name or Place of Business48
ARTICLE XVIII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 18.1. Applicable Law. . . . . . . . . . . . . 48
Section 18.2. Usury Limitations . . . . . . . . . . . 48
Section 18.3. Lender's Discretion . . . . . . . . . . 49
Section 18.4. Unenforceable Provisions. . . . . . . . 49
Section 18.5. Survival of Borrower's Obligations. . . 49
Section 18.6. Relationship Between Borrower and Lender; No Third
Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . 49
Section 18.7. Partial Reconveyances or Releases, Extensions, Waivers49
Section 18.8. Service of Process. . . . . . . . . . . 50
Section 18.9. Entire Agreement. . . . . . . . . . . . 50
Section 18.10. No Oral Amendment. . . . . . . . . . . 50
Section 18.11. Severability. . . . . . . . . . . . . . 50
Section 18.12. Covenants Run with the Land . . . . . . 50
Section 18.13. Time of the Essence . . . . . . . . . . 51
Section 18.14. Subrogation . . . . . . . . . . . . . . 51
Section 18.15. Joint and Several Liability. . . . . . 51
Section 18.16. Successors and Assigns. . . . . . . . . 51
Section 18.17. Duplicates and Counterparts . . . . . . 51
Section 18.18. Deed of Trust as Mortgage. . . . . . . . . . . 51
ARTICLE XIX
TRUSTEE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 51
Section 19.1 Acceptance of Trust . . . . . . . . . . 51
Exhibit ALEGAL DESCRIPTION . . . . . . . . . . . . . . . . . . 54
Exhibit B
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 59
Exhibit CRULES OF CONSTRUCTION . . . . . . . . . . . . . . . . 66
TIAA Appl. #VR-5
M-000462300
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Bedford Portfolio # 1 - Arizona Properties
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT made this ____ day of
May, l999, by BEDFORD PROPERTY INVESTORS, INC. ("Borrower"), a
Maryland corporation, having its principal place of business at 270
Lafayette Circle, Lafayette, California 94549, FIRST AMERICAN TITLE
INSURANCE COMPANY, a California corporation ("Trustee"), having an
address of P.O. Box 3915, Phoenix, Arizona 85030, for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA ("Lender"), a
New York corporation, having an address at 730 Third Avenue, New York,
New York l0017.
RECITALS:
A. Lender agreed to make and Borrower agreed to accept a
loan (the "Loan") in the maximum principal amount of FORTY THREE
MILLION FOUR HUNDRED AND FIFTY THOUSAND AND NO/100 DOLLARS
($43,450,000).
B. To evidence the Loan, Borrower executed and delivered
to Lender a promissory note (the "Note"), dated the date of this Deed
of Trust, in the principal amount of FORTY THREE MILLION FOUR HUNDRED
AND FIFTY THOUSAND AND NO/100 DOLLARS ($43,450,000) (that amount or so
much as is outstanding from time to time is referred to as the
"Principal"), promising to pay the Principal with interest thereon to
the order of Lender as set forth in the Note and with the balance, if
any, of the Debt being due and payable on June 1, 2009 (the "Maturity
Date").
C. To secure the Note and the Obligations, Deed of Trust
conveys, among other things, Borrower's fee interest in the real
property located in the City of Phoenix, County of Maricopa, State of
Arizona more particularly described in Exhibits A-1, A-2, A-3, A-4 and
A-5 and Borrower's interests under an Unsubordinated Ground Lease (the
"Ground Lease"), dated May 31, 1996, between City of Phoenix, a
municipal corporation ("Ground Lessor") and DPA holding II, L.L.C., a
Massachusetts limited liability company, as Ground Lessee, a
memorandum of which was recorded on November 22, 1996, as File No.
96-0822802 in the Recording Office of the County of Maricopa, State of
Arizona, with Ground Lessee's interest in the Ground Lease assigned to
Borrower pursuant to the Assignment of Ground Lease dated July 22,
1997, in which Ground Lessor granted to Borrower, among other things,
a leasehold interest in the real property located in the City of
Phoenix, County of Maricopa, State of Arizona more particularly
described in Exhibit A-6 (collectively, the "Land").
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. Capitalized terms used in this
Deed of Trust are defined in Exhibit B or in the text with a cross-
reference in Exhibit B.
Section 1.2. Rules of Construction. This Deed of Trust will
be interpreted in accordance with the rules of construction set forth
in Exhibit C.
ARTICLE II
GRANTING CLAUSES
Section 2.1. Encumbered Property. Borrower irrevocably
grants, mortgages, warrants, sells, conveys, assigns and pledges to
Trustee for the benefit of Lender in trust, WITH POWER OF SALE, and
grants to Trustee for the benefit of Lender a security interest in,
any and all of the following property, rights, interests and estates
now or in the future owned or held by Borrower (the "Property") for
the uses and purposes set forth in this Deed of Trust:
(i) the Land;
(ii) Borrower's fee interest in the portion of the
Land described in Exhibits A-1, A-2, A-3, A-4
and A-5, and all of Borrower's right, title and
interest under the Ground Lease and the
leasehold interest created under the Ground
Lease in the portions of the Land described as
Exhibit A-6;
(iii) all buildings and improvements located on
the Land (the "Improvements");
(iv) all easements; rights of way or use, including
any rights of ingress and egress; streets,
roads, ways, sidewalks, alleys and passages;
strips and gores; sewer rights; water, water
rights, water courses, riparian rights and
drainage rights; air rights and development
rights; Borrower's rights, title and benefits as
Approving Agent under the Declaration of
Restrictions for Rio Saldo Gateway Center
recorded May 21, 1984 in 84-311463 of the
Official Records, as amended; oil and mineral
rights; and tenements, hereditaments and
appurtenances, in each instance adjoining or
otherwise appurtenant to or benefitting the Land
or the Improvements;
(v) all materials intended for construction, re-
construction, alteration or repair of the
Improvements, such materials to be deemed
included in the Land and the Improvements
immediately on delivery to the Land; all
fixtures and personal property that are attached
to, contained in or used in connection with the
Land or the Improvements (excluding personal
property owned by tenants), including:
furniture; furnishings; machinery; motors;
elevators; fittings; microwave ovens;
refrigerators; office systems and equipment;
plumbing, heating, ventilating and air
conditioning systems and equipment; maintenance
and landscaping equipment; lighting, cooking,
laundry, dry cleaning, refrigerating,
incinerating and sprinkler systems and
equipment; telecommunications systems and
equipment; computer or word processing systems
and equipment; security systems and equipment;
and equipment leases for any of the property
described in this subsection (the "Fixtures and
Personal Property");
(vi) all agreements, ground leases, grants of
easements or rights-of-way, permits,
declarations of covenants, conditions and
restrictions, disposition and development
agreements, planned unit development agreements,
cooperative, condominium or similar ownership or
conversion plans, management, leasing, brokerage
or parking agreements or other material
documents affecting Borrower or the Land, the
Improvements or the Fixtures and Personal
Property, but expressly excluding the Leases
(the "Property Documents");
(vii) all inventory (including all goods,
merchandise, raw materials, incidentals,
office supplies and packaging materials)
held for sale, lease or resale or furnished
or to be furnished under contracts of
service, or used or consumed in the
ownership, use or operation of the Land,
the Improvements or the Fixtures and
Personal Property, all documents of title
evidencing any part of any of the foregoing
and all returned or repossessed goods
arising from or relating to any sale or
disposition of inventory;
(viii) all intangible personal property relating
to the Land, the Improvements or the
Fixtures and Personal Property, including
choses in action and causes of action
(except those personal to Borrower),
corporate and other business records,
inventions, designs, promotional materials,
blueprints, plans, specifications, patents,
patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, claims
for refunds or rebates of taxes, insurance
surpluses, refunds or rebates of taxes and
any letter of credit, guarantee, claim,
security interest or other security held by
or granted to Borrower to secure payment by
an account debtor of any of the accounts of
Borrower arising out of the ownership, use
or operation of the Land, the Improvements
or the Fixtures and Personal Property, and
documents covering all of the foregoing;
all accounts, accounts receivable,
documents, instruments, money, deposit
accounts, funds deposited in accounts
established with a bank, savings and loan
association, trust company or other
financial institution in connection with
the ownership, use or operation of the
Land, the Improvements or the Fixtures and
Personal Property, including any reserve
accounts or escrow accounts, and all
investments of the funds and all other
general intangibles;
(ix) all awards and other compensation paid after the
date of this Deed of Trust for any Condemnation
(the "Condemnation Awards");
(x) all proceeds of and all unearned premiums on the
Policies (the "Insurance Proceeds");
(xi) all licenses, certificates of occupancy,
contracts, management agreements, operating
agreements, operating covenants, franchise
agreements, permits and variances relating to
the Land, the Improvements or the Fixtures and
Personal Property;
(xii) all books, records and other information,
wherever located, which are in Borrower's
possession, custody or control or to which
Borrower is entitled at law or in equity
and which are related to the Property,
including all computer or other equipment
used to record, store, manage, manipulate
or access the information (the "Books and
Records");
(xiii) all deposits and letters of credit held
from time to time by the Accumulations
Depositary to provide reserves for Taxes
and Assessments together with interest
thereon, if any (the "Accumulations") and
the account or accounts in which such
deposits are or may be held; and
(xiv) all after-acquired title to or remainder or
reversion in any of the property described
in this Section; all additions, accessions
and extensions to, improvements of and
substitutions or replacements for any of
such property; all products and all cash
and non-cash proceeds, immediate or remote,
of any sale or other disposition of any of
such property, excluding sales or other
dispositions of inventory in the ordinary
course of the business of operating the
Land or the Improvements; and all
additional lands, estates, interests,
rights or other property acquired by
Borrower after the date of this Deed of
Trust for use in connection with the Land
and Improvements, all without the need for
any additional mortgage, assignment, pledge
or conveyance to Lender but Borrower will
execute and deliver to Lender, upon
Lender's request, any documents reasonably
requested by Lender to further evidence the
foregoing.
Section 2.2. Habendum Clause. The Property is conveyed to
Trustee, TO HAVE AND TO HOLD the Property IN TRUST, FOREVER, for the
purpose of securing the Note and the Obligations.
Section 2.3. Security Agreement.
(a) This Deed of Trust is a real property mortgage and
also a "security agreement" and a "financing statement" within the
meaning of the Uniform Commercial Code. The Property includes both
real and personal property and all of Borrower's other right, title
and interest, whether tangible or intangible, in the Property. By
executing and delivering this Deed of Trust, Borrower grants to
Trustee, as security for the Obligations, a security interest in the
Property to the full extent that any of the Property may be subject to
the Uniform Commercial Code.
(b) Borrower desires and intends that this Deed of Trust
also constitute a Fixture Filing between Borrower as debtor and Lender
as secured party, as defined in the Uniform Commercial Code. To this
end, Borrower acknowledges that (i) this Deed of Trust covers goods
which are or are to become fixtures on the Land; (ii) this financing
statement is to be recorded; (iii) Borrower is the record owner of
such property; (iv) products of collateral are also covered. Except
as otherwise provided in the Loan Documents, no financing statement in
favor of any secured party other than Lender covering the personal
property described herein or any portion thereof is on file in any
public office. Provided that obsolete and worn-out articles may be
removed concurrently with the replacement or renewal thereof with
property of at least equal value or usefulness in the operation of the
Property; Borrower will not otherwise remove or permit the removal of
the collateral or any part thereof without the prior written
permission of Lender.
Section 2.4. Conditions to Grant. This Deed of Trust is made
on the express condition that if Borrower pays and performs the
Obligations in full in accordance with the Loan Documents, then unless
expressly provided otherwise in the Loan Documents, the Loan Documents
will be released at Borrower's expense.
ARTICLE III
OBLIGATIONS SECURED
Section 3.1. The Obligations. This Deed of Trust secures the
Principal, the Interest, the Late Charges, the Prepayment Premiums,
the Expenses, any additional advances made by Lender in connection
with the Property or the Loan and all other amounts payable under the
Loan Documents (the "Debt") and also secures both the timely payment
of the Debt as and when required and the timely performance of all
other obligations and covenants to be performed under the Loan
Documents (the "Obligations").
ARTICLE IV
TITLE AND AUTHORITY
Section 4.1. Title to the Property.
(a) Subject to the conveyance effectuated by this Deed of
Trust, Borrower has and will continue to have good and marketable
title in fee simple absolute to the Land and the Improvements and good
and marketable title to the Fixtures and Personal Property, in each
case, free and clear of liens, encumbrances and charges except the
Permitted Exceptions. To Borrower's knowledge, there are no facts or
circumstances that might give rise to a lien, encumbrance or charge on
the Property.
(b) Borrower has and will continue to have good and
marketable title to the lessee's rights under the Ground Lease and the
leasehold interest under the Ground Lease on the Land described in
Exhibit A-6 and good and marketable title in fee simple absolute to
the Land described in Exhibit A-1, A-2, A-3, A-4 and A-5 and the
Improvements located thereon and good and marketable title to the
Fixtures and Personal Property, all free and clear of liens,
encumbrances and charges, except the Permitted Exceptions. To
Borrower's knowledge there are no facts or circumstances that might
give rise to a lien, encumbrance or charge on the Property.
(c) Borrower owns and will continue to own all of the
other Property free and clear of all liens, encumbrances and charges
except the Permitted Exceptions.
(d) This Deed of Trust is and will remain a valid and
enforceable first lien on and security interest in the Property,
subject only to the Permitted Exceptions.
Section 4.2. Authority.
(a) Borrower is and will continue to be (i) duly
organized, validly existing and in good standing under the Laws of the
state or commonwealth in which it was organized or incorporated and
(ii) duly qualified to conduct business, in good standing, in the
state or commonwealth where the Property is located.
(b) Borrower has and will continue to have all approvals
required by Law or otherwise and full right, power and authority to
(i) own and operate the Property and carry on Borrower's business as
now conducted or as proposed to be conducted; (ii) execute and deliver
the Loan Documents; (iii) grant, mortgage, warrant the title to,
convey, assign and pledge the Property to Lender pursuant to the
provisions of this Deed of Trust; and (iv) perform the Obligations.
(c) The execution and delivery of the Loan Documents and
the performance of the Obligations do not and will not conflict with
or result in a default under any Laws or any Leases or Property
Documents and do not and will not conflict with or result in a default
under any agreement binding upon any party to the Loan Documents.
(d) The Loan Documents constitute and will continue to
constitute legal, valid and binding obligations of all parties to the
Loan Documents enforceable in accordance with their respective terms.
Section 4.3. No Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
Section 4.4. Litigation. There are no Proceedings or, to
Borrower's knowledge, investigations against or affecting Borrower or
the Property and, to Borrower's knowledge, there are no facts or
circumstances that might give rise to a Proceeding or an investigation
against or affecting Borrower or the Property. Borrower will give
Lender prompt notice of the commencement of any Proceeding or
investigation against or affecting the Property or Borrower which
could have a material adverse effect on the Property or on Lender's
interests in the Property or under the Loan Documents. Borrower also
will deliver to Lender such additional information relating to the
Proceeding or investigation as Lender may request from time to time.
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES
Section 5.1. Status of the Property.
(a) Borrower has obtained and will maintain in full force
and effect all certificates, licenses, permits and approvals that are
issued or required by Law or by any entity having jurisdiction over
the Property or over Borrower or that are necessary for the Permitted
Use, for occupancy and operation of the Property for the conveyance
described in this Deed of Trust and for the conduct of Borrower's
business on the Property in accordance with the Permitted Use.
(b) The Property is and will continue to be serviced by
all public utilities required for the Permitted Use of the Property.
(c) All roads and streets necessary for service of and
access to the Property for the current or contemplated use of the
Property have been completed and are and will continue to be
serviceable, physically open and dedicated to and accepted by the
Government for use by the public.
(d) The Property is free from damage caused by a Casualty.
(e) Except as disclosed in writing to Lender, all costs
and expenses of labor, materials, supplies and equipment used in the
construction of the Improvements have been paid in full.
Section 5.2. Maintenance of the Property. Borrower will
maintain the Property in thorough repair and good and safe condition,
suitable for the Permitted Use, including, to the extent necessary,
replacing the Fixtures and Personal Property with property at least
equal in quality and condition to that being replaced and free of
liens. Borrower will not erect any new buildings, building additions
or other structures on the Land or otherwise materially alter the
Improvements without Lender's prior consent which may be withheld in
Lender's sole discretion. Lender shall be deemed to have consented if
it has not responded within 30 days of receipt of Borrower's written
request to the Lender at the addresses set forth herein. In the event
that Borrower does not manage the Property itself, the Property will
be managed by a property manager satisfactory to Lender pursuant to a
management agreement satisfactory to Lender and terminable by Borrower
upon 30 days notice to the property manager.
Section 5.3. Change in Use. Borrower will use and permit the
use of the Property for the Permitted Use and for no other purpose.
Section 5.4. Waste. Borrower will not commit or permit any
waste (including economic and non-physical waste), impairment or
deterioration of the Property or any alteration, demolition or removal
of any of the Property, excluding any tenant alterations of a non-
structural nature, without Lender's prior consent which may be
withheld in Lender's sole discretion. Lender shall be deemed to have
consented if it has not responded within 30 days of receipt of
Borrower's written request to the Lender at the addresses set forth
herein.
Section 5.5. Inspection of the Property. Subject to the
rights of tenants under the Leases, Lender has the right to enter and
inspect the Property on reasonable prior notice, except during the
existence of an Event of Default, when no prior notice is required.
Lender has the right to engage an independent expert to review and
report on Borrower's compliance with Borrower's obligations under this
Deed of Trust to maintain the Property, comply with Law and refrain
from waste, impairment or deterioration of the Property and the
alteration, demolition or removal of any of the Property except as may
be permitted by the provisions of this Deed of Trust. If the
independent expert's report discloses material failure to comply with
such obligations or if Lender engages the independent expert after the
occurrence of an Event of Default, then the independent expert's
review and report will be at Borrower's expense, payable within 3 days
after demand.
Section 5.6. Leases and Rents.
(a) Borrower assigns the Leases and the Rents to Lender
absolutely and unconditionally and not merely as additional collateral
or security for the payment and performance of the Obligations, but
subject to a license back to Borrower of the right to collect the
Rents unless and until an Event of Default occurs at which time the
license will terminate automatically, all as more particularly set
forth in the Assignment, the provisions of which are incorporated in
this Deed of Trust by reference.
(b) Borrower appoints Lender as Borrower's attorney-in-
fact to execute unilaterally and record, at Lender's election, a
document subordinating this Deed of Trust to the Leases, provided that
the subordination will not affect (i) the priority of Lender's
entitlement to Insurance Proceeds or Condemnation Awards or (ii) the
priority of this Deed of Trust over intervening liens or liens arising
under or with respect to the Leases.
Section 5.7. Parking. Borrower will provide, maintain,
monitor and light parking areas within the Property, including any
sidewalks, aisles, streets, driveways, sidewalk cuts and rights-of-way
to and from the adjacent public streets, in a manner consistent with
the Permitted Use and sufficient to accommodate the greatest of: (i)
the number of parking spaces required by Law; or (ii) the number of
parking spaces required by the Leases and the Property Documents. The
parking areas will be reserved and used exclusively for ingress,
egress and parking for Borrower and the tenants under the Leases and
their respective employees, customers and invitees and in accordance
with the Leases and the Property Documents.
Section 5.8. Separate Tax Lot. The Property is and will
remain assessed for real estate tax purposes as one or more wholly
independent tax lots, separate from any property that is not part of
the Property.
Section 5.9. Changes in Zoning or Restrictive Covenants.
Borrower will not (i) initiate, join in or consent to any change in
any Laws pertaining to zoning, any restrictive covenant or other
restriction which would restrict the Permitted Uses for the Property;
(ii) permit the Property to be used to fulfil any requirements of Law
for the construction or maintenance of any improvements on property
that is not part of the Property; (iii) permit the Property to be used
for any purpose not included in the Permitted Use; or (iv) impair the
integrity of the Property as a single, legally subdivided zoning lot
separate from all other property.
Section 5.10. Lender's Right to Appear. If Lender determines,
in its sole discretion, that Borrower is not adequately protecting
Lender's interest in the Property, upon written notice to Borrower,
except in the case of an emergency, Lender has the right to appear in
and defend any Proceeding brought regarding the Property and to bring
any Proceeding, in the name and on behalf of Borrower or in Lender's
name.
Section 5.11. Community Facilities District. Without obtaining
the prior written
consent of Lender, Borrower shall not consent to, or vote in favor of,
the inclusion of all or any part of the Property in any Community
Facilities District formed pursuant to the Community Facilities
District Act, A.R.S. Section 48-701, et seq., as amended from time to
time. Borrower shall immediately give notice to Lender of any
notification or advice that Borrower may receive from any municipality
or other third party of any intent or proposal to include all or any
part of the Property in a Community Facilities District. Lender shall
have the right to file a written objection to the inclusion of all or
any part of the Property in a Community Facilities District, either in
its own name or in the name of Borrower, and to appear at, and
participate in, any hearing with respect to the formation of any such
district.
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS
Section 6.1. Impositions.
(a) Borrower will pay each Imposition, unless the
Imposition is payable directly by the tenant, at least 15 days before
the date (the "Imposition Penalty Date") that is the earlier of (i)
the date on which the Imposition becomes delinquent and (ii) the date
on which any penalty, interest or charge for non-payment of the
Imposition accrues. If the Imposition is to be paid directly by a
tenant, Borrower shall deliver to Lender proof, in form and content
acceptable to Lender, of tenant's payment of such Impositions 15 days
before the Imposition Penalty Date.
(b) At least 10 days before each Imposition Penalty Date,
Borrower will deliver to Lender a receipted bill or other evidence of
payment.
(c) Borrower, at its own expense, may contest any Taxes or
Assessments, provided that the following conditions are met:
(i) not less than 30 days prior to the Imposition
Penalty Date, Borrower delivers to Lender notice
of the proposed contest;
(ii) the contest is by a Proceeding promptly
initiated and conducted diligently and in good
faith;
(iii) there is no Event of Default;
(iv) the Proceeding suspends the collection of the
contested Taxes or Assessments;
(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Documents;
(vi) the Proceeding precludes imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit; and
(vii) Borrower either deposits with the
Accumulations Depositary reserves or
furnishes a bond or other security
satisfactory to Lender, in either case in
an amount sufficient to pay the contested
Taxes or Assessments, together with all
interest and penalties or Borrower pays all
of the contested Taxes or Assessments under
protest.
(d) Installment Payments. If any future Assessment is
payable in installments, Borrower will nevertheless pay the Assessment
in its entirety on the day the first installment becomes due and
payable or a lien, unless Lender, in its sole discretion, approves
payment of the Assessment in installments.
Section 6.2. Accumulations.
(a) If required by Lender pursuant to Subsection 6.2(j)
hereof, Borrower will make an initial deposit with either Lender or a
mortgage servicer or financial institution designated or approved by
Lender from time to time to receive, hold and disburse the
Accumulations in accordance with this Section (the "Accumulations
Depositary"). On the first day of each calendar month during the
Term, Borrower will deposit with the Accumulations Depositary an
amount equal to one-twelfth (1/12) of the annual Taxes and Assessments
as determined by Lender or its designee. At least 45 days before each
Imposition Penalty Date, Borrower will deliver to the Accumulations
Depositary any bills and other documents that are necessary to pay the
Taxes and Assessments.
(b) The Accumulations will be applied to the payment of
Taxes and Assessments. Any excess Accumulations after payment of
Taxes and Assessments will be returned to Borrower or credited against
future payments of the Accumulations, at Lender's election or as
required by Law. If the Accumulations are not sufficient to pay Taxes
and Assessments, Borrower will pay the deficiency to the Accumulations
Depositary within 5 days of demand. At any time after an Event of
Default occurs, Lender may apply the Accumulations as a credit against
any portion of the Debt selected by Lender in its sole discretion.
(c) The Accumulations Depositary will hold the
Accumulations as additional security for the Obligations until applied
in accordance with the provisions of this Deed of Trust. If Lender is
not the Accumulations Depositary, the Accumulations Depositary will
deliver the Accumulations to Lender upon Lender's demand at any time
after an Event of Default.
(d) If the Property is sold or conveyed, other than by
foreclosure or transfer in lieu of foreclosure, and the Property
remains subject to this Deed of Trust, all right, title and interest
of Borrower to the Accumulations will automatically, and without
necessity of further assignment, be held for the account of the new
owner, subject to the provisions of this Section and Borrower will
have no further interest in the Accumulations.
(e) Borrower waives all right to demand, receive or
collect any interest or other return on the Accumulations which will
be held in a non-interest bearing account (except as required by Law)
and may be commingled with other monies held by the Accumulations
Depositary and will not be held in trust.
(f) Lender has the right to pay, or to direct the
Accumulations Depositary to pay, any Taxes or Assessments unless
Borrower is contesting the Taxes or Assessments in accordance with the
provisions of this Deed of Trust, in which event any payment of the
contested Taxes or Assessments will be made under protest in the
manner prescribed by Law or, at Lender's election, will be withheld.
(g) If Lender assigns this Deed of Trust, Lender will pay,
or cause the Accumulations Depositary to pay, the unapplied balance of
the Accumulations to or at the direction of the assignee.
Simultaneously with the payment, Lender and the Accumulations
Depositary will be released from all liability with respect to the
Accumulations and Borrower will look solely to the assignee with
respect to the Accumulations. When the Obligations have been fully
satisfied, any unapplied balance of the Accumulations will be returned
to Borrower.
(h) Notwithstanding the requirements set forth in
subsections (a) through (g) of this Section 6.2 and provided Borrower
pays the Taxes and Assessments to the taxing authority when due, as an
alternative to the requirements set forth in subsections (a) through
(g), subject to the limitation in subsection 6.2(j) hereof, at
Closing, Borrower shall, at Borrower's option, either (1) deposit an
amount equal to the annual real estate taxes for the Property next due
in an interest bearing account with an agent acceptable to Lender or
approved by Lender or (2) deposit a Letter of Credit equal to such
amount in a form satisfactory to Lender, which Letter of Credit shall
be renewed from time to time at least 30 days prior to the expiration
date thereof, pursuant to an agreement satisfactory to Lender to be
held by a depository, satisfactory to Lender, in Lender's sole
discretion. The amount deposited pursuant to this Subsection 6.2(h)
shall be held as additional security for the Obligations for the term
of the Loan. So long as there is no default under the Loan Documents
and so long as Borrower has deposited the required amount or provided
Lender with an acceptable Letter of Credit, Borrower shall pay real
estate taxes for the Property directly to the appropriate tax
authority.
(i) So long as there is no default under the Loan
Documents, real estate tax escrows will not be required for any tenant
with a credit rating equivalent to a Standard and Poors rating of BBB-
if the tenant's lease states that real estate taxes are to be paid
directly by the tenant and Borrower provides Lender written evidence
within 30 days after payment verifying payment of real estate taxes.
(j) If there is an Event of Default, Lender may, in
Lender's sole discretion, in addition to all of its other rights and
remedies under the Loan Documents, draw down on the deposited amount
or Letter of Credit, as the case may be, to pay the real estate taxes
and require Borrower to comply with the provisions set forth in
subsections 6.2(a) through (g) hereof rather than the provisions of
Subsection 6.2(h) hereof, and the requirement to make such deposits
shall not relieve Borrower of the obligation to remedy and cure the
Event of Default.
Section 6.3. Changes in Tax Laws. If a Law requires the
deduction of the Debt from the value of the Property for the purpose
of taxation or imposes a tax, either directly or indirectly, on the
Debt, any Loan Document or Lender's interest in the Property, Borrower
will pay the tax with interest and penalties, if any. If Lender
determines that Borrower's payment of the tax may be unlawful,
unenforceable, usurious or taxable to Lender, the Debt will become
immediately due and payable on 60 days' prior notice unless the tax
must be paid within the 60-day period, in which case, the Debt will be
due and payable within the lesser period in accordance with this
Section 6.3. Notwithstanding anything herein to the contrary, no
Prepayment Premium or Evasion Premium (as such terms are defined in
the Note) shall be due or payable in the event that all or any portion
of the Debt is prepaid as a result of the payment to Lender of the
Debt pursuant to this Section 6.3.
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION
Section 7.1. Insurance Coverages.
(a) Borrower will maintain such insurance coverages and
endorsements in form and substance and in amounts as Lender may
require in its sole discretion, from time to time. Until Lender
notifies Borrower of changes in Lender's requirements, Borrower will
maintain not less than the insurance coverages and endorsements Lender
required for closing of the Loan for all insurance except earthquake
insurance. Borrower will maintain not less than a $20,000,000
earthquake insurance policy.
(b) The insurance, including renewals, required under this
Section will be issued on valid and enforceable policies and
endorsements satisfactory to Lender (the "Policies"). Each Policy
will contain a standard waiver of subrogation and a replacement cost
endorsement and will provide that Lender will receive not less than 30
days' prior written notice of any cancellation, termination or non-
renewal of a Policy or any material change other than an increase in
coverage and that Lender will be named under a standard mortgage
endorsement as loss payee.
(c) The insurance companies issuing the Policies (the
"Insurers") must be authorized to do business in the State or
Commonwealth where the Property is located, must have been in business
for at least 5 years, must carry an A.M. Best Company, Inc. policy
holder rating of A or better and an A.M. Best Company, Inc. financial
category rating of Class X or better and must be otherwise
satisfactory to Lender. Lender may select an alternative credit
rating agency and may impose different credit rating standards for the
Insurers. Notwithstanding Lender's right to approve the Insurers and
to establish credit rating standards for the Insurers, Lender will not
be responsible for the solvency of any Insurer.
(d) Notwithstanding Lender's rights under this Article,
Lender will not be liable for any loss, damage or injury resulting
from the inadequacy or lack of any insurance coverage.
(e) Borrower will comply with the provisions of the
Policies and with the requirements, notices and demands imposed by the
Insurers and applicable to Borrower or the Property.
(f) Borrower will pay the Insurance Premiums for each
Policy not less than 5 days before the expiration date of the Policy
being replaced or renewed and will deliver to Lender an original or,
if a blanket policy, a certified copy of each Policy marked "Paid" not
less than 15 days prior to the expiration date of the Policy being
replaced or renewed.
(g) Borrower will not carry separate insurance concurrent
in kind or form or contributing in the event of loss with any other
insurance carried by Borrower.
(h) Borrower will not carry any of the insurance required
under this Section on a blanket or umbrella policy without in each
instance Lender's prior approval which may be withheld in Lender's
sole discretion. If Lender approves, Borrower will deliver to Lender
a certified copy of the blanket policy which will allocate to the
Property the amount of coverage required under this Section and
otherwise will provide the same coverage and protection as would a
separate policy insuring only the Property. Lender shall be deemed to
have approved the policy if it has not responded within 30 days of
receipt of Borrower's written request to the Lender at the addresses
set forth herein.
(i) Borrower will give the Insurers prompt notice of any
change in ownership or occupancy of the Property. This subsection
does not abrogate the prohibitions on transfers set forth in this Deed
of Trust.
(j) If the Property is sold at a foreclosure sale or
otherwise is transferred so as to extinguish the Obligations, all of
Borrower's right, title and interest in and to the Policies then in
force will be transferred automatically to the purchaser or
transferee.
Section 7.2. Casualty and Condemnation.
(a) Borrower will give Lender notice of any Casualty
promptly after it occurs and will give Lender notice of any
Condemnation Proceeding promptly after Borrower receives notice of
commencement or notice that such a Condemnation Proceeding will be
commencing. Borrower promptly will deliver to Lender copies of all
documents Borrower delivers or receives relating to the Casualty or
the Condemnation Proceeding, as the case may be.
(b) Borrower authorizes Lender, at Lender's option, to act
on Borrower's behalf to collect, adjust and compromise any claims for
loss, damage or destruction under the Policies on such terms as Lender
determines in Lender's sole discretion. If there is no Event of
Default which remains uncured within the applicable cure period,
Lender shall consult with Borrower before collecting, adjusting or
compromising said claims. Borrower authorizes Lender to act, at
Lender's option, on Borrower's behalf in connection with any
Condemnation Proceeding. Borrower will execute and deliver to Lender
all documents requested by Lender and all documents as may be required
by Law to confirm such authorizations. Nothing in this Section will
be construed to limit or prevent Lender from joining with Borrower
either as a co-defendant or as a co-plaintiff in any Condemnation
Proceeding.
(c) If Lender elects not to act on Borrower's behalf as
provided in this Section, then Borrower promptly will file and
prosecute all claims (including Lender's claims) relating to the
Casualty and will prosecute or defend (including defense of Lender's
interest) any Condemnation Proceeding. Borrower will have the
authority to settle or compromise the claims or Condemnation
Proceeding, as the case may be, provided that Lender has approved in
Lender's sole discretion any compromise or settlement that exceeds
$250,000.00. Any check for Insurance Proceeds or Condemnation Awards,
as the case may be (the "Proceeds") will be made payable to Lender and
Borrower. Borrower will endorse the check to Lender immediately upon
Lender presenting the check to Borrower for endorsement or if Borrower
receives the check first, will endorse the check immediately upon
receipt and forward it to Lender. If any Proceeds are paid to
Borrower, Borrower immediately will deposit the Proceeds with Lender,
to be applied or disbursed in accordance with the provisions of this
Deed of Trust. Lender will be responsible for only the Proceeds
actually received by Lender.
Section 7.3. Application of Proceeds. After deducting any
third party and out-of-pocket costs incurred by Lender in collecting
the Proceeds, Lender may, in its sole discretion, (i) apply the
Proceeds as a credit against any portion of the Debt selected by
Lender in its sole discretion of the Debt; (ii) apply the Proceeds to
restore the Improvements, provided that Lender will not be obligated
to see to the proper application of the Proceeds and provided further
that any amounts released for Restoration will not be deemed a payment
on the Debt; or (iii) deliver the Proceeds to Borrower.
Section 7.4. Conditions to Availability of Proceeds for
Restoration. Notwithstanding the preceding Section, after a Casualty
or a Condemnation (a "Destruction Event"), Lender will make the
Proceeds (less any third party and out-of-pocket costs incurred by
Lender in collecting the Proceeds) available for Restoration in
accordance with the conditions for disbursements set forth in the
Section entitled "Restoration", provided that the following conditions
are met:
(i) Bedford Property Investors, Inc. or the
transferee under a Permitted Transfer, if any,
continues to be Borrower at the time of the
Destruction Event and at all times thereafter
until the Proceeds have been fully disbursed;
(ii) no monetary default under the Loan Documents
exists at the time of the Destruction Event and
no Event of Default has occurred during the 12
months prior to the Destruction Event;
(iii) all Leases in effect immediately prior to
the Destruction Event and all Property
Documents in effect immediately prior to
the Destruction Event that are essential to
the use and operation of the Property
continue in full force and effect
notwithstanding the Destruction Event;
(iv) if the Destruction Event is a Condemnation,
Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Improvements can
be restored to an economically and
architecturally viable unit;
(v) Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Proceeds are
sufficient to complete Restoration or if the
Proceeds are insufficient to complete
Restoration, Borrower first deposits with Lender
funds ("Additional Funds") that when added to
the Proceeds will be sufficient to complete
Restoration;
(vi) if the Destruction Event is a Casualty, Borrower
delivers to Lender evidence reasonably
satisfactory to Lender that the Insurer under
each affected Policy has not denied liability
under the Policy as to Borrower or the insured
under the Policy;
(vii) Lender is reasonably satisfied that the
proceeds of any business interruption
insurance in effect together with other
available gross revenues from the Property
are sufficient to pay Debt Service Payments
after paying the Impositions, Insurance
Premiums, reasonable and customary
operating expenses and capital expenditures
until Restoration is complete;
(viii) Lender is reasonably satisfied that
Restoration will be completed on or before
the date (the "Restoration Completion
Date") that is the earliest of: (A) 12
months prior to the Maturity Date; (B) 12
months after the Destruction Event; (C) the
earliest date required for completion of
Restoration under any Lease or any Property
Document; or (D) any date required by Law;
and
(ix) the annual Rents (excluding security deposits)
under Leases in effect on the date of the
Destruction Event are providing debt service
coverage for the annual Debt Service Payments of
1.15 after payment of annual Insurance Premiums,
Impositions and operating expenses of the
Property (including ground rent, if any),
provided that, if the Rents do not provide such
debt service coverage, then Borrower expressly
authorizes and directs Lender to apply an amount
from the Proceeds to reduction of Principal in
order to reduce the annual Debt Service Payments
sufficiently for such debt service coverage to
be achieved. The reduced debt service payments
will be calculated using the Fixed Interest Rate
and an amortization schedule that will achieve
the same proportionate amortization of the
reduced Principal over the then remaining Term
as would have been achieved if the Principal and
the originally scheduled Debt Service Payments
had not been reduced. Borrower will execute any
documentation that Lender deems reasonably
necessary to evidence the reduced Principal and
debt service payments.
Section 7.5. Restoration.
(a) If the total Proceeds for any Destruction Event are
$250,000.00 or less and Lender elects or is obligated by Law or under
this Article to make the Proceeds available for Restoration, Lender
will disburse to Borrower the entire amount received by Lender and
Borrower will commence Restoration promptly after the Destruction
Event and complete Restoration not later than the Restoration
Completion Date.
(b) If the Proceeds for any Destruction Event exceed
$250,000.00 and Lender elects or is obligated by Law or under this
Article to make the Proceeds available for Restoration, Lender will
disburse the Proceeds and any Additional Funds (the "Restoration
Funds") upon Borrower's request as Restoration progresses, generally
in accordance with normal construction lending practices for
disbursing funds for construction costs, provided that the following
conditions are met:
(i) Borrower commences Restoration promptly after
the Destruction Event and completes Restoration
on or before the Restoration Completion Date;
(ii) if Lender requests, Borrower delivers to Lender
prior to commencing Restoration, for Lender's
approval, plans and specifications and a
detailed budget for the Restoration;
(iii) Borrower delivers to Lender reasonably
satisfactory evidence of the costs of
Restoration incurred prior to the date of
the request, and such other documents as
Lender may request including mechanics'
lien, waivers and title insurance
endorsements;
(iv) Borrower pays all costs of Restoration whether
or not the Restoration Funds are sufficient and,
if at any time during Restoration, Lender
determines that the undisbursed balance of the
Restoration Funds is insufficient to complete
Restoration, Borrower shall either: (1) deposit
with Lender, as part of the Restoration Funds,
an amount equal to the deficiency within 30 days
of receiving notice of the deficiency from
Lender; or (2) provide Lender with a letter of
credit, in form and content satisfactory to
Lender, in an amount equal to the deficiency
within 30 days of receiving notice of the
deficiency from Lender ; and
(v) there is no default under the Loan Documents at
the time Borrower requests funds or at the time
Lender disburses funds.
(c) If an Event of Default occurs at any time after the
Destruction Event, then Lender will have no further obligation to make
any remaining Proceeds available for Restoration and may apply any
remaining Proceeds as a credit against any portion of the Debt
selected by Lender in its sole discretion.
(d) Lender may elect at any time prior to commencement of
Restoration or while work is in progress to retain, at Borrower's
expense, an independent engineer or other consultant to review the
plans and specifications, to inspect the work as it progresses and to
provide reports. If any matter included in a report by the engineer
or consultant engaged by Lender is not in compliance with approved
plans and specifications, Lender may suspend disbursement of the
Restoration Funds until the matters contained in the report are
resolved to Lender's satisfaction.
(e) If Borrower fails to commence and complete Restoration
in accordance with the terms of this Article, then in addition to the
Remedies, Lender may elect to restore the Improvements on Borrower's
behalf and reimburse itself out of the Restoration Funds for costs and
expenses incurred by Lender in restoring the Improvements, or Lender
may apply the Restoration Funds as a credit against any portion of the
Debt selected by Lender in its sole discretion.
(f) Lender may commingle the Restoration Funds with its
general assets and will not be liable to pay any interest or other
return on the Restoration Funds unless otherwise required by Law.
Lender will not hold any Restoration Funds in trust. Lender may elect
to deposit the Restoration Funds with a depositary satisfactory to
Lender under a disbursement and security agreement satisfactory to
Lender.
(g) Borrower will pay all of Lender's out-of-pocket and
third party expenses incurred in connection with a Destruction Event
or Restoration. If Borrower fails to do so, then in addition to the
Remedies, Lender may from time to time reimburse itself out of the
Restoration Funds.
(h) Any excess Proceeds, excluding any proceeds from
business interruption insurance maintained by Borrower, remaining
after Restoration less than $100,000, shall be delivered to Borrower.
If the excess Proceeds remaining after Restoration are more than
$100,000, Lender may elect, in its sole discretion to apply any excess
as a credit against any portion of the Debt as selected by Lender in
its sole discretion or to deliver the excess to Borrower.
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS
Section 8.1. Compliance with Law. Borrower, the Property and
the use of the Property comply and will continue to comply with Law
and with all agreements and conditions necessary to preserve and
extend all rights, licenses, permits, privileges, franchises and
concessions (including zoning variances, special exceptions and non-
conforming uses) relating to the Property or Borrower. Borrower will
notify Lender of the commencement of any investigation or Proceeding
relating to a possible violation of Law immediately after Borrower
receives notice thereof and, will deliver promptly to Lender copies of
all documents Borrower receives or delivers in connection with the
investigation or Proceeding. Borrower will not alter the Property in
any manner that would increase Borrower's responsibilities for
compliance with Law.
Section 8.2. Compliance with Agreements. There are no
defaults, events of defaults or events which, with the passage of time
or the giving of notice, would constitute an event of default under
the Property Documents. Borrower will pay and perform all of its
obligations under the Property Documents as and when required by the
Property Documents. Borrower will cause all other parties to the
Property Documents to pay and perform their obligations under the
Property Documents as and when required by the Property Documents.
Borrower will not amend or waive any provisions of the Property
Documents; exercise any options under the Property Documents; give any
approval required or permitted under the Property Documents that would
adversely affect the Property or Lender's rights and interests under
the Loan Documents; cancel or surrender any of the Property Documents;
or release or discharge or permit the release or discharge of any
party to or entity bound by any of the Property Documents, without, in
each instance, Lender's prior approval (excepting therefrom all
service contracts or other agreements entered into in the normal
course of business that are cancelable upon not more than 30 days
notice). Lender shall be deemed to have approved the same if it has
not responded within 90 days of receipt of Borrower's written request
to the Lender at the addresses set forth herein. Borrower will
deliver promptly to Lender copies of any notices of default or of
termination that Borrower receives or delivers relating to any
Property Document.
Section 8.3. ERISA Compliance.
(a) Borrower is not and will continue not to be an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") that is subject to
Title I of ERISA or a "plan" as defined in Section 4975(e)(1) of the
Code that is subject to Section 4975 of the Code, and Borrower's
assets do not and will not constitute "plan assets" of one or more
such plans for purposes of Title I of ERISA or Section 4975 of the
Code.
(b) Borrower is not and will continue not to be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with Borrower are not and will not be subject to
any Laws regulating investments of and fiduciary obligations with
respect to governmental plans.
(c) Borrower will not engage in any transaction which
would cause any obligation or any action under the Loan Documents,
including Lender's exercise of the Remedies, to be a non-exempt
prohibited transaction under ERISA.
Section 8.4. Section 6045(e) Filing. Borrower will supply or
cause to be supplied to Lender either (i) a copy of a completed Form
1099-B, Statement for Recipients of Proceeds from Real Estate, Broker
and Barter Exchange Proceeds prepared by Borrower's attorney or other
person responsible for the preparation of the form, together with a
certificate from the person who prepared the form to the effect that
the form has, to the best of the preparer's knowledge, been accurately
prepared and that the preparer will timely file the form; or (ii) a
certification from Borrower that the Loan is a refinancing of the
Property or is otherwise not required to be reported to the Internal
Revenue Service pursuant to Section 6045(e) of the Code. Under no
circumstances will Lender or Lender's counsel be obligated to file the
reports or returns.
Section 8.5. Ground Lease Provisions.
(a) The Ground Lease is in full force and effect has not
been amended and
represents the entire agreement between Borrower and Ground Lessor and
there are no defaults, events of default or events which with the
passage of time or the giving of notice, would constitute a default or
event of default under the Ground Lease.
(b) Borrower will pay the Ground Rent as and when required
under the
Ground Lease and will perform all of Borrower's obligations as ground
lessee under the Ground Lease as and when required under the Ground
Lease.
(c) Borrower will cause Ground Lessor to pay and perform
all of Ground
Lessor's obligations under the Ground Lease as and when required under
the Ground Lease, will not give any approval required or permitted
under the Ground Lease without Lender's prior approval and will not
exercise any options under the Ground Lease without Lender's prior
approval.
(d) Borrower will not amend or waive any provisions of the
Ground Lease;
cancel or surrender the Ground Lease; or release or discharge Ground
Lessor from any of the terms or obligations of the Ground Lease,
without in each instance Lender's prior approval which may be withheld
in its sole discretion.
(e) Borrower promptly will deliver to Lender copies of any
notices of default
or of termination that Borrower receives or delivers relating to the
Ground Lease.
(f) Without limiting Lender's independent rights and
remedies under Section
365(h) of the Bankruptcy Code:
(i) Borrower will not elect to treat the Ground
Lease as terminated
under Subsection 365(h)(1) of the Bankruptcy Code
without Lender's prior consent to be exercised in its
sole discretion, any such election made without
Lender's prior consent is null and void;
(ii) Without in any manner limiting the provisions of
subparagraph (i)
of this Section, the lien of this Deed of Trust will
attach to all of Borrower's rights and remedies at any
time arising under or pursuant to Subsection 365(h) of
the Bankruptcy Code, including all of Borrower's
rights to remain in possession of the Property and
Lender may assert, or direct Borrower to assert, any
of such rights and remedies.
(iii) If, pursuant to Subsection 365(h) of the
Bankruptcy Code,
Borrower seeks to offset against Ground Rent the
amount of any damages caused by Ground Lessor's
failure to perform any of its obligations under the
Ground Lease after the Ground Lessor reject the Ground
Lease under the Code, Borrower will, prior to
effecting such offset, notify Lender of its intent to
do so, setting forth the amount proposed to be so
offset and the basis therefor. Lender will have the
right to object to all or any part of such offset and,
in the event of such objection, Borrower will not
effect any offset of the amount so objected to by
Lender. Neither Lender's failure to object as
aforesaid nor any objection or other communication
between Lender and Borrower relating to such offset
will constitute an approval of any such offset by
Lender. Borrower will indemnify, defend and save
Lender harmless from and against any and all claims,
demands, actions, suits, proceedings, damages, losses,
costs and expenses of every nature whatsoever
(including attorneys' fees) arising from or relating
to any offset by Borrower against the rent reserved in
the Ground Lease.
(iv) Borrower unconditionally assigns, transfers and
sets over to Lender
all of Borrower's claims and rights to the payment of
damages arising from any rejection by Ground Lessor of
the Ground Lease under the Bankruptcy Code. Lender
will have the right to proceed in its own name or in
the name of Borrower in respect of any claim, suit,
action or proceeding relating to the rejection of the
Ground Lease, including the right to file and
prosecute, to the exclusion of Borrower, any proofs of
claim, complaints, motions, application, notice and
other documents, in any case in respect of Ground
Lessor under the Bankruptcy Code. This assignment
constitutes a present, irrevocable and unconditional
assignment of the foregoing claims, rights and
remedies, and will continue in effect until all of the
indebtedness and obligations secured by this Deed of
Trust will have been satisfied and discharged in full.
Any amounts received by Lender as damages arising out
of the rejection of the Ground Lease as aforesaid will
be applied first to all costs and expenses of Lender
(including attorneys' fees) incurred in connection
with the exercise of any of its rights or remedies
under this subsection (iv) and then in accordance with
subsection (iii) of this Section 8.5.
(v) In any Proceeding under the Bankruptcy Code
relating to the
relating to the Ground Lease or the Property, Borrower
will appear in the Proceeding will protect Lender's
interests in the Property and under the Loan Documents
with attorneys and other professionals retained by
Borrower and approved by Lender. Lender may elect, in
Lender's sole discretion to engage its own attorneys
and other professionals at Borrower's expense to
appear in the Proceeding and to protect Lender's
interests in the Property and under the Loan
Documents. Borrower will not commence any Proceeding,
file any application or make any motion relating to
the Ground Lease in any Proceeding in its sole
discretion under the Code without Lender's prior
consent.
(vi) Borrower will give Lender prompt notice of any
filing by or
against Ground Lessor or Borrower of a Proceeding
under the Code. The notice will set forth any
information available to Borrower about the
proceeding, including the date of the filing, the
court in which the Proceeding was filed, and the
relief sought. Borrower also will deliver to Lender,
promptly following Borrower's receipt thereof, any
notices, summonses, pleadings, applications and other
documents received by Borrower in connection with the
Proceeding.
(vii) If a Proceeding under the Code is commenced
by or against
Borrower and Borrower, as lessee under the Ground
Lease, reject the Ground Lease pursuant to Section
365(a) of the Bankruptcy Code without giving Lender
not less than 10 Business Days' prior notice of the
date on which Borrower will apply to the Bankruptcy
court for authority to reject the Ground Lease.
Lender may, in its sole discretion, give Borrower
notice within such 10-day period stating that (a)
Lender demands that Borrower assume the Ground Lease
and assign it to Lender pursuant to Section 365 of the
Bankruptcy Code and (b) Lender will cure or provide
adequate assurance of prompt cure of all defaults and
will provide adequate assurance of future performance
under the Ground Lease. In that event, Borrower will
not seek to reject the Ground Lease and will comply
with the demand provided for in (a) above within 30
days after Lender's notice was given provided Lender
performs its obligations under (b) above.
(viii) Effective upon the entry of an order for
relief in respect of
Borrower under Chapter 7 of the Bankruptcy Code,
Borrower hereby assigns and transfers to Lender a non-
exclusive right to apply to the Bankruptcy Court under
Subsection 365(d)(1) of the Bankruptcy Code for an
order extending the period during which the Ground
Lease may be rejected or assumed.
ARTICLE IX
ENVIRONMENTAL
Section 9.1. Environmental Representations and Warranties.
Except as disclosed in the Environmental Report and to
Borrower's knowledge as of the date of this Deed of Trust:
(i) no Environmental Activity has occurred or is
occurring on the Property other than the use,
storage, and disposal of Hazardous Substances
which (A) is in the ordinary course of business
consistent with the Permitted Use; (B) is in
compliance with all Environmental Laws and (C)
has not resulted in Material Environmental
Contamination of the Property; and
(ii) no Environmental Activity has occurred or is
occurring on any property in the vicinity of the
Property which has resulted in Material
Environmental Contamination of the Property.
Section 9.2. Environmental Covenants.
(a) Borrower will not cause or permit any Material
Environmental Contamination of the Property.
(b) No Environmental Activity will occur on the Property
other than the use, storage and disposal of Hazardous Substances which
(A) is in the ordinary course of business consistent with the
Permitted Use; (B) is in compliance with all Environmental Laws; and
(C) does not create a risk of Material Environmental Contamination of
the Property.
(c) Borrower will notify Lender promptly upon Borrower
becoming aware of (i) any Material Environmental Contamination of the
Property or (ii) any Environmental Activity with respect to the
Property that is not in accordance with the preceding subsection (b).
Borrower promptly will deliver to Lender copies of all documents
delivered to or received by Borrower regarding the matters set forth
in this subsection, including notices of Proceedings or investigations
concerning any Material Environmental Contamination of the Property or
Environmental Activity or concerning Borrower's status as a
potentially responsible party (as defined in the Environmental Laws).
Borrower's notification of Lender in accordance with the provisions of
this subsection will not be deemed to excuse any default under the
Loan Documents resulting from the violation of Environmental Laws or
the Material Environmental Contamination of the Property or
Environmental Activity that is the subject of the notice. If Borrower
receives notice of a suspected violation of Environmental Laws in the
vicinity of the Property that poses a risk of Material Environmental
Contamination of the Property, Borrower will give Lender notice and
copies of any documents received relating to such suspected violation.
(d) From time to time at Lender's request, Borrower will
deliver to Lender any information known and documents available to
Borrower relating to the environmental condition of the Property.
(e) Lender may perform or engage an independent consultant
to perform an assessment of the environmental condition of the
Property and of Borrower's compliance with this Section on an annual
basis or at any time for reasonable cause or after an Event of
Default. In connection with the assessment: (i) Lender or consultant
may enter and inspect the Property and perform tests of the air, soil,
ground water and building materials; (ii) Borrower will cooperate and
use best efforts to cause tenants and other occupants of the Property
to cooperate with Lender or consultant; (iii) Borrower will receive a
copy of any final report prepared after the assessment, to be
delivered to Borrower not more than 10 days after Borrower requests a
copy and executes Lender's standard confidentiality and waiver of
liability letter; (iv) Borrower will accept custody of and arrange for
lawful disposal of any Hazardous Substances required to be disposed of
as a result of the tests; (v) Lender will not have liability to
Borrower with respect to the results of the assessment; (vi) Lender
will not be responsible for any damage to the Property resulting from
the tests described in this subsection and Borrower will look solely
to the consultants to reimburse Borrower for any such damage; and
(vii) Borrower acknowledges that the results of the assessment are to
be solely for Lender's benefit and Borrower may not rely on such
results for any purpose. The consultant's assessment and reports will
be at Borrower's expense (i) if the reports disclose any material
adverse change in the environmental condition of the Property from
that disclosed in the Environmental Report or any environmental report
previously ordered by Lender; (ii) if Lender engaged the consultant
when Lender had reasonable cause to believe Borrower was not in
compliance with the terms of this Article and, after written notice
from Lender, Borrower failed to provide promptly reasonable evidence
that Borrower is in compliance; or (iii) if Lender engaged the
consultant or after the occurrence of an Event of Default.
(f) If Lender has reasonable cause to believe that there
is Environmental Activity at the Property, Lender may elect in its
sole discretion to direct the Trustee to reconvey any portion of the
Property affected by the Environmental Activity and Borrower will
accept the reconveyance.
ARTICLE X
FINANCIAL REPORTING
Section 10.1. Financial Reporting.
(a) Borrower will deliver to Lender within 90 days after
the close of each Fiscal Year an annual financial statement, certified
by the chief financial officer of Borrower (the "Annual Financial
Statement") for the Property for the Fiscal Year, which will include a
comparative balance sheet, a cash flow statement, an income and
expense statement, a detailed breakdown of all receipts and expenses
and all supporting schedules. Upon request of Lender, Borrower will
also deliver to Lender within 90 days after the close of each Fiscal
Year the Form 10-K Annual Report to the Security and Exchange
Commission for Borrower. The Annual Financial Statement for the
Property will be:
(i) accompanied by an opinion of the CPA that, in
all material respects, the Annual Financial
Statement fairly presents the financial position
of Borrower;
(ii) accompanied by an opinion of the chief financial
officer of Borrower that, in all material
respects, the Annual Financial Statement fairly
presents the financial position of the Property;
(iii) separate and distinct from any consolidated
statement or report for Borrower or any
other entity or any other property.
Section 10.2. Annual Budget. Not less than 30 days prior to
the end of each Fiscal Year, Borrower will deliver to Lender, a
detailed comparative budget (the "Budget") for the Property for the
next succeeding Fiscal Year showing anticipated operating expenses,
Insurance Premiums, Impositions, leasing commissions, capital
improvement costs, tenant improvement costs and any other information
Lender requests. Unless Lender notifies Borrower within 60 days after
Lender receives the Budget that Lender disputes information in the
Budget, the Budget as submitted will constitute the Budget for the
next succeeding Fiscal Year. If Lender concludes in good faith that a
Budget needs material revision, Borrower will submit a revised Budget
to Lender, together with a detailed explanation of the revisions.
Borrower waives any defense or right of offset to the Obligations, and
any claim or counterclaim against Lender, arising out of any
discussions between Borrower and Lender regarding any Budget or
revised Budget delivered to Lender or the resolution of any
disagreements relating to a Budget or revised Budget including any
defense, right of offset, claim or counterclaim alleging in substance,
that by virtue of such delivery, discussions or resolution, Lender has
interfered with, influenced or controlled Borrower or the operations
at the Property.
ARTICLE XI
EXPENSES AND DUTY TO DEFEND
Section 11.1. Payment of Expenses.
(a) Borrower is obligated to pay all fees and expenses
(the "Expenses") incurred by Lender, Trustee or that are otherwise
payable in connection with the Loan, the Property or Borrower,
including attorneys' fees and expenses and any fees and expenses
relating to (i) the preparation, execution, acknowledgment, delivery
and recording or filing of the Loan Documents; (ii) any Proceeding or
other claim asserted against Lender; (iii) any inspection, assessment,
survey and test permitted under the Loan Documents; (iv) any
Destruction Event; (v) the preservation of Trustee's title, Lender's
security and the exercise of any rights or remedies available at Law,
in equity or otherwise; and (vi) the Leases and the Property
Documents.
(b) Borrower will pay the Expenses promptly on demand,
together with any applicable interest, premiums or penalties. If
Lender pays any of the Expenses, Borrower will reimburse Lender the
amount paid by Lender promptly upon demand, together with interest on
such amount at the Fixed Interest Rate from the date Lender paid the
Expenses through the fifth day after demand. Interest on such amount
will be at the Default Interest Rate from the sixth day after demand
through and including the date Borrower reimburses Lender. The
Expenses together with any applicable interest, premiums or penalties
constitute a portion of the Debt secured by this Deed of Trust.
Section 11.2. Duty to Defend. If Lender or any of its
trustees, officers, participants, employees or affiliates is a party
in any Proceeding relating to the Property, Borrower or the Loan,
Borrower will indemnify and hold harmless the party and will defend
the party with attorneys and other professionals retained by Borrower
and approved by Lender. Lender may elect to engage its own attorneys
and other professionals, at Borrower's expense, to defend or to assist
in the defense of the party. In all events, case strategy will be
determined by Lender if Lender so elects and no Proceeding will be
settled without Lender's prior approval which may be withheld in its
sole discretion. Lender shall be deemed to have approved if it has
not responded within 30 days of receipt of Borrower's written request
to the Lender at the addresses set forth herein, provided however,
Lender shall not incur any liability or costs relating to any
settlement pursuant to this Section 11.2.
ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES
Section 12.1. Prohibitions on Transfers, Liens and
Encumbrances.
(a) Borrower acknowledges that in making the Loan, Lender
is relying to a material extent on the business expertise and net
worth of Borrower and Borrower's general partners, members or
principals and on the continuing interest that each of them has,
directly or indirectly, in the Property. Accordingly, except as
specifically set forth in this Deed of Trust, Borrower (i) will not,
and will not permit its partners, members or principals to, effect a
Transfer without Lender's prior approval, which may be withheld in
Lender's sole discretion and (ii) will keep the Property free from all
liens and encumbrances other than the lien of this Deed of Trust and
the Permitted Exceptions. Lender shall be deemed to have approved a
Transfer if it has not responded within 90 days of receipt of
Borrower's written request providing any information required by
Lender as to the proposed Transfer to the Lender at the addresses set
forth herein. A "Transfer" is defined as any sale, grant, lease
(other than bona fide third-party space leases with tenants),
conveyance, assignment or other transfer of, or any encumbrance or
pledge against, the Property, any interest in the Property, any
interest of Borrower's partners, members or principals in the
Property, or any change in Borrower's composition, in each instance
whether voluntary or involuntary, direct or indirect, by operation of
law or otherwise and including the grant of an option or the execution
of an agreement relating to any of the foregoing matters. A Transfer
shall not include the public trading of shares of the Borrower in
accordance with applicable law.
(b) Borrower represents, warrants and covenants that:
(i) Borrower is a publically traded Maryland
corporation whose five largest shareholders as
of March 1999 (the "Existing Shareholders") are:
Bed Preferred No. 1 Limited Partnership, Lend
Lease Rosen Real Estate Securities LLC, PRA
Securities Advisors LP, Heitman PRA Securities
Advisors LLC and Peter B. Bedford.
Section 12.2. Permitted Transfers.
(a) Notwithstanding the prohibitions regarding Transfers,
a Permitted Transfer (as defined in (b) below) may occur, provided
that the following conditions are met:
(i) at least 30 days prior to the proposed Permitted
Transfer, Borrower delivers to Lender a notice
that is sufficiently detailed to enable Lender
to determine that the proposed Permitted
Transfer complies with the terms of this
Section;
(ii) there is no default under the Loan Documents
either when Lender receives the notice or when
the proposed Permitted Transfer occurs;
(iii) the proposed Permitted Transfer will not
result in a violation of any of the
covenants contained in the Section
entitled, "ERISA Compliance" and Borrower
will deliver to Lender such documentation
of compliance as Lender requests in its
sole discretion;
(iv) when Lender receives the notice and when the
proposed Permitted Transfer occurs, the
transferee has never been an adverse party to
Lender in any litigation to which Lender was a
party; the transferee has never defaulted on a
loan from Lender or on any contract or other
agreement with Lender; the transferee has never
threatened litigation against Lender, and the
transferee is free from bankruptcy (for purposes
of this subsection "transferee" includes the
transferee's constituent entities at all levels
and "Lender" includes Lender's subsidiaries);
(v) Borrower pays all of Lender's expenses relating
to the Transfer including Lender's attorneys'
fees regardless of whether or not the proposed
Transfer is consummated; and
(vi) Lender is satisfied that the Property will
continue to be managed by a manager satisfactory
to Lender.
(b) Upon compliance with the conditions set forth in the
preceding subsection, the following Transfers (the "Permitted
Transfers") may occur without Lender's prior consent as provided for
in Section 12.1.
(i) Transfers of shares in Borrower among the
Existing Shareholders;
(ii) Public trading of shares in Borrower in
accordance with applicable law (for public trading of
Borrower's shares, Borrower will not be required to
notify Lender in the event of trading in its shares
and Borrower shall not be required to reimburse the
Lender for the review of trades); and
(iii) A one-time sale of the Property together
with the Property as defined in the Deed of Trust,
Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Bedford Portfolio #1 - Colorado
Property) dated the date of this Deed of Trust,
executed by Borrower and which also secures the Note
("Portfolio #1 Colorado Property"), to one,
unaffiliated, bona fide purchaser, provided that the
following conditions are met:
(A) the transferee has a net worth of at least
$25,000,000;
(B) the transferee is (i) an Institutional
Investor or (ii) a developer or manager of first-class
commercial real estate comparable to the Property and
having a reputation in the industry at least equivalent to
that of Borrower as of the date of this Deed of Trust;
(C) the transferee has expressly assumed the
obligations of Borrower under the Property Documents and
under the Loan Documents; and
(D) subsequent to the Transfer, the Property is
managed by a property manager satisfactory to Lender; and
(E) Borrower pays to Lender a transfer fee of
one-half percent
(0.5%) of the outstanding Principal; provided, however, if,
in a single transaction there is a Transfer to the same
third-party approved by Lender, of the Property and the
Portfolio #1 Colorado Property together with the properties
described in the Deeds of Trust, Assignments of Leases and
Rents, Security Agreements and Fixture Filings which secure
the Promissory Note - Bedford Portfolio #2 in the original
principal amount of $37,200,000 dated the date of this Deed
of Trust executed by Borrower pursuant to Lender's Loan
Application and Commitment Agreement #VR-7 for Lender's
Mortgage Number M-000462600 ("Bedford Portfolio #2 Loan")
and the properties described in the Deeds of Trust,
Assignment of Leases and Rents, Security Agreements and
Fixture Filings which secure the Promissory Note - Bedford
Portfolio #3 in the original principal amount of
$27,350,000 dated the date of this Deed of Trust executed
by Borrower pursuant to Lender's Loan Application and
Commitment Agreement #VR-6 for Lender's Mortgage Number M-
000462400 ("Bedford Portfolio #3 Loan"), then Borrower pays
to Lender a transfer fee of one-fourth percent (.25%) of
the combined outstanding principal for the Loan, the
Bedford Portfolio #2 Loan and the Bedford Portfolio #3
Loan.
Section 12.3. Right to Contest Liens. Borrower, at its own
expense, may contest the amount, validity or application, in whole or
in part, of any mechanic's, materialmen's or environmental liens in
which event Lender will refrain from exercising any of the Remedies,
provided that the following conditions are met:
(i) Borrower delivers to Lender notice of the
proposed contest not more than 30 days after the
lien is filed;
(ii) the contest is by a Proceeding promptly
initiated and conducted in good faith and with
due diligence;
(iii) there is no Event of Default other than the
Event of Default arising from the filing of
the lien;
(iv) the Proceeding suspends enforcement of
collection of the lien, imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit;
(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Document;
(vi) Borrower sets aside reserves or furnishes a bond
or other security satisfactory to Lender, in
either case, in an amount sufficient to pay the
claim giving rise to the lien, together with all
interest and penalties, or Borrower pays the
contested lien under protest; and
(vii) with respect to an environmental lien,
Borrower is using best efforts to mitigate
or prevent any deterioration of the
Property resulting from the alleged
violation of any Environmental Laws or the
alleged Environmental Activity.
Section 12.4. Reconveyance Rights. Borrower may obtain the
reconveyance from Trustee of the all of the properties listed in
Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4, Exhibit A-5 and
Exhibit A-6 (the "Phoenix Airport Business Center" to be treated as a
single property for purposes of this Section 12.4 and Section 12.5)
and each of the properties listed in Exhibit A-1 or Exhibit A-2 of the
Deed of Trust, Assignment of Leases and Rents, Security Agreement, and
Fixture Filing (Bedford Portfolio #1 - Colorado Property) dated the
date of this Deed of Trust and which also secures the Note (all of the
Phoenix Airport Business Center together and each of the Bedford
Portfolio #1 - Colorado Properties being referred to as a "Release
Parcel") at any time more than 24 months after the execution of this
Deed of Trust, provided that the following conditions are met for each
reconveyance:
(i) Borrower shall not be entitled to the
reconveyance of more than
two Release Parcels; one reconveyance of a
Release Parcel shall be solely for the purpose
of a sale and a transfer of the Release Parcel
to a bona fide purchaser. The reconveyance of
any Release Parcel shall occur simultaneously
with the addition of a one or more new
properties to secure the Loan, in accordance
with the provisions of Section 12.5 of this Deed
of Trust and the securing of the lien of the
Lender's mortgage to encumber the Substitution
Property (as defined in Section 12.5); provided,
however, for the limited purpose of release of
the Phoenix Airport Business Center properties,
all of the properties of the Phoenix Airport
Business Center must be sold to a single third
party in a single sale under an approved
transfer, the release of all of such properties
shall be considered as one release of one
Release Parcel;
(ii) not less than 60 days prior to the proposed
date of reconveyance,
Borrower delivers to Lender a notice setting
forth (A) the proposed date of the reconveyance,
(B) the name of the proposed transferee (if the
Release Parcel is adjacent to a property still
covered by this Deed of Trust); (C) the intended
use of the Release Parcel; and (D) any other
information reasonably necessary for Lender to
analyze the terms of the reconveyance. Not
less than 30 days prior to the proposed
reconveyance, Borrower will deliver to Lender a
copy of the contract of sale or ground lease;
(iii) on the date Borrower delivers to Lender
notice of the proposed reconveyance and on
the date of the reconveyance, there is no
default under the Loan Documents on either
the notice date or the release date;
(iv) Borrower delivers to Lender evidence
satisfactory to Lender that Borrower has
complied with any requirements of the Property
Documents or the Leases applicable to the
reconveyance, that the reconveyance does not
violate any of the provisions of the Property
Documents or the Leases and, to the extent
necessary to comply with the Property Documents
or the Leases, that the transferee has assumed
all of Borrower's obligations relating to the
Release Parcel under the Property Documents;
(v) Borrower delivers to Lender an endorsement to
Lender's title insurance policy satisfactory to
Lender that (A) extends the effective date of
the policy to the effective date of the
reconveyance; (B) confirms no change in the
priority of the lien of Lender's Deed of Trust
on the balance of the Property and on the
Portfolio #1 Colorado Property or in the amount
of coverage; (C) consents to the reconveyance;
(D) waives any defense resulting from the
reconveyance; (E) to the extent of the value of
the Release Parcel, waives any right of
subrogation; and (F) includes the Substitution
Property (as defined in Section 12.5) or in the
alternative a separate title insurance policy
that affects the foregoing;
(vi) not less than 10 days prior to the date of the
reconveyance, Borrower delivers to Lender
consents to the reconveyance and substitution by
entities holding liens affecting the Property or
holding any other interest in the Property that
would be affected by the reconveyance and
substitution, including parties to any Property
Documents or to any Leases;
(vii) Borrower pays all expenses relating to the
reconveyance of the Release Parcel and the
addition of the Substitution Property,
including Lender's reasonable attorney's
fees if outside counsel is engaged by
Lender;
(viii) Borrower delivers to Lender copies of the
executed documents evidencing the transfer
of the Release Parcel as provided in
subsection (i) above;
(ix) Borrower delivers to Lender any other
information, approvals and documents reasonably
required by Lender relating to the reconveyance
and the substitution;
(x) The remaining Property together with the
remaining Portfolio #1 Colorado Property
together with the Substitution Property must
have a loan to value ratio of no more than 70%
and provide a debt service coverage ratio of at
least 1.50 times the debt service coverage (in a
manner reasonably determined by Lender); and
(xi) Borrower must prepay 110% of the difference
between the Principal of the Loan allocable to
the Release Parcel that is being released and
70% of the appraised value for the Substitution
Property with a prepayment premium equal to the
Prepayment Percentage (as defined in the Note)
times the resulting difference. For purposes of
this Subsection 12.4 (xi) only, if the
prepayment premium payable hereunder is
calculated on the Discounted Value (defined in
the Note), then the discount rate used to
calculate the prepayment premium shall equal the
Discount Rate (defined in the Note) plus 50
basis points. Allocation of the original
outstanding principal balance will be determined
by Lender's appraisal at Closing. The
additional 10% principal proceeds from a
prepayment pursuant to this Subsection 12.4(xi)
shall be applied at par to a pro-rata reduction
of the Principal balance of the Loan allocated
among the remaining Property, the remaining
Portfolio #1 Colorado Property and the
Substitution Property.
Section 12.5. Substitution. In conjunction with the
reconveyance of a Release Parcel (described in Section 12.4),
Borrower shall provide to Lender, as security for the Loan, the
replacement and substitution of one or more new properties to secure
the Loan, as provided herein (the "Substitution Property"). In
connection with providing the Substitution Property, Borrower shall,
at Borrower's expense, execute and deliver to Lender loan documents,
including an additional deed of trust or mortgage, an assignment of
leases, a UCC-1 financing statement, and any other document, including
title policy, that Lender may require, in form and content acceptable
to Lender in Lender's sole discretion, necessary in order to add the
Substitution Property as collateral for the Loan. Borrower shall also
provide for the Substitution Property all items required for the
Property by the Loan Application and Commitment Agreement dated
February 26, 1999 by and between Lender and Borrower for the Loan.
Lender shall have the sole and absolute discretion to either approve
or disapprove any proposed substitution, provided that such approval
shall not be unreasonably withheld so long as the Substitution
Property is (i) of comparable quality as the Release Parcel being
replaced, and (ii) Borrower demonstrates to Lender's satisfaction that
the Substitution Property has a fair market value of no less than 90%
of the fair market value of the Release Parcel immediately prior to
substitution. Lender shall be deemed to have approved the proposed
substitution if it has not responded within 90 days of Borrower's
written request providing all information required by Lender as to the
proposed substitution at the addresses set forth herein. In all
cases, Lender shall have 90 days to respond from the date of Lender's
receipt of the last information provided by Borrower. Any
substitutions shall be on terms and conditions acceptable to Lender
and shall be subject to Lender's internal approval process. The
Substitution Property together with the other properties comprising
the Property and the Portfolio #1 Colorado Property shall be subject
to a maximum loan-to-value ratio of 70%, have, at a minimum, a debt
service coverage ratio equal to 1.50, and a lease expiration profile
acceptable to Lender. Furthermore, Lender will not approve a
substitution that would negatively impact the loan portfolio with
regard to its geographic diversity, credit risk, leasing pro formas,
tenant quality, lease expiration risk and other similar factors,
including the ability to legally cross-default and cross-collateralize
the Substitution Property with the remainder of the portfolio, to be
determined in Lender's sole discretion. Borrower shall provide Lender
with such information and documentation (including leases and other
property documents) as Lender shall deem necessary to make an informed
decision and properly evaluate the proposed substitution. The
Substitution Property will be required to have a value of not less
than 90% of the fair market value of the Release Parcel to be
reconveyed. Borrower shall be responsible for all costs and expenses,
including, without limitation, reasonable attorney's fees (if outside
counsel is engaged by Lender), incurred by Lender in connection with
any proposed transaction along with title insurance premium and
engineering, environmental and appraisal reports associated with such
substitution. For the limited purpose of substitution of the Phoenix
Airport Business Center, as of the date of this Deed of Trust, all of
the properties of the Phoenix Airport Business Center must be sold to
a single third party in a single sale under an approved transfer.
Substitution of new property for the Phoenix Airport Business Center
shall be considered as one substitution event.
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 13.1. Further Assurances.
(a) Borrower will execute, acknowledge and deliver to
Lender or to any other entity Lender designates any additional or
replacement documents and perform any additional actions that Lender
determines are reasonably necessary to evidence, perfect or protect
Lender's first lien on and prior security interest in the Property or
to carry out the intent or facilitate the performance of the
provisions of the Loan Documents.
(b) Borrower appoints Lender as Borrower's attorney-in-
fact to perform, at Lender's election, any actions and to execute and
record any of the additional or replacement documents referred to in
this Section, in each instance only at Lender's election and only to
the extent Borrower has failed 3 days after written notice to Borrower
to comply with the terms of this Section.
Section 13.2. Estoppel Certificates.
(a) Within 10 days of Lender's request, but in no case
more often that twice in any 18 month period, except where Lender is
selling all or part of the Loan Borrower will deliver to Lender or to
any entity Lender designates a certificate certifying (i) the original
principal amount of the Note; (ii) the unpaid principal amount of the
Note; (iii) the Fixed Interest Rate; (iv) the amount of the then
current Debt Service Payments; (v) the Maturity Date; (vi) the date a
Debt Service Payment was last made; (vii) that, except as may be
disclosed in the statement, there are no defaults or events which,
with the passage of time or the giving of notice, would constitute an
Event of Default; and (viii) there are no offsets or defenses against
any portion of the Obligations except as may be disclosed in the
statement.
(b) If Lender requests, Borrower promptly will deliver to
Lender or to any entity Lender designates a certificate from each
party to any Property Document, certifying that the Property Document
is in full force and effect with no defaults or events which, with the
passage of time or the giving of notice, would constitute an event of
default under the Property Document and that there are no defenses or
offsets against the performance of its obligations under the Property
Document.
(c) If Lender requests, Borrower promptly will deliver to
Lender, or to any entity Lender designates, a certificate from each
tenant under a Lease then affecting the Property, certifying to any
facts regarding the Lease as Lender may require, including that the
Lease is in full force and effect with no defaults or events which,
with the passage of time or the giving of notice, would constitute an
event of default under the Lease by any party, that the rent has not
been paid more than one month in advance and that the tenant claims no
defense or offset against the performance of its obligations under the
Lease.
ARTICLE XIV
DEFAULTS AND REMEDIES
Section 14.1. Events of Default. The term "Event of Default"
means the occurrence of any of the following events:
(i) if Borrower fails to pay any amount due, as and
when required, under any Loan Document and the
failure continues for a period of 5 days;
(ii) if Borrower makes a general assignment for the
benefit of creditors or generally is not paying,
or is unable to pay, or admits in writing its
inability to pay, its debts as they become due;
or if Borrower or any other party commences any
Proceeding (A) relating to bankruptcy,
insolvency, reorganization, conservatorship or
relief of debtors, in each instance with respect
to Borrower; (B) seeking to have an order for
relief entered with respect to Borrower; (C)
seeking attachment, distraint or execution of a
judgment with respect to Borrower; (D) seeking
to adjudicate Borrower as bankrupt or insolvent;
(E) seeking reorganization, arrangement,
adjustment, winding-up, liquidation,
dissolution, composition or other relief with
respect to Borrower or Borrower's debts; or (F)
seeking appointment of a Receiver, trustee,
custodian, conservator or other similar official
for Borrower or for all or any substantial part
of Borrower's assets, provided that if the
Proceeding is commenced by a party other than
Borrower or any of Borrower's general partners
or members, Borrower will have 120 days to have
the Proceeding dismissed or discharged before an
Event of Default occurs;
(iii) if Borrower is in default beyond any
applicable grace and cure period under any
other mortgage, deed of trust, deed to
secure debt or other security agreement
encumbering the Property whether junior or
senior to the lien of this Deed of Trust;
(iv) if Borrower is in default beyond any applicable
grace and cure period under the loan documents
described in the Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture
Filing (Bedford Portfolio #1 - Colorado
Property) evidencing and securing the Loan made
by Lender in favor of Borrower pursuant to the
Note and encumbering the Portfolio #1 - Colorado
Property;
(v) if Borrower is in default beyond any applicable
grace and cure period under the Ground Lease or
if the Ground Lease terminates for any reason;
(vi) if Borrower fails to exercise its first option
to renew the Ground Lease for an additional five
years on or before June 30, 2002;
(vii) if a Transfer occurs except in accordance
with the provisions of this Deed of Trust;
(viii) if Borrower abandons the Property or ceases
to conduct its business at the Property;
(ix) if there is a default in the performance of any
other provision of any Loan Document or if there
is any inaccuracy or falsehood in any
representation or warranty contained in any Loan
Document which is not remedied within 30 days
after Borrower receives notice thereof, provided
that if the default, inaccuracy or falsehood is
of a nature that it cannot be cured within the
30-day period and during that period Borrower
commences to cure, and thereafter diligently
continues to cure, the default, inaccuracy or
falsehood, then the 30-day period will be
extended for a reasonable period not to exceed
120 days after the notice to Borrower; or
(x) if Borrower fails to provide Lender with the
Leasing Letter of Credit (defined below) or if
Borrower fails to renew the Leasing Letter of
Credit; the "Leasing Letter of Credit" shall
mean the Letter of Credit in the amount of Two
Million Seven Hundred Thousand and No/100
Dollars ($2,700,000) that Borrower is required
to provide and renew pursuant to Section 6.4 of
the Deed of Trust, Assignment of Leases and
Rents, Security Agreement and Fixture Filing
Statement (Bedford Portfolio #1 - Colorado
Properties) dated the date of this Deed of
Trust, executed by Borrower for the benefit of
Lender pursuant to TIAA Application #VR-5, M-
000462300.
Section 14.2. Remedies.
(a) If an Event of Default occurs, Lender may take any of
the following actions (the "Remedies") without notice to Borrower:
(i) declare all or any portion of the Debt
immediately due and payable ("Acceleration");
(ii) pay or perform any Obligation;
(iii) institute a Proceeding for the specific
performance of any Obligation;
(iv) apply for and obtain the appointment of a
Receiver to be vested with the fullest powers
permitted by Law, without bond being required,
which appointment may be made ex parte, as a
matter of right and without regard to the value
of the Property, the amount of the Debt or the
solvency of Borrower or any other person liable
for the payment or performance of any portion of
the Obligations;
(v) directly, by its agents or representatives or
through a Receiver appointed by a court of
competent jurisdiction, enter on the Land and
Improvements, take possession of the Property,
dispossess Borrower and exercise Borrower's
rights with respect to the Property, either in
Borrower's name or otherwise;
(vi) institute a Proceeding for the foreclosure of
this Deed of Trust or, if applicable, sell by
power of sale, all or any portion of the
Property, in any court of competent
jurisdiction;
(vii) institute proceedings for the partial
foreclosure of this Deed of Trust for the
portion of the Debt then due and payable,
subject to the continuing lien of this Deed
of Trust for the balance of the Debt not
then due;
(viii) cause Trustee to commence sale of
Borrower's interest in the Property
pursuant to applicable law;
(ix) exercise any and all rights and remedies granted
to a secured party under the Uniform Commercial
Code; and
(x) pursue any other right or remedy available to
Lender at Law, in equity or otherwise.
(b) If an Event of Default occurs, the license granted to
Borrower in the Loan Documents to collect Rents will terminate
automatically without any action required of Lender.
Section 14.3. General Provisions Pertaining to Remedies.
(a) The Remedies are cumulative and may be pursued by
Lender or Trustee concurrently or otherwise, at such time and in such
order as Lender or Trustee may determine in their sole discretion and
without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by Borrower.
(b) The enumeration in the Loan Documents of specific
rights or powers will not be construed to limit any general rights or
powers or impair Lender's or Trustee's rights with respect to the
Remedies.
(c) If Lender or Trustee exercises any of the Remedies,
Lender will not be deemed a mortgagee-in-possession unless Lender has
elected affirmatively to be a mortgagee-in-possession.
(d) Lender and Trustee will not be liable for any act or
omission of Lender or Trustee in connection with the exercise of the
Remedies.
(e) Lender's and Trustee's right to exercise any Remedy
will not be impaired by any delay in exercising or failure to exercise
the Remedy and the delay or failure will not be construed as extending
any cure period or constitute a waiver of the default or Event of
Default.
(f) If an Event of Default occurs, Lender's payment or
performance or acceptance of payment or performance will not be deemed
a waiver or cure of the Event of Default.
(g) Lender's acceptance of partial payment or receipt of
Rents will not extend or affect any grace period or constitute a
waiver of a default or Event of Default or constitute a rescission of
Acceleration.
(h) Until this Deed of Trust is satisfied of record, the
fee and leasehold estates
in the Land (and/or in any other portion of the Property demised under
the Ground Lease) will not merge without Lender's prior approval,
which may be withheld in Lender's sole discretion, notwithstanding
that the fee and leasehold estates are held by a single entity. If
Borrower acquires the fee title, or any other estate, title or
interest in the Land (and/or any other portion of the Property demised
under the Ground Lease), this Deed of Trust immediately and
automatically, without the need for any additional deed of trust,
mortgage, assignment, pledge or conveyance to Lender or Trustee, will
convey or encumber the newly acquired interest with the same force and
effect as though specifically mortgaged, assigned, pledged or conveyed
in this Deed of Trust. However, Borrower will deliver to Lender, at
Lender's request, documents reasonably satisfactory to Lender
evidencing Lender's first lien.
(i) If Borrower defaults under the Ground Lease and
Lender cures the default for purposes of the Ground Lease,
Lender's action in and of itself will not cure the corresponding
Event of Default.
(ii) If Borrower or any other entity exercises any
right of redemption after foreclosure, the amount payable to
effect the redemption will include all rents paid and other sums
advanced by Lender to satisfy obligations of Borrower as lessee
under the Ground Lease.
Section 14.4. Foreclosure by Power of Sale.
(a) Should Lender elect, following an Event of Default, to
foreclose this Deed of Trust by exercise of the power of sale
contained in this Deed of Trust, Lender will notify Trustee and
deposit, if required by Trustee, with Trustee this Deed of Trust, the
Note and such of the other Loan Documents as Trustee may require.
(b) Upon receipt of the notice from Lender, Trustee will
have recorded, published and delivered to Borrower any notice of
default as is then required by Law. Trustee will, without demand on
Borrower after lapse of any time as may then be required by Law and
after notice of sale having been given as required by Law, sell the
Property at the time and place of sale fixed by it in the notice of
sale, either as a whole, or in separate lots or parcels or items and
in such order as Lender may direct Trustee so to do, at public auction
to the highest bidder as provided by Law. Trustee will deliver to the
purchaser of the Property a good and sufficient deed or deeds
conveying the Property so sold, but without any covenant or warranty,
express or implied. The recitals in the deed of any matter or fact
will be conclusive proof of the truthfulness of the recitals. Any
person, including Borrower, Trustee or Lender may purchase at the
sale, and Borrower will warrant and defend the title of the purchaser.
(c) After deducting all costs, fees and expenses of Lender
and Trustee, including costs of evidence of title in connection with
sale, Lender will apply the proceeds of sale in the following
priority, to payment of (i) first, all sums expended under the terms
of the Loan Documents, not then repaid, with accrued interest at the
Default Rate; (ii) second, the Debt in such order as Lender
determines; and (iii) the remainder, if any to the person or persons
legally entitled to it.
(d) Trustee may postpone sale of all or any portion of the
Property as permitted by Law, and without further notice make such
sale at the time fixed by the last postponement, or may, in its
discretion, give a new notice of sale.
(e) A sale of less than the whole of the Property or any
defective or irregular sale made under this Deed of Trust will not
exhaust the power of sale provided for in this Deed of Trust; and
subsequent sales may be made until the Obligations have been
satisfied, or the entire Property sold, without defect or
irregularity.
Section 14.5. General Provisions Pertaining to Receiver and
other Remedies.
(a) If an Event of Default occurs and without notice to
Borrower, any court of competent jurisdiction will, upon application
by Lender, appoint a Receiver as designated in the application and
issue an injunction prohibiting Borrower from interfering with the
Receiver, collecting Rents, disposing of any Rents or any part of the
Property, committing waste or doing any other act that will tend to
affect the preservation of the Leases, the Rents and the Property and
Borrower approves the appointment of the designated Receiver or any
other Receiver appointed by the court. By execution of this Deed of
Trust, Borrower irrevocably consents to the appointment of a receiver
to be made ex parte and as a matter of right to Lender or Trustee,
either before or after sale of the Property, without further notice,
and without regard to the solvency or insolvency, at the time of
application for the Receiver, of the person or persons, if any, liable
for the payment of any portion of the Debt and the performance of any
portion of the Obligations and without regard to the value of the
Property or whether the Property is occupied as a homestead and
without bond being required of the applicant.
(b) The Receiver will be vested with the fullest powers
permitted by Law including all powers necessary or usual in similar
cases for the protection, possession and operation of the Property and
all the powers and duties of Lender as a mortgagee-in-possession as
provided in this Deed of Trust and may continue to exercise all the
usual powers and duties until the Receiver is discharged by the court.
(c) In addition to the Remedies and all other available
rights, Lender or the Receiver may take any of the following actions:
(i) take exclusive possession, custody and control
of the Property and manage the Property so as to
prevent waste;
(ii) require Borrower to deliver to Lender or the
Receiver all keys, security deposits, operating
accounts, prepaid Rents, past due Rents, the
Books and Records and all original counterparts
of the Leases and the Property Documents;
(iii) collect, sue for and give receipts for the
Rents and, after paying all expenses of
collection, including reasonable
receiver's, broker's and attorney's fees,
apply the net collections to any portion of
the Debt selected by Lender in its sole
discretion,
(iv) enter into, modify, extend, enforce, terminate,
renew or accept surrender of Leases and evict
tenants except that in the case of a Receiver,
such actions may be taken only with the written
consent of Lender as provided in this Deed of
Trust and in the Assignment;
(v) enter into, modify, extend, enforce, terminate
or renew Property Documents except that in the
case of a Receiver, such actions may be taken
only with the written consent of Lender as
provided in this Deed of Trust and in the
Assignment;
(vi) appear in and defend any Proceeding brought in
connection with the Property and bring any
Proceeding to protect the Property as well as
Borrower's and Lender's respective interests in
the Property (unless any such Proceeding has
been assigned previously to Lender in the
Assignment, or if so assigned, Lender has not
expressly assigned such Proceeding to the
Receiver and consented to such appearance or
defense by Receiver); and
(vii) perform any act in the place of Borrower
that Lender or the Receiver deems necessary
(A) to preserve the value, marketability or
rentability of the Property; (B) to
increase the gross receipts from the
Property; or (C) otherwise to protect
Borrower's and Lender's respective
interests in the Property.
(d) Borrower appoints Lender as Borrower's attorney-in-
fact, at Lender's election, to perform any actions and to execute and
record any instruments necessary to effectuate the actions described
in this Section, in each instance only at Lender's election and only
to the extent Borrower has failed to comply with the provisions of
this Section.
Section 14.6. General Provisions Pertaining to Foreclosures
and the Power of Sale. The following provisions will apply to any
Proceeding to foreclose and to any sale of the Property by power of
sale or pursuant to a judgment of foreclosure and sale:
(i) Lender's or Trustee's right to institute a
Proceeding to foreclose or to sell by power of
sale will not be exhausted by a Proceeding or a
sale that is defective or not completed or by
conducting separate sales of portions of the
Property;
(ii) any sale may be postponed or adjourned by Lender
by public announcement at the time and place
appointed for the sale without further notice;
(iii) with respect to sale pursuant to a judgment
of foreclosure and sale, the Property may
be sold as an entirety or in parcels, at
one or more sales, at the time and place,
on terms and in the order that Lender deems
expedient in its sole discretion;
(iv) if a portion of the Property is sold pursuant to
this Article, the Loan Documents will remain in
full force and effect with respect to any
unmatured portion of the Debt and this Deed of
Trust will continue as a valid and enforceable
first lien on and security interest in the
remaining portion of the Property, subject only
to the Permitted Exceptions, without loss of
priority and without impairment of any of
Lender's or Trustee's rights and remedies with
respect to the unmatured portion of the Debt;
(v) Lender may bid for and acquire the Property at a
sale and, in lieu of paying cash, may credit the
amount of Lender's bid against any portion of
the Debt selected by Lender in its sole
discretion after deducting from the amount of
Lender's bid the expenses of the sale, costs of
enforcement and other amounts that Lender is
authorized to deduct at Law, in equity or
otherwise; and
(vi) Lender's receipt of the proceeds of a sale will
be sufficient consideration for the portion of
the Property sold and Lender will apply the
proceeds as set forth in this Deed of Trust.
Section 14.7. Application of Proceeds. Lender may apply the
proceeds of any sale of the Property pursuant to a judgment of
foreclosure and sale and any other amounts collected by Lender in
connection with the exercise of the Remedies to payment of the Debt in
such priority and proportions as Lender may determine in its sole
discretion or in such priority and proportions as required by Law.
Section 14.8. Power of Attorney. Borrower appoints Lender as
Borrower's attorney-in-fact to perform any actions necessary and
incidental to exercising the Remedies.
Section 14.9. Tenant at Sufferance. If Lender, Trustee, or a
Receiver enters the Property in the exercise of the Remedies and
Borrower is allowed to remain in occupancy of the Property, Borrower
will pay to Lender, Trustee, or the Receiver, as the case may be, in
advance, a reasonable rent for the Property occupied by Borrower. If
Borrower fails to pay the rent, Borrower may be dispossessed by the
usual Proceedings available against defaulting tenants.
ARTICLE XV
LIMITATION OF LIABILITY
Section 15.1. Limitation of Liability.
(a) Notwithstanding any provision in the Loan Documents to
the contrary, except as set forth in subsections (b) and (c), if
Lender seeks to enforce the collection of the Debt, Lender will
foreclose this Deed of Trust instead of instituting suit on the Note.
If a lesser sum is realized from a foreclosure of this Deed of Trust
and sale of the Property than the then outstanding Debt, Lender will
not institute any Proceeding against Borrower or Borrower's general
partners, if any, for or on account of the deficiency, except as set
forth in subsections (b) and (c).
(b) The limitation of liability in subsection (a) will not
affect or impair (i) the lien of this Deed of Trust or Lender's other
rights and Remedies under the Loan Documents, including Lender's right
as mortgagee or secured party to commence an action to foreclose any
lien or security interest Lender has under the Loan Documents; (ii)
the validity of the Loan Documents or the Obligations; (iii) Lender's
rights under any Loan Document that are not expressly non-recourse; or
(iv) Lender's right to present and collect on any letter of credit or
other credit enhancement document held by Lender in connection with
the Obligations.
(c) The following are excluded and excepted from the
limitation of liability in subsection (a) and Lender may recover
personally against Borrower and its general partners, if any, for the
following:
(i) all losses suffered and liabilities and expenses
incurred by Lender relating to any fraud or
intentional misrepresentation or omission by
Borrower or any of Borrower's partners, members,
officers, directors, shareholders or principals
in connection with (A) the performance of any of
the conditions to Lender making the Loan; (B)
any inducements to Lender to make the Loan; (C)
the execution and delivery of the Loan
Documents; (D) any certificates, representations
or warranties given in connection with the Loan
(including, but not limited to, Estoppel
Certificates executed by Borrower and
representations made by Borrower related to
Property); or (E) Borrower's performance of the
Obligations;
(ii) all Rents derived from the Property after a
default under the Loan Documents which default
is a basis of a Proceeding by Lender to enforce
collection of the Debt and all moneys that, on
the date such a default occurs, are on deposit
in one or more accounts used by or on behalf of
Borrower relating to the operation of the
Property, except to the extent properly applied
to payment of Debt Service Payments,
Impositions, Insurance Premiums and any
reasonable and customary expenses incurred by
Borrower in the operation, maintenance and
leasing of the Property or delivered to Lender;
(iii) the cost of remediation of any
Environmental Activity affecting the
Property, any diminution in the value of
the Property arising from any Environmental
Activity affecting the Property and any
other losses suffered and liabilities and
expenses incurred by Lender relating to a
default under the Article entitled
"Environmental";
(iv) all security deposits collected by Borrower or
any of Borrower's predecessors and not refunded
to Tenants in accordance with their respective
Leases, applied in accordance with the Leases or
Law or delivered to Lender, and all advance
rents collected by Borrower or any of Borrower's
predecessors and not applied in accordance with
the Leases or delivered to Lender;
(v) the replacement cost of any Fixtures or Personal
Property removed from the Property after a
default occurs;
(vi) all losses suffered and liabilities and expenses
incurred by Lender relating to any acts or
omissions by Borrower that result in waste
(including economic and non-physical waste) on
the Property;
(vii) all protective advances and other payments
made by Lender pursuant to express
provisions of the Loan Documents to protect
Lender's security interest in the Property
or to protect the assignment of the
property described in and effected by the
Assignment, but only to the extent that the
Rents would have been sufficient to permit
Borrower to make the payment and Borrower
failed to do so;
(viii) all mechanics' or similar liens relating to
work performed on or materials delivered to
the Property prior to a foreclosure sale of
the Property, but only to the extent Lender
had advanced funds to pay for the work or
materials;
(ix) all Proceeds that are not applied in accordance
with this Deed of Trust or not paid to Lender as
required under this Deed of Trust;
(x) all losses suffered and liabilities and expenses
incurred by Lender relating to a Transfer that
is not permitted under the Section entitled
"Permitted Transfers".
(xi) all losses suffered and liabilities and expenses
incurred by Lender relating to forfeiture or
threatened forfeiture of the Property to the
Government; and
(xii) all losses suffered and liabilities and
expenses incurred by Lender relating to any
default by Borrower under any of the
provisions of this Deed of Trust relating
to ERISA including the prohibition on any
Transfer that results in a violation of
ERISA.
(d) Nothing under subsection (a) above will be deemed to
be a waiver of any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the Bankruptcy Code or
under any other Law relating to bankruptcy or insolvency to file a
claim for the full amount of the Debt or to require that all
collateral will continue to secure all of the Obligations in
accordance with the Loan Documents.
ARTICLE XVI
WAIVERS
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. BORROWER
WAIVES THE RIGHT TO CLAIM ANY STATUTE OF LIMITATIONS AS A DEFENSE TO
BORROWER'S PAYMENT AND PERFORMANCE OF THE OBLIGATIONS.
Section 16.2. WAIVER OF NOTICE. BORROWER WAIVES THE RIGHT TO
RECEIVE ANY NOTICE FROM LENDER OR TRUSTEE WITH RESPECT TO THE LOAN
DOCUMENTS EXCEPT FOR THOSE NOTICES THAT LENDER OR TRUSTEE IS EXPRESSLY
REQUIRED TO DELIVER PURSUANT TO THE LOAN DOCUMENTS.
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS.
BORROWER WAIVES THE BENEFIT OF ANY RIGHTS OF MARSHALLING OR ANY OTHER
RIGHT TO DIRECT THE ORDER IN WHICH ANY OF THE PROPERTY WILL BE (i)
SOLD; OR (ii) MADE AVAILABLE TO ANY ENTITY IF THE PROPERTY IS SOLD BY
POWER OF SALE OR PURSUANT TO A JUDGMENT OF FORECLOSURE AND SALE.
BORROWER ALSO WAIVES THE BENEFIT OF ANY LAWS RELATING TO APPRAISEMENT,
VALUATION, STAY, EXTENSION, REINSTATEMENT, MORATORIUM, HOMESTEAD AND
EXEMPTION RIGHTS OR A SALE IN INVERSE ORDER OF ALIENATION.
Section 16.4. WAIVER OF TRIAL BY JURY. BORROWER WAIVES TRIAL
BY JURY IN ANY PROCEEDING BROUGHT BY, OR AGAINST, OR COUNTERCLAIM OR
CROSS-COMPLAINT ASSERTED BY OR AGAINST, LENDER OR TRUSTEE RELATING TO
THE LOAN, THE PROPERTY DOCUMENTS OR THE LEASES.
Section 16.5. WAIVER OF COUNTERCLAIM. BORROWER WAIVES THE
RIGHT TO ASSERT A COUNTERCLAIM OR CROSS-COMPLAINT, OTHER THAN
COMPULSORY OR MANDATORY COUNTERCLAIMS OR CROSS-COMPLAINTS, IN ANY
PROCEEDING LENDER OR TRUSTEE BRINGS AGAINST BORROWER RELATING TO THE
LOAN, INCLUDING ANY PROCEEDING TO ENFORCE REMEDIES.
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING. BORROWER
WAIVES ANY RIGHT BORROWER MAY HAVE UNDER LAW TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED
BY THE LOAN DOCUMENTS TO LENDER AND BORROWER WAIVES THE RIGHTS, IF
ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN
ACCORDANCE WITH THE PROVISIONS OF THE LOAN DOCUMENTS ON THE GROUND (IF
SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR
JUDICIAL HEARING.
Section 16.7. WAIVER OF SUBROGATION. BORROWER WAIVES ALL
RIGHTS OF SUBROGATION TO LENDER'S RIGHTS OR CLAIMS RELATED TO OR
AFFECTING THE PROPERTY OR ANY OTHER SECURITY FOR THE LOAN UNTIL THE
LOAN IS PAID IN FULL AND ALL FUNDING OBLIGATIONS UNDER THE LOAN
DOCUMENTS HAVE BEEN TERMINATED.
Section 16.8. GENERAL WAIVER. BORROWER ACKNOWLEDGES THAT (A)
BORROWER AND BORROWER'S PARTNERS, MEMBERS OR PRINCIPALS, AS THE CASE
MAY BE, ARE KNOWLEDGEABLE BORROWERS OF COMMERCIAL FUNDS AND
EXPERIENCED REAL ESTATE DEVELOPERS OR INVESTORS WHO UNDERSTAND FULLY
THE EFFECT OF THE ABOVE PROVISIONS; (B) LENDER WOULD NOT MAKE THE LOAN
WITHOUT THE PROVISIONS OF THIS ARTICLE; (C) THE LOAN IS A COMMERCIAL
OR BUSINESS LOAN UNDER THE LAWS OF THE STATE OR COMMONWEALTH WHERE THE
PROPERTY IS LOCATED NEGOTIATED BY LENDER AND BORROWER AND THEIR
RESPECTIVE ATTORNEYS AT ARMS LENGTH; AND (D) ALL WAIVERS BY BORROWER
IN THIS ARTICLE HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND
KNOWINGLY, AFTER BORROWER FIRST HAS BEEN INFORMED BY COUNSEL OF
BORROWER'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE RIGHTS, AND HAVE
BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND ABANDONMENT OF A KNOWN
RIGHT AND PRIVILEGE. THE FOREGOING ACKNOWLEDGMENT IS MADE WITH THE
INTENT THAT LENDER AND ANY SUBSEQUENT HOLDER OF THE NOTE WILL RELY ON
THE ACKNOWLEDGMENT.
ARTICLE XVII
NOTICES
Section 17.1. Notices. All acceptances, approvals, consents,
demands, notices, requests, waivers and other communications (the
"Notices") required or permitted to be given under the Loan Documents
must be in writing and (a) delivered personally by a process server
providing a sworn declaration evidencing the date of service, the
individual served, and the address where the service was made; (b)
sent by certified mail, return receipt requested; or (c) delivered by
nationally recognized overnight delivery service that provides
evidence of the date of delivery, with all charges prepaid (for next
morning delivery if sent by overnight delivery service), addressed to
the appropriate party at its address listed below:
If to Borrower:
Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, California 94549
Attn: Ms. Hanh Kihara
Chief Financial Officer and Senior Vice President
Application #VR-5
Mortgage #000462300
with a courtesy copy to:
Sherman & Sterling
555 California Street, 20th Floor
San Francisco, California 94104
Attn: Emery Mitchell, Esq.
Barbara J.S. McKee, Esq.
Application #VR-5
Mortgage #000462300
If to Lender:
Teachers Insurance and Annuity
Association
730 Third Avenue
New York, New York 10017
Attn: Director of Portfolio Management
for Mortgage and Real Estate Division
Region: Midwest
TIAA Appl. # VR-5
M - 000462300
with a courtesy copy to:
Teachers Insurance and Annuity
Association
730 Third Avenue
New York, New York 10017
Attn: Vice President and Chief Counsel,
Mortgage and Real Estate Law
TIAA Appl. # VR-5
M - 000462300
If to Trustee: First American Title Insurance Company
P.O. Box 3915
Phoenix, Arizona 85030
Attention:____________________
Lender and Borrower each may change from time to time the address to
which Notices must be sent, by notice given in accordance with the
provisions of this Section. All Notices given in accordance with the
provisions of this Section will be deemed to have been received on the
earliest of (i) actual receipt; (ii) Borrower's rejection of delivery;
or (iii) 3 Business Days after having been deposited in any mail
depository regularly maintained by the United States postal service,
if sent by certified mail, or 1 Business Day after having been
deposited with a nationally recognized overnight delivery service, if
sent by overnight delivery or on the date of personal service, if
served by a process server.
Section 17.2. Change in Borrower's Name or Place of Business.
Borrower will immediately notify Lender in writing of any change in
Borrower's name or the place of business set forth in the beginning of
this Deed of Trust.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to the parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.
Section 18.2. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.
Section 18.3. Lender's Discretion. Wherever under the Loan
Documents any matter is required to be satisfactory to Lender, Lender
has the right to approve or determine any matter or Lender has an
election, Lender's approval, determination or election will be made in
Lender's reasonable discretion unless expressly provided to the
contrary.
Section 18.4. Unenforceable Provisions. If any provision in
the Loan Documents is found to be illegal or unenforceable or would
operate to invalidate any of the Loan Documents, then the provision
will be deemed expunged and the Loan Documents will be construed as
though the provision was not contained in the Loan Documents and the
remainder of the Loan Documents will remain in full force and effect.
Section 18.5. Survival of Borrower's Obligations. Borrower's
representations, warranties and covenants contained in the Loan
Documents will continue in full force and effect and survive (i)
satisfaction of the Obligations; (ii) reconveyance of the lien of this
property by Trustee; (iii) assignment or other transfer of all or any
portion of Lender's interest in the Loan Documents or the Property;
(iv) Lender's or Trustee's exercise of any of the Remedies or any of
Lender's or Trustee's other rights under the Loan Documents; (v) a
Transfer; (vi) amendments to the Loan Documents; and (vii) any other
act or omission that might otherwise be construed as a release or
discharge of Borrower.
Section 18.6. Relationship Between Borrower and Lender; No
Third Party Beneficiaries.
(a) Lender is not a partner of or joint venturer with
Borrower or any other entity as a result of the Loan or Lender's
rights under the Loan Documents; the relationship between Lender and
Borrower is strictly that of creditor and debtor. Each Loan Document
is an agreement between the parties to that Loan Document for the
mutual benefit of the parties and no entities other than the parties
to that Loan Document will be a third party beneficiary or will have
any claim against Lender or Borrower by virtue of the Loan Document.
As between Lender and Borrower, any actions taken by Lender under the
Loan Documents will be taken for Lender's protection only, and Lender
has not and will not be deemed to have assumed any responsibility to
Borrower or to any other entity by virtue of Lender's actions.
(b) All conditions to Lender's performance of its
obligations under the Loan Documents are imposed solely for the
benefit of Lender. No entity other than Lender will have standing to
require satisfaction of the conditions in accordance with their
provisions or will be entitled to assume that Lender will refuse to
perform its obligations in the absence of strict compliance with any
of the conditions.
Section 18.7. Partial Reconveyances or Releases, Extensions,
Waivers. Lender may: (i) permit the reconveyance of any part of the
Property or release any entity obligated for the Obligations; (ii)
extend the time for payment or performance of any of the Obligations
or otherwise amend the provisions for payment or performance by
agreement with any entity that is obligated for the Obligations or
that has an interest in the Property; (iii) accept additional security
for the payment and performance of the Obligations; and (iv) waive any
entity's performance of an Obligation, release any entity or
individual now or in the future liable for the performance of the
Obligation or waive the exercise of any Remedy or option. Lender may
exercise any of the foregoing rights without notice, without regard to
the amount of any consideration given, without affecting the priority
of the Loan Documents, without releasing any entity not specifically
released from its obligations under the Loan Documents, without
releasing any guarantor(s) or surety(ies) of the Obligations, without
effecting a novation of the Loan Documents and, with respect to a
waiver, without waiving future performance of the Obligation or
exercise of the Remedy waived.
Section 18.8. Service of Process. Borrower irrevocably
consents to service of process by registered or certified mail,
postage prepaid, return receipt requested, to Borrower at its address
set forth in the Article entitled "Notices" or any other address to
which such address has been changed as permitted hereunder.
Section 18.9. Entire Agreement. Oral agreements or
commitments between Borrower and Lender to lend money, to extend
credit or to forbear from enforcing repayment of a debt, including
promises to extend or renew the debt, are not enforceable. Any
agreements among Borrower, Lender and Trustee relating to the Loan are
contained in the Loan Documents, which contain the complete and
exclusive statement of the agreements among Borrower, Lender and
Trustee, except as Borrower, Lender and, if applicable, Trustee may
later agree in writing to amend the Loan Documents. The language of
each Loan Document will be construed as a whole according to its fair
meaning and will not be construed against the draftsman.
Section 18.10. No Oral Amendment. The Loan Documents may not
be amended, waived or terminated orally or by any act or omission made
individually by Borrower, Lender or Trustee but may be amended, waived
or terminated only by a written document signed by the party against
which enforcement of the amendment, waiver or termination is sought.
Section 18.11. Severability. The invalidity, illegality or
unenforceability of any provision of any of the Loan Documents will
not affect any other provisions of the Loan Documents, which will be
construed as if the invalid, illegal or unenforceable provision never
had been included.
Section 18.12. Covenants Run with the Land. Subject to the
restrictions on transfer contained in the Article entitled "TRANSFERS,
LIENS AND ENCUMBRANCES", all of the covenants of this Deed of Trust
and the Assignment run with the Land, will bind all parties hereto and
all tenants and subtenants of the Land or the Improvements and their
respective heirs, executors, administrators, successors and assigns,
and all occupants and subsequent owners of the Property, and will
inure to the benefit of Lender and all subsequent holders of the Note
and this Deed of Trust.
Section 18.13. Time of the Essence. Time is of the essence
with respect to Borrower's payment and performance of the Obligations.
Section 18.14. Subrogation. If the Principal or any other
amount advanced by Lender is used directly or indirectly to pay off,
discharge or satisfy all or any part of an encumbrance affecting the
Property, then Lender is subrogated to the encumbrance and to any
security held by the holder of the encumbrance, all of which will
continue in full force and effect in favor of Lender as additional
security for the Obligations.
Section 18.15. Joint and Several Liability. If Borrower
consists of more than one person or entity, the obligations and
liabilities of each such person or entity under this Deed of Trust are
joint and several.
Section 18.16. Successors and Assigns. The Loan Documents bind
the parties to the Loan Documents and their respective successors,
assigns, heirs, administrators, executors, agents and representatives
and inure to the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives and to the
extent applicable inure to the benefit of Trustee and its successors,
assigns, heirs, administrators, executors, agents and representatives.
Section 18.17. Duplicates and Counterparts. Duplicate
counterparts of any of the Loan Documents, other than the Note, may be
executed and together will constitute a single original document.
Section 18.18. Deed of Trust as Mortgage. If for any reason
this Deed of Trust shall be
ineffective as a Deed of Trust, it shall be construed and enforced as
a realty mortgage with Borrower being the Mortgagor and Lender being
the Mortgagee.
ARTICLE XIX
TRUSTEE PROVISIONS
Section 19.1 Acceptance of Trust.
(a) Trustee accepts this Trust upon recordation of this
Deed of Trust as provided by Law. Except as provided by Law, Trustee
is not obligated to notify any party of a pending sale under this Deed
of Trust or of a Proceeding in which Borrower, Lender or Trustee is a
party.
(b) Lender may from time to time unilaterally substitute a
successor to Trustee pursuant to a recordable instrument that complies
with Law for substitution of Trustees. The recorded substitution will
be conclusive proof of proper substitution of trustee who will,
without conveyance from predecessor trustee, succeed to all of the
predecessor trustee's title, estate, rights, powers and duties.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Deed of Trust as of the date first set forth above.
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By: /s/ Hanh Kihara
Name: Hanh Kihara
Title: Senior Vice President
<PAGE>
ACKNOWLEDGMENTS
STATE OF )
) SS:
COUNTY OF )
On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
Signature:
______________________________
Name (Typed or Printed)
STATE OF )
) SS:
COUNTY OF )
On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
Signature:
______________________________
Name (Typed or Printed)
<PAGE>
Exhibit A
LEGAL DESCRIPTIONS
Exhibit A-1
Legal Description of Property #1
Known As 4602 E. University Drive, Phoenix, Arizona,
Exhibit A-2
Legal Description of Property #2
Known as 2617 South 46th Street, Phoenix, Arizona
Exhibit A-3 and Exhibit A-4
Legal Description of Property #3 and Property #4
Known as 4602 E. Hamond Lane, Phoenix, Arizona and
Known as 4632 E. Hamond Lane, Phoenix, Arizona
(The legal description of these two addresses are identical)
Exhibit A-5
Legal Description of Property #5
Known as 4602 E. Hilton Avenue, Phoenix, Arizona
<PAGE>
Exhibit A-6
Legal Description of Ground Lease Property
Exhibit B
DEFINITIONS
"Acceleration" is defined in Section 14.2(a)(i).
"Accumulations" is defined in Section 2.1(xii).
"Accumulations Depositary" is defined in Section 6.2(a).
"Additional Funds" is defined in Section 7.4(v).
"Annual Financial Statement" is defined in Section 10.1(a).
"Assessments" is defined as all assessments now or hereafter levied,
assessed or imposed against the Property.
"Assignment" is defined as the Assignment of Leases and Rents dated of
even date with this Deed of Trust made by Borrower for the benefit of
Lender.
"Bankruptcy Code" means Title 11 of the United States Code.
"Books and Records" is defined in Section 2.1(xi).
"Borrower" is defined in the introductory paragraph.
"Budget" is defined in Section 10.2.
"Business Days" is defined as any day on which commercial banks are
not authorized or required by Law to close in New York, New York.
"Casualty" is defined as damage to or destruction of the Property by
fire or other casualty.
"Code" is defined as the Internal Revenue Code of 1986, as amended and
the regulations promulgated thereunder.
"Condemnation" is defined as the permanent or temporary taking of all
or any portion of the Property, or any interest therein or right
accruing thereto, by the exercise of the right of eminent domain
(including any transfer in lieu of or in anticipation of the exercise
of the right), inverse condemnation or any similar injury or damage to
or decrease in the value of the Property, including severance and
change in the grade of any streets
"Condemnation Awards" is defined in Section 2.1(viii).
"Condemnation Proceeding" is defined as a Proceeding that could result
in a Condemnation.
"CPA" is defined as an independent certified public accountant
satisfactory to Lender.
"Debt" is defined in Section 3.1.
"Debt Service Payments" is defined as the monthly installments of
principal and interest payable by Borrower to Lender as set forth in
the Note.
"Deed of Trust" is defined as this Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing Statement.
"Default Interest Rate" is defined as the lower of 5% per annum over
the Fixed Interest Rate or the Maximum Interest Rate, if any.
"Destruction Event" is defined in Section 7.4.
"Environmental Activity" is defined as any actual, suspected or
threatened abatement, cleanup, disposal, generation, handling,
manufacture, possession, release, remediation, removal, storage,
transportation, treatment or use of any Hazardous Substances. The
actual, suspected or threatened presence of any Hazardous Substances,
or the actual, suspected or threatened noncompliance with any
Environmental Laws, will be deemed Environmental Activity.
"Environmental Laws" is defined as all Laws pertaining to health,
safety, protection of the environment, natural resources,
conservation, wildlife, waste management, Environmental Activities and
pollution.
"Environmental Report" is defined as the report prepared by ICK
Kaiser, dated April 22, 1999, as amended, for the Property described
in Exhibit A-1 and dated April 26, 1999, as amended, for the Property
described in Exhibits A-2, A-3, A-4 and A-5.
"ERISA" is defined in Section 8.3(a).
"Event of Default" is defined in Section 14.1.
"Existing Shareholder" is defined in Section 12.1(b).
"Expenses" is defined in Section 11.1(a).
"Financial Books and Records" is defined as detailed accounts of the
income and expenses of the Property and of Borrower and all other
data, records and information that either are specifically referred to
in the Article entitled "FINANCIAL REPORTING" or are necessary to the
preparation of any of the statements, reports or certificates required
under such Article and includes all supporting schedules prepared or
used by the CPA in auditing the Annual Financial Statement or in
issuing its opinion.
"Fiscal Year" is defined as any calendar year or partial calendar year
during the Term.
"Fixed Interest Rate" is defined as 7.17% per annum.
"Fixtures and Personal Property" is defined in Section 2.1(iv).
"Government" is defined as any federal, state or municipal
governmental or quasi-governmental authority including executive,
legislative or judicial branch, division and any subdivision or agency
of any of them and any entity to which any of them has delegated
authority.
"Ground Lease" is defined in the Recitals.
"Ground Lessor" is defined in the Recitals.
"Ground Rent" is defined as any fixed, contingent or additional ground
rent or other sums due and payable under the Ground Lease.
"Hazardous Substances" is defined as (i) any by product, chemical,
compound, material, mixture or substance that is now or hereafter
defined or listed in, or otherwise classified pursuant to, any
Environmental Laws, as a "hazardous substance", "hazardous material",
"hazardous waste", "extremely hazardous waste", infectious waste",
"toxic substance", "toxic pollutant", or any other formulation intended
to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, or "EP toxicity",
(ii) any petroleum, natural gas, natural gas liquid, liquified natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and
such synthetic gas), ash produced by a resource recovery facility
utilizing a municipal solid waste stream, and drilling fluids,
produced waters, and other wastes associated with the exploration,
development or production of crude oil, natural gas, or geothermal
resources, and (iii) any underground storage tanks.
"Imposition Penalty Date" is defined in Section 6.1(a).
"Impositions" is defined as all Taxes, Assessments, ground rent, if
any, water and sewer rents, fees and charges, levies, permit,
inspection and license fees and other dues, charges or impositions,
including all charges and license fees for the use of vaults, chutes
and similar areas adjoining the Land, maintenance and similar charges
and charges for utility services, in each instance whether now or in
the future, directly or indirectly, levied, assessed or imposed on the
Property or Borrower and whether levied, assessed or imposed as
excise, privilege or property taxes.
"Improvements" is defined in Section 2.1(ii).
"Individual Property" is defined in Recital D of the Assignment.
"Insurance Premiums" is defined as all present and future premiums and
other charges due and payable on policies of fire, rental value and
other insurance covering the Property and required pursuant to the
provisions of this Deed of Trust.
"Insurance Proceeds" is defined in Section 2.1(ix).
"Insurers" is defined in Section 7.1(c).
"Institutional Investor" is defined as any bank, savings institution,
charitable foundation, insurance company, real estate investment
trust, pension fund or investment advisor registered under the
Investment Advisors Act of 1940, as amended, and acting as trustee or
agent.
"Interest" is defined as the amount of fixed interest payable under
the Note at the Fixed Interest Rate and any other sums which could be
deemed to be interest under Law.
"Land" is defined in the Recitals.
"Late Charge" is defined in the Note.
"Law" is defined as all present and future codes, constitutions,
cases, opinions, rules, manuals, regulations, determinations, laws,
orders, ordinances, requirements and statutes, as amended, of any
Government that affect or that may be interpreted to affect the
Property, Borrower or the Loan, including amendments and all guidance
documents and publications promulgated thereunder.
"Leases" is defined as all present and future leases, subleases,
licenses and other agreements for the use and occupancy of the Land
and Improvements, any related guarantees and including any use and
occupancy arrangements created pursuant to Section 365 (h) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuation of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar Proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land and Improvements.
"Lender" is defined in the introductory paragraph.
"Loan" is defined in the Recitals.
"Loan Documents" is defined as the Note, this Deed of Trust, the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement (Bedford Portfolio #1 - Colorado Property)
dated the date of this Deed of Trust and securing the Note, the
Assignment, the Assignment of Leases and Rents (Bedford Portfolio #1 -
Colorado Properties) dated the date of this Deed of Trust and securing
the Note and all documents now or hereafter executed by Borrower or
held by Lender or Trustee relating to the Loan, including all
amendments.
"Material Environmental Contamination" is defined as contamination of
the Property with Hazardous Substances (i) that constitutes a
violation of one or more Environmental Laws; (ii) for which there is a
significant possibility that remediation will be required under
Environmental Laws; (iii) that results in a material risk of liability
or expense to Lender; or (iv) that diminishes the value of the
Property.
"Maturity Date" is defined in the Recitals.
"Maximum Interest Rate" is defined as the maximum rate of interest, if
any, permitted by Law to be charged with respect to the Loan as the
maximum rate may be increased or decreased from time to time.
"Note" is defined in the Recitals.
"Note Payments" is defined in the Note.
"Notices" is defined in Section 17.1.
"Obligations" is defined in Section 3.1.
"Permitted Exceptions" is defined as the matters shown in Schedule B,
Part 1 and 2 of the title insurance policy insuring the lien of this
Deed of Trust.
"Permitted Transfers" is defined in Section 12.2(b).
"Permitted Use" is defined as use as a first-class commercial office
buildings with respect to the property described in Exhibit A-1 known
as 4602 E. University Drive, Phoenix, Arizona, and as industrial
research and development buildings with respect to the properties
described in Exhibit A-2 known as 2617 South 46th Street, Phoenix,
Arizona, Exhibit A-3 known as 4602 East Hammond Lane, Phoenix,
Arizona, Exhibit A-4 known as 4632 East Hammond Lane, Phoenix, Arizona
and Exhibit A-5 known as 4602 E. Hilton Avenue, Phoenix, Arizona, and
uses incidentally and directly related to such uses.
"Policies" is defined in Section 7.1(b).
"Prepayment Premium" is defined in the Note.
"Principal" is defined in the Recitals.
"Proceeding" is defined as a pending or threatened action, claim or
litigation before a legal, equitable or administrative tribunal having
proper jurisdiction.
"Proceeds" is defined in Section 7.2(c).
"Property" is defined in Section 2.1.
"Property Documents" is defined in Section 2.1(v).
"Receiver" is defined as a receiver, custodian, trustee, liquidator or
conservator of the Property.
"Release Parcel" is defined in Section 12.4.
"Remedies" is defined in Section 14.2(a).
"Rents" is defined as all present and future rents, prepaid rents,
percentage, participation or contingent rents, issues, profits,
proceeds, parking fees, revenues and other consideration accruing
under the Leases or otherwise derived from the use and occupancy of
the Land or the Improvements, including tenant contributions to
expenses, security deposits, royalties and contingent rent, if any,
all other fees, accounts, accounts receivable or payments paid to or
for the benefit of Borrower, including liquidated damages after a
default under a lease, any premium or other termination fee payable by
tenant after cancellation of a Lease and the proceeds of any rental
insurance, and any payments received pursuant to Section 502(b) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land or the Improvements and all claims as a
creditor in connection with any of the foregoing.
"Restoration" is defined as the restoration of the Property after a
Destruction Event as nearly as possible to its condition immediately
prior to the Destruction Event, in accordance with the plans and
specifications, in a first-class workmanlike manner using materials
substantially equivalent in quality and character to those used for
the original improvements, in accordance with Law and free and clear
of all liens, encumbrances or other charges other than this Deed of
Trust and the Permitted Exceptions.
"Restoration Completion Date" is defined in Section 7.4(viii).
"Restoration Funds" is defined in Section 7.5(b).
"Substitution Property" is defined in Section 12.5.
"Taxes" is defined as all present and future real estate taxes levied,
assessed or imposed against the Property.
"Term" is defined as the scheduled term of this Deed of Trust
commencing on the date Lender makes the first disbursement of the Loan
and terminating on the Maturity Date.
"Transfer" is defined in Section 12.1(a).
"Uniform Commercial Code" is defined as the Uniform Commercial Code in
effect in the jurisdiction where the Land is located.
<PAGE>
Exhibit C
RULES OF CONSTRUCTION
(a) References in any Loan Document to numbered Articles or
Sections are references to the Articles and Sections of that Loan
Document. References in any Loan Document to lettered Exhibits are
references to the Exhibits attached to that Loan Document, all of
which are incorporated in and constitute a part of that Loan Document.
Article, Section and Exhibit captions used in any Loan Document are
for reference only and do not describe or limit the substance, scope
or intent of that Loan Document or the individual Articles, Sections
or Exhibits of that Loan Document.
(b) The terms "include", "including" and similar terms are
construed as if followed by the phrase "without limitation".
(c) The terms "Land", "Improvements", "Fixtures and Personal
Property", "Condemnation Awards", "Insurance Proceeds" and "Property"
are construed as if followed by the phrase "or any part thereof".
(d) Any agreement by or duty imposed on Borrower in any Loan
Document to perform any obligation or to refrain from any act or
omission constitutes a covenant running with the ownership or
occupancy of the Land and the Improvements, which will bind all
parties hereto and their respective successors and assigns, and all
lessees, subtenants and assigns of same, and all occupants and
subsequent owners of the Property, and will inure to the benefit of
Lender and all subsequent holders of the Note and this Deed of Trust
and includes a covenant by Borrower to cause its partners, members,
principals, agents, representatives and employees to perform the
obligation or to refrain from the act or omission in accordance with
the Loan Documents. Any statement or disclosure contained in any Loan
Document about facts or circumstances relating to the Property,
Borrower or the Loan constitutes a representation and warranty by
Borrower made as of the date of the Loan Document in which the
statement or disclosure is contained.
(e) The term "to Borrower's knowledge" is construed as meaning
to the best of Borrower's knowledge after diligent inquiry.
(f) The singular of any word includes the plural and the plural
includes the singular. The use of any gender includes all genders.
(g) The terms "person", "party" and "entity" include natural
persons, firms, partnerships, limited liability companies and
partnerships, corporations and any other public or private legal
entity.
(h) The term "provisions" includes terms, covenants,
conditions, agreements and requirements.
(i) The term "amend" includes modify, supplement, renew,
extend, replace or substitute and the term "amendment" includes
modification, supplement, renewal, extension, replacement and
substitution.
(j) Reference to any specific Law or to any document or
agreement, including the Note, this Deed of Trust, any of the other
Loan Documents, the Leases, the Property Documents, and the Ground
Lease includes any future amendments to the Law, document or
agreement, as the case may be.
(k) No inference in favor of or against a party with respect to
any provision in any Loan Document may be drawn from the fact that the
party drafted the Loan Document.
(l) The term "certificate" means the sworn, notarized statement
of the entity giving the certificate, made by a duly authorized person
satisfactory to Lender affirming the truth and accuracy of every
statement in the certificate. Any document that is "certified" means
the document has been appended to a certificate of the entity
certifying the document that affirms the truth and accuracy of
everything in the document being certified. In all instances the
entity issuing a certificate must be satisfactory to Lender.
(m) Any appointment of Lender as Borrower's attorney-in-fact is
irrevocable and coupled with an interest. Lender may appoint a
substitute attorney-in-fact. Borrower ratifies all actions taken by
the attorney-in-fact but, nevertheless, if Lender requests, Borrower
will specifically ratify any action taken by the attorney-in-fact by
executing and delivering to the attorney-in-fact or to any entity
designated by the attorney-in-fact all documents necessary to effect
the ratification.
(n) Any document, instrument or agreement to be delivered by
Borrower will be in form and content satisfactory to Lender.
(o) All obligations, rights, remedies and waivers contained in
the Loan Documents will be construed as being limited only to the
extent required to be enforceable under the Law.
(p) The unmodified word "days" means calendar days.
EXHIBIT 10.23 TIAA Appl. #VR-7
M -000462600
PROMISSORY NOTE
Bedford Portfolio #2
$37,200,000 Dated:
May __,
1999
FOR VALUE RECEIVED, BEDFORD PROPERTY INVESTORS, INC., a
Maryland corporation ("Borrower"), having its principal place of
business at 270 Lafayette Circle, Lafayette, California 94549,
promises to pay to TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
AMERICA, a New York corporation ("Lender"), or order, at Lender's
offices at 730 Third Avenue, New York, New York 10017 or at such
other place as Lender designates in writing, the principal sum of
THIRTY SEVEN MILLION TWO HUNDRED THOUSAND AND NO/100 DOLLARS
($37,200,000) (the principal sum or so much of the principal sum as
may be advanced and outstanding from time to time, the "Principal"),
in lawful money of the United States of America, with interest on the
Principal from the date of this Promissory Note (this "Note") through
and including June 1, 2007 (the "Maturity Date") at the fixed rate of
seven and seventeen one-hundredths percent (7.17%) per annum (the
"Fixed Interest Rate").
This Note is secured by, among other things, the Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement (Bedford Portfolio #2 - California Properties) (the
"Deed of Trust") dated the date of this Note made by Borrower for the
benefit of Lender as security for the Loan. All capitalized terms not
expressly defined in this Note will have the definitions set forth in
the Deed of Trust.
Section 1. Payments of Principal and Fixed Interest.
(a) Borrower will make monthly installment payments ("Debt
Service Payments") as follows:
(i) On June 1, 1999, a payment of accrued interest on the
Principal at the Fixed Interest Rate; and
(ii) On July 1, 1999 and on the first day of each succeeding
calendar month through and including June 1, 2007, payments in
the amount of $266,969.82, each of which will be applied first
to interest on the Principal at the Fixed Interest Rate and then
to the Principal.
(b) On the Maturity Date, Borrower will pay the Principal in
full together with accrued interest at the Fixed Interest Rate and all
other amounts due under the Loan Documents.
Section 2. Prepayment Provisions.
(a) The following definitions apply:
"Discount Rate" means the yield on a U.S. Treasury issue selected by
Lender, as published in the Wall Street Journal, two weeks prior to
prepayment, having a maturity date corresponding (or most closely
corresponding, if not identical) to the Maturity Date, and, if
applicable, a coupon rate corresponding (or most closely
corresponding, if not identical) to the Fixed Interest Rate.
"Default Discount Rate" means the Discount Rate less 300 basis points.
"Discounted Value" means the Discounted Value of a Note Payment based
on the following formula:
NP
(1 + R/12)n = Discounted Value
NP = Amount of Note Payment
R = Discount Rate or Default Discount Rate as the case may
be.
n = The number of months between the date of prepayment
and the scheduled date of the Note Payment being
discounted rounded to the nearest integer.
"Note Payments" means (i) the scheduled Debt Service Payments for the
period from the date of prepayment through the Maturity Date and (ii)
the scheduled repayment of Principal, if any, on the Maturity Date.
"Prepayment Date Principal" means the Principal on the date of
prepayment.
(b) This Note may not be prepaid in full or in part before June
1, 2001. Commencing on June 1, 2001, provided there is no Event of
Default that is not cured within the applicable cure period and
provided that either (i) Borrower has prepaid in full or (ii) Borrower
will simultaneously prepay in full, the Promissory Note - Bedford
Portfolio #3 in the original principal amount of $27,350,000 dated the
date of this Note executed by Borrower pursuant to Loan Application
and Commitment Agreement # VR-6 for Lender's Mortgage Number
M-000462400, Borrower may prepay this Note in full, but not in part,
on the first day of any calendar month, upon 90 days prior notice to
Lender and upon payment in full of the Debt which will include a
payment (the "Prepayment Premium") equal to the greater of (i) an
amount equal to 1% (the "Prepayment Percentage") times the Prepayment
Date Principal or (ii) the amount by which the sum of the Discounted
Values of Note Payments, calculated at the Discount Rate plus 50 basis
points, exceeds the Prepayment Date Principal. Provided there is no
Event of Default that is not cured within the applicable cure period,
this Note may be prepaid in full without payment of the Prepayment
Premium during the last 90 days of the Term. This Note may not be
prepaid without simultaneous prepayment in full of any other notes
secured by the Loan Documents.
(c) After an Event of Default or upon any prepayment not
permitted by the Loan Documents, any tender of payment of the amount
necessary to satisfy all or any part of the Debt, any decree of
foreclosure, any statement of the amount due at the time of
foreclosure (including foreclosure by power of sale) and any tender of
payment during any redemption period after foreclosure, will include
an amount (the "Evasion Premium") equal to the greater of (i) an
amount equal to the product of the Prepayment Premium plus 300 basis
points times the Prepayment Date Principal, or (ii) the amount by
which the sum of the Discounted Values of the Note Payments,
calculated at the Default Discount Rate, exceeds the Prepayment Date
Principal.
(d) Borrower acknowledges that:
(i) a prepayment will cause damage to Lender;
(ii) the Evasion Premium is intended to compensate Lender for
the loss of its investment and the expense incurred and time and
effort associated with making the Loan, which will not be fully
repaid if the Loan is prepaid;
(iii) it will be extremely difficult and impractical to
ascertain the extent of Lender's damages caused by a prepayment
after an Event of Default or any other prepayment not permitted
by the Loan Documents; and
(iv) the Evasion Premium represents Lender and Borrower's
reasonable estimate of Lender's damages for the prepayment and
is not a penalty.
(e) BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT LENDER WOULD
NOT LEND TO BORROWER THE LOAN EVIDENCED BY THIS NOTE WITHOUT
BORROWER'S AGREEMENT, AS SET FORTH ABOVE, TO PAY LENDER A PREPAYMENT
PREMIUM UPON THE SATISFACTION OF ALL OR ANY PORTION OF THE PRINCIPAL
INDEBTEDNESS EVIDENCED FOLLOWING THE ACCELERATION OF THE MATURITY DATE
HEREOF BY REASON OF A DEFAULT HEREUNDER OR UNDER THE DEED OF TRUST
INCLUDING, WITHOUT LIMITATION, A DEFAULT ARISING FROM THE CONVEYANCE
OF ANY RIGHT, TITLE OR INTEREST IN THE PROPERTY ENCUMBERED BY THE DEED
OF TRUST AND BORROWER ACKNOWLEDGES THAT (I) THE GENERAL PARTNERS,
PRINCIPALS OR MEMBERS, AS THE CASE MAY BE, OF BORROWER ARE
KNOWLEDGEABLE REAL ESTATE DEVELOPERS OR INVESTORS, (II) BORROWER FULLY
UNDERSTANDS THE EFFECT OF THE ABOVE WAIVER, (III) THE MAKING OF THE
LOAN BY LENDER AT THE RATE SET FORTH ABOVE IS SUFFICIENT CONSIDERATION
FOR SUCH WAIVER, AND (IV) LENDER WOULD NOT MAKE THE LOAN WITHOUT SUCH
WAIVER, AND BORROWER HAS CAUSED THOSE PERSONS SIGNING THIS NOTE ON
BORROWER'S BEHALF TO SEPARATELY INITIAL THE AGREEMENT CONTAINED IN
THIS PARAGRAPH BY PLACING THEIR INITIALS BELOW.
INITIALS _______
Section 3. Events of Default:
(a) It is an "Event of Default" under this Note:
(i) if Borrower fails to pay any amount due, as and when
required, under this Note or any other Loan Document and the
failure continues for a period of 5 days; or
(ii) if an Event of Default occurs under any other Loan
Document.
(b) If an Event of Default occurs, Lender may declare all or
any portion of the Debt immediately due and payable ("Acceleration")
and exercise any of the other Remedies.
Section 4. Interest on the Principal will accrue at the
Default Interest Rate from the date an Event of Default occurs.
Section 5. Late Charges.
(a) If Borrower fails to pay any Debt Service Payment when due
and the failure continues for a period of 5 days or more or fails to
pay any amount due under the Loan Documents on the Maturity Date,
Borrower agrees to pay to Lender an amount (a "Late Charge") equal to
five cents ($.05) for each one dollar ($1.00) of the delinquent
payment.
(b) Borrower acknowledges that:
(i) a delinquent payment will cause damage to Lender;
(ii) the Late Charge is intended to compensate Lender for loss
of use of the delinquent payment and the expense incurred and
time and effort associated with recovering the delinquent
payment;
(iii) it will be extremely difficult and impractical to
ascertain the extent of Lender's damages caused by the
delinquency; and
(iv) the Late Charge represents Lender and Borrower's
reasonable estimate of Lender's damages from the delinquency and
is not a penalty.
Section 6. Limitation of Liability. This Note is subject
to the limitations on liability set forth in the Article of the Deed
of Trust entitled "Limitation of Liability."
Section 7. WAIVERS. IN ADDITION TO THE WAIVERS SET FORTH
IN THE ARTICLE OF THE DEED OF TRUST ENTITLED "WAIVERS", BORROWER
WAIVES PRESENTMENT FOR PAYMENT, DEMAND, DISHONOR AND, EXCEPT AS
EXPRESSLY SET FORTH IN THE LOAN DOCUMENTS, NOTICE OF ANY OF THE
FOREGOING. BORROWER FURTHER WAIVES ANY PROTEST, LACK OF DILIGENCE OR
DELAY IN COLLECTION OF THE DEBT OR ENFORCEMENT OF THE LOAN DOCUMENTS.
BORROWER AND ALL INDORSERS, SURETIES AND GUARANTORS OF THE OBLIGATIONS
CONSENT TO ANY EXTENSIONS OF TIME, RENEWALS, WAIVERS AND MODIFICATIONS
THAT LENDER MAY GRANT WITH RESPECT TO THE OBLIGATIONS AND TO THE
RELEASE OF ANY SECURITY FOR THIS NOTE AND AGREE THAT ADDITIONAL
BORROWERS MAY BECOME PARTIES TO THIS NOTE AND ADDITIONAL INDORSERS,
GUARANTORS OR SURETIES MAY BE ADDED WITHOUT NOTICE AND WITHOUT
AFFECTING THE LIABILITY OF THE ORIGINAL BORROWER OR ANY ORIGINAL
INDORSER, SURETY OR GUARANTOR.
Section 8. Commercial Loan. The Loan is made for the
purpose of carrying on a business or commercial activity or acquiring
real or personal property as an investment or carrying on an
investment activity and not for personal or household purposes.
Section 9. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.
Section 10. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to the parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.
Section 11. Time of the Essence. Time is of the essence
with respect to the payment and performance of the Obligations.
Section 12. Cross-Default. A default under any other note
now or hereafter secured by the Loan Documents or under any loan
document related to such other note constitutes a default under this
Note and under the other Loan Documents. When the default under the
other note constitutes an Event of Default under that note or the
related loan document, an Event of Default also will exist under this
Note and the other Loan Documents.
Section 13. Construction. Unless expressly provided
otherwise in this Note, this Note will be construed in accordance with
the Exhibit attached to the Deed of Trust entitled "Rules of
Construction."
Section 14. Deed of Trust Provisions Incorporated. To the
extent not otherwise set forth in this Note, the provisions of the
Articles of the Deed of Trust entitled "Expenses and Duty to Defend,"
"Waivers," "Notices," and "Miscellaneous" are applicable to this Note
and deemed incorporated by reference as if set forth at length in this
Note.
Section 15. Joint and Several Liability; Successors and
Assigns. If Borrower consists of more than one entity, the
obligations and liabilities of each such entity will be joint and
several. This Note binds Borrower and successors, assigns, heirs,
administrators, executors, agents and representatives and inures to
the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives.
Section 16. Absolute Obligation. Except for the Section of
this Note entitled "Limitation of Liability," no reference in this
Note to the other Loan Documents and no other provision of this Note
or of the other Loan Documents will impair or alter the obligation of
Borrower, which is absolute and unconditional, to pay the Principal,
interest at the Fixed Interest Rate and any other amounts due and
payable under this Note, as and when required.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Note as of the date first set forth above.
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By: /s/ Hanh Kihara
Hanh Kihara, Senior Vice
President
<PAGE>
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TIAA Appl. #VR-7
000462600
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT
Bedford Portfolio #2 - California Properties
by
BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
as Borrower
and
FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation
as Trustee
for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation
as Lender
Properties Known As
13112 Evening Creek Drive South, San Diego, California
2149-2161 O'Toole Avenue, San Jose, California
6925 & 6965 Lusk Boulevard, San Diego, California
2545-2557 Napa Valley Corp. Drive, Napa, California
After Recordation This Deed of Trust Should Be Returned To:
Beverly J. Quail, Esquire
c/o Ballard Spahr Andrews & Ingersoll LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
<PAGE>
TABLE OF CONTENTS
Page
RECITALS:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION. . . . . . . . . . . . . .1
Section 1.1. Definitions . . . . . . . . . . . . . . .1
Section 1.2. Rules of Construction . . . . . . . . . .2
ARTICLE II
GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.1. Encumbered Property . . . . . . . . . . .2
Section 2.2. Habendum Clause . . . . . . . . . . . . .4
Section 2.3. Security Agreement. . . . . . . . . . . .4
Section 2.4. Conditions to Grant . . . . . . . . . . .5
ARTICLE III
OBLIGATIONS SECURED. . . . . . . . . . . . . . . . . . . . . . .5
Section 3.1. The Obligations . . . . . . . . . . . . .5
ARTICLE IV
TITLE AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . .6
Section 4.1. Title to the Property . . . . . . . . . .6
Section 4.2. Authority . . . . . . . . . . . . . . . .6
Section 4.3. No Foreign Person . . . . . . . . . . . .6
Section 4.4. Litigation. . . . . . . . . . . . . . . .7
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES. . . . . . . . . . . . .7
Section 5.1. Status of the Property. . . . . . . . . .7
Section 5.2. Maintenance of the Property . . . . . . .7
Section 5.3. Change in Use . . . . . . . . . . . . . .8
Section 5.4. Waste . . . . . . . . . . . . . . . . . .8
Section 5.5. Inspection of the Property. . . . . . . .8
Section 5.6. Leases and Rents. . . . . . . . . . . . .8
Section 5.7. Parking . . . . . . . . . . . . . . . . .8
Section 5.8. Separate Tax Lot. . . . . . . . . . . . .9
Section 5.9. Changes in Zoning or Restrictive Covenants9
Section 5.10. Lender's Right to Appear. . . . . . . . .9
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS. . . . . . . . . . . . . . . . . .9
Section 6.1. Impositions . . . . . . . . . . . . . . .9
Section 6.2. Accumulations . . . . . . . . . . . . . 10
Section 6.3. Changes in Tax Laws . . . . . . . . . . 12
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.1. Insurance Coverages . . . . . . . . . . 12
Section 7.2. Casualty and Condemnation . . . . . . . 14
Section 7.3. Application of Proceeds . . . . . . . . 14
Section 7.4. Conditions to Availability of Proceeds for Restoration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 7.5. Restoration . . . . . . . . . . . . . . 16
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS . . . . . . . . . . . . . . 18
Section 8.1. Compliance with Law . . . . . . . . . . 18
Section 8.2. Compliance with Agreements. . . . . . . 18
Section 8.3. ERISA Compliance. . . . . . . . . . . . 19
Section 8.4. Section 6045(e) Filing. . . . . . . . . 19
ARTICLE IX
ENVIRONMENTAL. . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 9.1. Environmental Representations and Warranties19
Section 9.2. Environmental Covenants . . . . . . . . 20
ARTICLE X
FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . 21
Section 10.1. Financial Reporting . . . . . . . . . . 21
Section 10.2. Annual Budget . . . . . . . . . . . . . 21
ARTICLE XI
EXPENSES AND DUTY TO DEFEND. . . . . . . . . . . . . . . . . . 22
Section 11.1. Payment of Expenses . . . . . . . . . . 22
Section 11.2. Duty to Defend. . . . . . . . . . . . . 22
ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES. . . . . . . . . . . . . . . 23
Section 12.1. Prohibitions on Transfers, Liens and Encumbrances23
Section 12.2. Permitted Transfers . . . . . . . . . . 23
Section 12.3. Right to Contest Lien . . . . . . . . . 25
Section 12.4. Reconveyance Rights . . . . . . . . . . 26
Section 12.5. Substitution. . . . . . . . . . . . . . 28
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . 29
Section 13.1. Further Assurances. . . . . . . . . . . 29
Section 13.2. Estoppel Certificates . . . . . . . . . 29
ARTICLE XIV
DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 30
Section 14.1. Events of Default . . . . . . . . . . . 30
Section 14.2. Remedies. . . . . . . . . . . . . . . . 31
Section 14.3. General Provisions Pertaining to Remedies32
Section 14.4. Foreclosure by Power of Sale. . . . . . 33
Section 14.5. General Provisions Pertaining to Mortgagee-in-
Possession or Receiver
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 14.6. General Provisions Pertaining to Foreclosures and the
Power of Sale. . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 14.7. Application of Proceeds . . . . . . . . 36
Section 14.8. Power of Attorney . . . . . . . . . . . 36
Section 14.9. Tenant at Sufferance. . . . . . . . . . 36
ARTICLE XV
LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . 36
Section 15.1. Limitation of Liability . . . . . . . . 36
ARTICLE XVI
WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. . . . 39
Section 16.2. WAIVER OF NOTICE. . . . . . . . . . . . 39
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS 39
Section 16.4. WAIVER OF TRIAL BY JURY . . . . . . . . 39
Section 16.5. WAIVER OF COUNTERCLAIM. . . . . . . . . 39
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING . 39
Section 16.7. WAIVER OF SUBROGATION . . . . . . . . . 40
Section 16.8. GENERAL WAIVER. . . . . . . . . . . . . 40
ARTICLE XVII
NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 17.1. Notices . . . . . . . . . . . . . . . . 40
Section 17.2. Change in Borrower's Name or Place of Business42
ARTICLE XVIII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 18.1. Applicable Law. . . . . . . . . . . . . 42
Section 18.2. Usury Limitations . . . . . . . . . . . 42
Section 18.3. Lender's Discretion . . . . . . . . . . 42
Section 18.4. Unenforceable Provisions. . . . . . . . 43
Section 18.5. Survival of Borrower's Obligations. . . 43
Section 18.6. Relationship Between Borrower and Lender; No Third
Party Beneficiaries
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 18.7. Partial Reconveyances or Releases, Extensions, Waivers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 18.8. Service of Process. . . . . . . . . . . 44
Section 18.9. Entire Agreement. . . . . . . . . . . . 44
Section 18.10. No Oral Amendment. . . . . . . . . . . 44
Section 18.11. Severability. . . . . . . . . . . . . . 44
Section 18.12. Covenants Run with the Land . . . . . . 44
Section 18.13. Time of the Essence . . . . . . . . . . 44
Section 18.14. Subrogation . . . . . . . . . . . . . . 44
Section 18.15. Joint and Several Liability. . . . . . 45
Section 18.16. Successors and Assigns. . . . . . . . . 45
Section 18.17. Duplicates and Counterparts . . . . . . 45
ARTICLE XIX
TRUSTEE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 45
Section 19.1 Acceptance of Trust . . . . . . . . . . 45
Exhibit A
LEGAL DESCRIPTION. . . . . . . . . . . . . . . . . . . . . . .A-1
Exhibit B
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .B-1
Exhibit C
RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . .C-1
<PAGE>
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Bedford Portfolio # 2 - California Properties
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT made this ____ day of
May, l999, by BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
("Borrower"), having its principal place of business at 270 Lafayette
Circle, Lafayette, California 94549, and FIRST AMERICAN TITLE
INSURANCE COMPANY ("Trustee"), a California corporation, having an
office at 1850 Mt. Diablo Boulevard, Suite 300, Walnut Creek,
California 94596, for the benefit of TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA, a New York corporation ("Lender"), having an
address at 730 Third Avenue, New York, New York l0017.
RECITALS:
A. Lender agreed to make and Borrower agreed to accept a
loan (the "Loan") in the maximum principal amount of $37,200,000.
B. To evidence the Loan, Borrower executed and delivered
to Lender a promissory note (the "Note"), dated the date of this Deed
of Trust, in the principal amount of THIRTY SEVEN MILLION TWO HUNDRED
THOUSAND AND NO/100 Dollars ($37,200,000)(that amount or so much as is
outstanding from time to time is referred to as the "Principal"),
promising to pay the Principal with interest thereon to the order of
Lender as set forth in the Note and with the balance, if any, of the
Debt being due and payable on June 1, 2007 (the "Maturity Date").
C. To secure the Note and the Obligations, this Deed of
Trust conveys, among other things, Borrower's fee interest in the real
property located in the Cities of Napa, San Jose and San Diego,
Counties of Napa, Santa Clara and San Diego, State of California more
particularly described in Exhibits A (the "Land").
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. Capitalized terms used in this
Deed of Trust are defined in Exhibit B or in the text with a cross-
reference in Exhibit B.
Section 1.2. Rules of Construction. This Deed of Trust will
be interpreted in accordance with the rules of construction set forth
in Exhibit C.
ARTICLE II
GRANTING CLAUSES
Section 2.1. Encumbered Property. Borrower irrevocably
grants, mortgages, warrants, sells, conveys, assigns and pledges to
Trustee in trust, WITH POWER OF SALE, and grants to Trustee a security
interest in any and all of the following property, rights, interests
and estates now or in the future owned or held by Borrower (the
"Property") for the uses and purposes set forth in this Deed of Trust:
(i) the Land;
(ii) all buildings and improvements located on the
Land (the "Improvements");
(iii) all easements; rights of way or use,
including any rights of ingress and egress;
streets, roads, ways, sidewalks, alleys and
passages; strips and gores; sewer rights;
water, water rights, water courses,
riparian rights and drainage rights; air
rights and development rights; oil and
mineral rights; and tenements,
hereditaments and appurtenances, in each
instance adjoining or otherwise appurtenant
to or benefitting the Land or the
Improvements;
(iv) all materials intended for construction, re-
construction, alteration or repair of the
Improvements, such materials to be deemed
included in the Land and the Improvements
immediately on delivery to the Land; all
fixtures and personal property that are attached
to, contained in or used in connection with the
Land or the Improvements (excluding personal
property owned by tenants), including:
furniture; furnishings; machinery; motors;
elevators; fittings; microwave ovens;
refrigerators; office systems and equipment;
plumbing, heating, ventilating and air
conditioning systems and equipment; maintenance
and landscaping equipment; lighting, cooking,
laundry, dry cleaning, refrigerating,
incinerating and sprinkler systems and
equipment; telecommunications systems and
equipment; computer or word processing systems
and equipment; security systems and equipment;
and equipment leases for any of the property
described in this subsection (the "Fixtures and
Personal Property");
(v) all agreements, ground leases, grants of
easements or rights-of-way, permits,
declarations of covenants, conditions and
restrictions, disposition and development
agreements, planned unit development agreements,
cooperative, condominium or similar ownership or
conversion plans, management, leasing, brokerage
or parking agreements or other material
documents affecting Borrower or the Land, the
Improvements or the Fixtures and Personal
Property, but expressly excluding the Leases
(the "Property Documents");
(vi) all inventory (including all goods, merchandise,
raw materials, incidentals, office supplies and
packaging materials) held for sale, lease or
resale or furnished or to be furnished under
contracts of service, or used or consumed in the
ownership, use or operation of the Land, the
Improvements or the Fixtures and Personal
Property, all documents of title evidencing any
part of any of the foregoing and all returned or
repossessed goods arising from or relating to
any sale or disposition of inventory;
(vii) all intangible personal property relating
to the Land, the Improvements or the
Fixtures and Personal Property, including
choses in action and causes of action
(except those personal to Borrower),
corporate and other business records,
inventions, designs, promotional materials,
blueprints, plans, specifications, patents,
patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, claims
for refunds or rebates of taxes, insurance
surpluses, refunds or rebates of taxes and
any letter of credit, guarantee, claim,
security interest or other security held by
or granted to Borrower to secure payment by
an account debtor of any of the accounts of
Borrower arising out of the ownership, use
or operation of the Land, the Improvements
or the Fixtures and Personal Property, and
documents covering all of the foregoing;
all accounts, accounts receivable,
documents, instruments, money, deposit
accounts, funds deposited in accounts
established with a bank, savings and loan
association, trust company or other
financial institution in connection with
the ownership, use or operation of the
Land, the Improvements or the Fixtures and
Personal Property, including any reserve
accounts or escrow accounts, and all
investments of the funds and all other
general intangibles;
(viii) all awards and other compensation paid
after the date of this Deed of Trust for
any Condemnation (the "Condemnation
Awards");
(ix) all proceeds of and all unearned premiums on the
Policies (the "Insurance Proceeds");
(x) all licenses, certificates of occupancy,
contracts, management agreements, operating
agreements, operating covenants, franchise
agreements, permits and variances relating to
the Land, the Improvements or the Fixtures and
Personal Property;
(xi) all books, records and other information,
wherever located, which are in Borrower's
possession, custody or control or to which
Borrower is entitled at law or in equity and
which are related to the Property, including all
computer or other equipment used to record,
store, manage, manipulate or access the
information (the "Books and Records");
(xii) all deposits and letters of credit held
from time to time by the Accumulations
Depositary to provide reserves for Taxes
and Assessments together with interest
thereon, if any (the "Accumulations") and
the account or accounts in which such
deposits are or may be held; and
(xiii) all after-acquired title to or remainder or
reversion in any of the property described
in this Section; all additions, accessions
and extensions to, improvements of and
substitutions or replacements for any of
such property; all products and all cash
and non-cash proceeds, immediate or remote,
of any sale or other disposition of any of
such property, excluding sales or other
dispositions of inventory in the ordinary
course of the business of operating the
Land or the Improvements; and all
additional lands, estates, interests,
rights or other property acquired by
Borrower after the date of this Deed of
Trust for use in connection with the Land
and Improvements, all without the need for
any additional mortgage, assignment, pledge
or conveyance to Lender but Borrower will
execute and deliver to Lender, upon
Lender's request, any documents reasonably
requested by Lender to further evidence the
foregoing.
Section 2.2. Habendum Clause. The Property is conveyed to
Trustee, TO HAVE AND TO HOLD the Property IN TRUST, FOREVER, for the
purpose of securing the Note and the Obligations.
Section 2.3. Security Agreement.
(a) This Deed of Trust is a real property deed of trust
and also a "security agreement" and a "financing statement" within the
meaning of the Uniform Commercial Code. The Property includes both
real and personal property and all of Borrower's other right, title
and interest, whether tangible or intangible, in the Property. By
executing and delivering this Deed of Trust, Borrower grants to
Trustee, as security for the Obligations, a security interest in the
Property to the full extent that any of the Property may be subject to
the Uniform Commercial Code.
(b) Borrower desires and intends that this Deed of Trust
also constitute a Fixture Filing between Borrower as debtor and Lender
as secured party, as defined in the Uniform Commercial Code. To this
end, Borrower acknowledges that (i) this Deed of Trust covers goods
which are or are to become fixtures on the Land; (ii) this financing
statement is to be recorded; (iii) Borrower is the record owner of
such property; (iv) products of collateral are also covered; (v) the
debtor is Bedford Property Investors, Inc., a Maryland corporation
whose address is 270 Lafayette Circle, Lafayette, California 94549;
(vi) the secured party is Teachers Insurance and Annuity Association
of America, a New York corporation, whose address is 730 Third Avenue,
New York, New York 10070; (vii) the record owner of the Property is
Bedford Property Investors, Inc., a Maryland corporation, whose
address is stated above. Except as otherwise provided in the Loan
Documents, no financing statement in favor of any secured party other
than Lender covering the personal property described herein or any
portion thereof is on file in any public office. Provided that
obsolete and worn-out articles may be removed concurrently with the
replacement or renewal thereof with property of at least equal value
or usefulness in the operation of the Property; Borrower will not
otherwise remove or permit the removal of the collateral or any part
thereof without the prior written permission of Lender.
Section 2.4. Conditions to Grant. This Deed of Trust is made
on the express condition that if Borrower pays and performs the
Obligations in full in accordance with the Loan Documents, then unless
expressly provided otherwise in the Loan Documents, the Loan Documents
will be released at Borrower's expense.
ARTICLE III
OBLIGATIONS SECURED
Section 3.1. The Obligations. This Deed of Trust secures the
Principal, the Interest, the Late Charges, the Prepayment Premiums,
the Expenses, any additional advances made by Lender in connection
with the Property or the Loan and all other amounts payable under the
Loan Documents (the "Debt") and also secures both the timely payment
of the Debt as and when required and the timely performance of all
other obligations and covenants to be performed under the Loan
Documents (the "Obligations").
ARTICLE IV
TITLE AND AUTHORITY
Section 4.1. Title to the Property.
(a) Subject to the conveyance effectuated by this Deed of
Trust, Borrower has and will continue to have good and marketable
title in fee simple absolute to the Land and the Improvements and good
and marketable title to the Fixtures and Personal Property, in each
case, free and clear of liens, encumbrances and charges except the
Permitted Exceptions. To Borrower's knowledge, there are no facts or
circumstances that might give rise to a lien, encumbrance or charge on
the Property.
(b) Borrower owns and will continue to own all of the
other Property free and clear of all liens, encumbrances and charges
except the Permitted Exceptions.
(c) This Deed of Trust is and will remain a valid and
enforceable first lien on and security interest in the Property,
subject only to the Permitted Exceptions.
Section 4.2. Authority.
(a) Borrower is and will continue to be (i) duly
organized, validly existing and in good standing under the Laws of the
state or commonwealth in which it was organized or incorporated and
(ii) duly qualified to conduct business, in good standing, in the
state or commonwealth where the Property is located.
(b) Borrower has and will continue to have all approvals
required by Law or otherwise and full right, power and authority to
(i) own and operate the Property and carry on Borrower's business as
now conducted or as proposed to be conducted; (ii) execute and deliver
the Loan Documents; (iii) grant, mortgage, warrant the title to,
convey, assign and pledge the Property to Lender pursuant to the
provisions of this Deed of Trust; and (iv) perform the Obligations.
(c) The execution and delivery of the Loan Documents and
the performance of the Obligations do not and will not conflict with
or result in a default under any Laws or any Leases or Property
Documents and do not and will not conflict with or result in a default
under any agreement binding upon any party to the Loan Documents.
(d) The Loan Documents constitute and will continue to
constitute legal, valid and binding obligations of all parties to the
Loan Documents enforceable in accordance with their respective terms.
Section 4.3. No Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
Section 4.4. Litigation. There are no Proceedings or, to
Borrower's knowledge, investigations against or affecting Borrower or
the Property and, to Borrower's knowledge, there are no facts or
circumstances that might give rise to a Proceeding or an investigation
against or affecting Borrower or the Property. Borrower will give
Lender prompt notice of the commencement of any Proceeding or
investigation against or affecting the Property or Borrower which
could have a material adverse effect on the Property or on Lender's
interests in the Property or under the Loan Documents. Borrower also
will deliver to Lender such additional information relating to the
Proceeding or investigation as Lender may request from time to time.
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES
Section 5.1. Status of the Property.
(a) Borrower has obtained and will maintain in full force
and effect all certificates, licenses, permits and approvals that are
issued or required by Law or by any entity having jurisdiction over
the Property or over Borrower or that are necessary for the Permitted
Use, for occupancy and operation of the Property for the conveyance
described in this Deed of Trust and for the conduct of Borrower's
business on the Property in accordance with the Permitted Use.
(b) The Property is and will continue to be serviced by
all public utilities required for the Permitted Use of the Property.
(c) All roads and streets necessary for service of and
access to the Property for the current or contemplated use of the
Property have been completed and are and will continue to be
serviceable, physically open and dedicated to and accepted by the
Government for use by the public.
(d) The Property is free from damage caused by a Casualty.
(e) Except as disclosed in writing to Lender, all costs
and expenses of labor, materials, supplies and equipment used in the
construction of the Improvements have been paid in full.
Section 5.2. Maintenance of the Property. Borrower will
maintain the Property in thorough repair and good and safe condition,
suitable for the Permitted Use, including, to the extent necessary,
replacing the Fixtures and Personal Property with property at least
equal in quality and condition to that being replaced and free of
liens. Borrower will not erect any new buildings, building additions
or other structures on the Land or otherwise materially alter the
Improvements without Lender's prior consent which may be withheld in
Lender's sole discretion. Lender shall be deemed to have consented if
it has not responded within 30 days of receipt of Borrower's written
request to the Lender at the addresses set forth herein. In the event
that Borrower does not manage the Property itself, the Property will
be managed by a property manager satisfactory to Lender pursuant to a
management agreement satisfactory to Lender and terminable by Borrower
upon 30 days notice to the property manager.
Section 5.3. Change in Use. Borrower will use and permit the
use of the Property for the Permitted Use and for no other purpose.
Section 5.4. Waste. Borrower will not commit or permit any
waste (including economic and non-physical waste), impairment or
deterioration of the Property or any alteration, demolition or removal
of any of the Property, excluding any tenant alterations of a non-
structural nature, without Lender's prior consent which may be
withheld in Lender's sole discretion. Lender shall be deemed to have
consented if it has not responded within 30 days of receipt of
Borrower's written request to the Lender at the addresses set forth
herein.
Section 5.5. Inspection of the Property. Subject to the
rights of tenants under the Leases, Lender has the right to enter and
inspect the Property on reasonable prior notice, except during the
existence of an Event of Default, when no prior notice is required.
Lender has the right to engage an independent expert to review and
report on Borrower's compliance with Borrower's obligations under this
Deed of Trust to maintain the Property, comply with Law and refrain
from waste, impairment or deterioration of the Property and the
alteration, demolition or removal of any of the Property except as may
be permitted by the provisions of this Deed of Trust. If the
independent expert's report discloses material failure to comply with
such obligations or if Lender engages the independent expert after the
occurrence of an Event of Default, then the independent expert's
review and report will be at Borrower's expense, payable within 3 days
after demand.
Section 5.6. Leases and Rents.
(a) Borrower assigns the Leases and the Rents to Lender
absolutely and unconditionally and not merely as additional collateral
or security for the payment and performance of the Obligations, but
subject to a license back to Borrower of the right to collect the
Rents unless and until an Event of Default occurs at which time the
license will terminate automatically, all as more particularly set
forth in the Assignment, the provisions of which are incorporated in
this Deed of Trust by reference.
(b) Borrower appoints Lender as Borrower's attorney-in-
fact to execute unilaterally and record, at Lender's election, a
document subordinating this Deed of Trust to the Leases, provided that
the subordination will not affect (i) the priority of Lender's
entitlement to Insurance Proceeds or Condemnation Awards or (ii) the
priority of this Deed of Trust over intervening liens or liens arising
under or with respect to the Leases.
Section 5.7. Parking. Borrower will provide, maintain,
monitor and light parking areas within the Property, including any
sidewalks, aisles, streets, driveways, sidewalk cuts and rights-of-way
to and from the adjacent public streets, in a manner consistent with
the Permitted Use and sufficient to accommodate the greatest of: (i)
the number of parking spaces required by Law; or (ii) the number of
parking spaces required by the Leases and the Property Documents. The
parking areas will be reserved and used exclusively for ingress,
egress and parking for Borrower and the tenants under the Leases and
their respective employees, customers and invitees and in accordance
with the Leases and the Property Documents.
Section 5.8. Separate Tax Lot. The Property is and will
remain assessed for real estate tax purposes as one or more wholly
independent tax lots, separate from any property that is not part of
the Property.
Section 5.9. Changes in Zoning or Restrictive Covenants.
Borrower will not (i) initiate, join in or consent to any change in
any Laws pertaining to zoning, any restrictive covenant or other
restriction which would restrict the Permitted Uses for the Property;
(ii) permit the Property to be used to fulfil any requirements of Law
for the construction or maintenance of any improvements on property
that is not part of the Property; (iii) permit the Property to be used
for any purpose not included in the Permitted Use; or (iv) impair the
integrity of the Property as a single, legally subdivided zoning lot
separate from all other property.
Section 5.10. Lender's Right to Appear. If Lender determines,
in its sole discretion, that Borrower is not adequately protecting
Lender's interest in the Property, upon written notice to Borrower,
except in the case of an emergency, Lender has the right to appear in
and defend any Proceeding brought regarding the Property and to bring
any Proceeding, in the name and on behalf of Borrower or in Lender's
name.
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS
Section 6.1. Impositions.
(a) Borrower will pay each Imposition, unless the
Imposition is payable directly by the tenant, at least 15 days before
the date (the "Imposition Penalty Date") that is the earlier of (i)
the date on which the Imposition becomes delinquent and (ii) the date
on which any penalty, interest or charge for non-payment of the
Imposition accrues. If the Imposition is to be paid directly by a
tenant, Borrower shall deliver to Lender proof, in form and content
acceptable to Lender, of tenant's payment of such Imposition 15 days
before the Imposition Penalty Date.
(b) At least 10 days before each Imposition Penalty Date,
Borrower will deliver to Lender a receipted bill or other evidence of
payment.
(c) Borrower, at its own expense, may contest any Taxes or
Assessments, provided that the following conditions are met:
(i) not less than 30 days prior to the Imposition
Penalty Date, Borrower delivers to Lender notice
of the proposed contest;
(ii) the contest is by a Proceeding promptly
initiated and conducted diligently and in good
faith;
(iii) there is no Event of Default;
(iv) Borrower pays the contested Taxes or Assessments
under protest;
(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Documents;
(vi) the Proceeding precludes imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit; and
(vii) Borrower either (a) deposits with the
Accumulations Depositary reserves or
furnishes a bond or other security
satisfactory to Lender, in either case in
an amount sufficient to pay the contested
Taxes or Assessments, together with all
interest and penalties, or (b) Borrower
pays all of the contested Taxes or
Assessments under protest.
(d) Installment Payments. If any future Assessment is
payable in installments, Borrower will nevertheless pay the Assessment
in its entirety on the day the first installment becomes due and
payable or a lien, unless Lender, in its sole discretion, approves
payment of the Assessment in installments.
Section 6.2. Accumulations.
(a) If required by Lender pursuant to Subsection 6.2 (j)
hereof, Borrower will make an initial deposit with either Lender or a
mortgage servicer or financial institution designated or approved by
Lender from time to time to receive, hold and disburse the
Accumulations in accordance with this Section (the "Accumulations
Depositary"). On the first day of each calendar month during the Term
Borrower will deposit with the Accumulations Depositary an amount
equal to one-twelfth (1/12) of the annual Taxes and Assessments as
determined by Lender or its designee. At least 45 days before each
Imposition Penalty Date, Borrower will deliver to the Accumulations
Depositary any bills and other documents that are necessary to pay the
Taxes and Assessments.
(b) The Accumulations will be applied to the payment of
Taxes and Assessments. Any excess Accumulations after payment of
Taxes and Assessments will be returned to Borrower or credited against
future payments of the Accumulations, at Lender's election or as
required by Law. If the Accumulations are not sufficient to pay Taxes
and Assessments, Borrower will pay the deficiency to the Accumulations
Depositary within 5 days of demand. At any time after an Event of
Default occurs, Lender may apply the Accumulations as a credit against
any portion of the Debt selected by Lender in its sole discretion.
(c) The Accumulations Depositary will hold the
Accumulations as additional security for the Obligations until applied
in accordance with the provisions of this Deed of Trust. If Lender is
not the Accumulations Depositary, the Accumulations Depositary will
deliver the Accumulations to Lender upon Lender's demand at any time
after an Event of Default.
(d) If the Property is sold or conveyed, other than by
foreclosure or transfer in lieu of foreclosure, and the Property
remains subject to this Deed of Trust, all right, title and interest
of Borrower to the Accumulations will automatically, and without
necessity of further assignment, be held for the account of the new
owner, subject to the provisions of this Section and Borrower will
have no further interest in the Accumulations.
(e) Borrower waives all right to demand, receive or
collect any interest or other return on the Accumulations which will
be held in a non-interest bearing account (except as required by Law)
and may be commingled with other monies held by the Accumulations
Depositary and will not be held in trust.
(f) Lender has the right to pay, or to direct the
Accumulations Depositary to pay, any Taxes or Assessments unless
Borrower is contesting the Taxes or Assessments in accordance with the
provisions of this Deed of Trust, in which event any payment of the
contested Taxes or Assessments will be made under protest in the
manner prescribed by Law or, at Lender's election, will be withheld.
(g) If Lender assigns this Deed of Trust, Lender will pay,
or cause the Accumulations Depositary to pay, the unapplied balance of
the Accumulations to or at the direction of the assignee.
Simultaneously with the payment, Lender and the Accumulations
Depositary will be released from all liability with respect to the
Accumulations and Borrower will look solely to the assignee with
respect to the Accumulations. When the Obligations have been fully
satisfied, any unapplied balance of the Accumulations will be returned
to Borrower.
(h) Notwithstanding the requirements set forth in
subsections (a) through (g) of this Section 6.2 and provided Borrower
pays the Taxes and Assessments to the taxing authority when due, as an
alternative to the requirements set forth in subsections (a) through
(g), subject to the limitation in subsection 6.2(j) hereof, at
Closing, Borrower shall, at Borrower's option, either (1) deposit an
amount equal to the annual real estate taxes for the Property next due
in an interest bearing account with an agent acceptable to Lender or
approved by Lender or (2) deposit a Letter of Credit equal to such
amount in a form satisfactory to Lender, which Letter of Credit shall
be renewed from time to time at least 30 days prior to the expiration
date thereof, pursuant to an agreement satisfactory to Lender to be
held by a depository, satisfactory to Lender, in Lender's sole
discretion. The amount deposited pursuant to this Subsection 6.2(h)
shall be held as additional security for the Obligations for the term
of the Loan. So long as there is no default under the Loan Documents
and so long as Borrower has deposited the required amount or provided
Lender with an acceptable Letter of Credit, Borrower shall pay real
estate taxes for the Property directly to the appropriate tax
authority.
(i) So long as there is no default under the Loan
Documents, real estate tax escrows will not be required for any tenant
with a credit rating equivalent to a Standard and Poors rating of BBB-
if the tenant's lease states that real estate taxes are to be paid
directly by the tenant and Borrower provides Lender written evidence
within 30 days after payment verifying payment of real estate taxes.
(j) If there is an Event of Default, Lender may, in
Lender's sole discretion, in addition to all of its other rights and
remedies under the Loan Documents, draw down on the deposited amount
or Letter of Credit, as the case may be, to pay the real estate taxes
and require Borrower to comply with the provisions set forth in
subsections 6.2(a) through (g) hereof rather than the provisions of
Subsection 6.2(h) hereof, and the requirement to make such deposits
shall not relieve Borrower of the obligation to remedy and cure the
Event of Default.
Section 6.3. Changes in Tax Laws. If a Law requires the
deduction of the Debt from the value of the Property for the purpose
of taxation or imposes a tax, either directly or indirectly, on the
Debt, any Loan Document or Lender's interest in the Property, Borrower
will pay the tax with interest and penalties, if any. If Lender
determines that Borrower's payment of the tax may be unlawful,
unenforceable, usurious or taxable to Lender, the Debt will become
immediately due and payable on 60 days' prior notice unless the tax
must be paid within the 60-day period, in which case, the Debt will be
due and payable within the lesser period in accordance with this
Section 6.3. Notwithstanding anything herein to the contrary, no
Prepayment Premium or Evasion Premium (as such terms are defined in
the Note) shall be due or payable in the event that all or any portion
of the Debt is prepaid as a result of the payment to Lender of the
Debt pursuant to this Section 6.3.
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION
Section 7.1. Insurance Coverages.
(a) Borrower will maintain such insurance coverages and
endorsements in form and substance and in amounts as Lender may
require in its sole discretion, from time to time. Until Lender
notifies Borrower of changes in Lender's requirements, Borrower will
maintain not less than the insurance coverages and endorsements Lender
required for closing of the Loan for all insurance except earthquake
insurance. Borrower will maintain not less than a $20,000,000
earthquake insurance policy.
(b) The insurance, including renewals, required under this
Section will be issued on valid and enforceable policies and
endorsements satisfactory to Lender (the "Policies"). Each Policy
will contain a standard waiver of subrogation and a replacement cost
endorsement and will provide that Lender will receive not less than 30
days' prior written notice of any cancellation, termination or non-
renewal of a Policy or any material change other than an increase in
coverage and that Lender will be named under a standard mortgage
endorsement as loss payee.
(c) The insurance companies issuing the Policies (the
"Insurers") must be authorized to do business in the State or
Commonwealth where the Property is located, must have been in business
for at least 5 years, must carry an A.M. Best Company, Inc. policy
holder rating of A or better and an A.M. Best Company, Inc. financial
category rating of Class X or better and must be otherwise
satisfactory to Lender. Lender may select an alternative credit
rating agency and may impose different credit rating standards for the
Insurers. Notwithstanding Lender's right to approve the Insurers and
to establish credit rating standards for the Insurers, Lender will not
be responsible for the solvency of any Insurer.
(d) Notwithstanding Lender's rights under this Article,
Lender will not be liable for any loss, damage or injury resulting
from the inadequacy or lack of any insurance coverage.
(e) Borrower will comply with the provisions of the
Policies and with the requirements, notices and demands imposed by the
Insurers and applicable to Borrower or the Property.
(f) Borrower will pay the Insurance Premiums for each
Policy not less than 5 days before the expiration date of the Policy
being replaced or renewed and will deliver to Lender an original or,
if a blanket policy, a certified copy of each Policy marked "Paid" not
less than 15 days prior to the expiration date of the Policy being
replaced or renewed.
(g) Borrower will not carry separate insurance concurrent
in kind or form or contributing in the event of loss with any other
insurance carried by Borrower.
(h) Borrower will not carry any of the insurance required
under this Section on a blanket or umbrella policy without in each
instance Lender's prior approval which may be withheld in Lender's
sole discretion. If Lender approves, Borrower will deliver to Lender
a certified copy of the blanket policy which will allocate to the
Property the amount of coverage required under this Section and
otherwise will provide the same coverage and protection as would a
separate policy insuring only the Property. Lender shall be deemed to
have approved the policy if it has not responded within 30 days of
receipt of Borrower's written request to the Lender at the addresses
set forth herein.
(i) Borrower will give the Insurers prompt notice of any
change in ownership or occupancy of the Property. This subsection
does not abrogate the prohibitions on transfers set forth in this Deed
of Trust.
(j) If the Property is sold at a foreclosure sale or
otherwise is transferred so as to extinguish the Obligations, all of
Borrower's right, title and interest in and to the Policies then in
force will be transferred automatically to the purchaser or
transferee.
Section 7.2. Casualty and Condemnation.
(a) Borrower will give Lender notice of any Casualty
promptly after it occurs and will give Lender notice of any
Condemnation Proceeding promptly after Borrower receives notice of
commencement or notice that such a Condemnation Proceeding will be
commencing. Borrower promptly will deliver to Lender copies of all
documents Borrower delivers or receives relating to the Casualty or
the Condemnation Proceeding, as the case may be.
(b) Borrower authorizes Lender, at Lender's option, to act
on Borrower's behalf to collect, adjust and compromise any claims for
loss, damage or destruction under the Policies on such terms as Lender
determines in Lender's sole discretion. If there is no Event of
Default which remains uncured within the applicable cure period,
Lender shall consult with Borrower before collecting, adjusting or
compromising said claims. Borrower authorizes Lender to act, at
Lender's option, on Borrower's behalf in connection with any
Condemnation Proceeding. Borrower will execute and deliver to Lender
all documents requested by Lender and all documents as may be required
by Law to confirm such authorizations. Nothing in this Section will
be construed to limit or prevent Lender from joining with Borrower
either as a co-defendant or as a co-plaintiff in any Condemnation
Proceeding.
(c) If Lender elects not to act on Borrower's behalf as
provided in this Section, then Borrower promptly will file and
prosecute all claims (including Lender's claims) relating to the
Casualty and will prosecute or defend (including defense of Lender's
interest) any Condemnation Proceeding. Borrower will have the
authority to settle or compromise the claims or Condemnation
Proceeding, as the case may be, provided that Lender has approved in
Lender's sole discretion any compromise or settlement that exceeds
$250,000.00. Any check for Insurance Proceeds or Condemnation Awards,
as the case may be (the "Proceeds") will be made payable to Lender and
Borrower. Borrower will endorse the check to Lender immediately upon
Lender presenting the check to Borrower for endorsement or if Borrower
receives the check first, will endorse the check immediately upon
receipt and forward it to Lender. If any Proceeds are paid to
Borrower, Borrower immediately will deposit the Proceeds with Lender,
to be applied or disbursed in accordance with the provisions of this
Deed of Trust. Lender will be responsible for only the Proceeds
actually received by Lender.
Section 7.3. Application of Proceeds. After deducting any
third party and out-of-pocket costs incurred by Lender in collecting
the Proceeds, Lender may, in its sole discretion, (i) apply the
Proceeds as a credit against any portion of the Debt selected by
Lender in its sole discretion of the Debt; (ii) apply the Proceeds to
restore the Improvements, provided that Lender will not be obligated
to see to the proper application of the Proceeds and provided further
that any amounts released for Restoration will not be deemed a payment
on the Debt; or (iii) deliver the Proceeds to Borrower.
Section 7.4. Conditions to Availability of Proceeds for
Restoration. Notwithstanding the preceding Section, after a Casualty
or a Condemnation (a "Destruction Event"), Lender will make the
Proceeds (less any third party and out-of-pocket costs incurred by
Lender in collecting the Proceeds) available for Restoration in
accordance with the conditions for disbursements set forth in the
Section entitled "Restoration", provided that the following conditions
are met:
(i) Bedford Property Investors, Inc. or the
transferee under a Permitted Transfer, if any,
continues to be Borrower at the time of the
Destruction Event and at all times thereafter
until the Proceeds have been fully disbursed;
(ii) no monetary default under the Loan Documents
exists at the time of the Destruction Event and
no Event of Default has occurred during the 12
months prior to the Destruction Event;
(iii) all Leases in effect immediately prior to
the Destruction Event and all Property
Documents in effect immediately prior to
the Destruction Event that are essential to
the use and operation of the Property
continue in full force and effect
notwithstanding the Destruction Event;
(iv) if the Destruction Event is a Condemnation,
Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Improvements can
be restored to an economically and
architecturally viable unit;
(v) Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Proceeds are
sufficient to complete Restoration or if the
Proceeds are insufficient to complete
Restoration, Borrower first deposits with Lender
funds ("Additional Funds") that when added to
the Proceeds will be sufficient to complete
Restoration;
(vi) if the Destruction Event is a Casualty, Borrower
delivers to Lender evidence reasonably
satisfactory to Lender that the Insurer under
each affected Policy has not denied liability
under the Policy as to Borrower or the insured
under the Policy;
(vii) Lender is reasonably satisfied that the
proceeds of any business interruption
insurance in effect together with other
available gross revenues from the Property
are sufficient to pay Debt Service Payments
after paying the Impositions, Insurance
Premiums, reasonable and customary
operating expenses and capital expenditures
until Restoration is complete;
(viii) Lender is reasonably satisfied that
Restoration will be completed on or before
the date (the "Restoration Completion
Date") that is the earliest of: (A) 12
months prior to the Maturity Date; (B) 12
months after the Destruction Event; (C) the
earliest date required for completion of
Restoration under any Lease or any Property
Document; or (D) any date required by Law;
and
(ix) the annual Rents (excluding security deposits)
under Leases in effect on the date of the
Destruction Event are providing debt service
coverage for the annual Debt Service Payments of
1.15 after payment of annual Insurance Premiums,
Impositions and operating expenses of the
Property (including ground rent, if any),
provided that, if the Rents do not provide such
debt service coverage, then Borrower expressly
authorizes and directs Lender to apply an amount
from the Proceeds to reduction of Principal in
order to reduce the annual Debt Service Payments
sufficiently for such debt service coverage to
be achieved. The reduced debt service payments
will be calculated using the Fixed Interest Rate
and an amortization schedule that will achieve
the same proportionate amortization of the
reduced Principal over the then remaining Term
as would have been achieved if the Principal and
the originally scheduled Debt Service Payments
had not been reduced. Borrower will execute any
documentation that Lender deems reasonably
necessary to evidence the reduced Principal and
debt service payments.
Section 7.5. Restoration.
(a) If the total Proceeds for any Destruction Event are
$250,000.00 or less and Lender elects or is obligated by Law or under
this Article to make the Proceeds available for Restoration, Lender
will disburse to Borrower the entire amount received by Lender and
Borrower will commence Restoration promptly after the Destruction
Event and complete Restoration not later than the Restoration
Completion Date.
(b) If the Proceeds for any Destruction Event exceed
$250,000.00 and Lender elects or is obligated by Law or under this
Article to make the Proceeds available for Restoration, Lender will
disburse the Proceeds and any Additional Funds (the "Restoration
Funds") upon Borrower's request as Restoration progresses, generally
in accordance with normal construction lending practices for
disbursing funds for construction costs, provided that the following
conditions are met:
(i) Borrower commences Restoration promptly after
the Destruction Event and completes Restoration
on or before the Restoration Completion Date;
(ii) if Lender requests, Borrower delivers to Lender
prior to commencing Restoration, for Lender's
approval, plans and specifications and a
detailed budget for the Restoration;
(iii) Borrower delivers to Lender reasonably
satisfactory evidence of the costs of
Restoration incurred prior to the date of
the request, and such other documents as
Lender may request including mechanics'
lien waivers and title insurance
endorsements;
(iv) Borrower pays all costs of Restoration whether
or not the Restoration Funds are sufficient and,
if at any time during Restoration, Lender
determines that the undisbursed balance of the
Restoration Funds is insufficient to complete
Restoration, Borrower shall either: (1) deposit
with Lender, as part of the Restoration Funds,
an amount equal to the deficiency within 30 days
of receiving notice of the deficiency from
Lender or (2) provide Lender with a letter of
credit, in form and content satisfactory to
Lender, in an amount equal to the deficiency
within 30 days of receiving notice of the
deficiency from Lender; and
(v) there is no default under the Loan Documents at
the time Borrower requests funds or at the time
Lender disburses funds.
(c) If an Event of Default occurs at any time after the
Destruction Event, then Lender will have no further obligation to make
any remaining Proceeds available for Restoration and may apply any
remaining Proceeds as a credit against any portion of the Debt
selected by Lender in its sole discretion.
(d) Lender may elect at any time prior to commencement of
Restoration or while work is in progress to retain, at Borrower's
expense, an independent engineer or other consultant to review the
plans and specifications, to inspect the work as it progresses and to
provide reports. If any matter included in a report by the engineer
or consultant engaged by Lender is not in compliance with approved
plans and specifications, Lender may suspend disbursement of the
Restoration Funds until the matters contained in the report are
resolved to Lender's satisfaction.
(e) If Borrower fails to commence and complete Restoration
in accordance with the terms of this Article, then in addition to the
Remedies, Lender may elect to restore the Improvements on Borrower's
behalf and reimburse itself out of the Restoration Funds for costs and
expenses incurred by Lender in restoring the Improvements, or Lender
may apply the Restoration Funds as a credit against any portion of the
Debt selected by Lender in its sole discretion.
(f) Lender may commingle the Restoration Funds with its
general assets and will not be liable to pay any interest or other
return on the Restoration Funds unless otherwise required by Law.
Lender will not hold any Restoration Funds in trust. Lender may elect
to deposit the Restoration Funds with a depositary satisfactory to
Lender under a disbursement and security agreement satisfactory to
Lender.
(g) Borrower will pay all of Lender's out-of-pocket and
third party expenses incurred in connection with a Destruction Event
or Restoration. If Borrower fails to do so, then in addition to the
Remedies, Lender may from time to time reimburse itself out of the
Restoration Funds.
(h) Any excess Proceeds, excluding any proceeds from
business/rental interruption insurance maintained by Borrower,
remaining after Restoration less than $100,000 shall be delivered to
Borrower. If the excess Proceeds remaining after Restoration are more
than $100,000, Lender may elect, in its sole discretion to apply any
excess as a credit against any portion of the Debt as selected by
Lender in its sole discretion or to deliver the excess to Borrower.
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS
Section 8.1. Compliance with Law. Borrower, the Property and
the use of the Property comply and will continue to comply with Law
and with all agreements and conditions necessary to preserve and
extend all rights, licenses, permits, privileges, franchises and
concessions (including zoning variances, special exceptions and non-
conforming uses) relating to the Property or Borrower. Borrower will
notify Lender of the commencement of any investigation or Proceeding
relating to a possible violation of Law immediately after Borrower
receives notice thereof and, will deliver promptly to Lender copies of
all documents Borrower receives or delivers in connection with the
investigation or Proceeding. Borrower will not alter the Property in
any manner that would increase Borrower's responsibilities for
compliance with Law.
Section 8.2. Compliance with Agreements. There are no
defaults, events of defaults or events which, with the passage of time
or the giving of notice, would constitute an event of default under
the Property Documents. Borrower will pay and perform all of its
obligations under the Property Documents as and when required by the
Property Documents. Borrower will cause all other parties to the
Property Documents to pay and perform their obligations under the
Property Documents as and when required by the Property Documents.
Borrower will not amend or waive any provisions of the Property
Documents; exercise any options under the Property Documents; give any
approval required or permitted under the Property Documents that would
adversely affect the Property or Lender's rights and interests under
the Loan Documents; cancel or surrender any of the Property Documents;
or release or discharge or permit the release or discharge of any
party to or entity bound by any of the Property Documents, without, in
each instance, Lender's prior approval (excepting therefrom all
service contracts or other agreements entered into in the normal
course of business that are cancelable upon not more than 30 days
notice). Lender shall be deemed to have approved the same if it has
not responded within 90 days of receipt of Borrower's written request
to Lender at the addresses set forth herein. Borrower will deliver
promptly to Lender copies of any notices of default or of termination
that Borrower receives or delivers relating to any Property Document.
Section 8.3. ERISA Compliance.
(a) Borrower is not and will continue not to be an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") that is subject to
Title I of ERISA or a "plan" as defined in Section 4975(e)(1) of the
Code that is subject to Section 4975 of the Code, and Borrower's
assets do not and will not constitute "plan assets" of one or more
such plans for purposes of Title I of ERISA or Section 4975 of the
Code.
(b) Borrower is not and will continue not to be a
"governmental plan" within the meaning of Section 3(32) of ERISA, and
transactions by or with Borrower are not and will not be subject to
any Laws regulating investments of and fiduciary obligations with
respect to governmental plans.
(c) Borrower will not engage in any transaction which
would cause any obligation or any action under the Loan Documents,
including Lender's exercise of the Remedies, to be a non-exempt
prohibited transaction under ERISA.
Section 8.4. Section 6045(e) Filing. Borrower will supply or
cause to be supplied to Lender either (i) a copy of a completed Form
1099-B, Statement for Recipients of Proceeds from Real Estate, Broker
and Barter Exchange Proceeds prepared by Borrower's attorney or other
person responsible for the preparation of the form, together with a
certificate from the person who prepared the form to the effect that
the form has, to the best of the preparer's knowledge, been accurately
prepared and that the preparer will timely file the form; or (ii) a
certification from Borrower that the Loan is a refinancing of the
Property or is otherwise not required to be reported to the Internal
Revenue Service pursuant to Section 6045(e) of the Code. Under no
circumstances will Lender or Lender's counsel be obligated to file the
reports or returns.
ARTICLE IX
ENVIRONMENTAL
Section 9.1. Environmental Representations and Warranties.
Except as disclosed in the Environmental Report and to
Borrower's knowledge as of the date of this Deed of Trust:
(i) no Environmental Activity has occurred or is
occurring on the Property other than the use,
storage, and disposal of Hazardous Substances
which (A) is in the ordinary course of business
consistent with the Permitted Use; (B) is in
compliance with all Environmental Laws and (C)
has not resulted in Material Environmental
Contamination of the Property; and
(ii) no Environmental Activity has occurred or is
occurring on any property in the vicinity of the
Property which has resulted in Material
Environmental Contamination of the Property.
Section 9.2. Environmental Covenants.
(a) Borrower will not cause or permit any Material
Environmental Contamination of the Property.
(b) No Environmental Activity will occur on the Property
other than the use, storage and disposal of Hazardous Substances which
(A) is in the ordinary course of business consistent with the
Permitted Use; (B) is in compliance with all Environmental Laws; and
(C) does not create a risk of Material Environmental Contamination of
the Property.
(c) Borrower will notify Lender promptly upon Borrower
becoming aware of (i) any Material Environmental Contamination of the
Property or (ii) any Environmental Activity with respect to the
Property that is not in accordance with the preceding subsection (b).
Borrower promptly will deliver to Lender copies of all documents
delivered to or received by Borrower regarding the matters set forth
in this subsection, including notices of Proceedings or investigations
concerning any Material Environmental Contamination of the Property or
Environmental Activity or concerning Borrower's status as a
potentially responsible party (as defined in the Environmental Laws).
Borrower's notification of Lender in accordance with the provisions of
this subsection will not be deemed to excuse any default under the
Loan Documents resulting from the violation of Environmental Laws or
the Material Environmental Contamination of the Property or
Environmental Activity that is the subject of the notice. If Borrower
receives notice of a suspected violation of Environmental Laws in the
vicinity of the Property that poses a risk of Material Environmental
Contamination of the Property, Borrower will give Lender notice and
copies of any documents received relating to such suspected violation.
(d) From time to time at Lender's request, Borrower will
deliver to Lender any information known and documents available to
Borrower relating to the environmental condition of the Property.
(e) Lender may perform or engage an independent consultant
to perform an assessment of the environmental condition of the
Property and of Borrower's compliance with this Section on an annual
basis or at any time for reasonable cause or after an Event of
Default. In connection with the assessment: (i) Lender or consultant
may enter and inspect the Property and perform tests of the air, soil,
ground water and building materials; (ii) Borrower will cooperate and
use best efforts to cause tenants and other occupants of the Property
to cooperate with Lender or consultant; (iii) Borrower will receive a
copy of any final report prepared after the assessment, to be
delivered to Borrower not more than 10 days after Borrower requests a
copy and executes Lender's standard confidentiality and waiver of
liability letter; (iv) Borrower will accept custody of and arrange for
lawful disposal of any Hazardous Substances required to be disposed of
as a result of the tests; (v) Lender will not have liability to
Borrower with respect to the results of the assessment; (vi) Lender
will not be responsible for any damage to the Property resulting from
the tests described in this subsection and Borrower will look solely
to the consultants to reimburse Borrower for any such damage; and
(vii) Borrower acknowledges that the results of the assessment are to
be solely for Lender's benefit and Borrower may not rely on such
results for any purpose. The consultant's assessment and reports will
be at Borrower's expense (i) if the reports disclose any material
adverse change in the environmental condition of the Property from
that disclosed in the Environmental Report or any environmental report
previously ordered by Lender; (ii) if Lender engaged the consultant
when Lender had reasonable cause to believe Borrower was not in
compliance with the terms of this Article and, after written notice
from Lender, Borrower failed to provide promptly reasonable evidence
that Borrower is in compliance; or (iii) if Lender engaged the
consultant or after the occurrence of an Event of Default.
(f) If Lender has reasonable cause to believe that there
is Environmental Activity at the Property, Lender may elect in its
sole discretion to direct the Trustee to reconvey any portion of the
Property affected by the Environmental Activity and Borrower will
accept the reconveyance.
ARTICLE X
FINANCIAL REPORTING
Section 10.1. Financial Reporting.
(a) Borrower will deliver to Lender within 90 days after
the close of each Fiscal Year an annual financial statement, certified
by the chief financial officer of Borrower (the "Annual Financial
Statement") for the Property for the Fiscal Year, which will include a
comparative balance sheet, a cash flow statement, an income and
expense statement, a detailed breakdown of all receipts and expenses
and all supporting schedules. Upon request of Lender, Borrower will
also deliver to Lender within 90 days after the close of each Fiscal
Year the Form 10-K Annual Report to the Security and Exchange
Commission for Borrower. The Annual Financial Statement for the
Property will be:
(i) accompanied by an opinion of the CPA that, in
all material respects, the Annual Financial Statement fairly
presents the financial position of Borrower;
(ii) accompanied by an opinion of the chief
financial officer of Borrower that, in all material respects,
the Annual Financial Statement fairly presents the financial
position of the Property; and
(iii) separate and distinct from any consolidated
statement or report for Borrower or any other entity or any
other property.
Section 10.2. Annual Budget. Not less than 30 days prior to
the end of each Fiscal Year, Borrower will deliver to Lender, a
detailed comparative budget (the "Budget") for the Property for the
next succeeding Fiscal Year showing anticipated operating expenses,
Insurance Premiums, Impositions, leasing commissions, capital
improvement costs, tenant improvement costs and any other information
Lender requests. Unless Lender notifies Borrower within 60 days after
Lender receives the Budget that Lender disputes information in the
Budget, the Budget as submitted will constitute the Budget for the
next succeeding Fiscal Year. If Lender concludes in good faith that a
Budget needs material revision, Borrower will submit a revised Budget
to Lender, together with a detailed explanation of the revisions.
Borrower waives any defense or right of offset to the Obligations, and
any claim or counterclaim against Lender, arising out of any
discussions between Borrower and Lender regarding any Budget or
revised Budget delivered to Lender or the resolution of any
disagreements relating to a Budget or revised Budget including any
defense, right of offset, claim or counterclaim alleging in substance,
that by virtue of such delivery, discussions or resolution, Lender has
interfered with, influenced or controlled Borrower or the operations
at the Property.
ARTICLE XI
EXPENSES AND DUTY TO DEFEND
Section 11.1. Payment of Expenses.
(a) Borrower is obligated to pay all fees and expenses
(the "Expenses") incurred by Lender, Trustee or that are otherwise
payable in connection with the Loan, the Property or Borrower,
including attorneys' fees and expenses and any fees and expenses
relating to (i) the preparation, execution, acknowledgment, delivery
and recording or filing of the Loan Documents; (ii) any Proceeding or
other claim asserted against Lender; (iii) any inspection, assessment,
survey and test permitted under the Loan Documents; (iv) any
Destruction Event; (v) the preservation of Trustee's title, Lender's
security and the exercise of any rights or remedies available at Law,
in equity or otherwise; and (vi) the Leases and the Property
Documents.
(b) Borrower will pay the Expenses promptly on demand,
together with any applicable interest, premiums or penalties. If
Lender pays any of the Expenses, Borrower will reimburse Lender the
amount paid by Lender promptly upon demand, together with interest on
such amount at the Fixed Interest Rate from the date Lender paid the
Expenses through the fifth day after demand. Interest on such amount
will be at the Default Interest Rate from the sixth day after demand
through and including the date Borrower reimburses Lender. The
Expenses together with any applicable interest, premiums or penalties
constitute a portion of the Debt secured by this Deed of Trust.
Section 11.2. Duty to Defend. If Lender or any of its
trustees, officers, participants, employees or affiliates is a party
in any Proceeding relating to the Property, Borrower or the Loan,
Borrower will indemnify and hold harmless the party and will defend
the party with attorneys and other professionals retained by Borrower
and approved by Lender. Lender may elect to engage its own attorneys
and other professionals, at Borrower's expense, to defend or to assist
in the defense of the party. In all events, case strategy will be
determined by Lender if Lender so elects and no Proceeding will be
settled without Lender's prior approval which may be withheld in its
sole discretion. Lender shall be deemed to have approved if it has
not yet responded within 30 days of receipt of Borrower's written
request to Lender at the addresses set forth herein, provided however,
Lender shall not incur any liability or costs relating to any
settlement pursuant to this Section 11.2.
ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES
Section 12.1. Prohibitions on Transfers, Liens and
Encumbrances.
(a) Borrower acknowledges that in making the Loan, Lender
is relying to a material extent on the business expertise and net
worth of Borrower and Borrower's general partners, members or
principals and on the continuing interest that each of them has,
directly or indirectly, in the Property. Accordingly, except as
specifically set forth in this Deed of Trust, Borrower (i) will not,
and will not permit its partners, members or principals to, effect a
Transfer without Lender's prior approval, which may be withheld in
Lender's sole discretion and (ii) will keep the Property free from all
liens and encumbrances other than the lien of this Deed of Trust and
the Permitted Exceptions. Lender shall be deemed to have approved a
Transfer if it has not responded within 90 days of receipt of
Borrower's written request providing any information required by
Lender as to the proposed Transfer to the Lender at the addresses set
forth herein. A "Transfer" is defined as any sale, grant, lease
(other than bona fide third-party space leases with tenants),
conveyance, assignment or other transfer of, or any encumbrance or
pledge against, the Property, any interest in the Property, any
interest of Borrower's partners, members or principals in the
Property, or any change in Borrower's composition, in each instance
whether voluntary or involuntary, direct or indirect, by operation of
law or otherwise and including the grant of an option or the execution
of an agreement relating to any of the foregoing matters. A Transfer
shall not include the public trading of shares of the Borrower in
accordance with applicable law.
(b) Borrower represents, warrants and covenants that:
(i) Borrower is a publically traded Maryland
corporation whose five largest shareholders as
of March 1999 (the "Existing Shareholders") are:
Bed Preferred No. 1 Limited Partnership, Lend
Lease Rosen Real Estate Securities LLC, PRA
Securities Advisors LP, Heitman PRA Securities
Advisors LLC and Peter B. Bedford.
Section 12.2. Permitted Transfers.
(a) Notwithstanding the prohibitions regarding Transfers,
a Permitted Transfer (as defined in (b) below) may occur, provided
that the following conditions are met:
(i) at least 30 days prior to the proposed Permitted
Transfer, Borrower delivers to Lender a notice
that is sufficiently detailed to enable Lender
to determine that the proposed Permitted
Transfer complies with the terms of this
Section;
(ii) there is no default under the Loan Documents
either when Lender receives the notice or when
the proposed Permitted Transfer occurs;
(iii) the proposed Permitted Transfer will not
result in a violation of any of the
covenants contained in the Section
entitled, "ERISA Compliance" and Borrower
will deliver to Lender such documentation
of compliance as Lender requests in its
sole discretion;
(iv) when Lender receives the notice and when the
proposed Permitted Transfer occurs, the
transferee has never been an adverse party to
Lender in any litigation to which Lender was a
party; the transferee has never defaulted on a
loan from Lender or on any contract or other
agreement with Lender; the transferee has never
threatened litigation against Lender; and the
transferee is free from bankruptcy (for purposes
of this subsection "transferee" includes the
transferee's constituent entities at all levels
and "Lender" includes Lender's subsidiaries);
(v) Borrower pays all of Lender's expenses relating
to the Transfer including Lender's attorneys'
fees regardless of whether or not the proposed
Transfer is consummated; and
(vi) Lender is satisfied that the Property will
continue to be managed by a manager satisfactory
to Lender.
(b) Upon compliance with the conditions set forth in the
preceding subsection, the following Transfers (the "Permitted
Transfers") may occur without Lender's prior consent as provided for
in Section 12.1:
(i) Transfers of shares in Borrower among the
Existing Shareholders;
(ii) Public trading of shares in Borrower in
accordance with applicable law (for public trading of
Borrower's shares, Borrower will not be required to
notify Lender in the event of trading in its shares
and Borrower shall not be required to reimburse the
Lender for the review of trades); and
(iii) A one-time sale of the Property to one,
unaffiliated, bona fide purchaser, provided that the
following conditions are met:
(A) the transferee has a net worth of at least
$25,000,000;
(B) the transferee is (i) an Institutional
Investor or (ii) a developer or manager of first-class
commercial real estate comparable to the Property and
having a reputation in the industry at least equivalent to
that of Borrower as of the date of this Deed of Trust;
(C) the transferee has expressly assumed the
obligations of Borrower under the Property Documents and
under the Loan Documents; and
(D) subsequent to the Transfer, the Property is
managed by a property manager satisfactory to Lender; and
(E) Borrower pays to Lender a transfer fee of
one-half percent
(0.5%) of the outstanding Principal; provided, however, if,
in a single transaction there is a Transfer to the same
third-party approved by Lender, of the Property, together
with the properties described in the Deeds of Trust,
Assignments of Leases and Rents, Security Agreements and
Fixture Filings which secure the Promissory Note - Bedford
Portfolio #1 in the original principal amount of
$43,450,000 dated the date of this Deed of Trust executed
by Borrower pursuant to Lender's Loan Application and
Commitment Agreement #VR-5 for Lender's Mortgage Number M-
000462300 ("Bedford Portfolio #1 Loan") and the properties
described in the Deeds of Trust, Assignment of Leases and
Rents, Security Agreements and Fixture Filings which secure
the Promissory Note - Bedford Portfolio #3 in the original
principal amount of $27,350,000 dated the date of this Deed
of Trust executed by Borrower pursuant to Lender's Loan
Application and Commitment Agreement #VR-6 for Lender's
Mortgage Number M-000462400 ("Bedford Portfolio #3 Loan"),
then Borrower pays to Lender a transfer fee of one-fourth
percent (.25%) of the combined outstanding principal for
the Loan, the Bedford Portfolio #1 Loan and the Bedford
Portfolio #3 Loan.
Section 12.3. Right to Contest Liens. Borrower, at its own
expense, may contest the amount, validity or application, in whole or
in part, of any mechanic's, materialmen's or environmental liens in
which event Lender will refrain from exercising any of the Remedies,
provided that the following conditions are met:
(i) Borrower delivers to Lender notice of the
proposed contest not more than 30 days after the
lien is filed;
(ii) the contest is by a Proceeding promptly
initiated and conducted in good faith and with
due diligence;
(iii) there is no Event of Default other than the
Event of Default arising from the filing of
the lien;
(iv) the Proceeding suspends enforcement of
collection of the lien, imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit;
(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Document;
(vi) Borrower sets aside reserves or furnishes a bond
or other security satisfactory to Lender, in
either case in an amount sufficient to pay the
claim giving rise to the lien, together with all
interest and penalties, or Borrower pays the
contested lien under protest; and
(vii) with respect to an environmental lien,
Borrower is using best efforts to mitigate
or prevent any deterioration of the
Property resulting from the alleged
violation of any Environmental Laws or the
alleged Environmental Activity.
Section 12.4. Reconveyance Rights. Borrower may obtain the
reconveyance from Trustee of the property listed in Exhibit A of this
Deed of Trust (each of the five described properties being referred to
as a "Release Parcel") at any time more than 24 months after the
execution of this Deed of Trust, provided that the following
conditions are met for each reconveyance:
(i) Borrower shall not be entitled to the
reconveyance of more than two Release Parcels;
one reconveyance of a Release Parcel shall be
solely for the purpose of a sale and a transfer
of the Release Parcel to a bona fide purchaser.
The reconveyance of any Release Parcel shall
occur simultaneously with the addition of one or
more new properties to secure the Loan, in
accordance with the provisions of Section 12.5
of this Deed of Trust and the securing of the
lien of the Lender's mortgage to encumber the
Substitution Property (as defined in Section
12.5);
(ii) not less than 60 days prior to the proposed
date of reconveyance, Borrower delivers to
Lender a notice setting forth (A) the
proposed date of the reconveyance, (B) the
name of the proposed transferee (if the
Release Parcel is adjacent to a property
still covered by this Deed of Trust); (C)
the intended use of the Release Parcel; and
(D) any other information reasonably
necessary for Lender to analyze the terms
of the reconveyance. Not less than 30
days prior to the proposed reconveyance,
Borrower will deliver to Lender a copy of
the contract of sale or ground lease;
(iii) on the date Borrower delivers to Lender
notice of the proposed reconveyance and on
the date of the reconveyance, there is no
default under the Loan Documents on either
the notice date or the release date;
(iv) Borrower delivers to Lender evidence
satisfactory to Lender that Borrower has
complied with any requirements of the Property
Documents or the Leases applicable to the
reconveyance, that the reconveyance does not
violate any of the provisions of the Property
Documents or the Leases and, to the extent
necessary to comply with the Property Documents
or the Leases, that the transferee has assumed
all of Borrower's obligations relating to the
Release Parcel under the Property Documents;
(v) Borrower delivers to Lender an endorsement to
Lender's title insurance policy satisfactory to
Lender that (A) extends the effective date of
the policy to the effective date of the
reconveyance; (B) confirms no change in the
priority of the lien of Lender's Deed of Trust
on the balance of the Property or in the amount
of coverage; (C) consents to the reconveyance;
(D) waives any defense resulting from the
reconveyance; (E) to the extent of the value of
the Release Parcel, waives any right of
subrogation; and (F) includes the Substitution
Property (as defined in Section 12.5) or in the
alternative a separate title insurance policy
that affects the foregoing;
(vi) not less than 10 days prior to the date of the
reconveyance, Borrower delivers to Lender
consents to the reconveyance and substitution by
entities holding liens affecting the Property or
holding any other interest in the Property that
would be affected by the reconveyance and
substitution, including parties to any Property
Documents or to any Leases;
(vii) Borrower pays all expenses relating to the
reconveyance of the Release Parcel and the
addition of the Substitution Property,
including Lender's reasonable attorney's
fees if outside counsel is engaged by
Lender;
(viii) Borrower delivers to Lender copies of the
executed documents evidencing the transfer
of the Release Parcel as provided in
subsection (i) above;
(ix) Borrower delivers to Lender any other
information, approvals and documents reasonably
required by Lender relating to the reconveyance
and the substitution;
(x) The remaining Property together with the
Substitution Property must have a loan to value
ratio of no more than 70% and provide a debt
service coverage ratio of at least 1.50 times
the debt service coverage (in a manner
reasonably determined by Lender); and
(xi) Borrower must prepay 110% of the difference
between the Principal of the Loan allocable to
the Release Parcel that is being released and
70% of the appraised value for the Substitution
Property with a prepayment premium equal to the
Prepayment Percentage (as defined in the Note)
times the resulting difference. For purposes of
this Subsection 12.4 (xi) only, if the
prepayment premium payable hereunder is
calculated on the Discounted Value (defined in
the Note), then the discount rate used to
calculate the prepayment premium shall equal the
Discount Rate (defined in the Note) plus 50
basis points. Allocation of the original
outstanding principal balance will be determined
by Lender's appraisal at Closing. The
additional 10% principal proceeds from a
prepayment pursuant to this Subsection 12.4(xi)
shall be applied at par to a pro-rata reduction
of the Principal balance of the Loan allocated
among the remaining Property and the
Substitution Property.
Section 12.5. Substitution. In conjunction with the
reconveyance of a Release Parcel (described in Section 12.4),
Borrower shall provide to Lender, as security for the Loan, the
replacement and substitution of one or more new properties to secure
the Loan, as provided herein (the "Substitution Property"). In
connection with providing the Substitution Property, Borrower shall,
at Borrower's expense, execute and deliver to Lender loan documents,
including an additional deed of trust or mortgage, an assignment of
leases, a UCC-1 financing statement, and any other document, including
title policy, that Lender may require, in form and content acceptable
to Lender in Lender's sole discretion, necessary in order to add the
Substitution Property as collateral for the Loan. Borrower shall also
provide for the Substitution Property all items required for the
Property by the Loan Application and Commitment Agreement dated
February 26, 1999 by and between Lender and Borrower for the Loan.
Lender shall have the sole and absolute discretion to either approve
or disapprove any proposed substitution, provided that such approval
shall not be unreasonably withheld so long as the Substitution
Property is (i) of comparable quality as the Release Parcel being
replaced, and (ii) Borrower demonstrates to Lender's satisfaction that
the Substitution Property has a fair market value of no less than 90%
of the fair market value of the Release Parcel immediately prior to
substitution. Lender shall be deemed to have approved the proposed
substitution if it has not responded within 90 days of Borrower's
written request providing all information required by Lender as to the
proposed substitution at the addresses set forth herein. In all
cases, Lender shall have 90 days to respond from the date of Lender's
receipt of the last information provided by Borrower. Any
substitutions shall be on terms and conditions acceptable to Lender
and shall be subject to Lender's internal approval process. The
Substitution Property together with the other properties comprising
the Property shall be subject to a maximum loan-to-value ratio of
70%, have, at a minimum, a debt service coverage ratio equal to 1.50,
and a lease expiration profile acceptable to Lender. Furthermore,
Lender will not approve a substitution that would negatively impact
the loan portfolio with regard to its geographic diversity, credit
risk, leasing pro formas, tenant quality, lease expiration risk and
other similar factors, including the ability to legally cross-default
and cross-collateralize the Substitution Property with the remainder
of the portfolio, to be determined in Lender's sole discretion.
Borrower shall provide Lender with such information and documentation
(including leases and other property documents) as Lender shall deem
necessary to make an informed decision and properly evaluate the
proposed substitution. The Substitution Property will be required to
have a value of not less than 90% of the fair market value of the
Release Parcel to be reconveyed. Borrower shall be responsible for
all costs and expenses, including, without limitation, reasonable
attorney's fees (if outside counsel is engaged by Lender), incurred by
Lender in connection with any proposed transaction along with title
insurance premium and engineering, environmental and appraisal reports
associated with such substitution.
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 13.1. Further Assurances.
(a) Borrower will execute, acknowledge and deliver to
Lender or to any other entity Lender designates any additional or
replacement documents and perform any additional actions that Lender
determines are reasonably necessary to evidence, perfect or protect
Lender's first lien on and prior security interest in the Property or
to carry out the intent or facilitate the performance of the
provisions of the Loan Documents.
(b) Borrower appoints Lender as Borrower's attorney-in-
fact to perform, at Lender's election, any actions and to execute and
record any of the additional or replacement documents referred to in
this Section, in each instance only at Lender's election and only to
the extent Borrower has failed 3 days after written notice to Borrower
to comply with the terms of this Section.
Section 13.2. Estoppel Certificates.
(a) Within 10 days of Lender's request, but in no case
more often that twice in any 18 month period, except where Lender is
selling all or part of the Loan Borrower will deliver to Lender or to
any entity Lender designates a certificate certifying (i) the original
principal amount of the Note; (ii) the unpaid principal amount of the
Note; (iii) the Fixed Interest Rate; (iv) the amount of the then
current Debt Service Payments; (v) the Maturity Date; (vi) the date a
Debt Service Payment was last made; (vii) that, except as may be
disclosed in the statement, there are no defaults or events which,
with the passage of time or the giving of notice, would constitute an
Event of Default; and (viii) there are no offsets or defenses against
any portion of the Obligations except as may be disclosed in the
statement.
(b) If Lender requests, Borrower promptly will deliver to
Lender or to any entity Lender designates a certificate from each
party to any Property Document, certifying that the Property Document
is in full force and effect with no defaults or events which, with the
passage of time or the giving of notice, would constitute an event of
default under the Property Document and that there are no defenses or
offsets against the performance of its obligations under the Property
Document.
(c) If Lender requests, Borrower promptly will deliver to
Lender, or to any entity Lender designates, a certificate from each
tenant under a Lease then affecting the Property, certifying to any
facts regarding the Lease as Lender may require, including that the
Lease is in full force and effect with no defaults or events which,
with the passage of time or the giving of notice, would constitute an
event of default under the Lease by any party, that the rent has not
been paid more than one month in advance and that the tenant claims no
defense or offset against the performance of its obligations under the
Lease.
ARTICLE XIV
DEFAULTS AND REMEDIES
Section 14.1. Events of Default. The term "Event of Default"
means the occurrence of any of the following events:
(i) if Borrower fails to pay any amount due, as and
when required, under any Loan Document and the
failure continues for a period of 5 days;
(ii) if Borrower makes a general assignment for the
benefit of creditors or generally is not paying,
or is unable to pay, or admits in writing its
inability to pay, its debts as they become due;
or if Borrower or any other party commences any
Proceeding (A) relating to bankruptcy,
insolvency, reorganization, conservatorship or
relief of debtors, in each instance with respect
to Borrower; (B) seeking to have an order for
relief entered with respect to Borrower; (C)
seeking attachment, distraint or execution of a
judgment with respect to Borrower; (D) seeking
to adjudicate Borrower as bankrupt or insolvent;
(E) seeking reorganization, arrangement,
adjustment, winding-up, liquidation,
dissolution, composition or other relief with
respect to Borrower or Borrower's debts; or (F)
seeking appointment of a Receiver, trustee,
custodian, conservator or other similar official
for Borrower or for all or any substantial part
of Borrower's assets, provided that if the
Proceeding is commenced by a party other than
Borrower or any of Borrower's general partners
or members, Borrower will have 120 days to have
the Proceeding dismissed or discharged before an
Event of Default occurs;
(iii) if Borrower is in default beyond any
applicable grace and cure period under any
other mortgage, deed of trust, deed to
secure debt or other security agreement
encumbering the Property whether junior or
senior to the lien of this Deed of Trust;
(iv) if a Transfer occurs except in accordance with
the provisions of this Deed of Trust;
(v) if Borrower abandons the Property or ceases to
conduct its business at the Property;
(vi) if there is a default in the performance of any
other provision of any Loan Document or if there
is any inaccuracy or falsehood in any
representation or warranty contained in any Loan
Document which is not remedied within 30 days
after Borrower receives notice thereof, provided
that if the default, inaccuracy or falsehood is
of a nature that it cannot be cured within the
30-day period and during that period Borrower
commences to cure, and thereafter diligently
continues to cure, the default, inaccuracy or
falsehood, then the 30-day period will be
extended for a reasonable period not to exceed
120 days after the notice to Borrower; or
(vii) if Borrower fails to provide Lender with
the Leasing Letter of Credit (defined
below) or if Borrower fails to renew the
Leasing Letter of Credit; the "Leasing
Letter of Credit" shall mean the Letter of
Credit in the amount of Two Million Seven
Hundred Thousand and No/100 Dollars
($2,700,000) that Borrower is required to
provide and renew pursuant to Section 6.4
of the Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture
Filing Statement (Bedford Portfolio #1 -
Colorado Properties) dated the date of this
Deed of Trust, executed by Borrower for the
benefit of Lender pursuant to TIAA
Application #VR-5, M-000462300.
Section 14.2. Remedies.
(a) If an Event of Default occurs, Lender may take any of
the following actions (the "Remedies") without notice to Borrower:
(i) declare all or any portion of the Debt
immediately due and payable ("Acceleration");
(ii) pay or perform any Obligation;
(iii) institute a Proceeding for the specific
performance of any Obligation;
(iv) apply for and obtain the appointment of a
Receiver to be vested with the fullest powers
permitted by Law, without bond being required,
which appointment may be made ex parte, as a
matter of right and without regard to the value
of the Property, the amount of the Debt or the
solvency of Borrower or any other person liable
for the payment or performance of any portion of
the Obligations;
(v) directly, by its agents or representatives or
through a Receiver appointed by a court of
competent jurisdiction, enter on the Land and
Improvements, take possession of the Property,
dispossess Borrower and exercise Borrower's
rights with respect to the Property, either in
Borrower's name or otherwise;
(vi) institute a Proceeding for the foreclosure of
this Deed of Trust or, if applicable, sell by
power of sale all or any portion of the
Property, in any court of competent
jurisdiction;
(vii) institute proceedings for the partial
foreclosure of this Deed of Trust for the
portion of the Debt then due and payable,
subject to the continuing lien of this Deed
of Trust for the balance of the Debt not
then due;
(viii) deliver to Trustee a declaration of default
and demand for sale and a notice of default
and election to cause Borrower's interest
in the Property to be sold, which notice
Trustee or Lender will file in the official
records of the county in which the Property
is located;
(ix) exercise any and all rights and remedies granted
to a secured party under the Uniform Commercial
Code; and
(x) pursue any other right or remedy available to
Lender at Law, in equity or otherwise.
(b) If an Event of Default occurs, the license granted to
Borrower in the Loan Documents to collect Rents will terminate
automatically without any action required of Lender.
Section 14.3. General Provisions Pertaining to Remedies.
(a) The Remedies are cumulative and may be pursued by
Lender or Trustee concurrently or otherwise; at such time and in such
order as Lender or Trustee may determine in their sole discretion and
without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by Borrower.
(b) The enumeration in the Loan Documents of specific
rights or powers will not be construed to limit any general rights or
powers or impair Lender's or Trustee's rights with respect to the
Remedies.
(c) If Lender or Trustee exercises any of the Remedies,
Lender will not be deemed a mortgagee-in-possession unless Lender has
elected affirmatively to be a mortgagee-in-possession.
(d) Lender and Trustee will not be liable for any act or
omission of Lender or Trustee in connection with the exercise of the
Remedies.
(e) Lender's and Trustee's right to exercise any Remedy
will not be impaired by any delay in exercising or failure to exercise
the Remedy and the delay or failure will not be construed as extending
any cure period or constitute a waiver of the default or Event of
Default.
(f) If an Event of Default occurs, Lender's payment or
performance or acceptance of payment or performance will not be deemed
a waiver or cure of the Event of Default.
(g) Lender's acceptance of partial payment or receipt of
Rents will not extend or affect any grace period or constitute a
waiver of a default or Event of Default or constitute a rescission of
Acceleration.
Section 14.4. Foreclosure by Power of Sale.
(a) Should Lender elect, following an Event of Default, to
foreclose this Deed of Trust by exercise of the power of sale
contained in this Deed of Trust, Lender will notify Trustee and
deposit, if required by Trustee, with Trustee this Deed of Trust, the
Note and such of the other Loan Documents as Trustee may require.
(b) Upon receipt of the notice from Lender, Trustee will
have recorded, published and delivered to Borrower any notice of
default as is then required by Law. Trustee will, without demand on
Borrower after lapse of any time as may then be required by Law and
after notice of sale having been given as required by Law, sell the
Property at the time and place of sale fixed by it in the notice of
sale, either as a whole, or in separate lots or parcels or items and
in such order as Lender may direct Trustee so to do, at public auction
to the highest bidder as provided by Law. Trustee will deliver to the
purchaser of the Property a good and sufficient deed or deeds
conveying the Property so sold, but without any covenant or warranty,
express or implied. The recitals in the deed of any matter or fact
will be conclusive proof of the truthfulness of the recitals. Any
person, including Borrower, Trustee or Lender may purchase at the
sale, and Borrower will warrant and defend the title of the purchaser.
(c) After deducting all costs, fees and expenses of Lender
and Trustee, including costs of evidence of title in connection with
sale, Lender will apply the proceeds of sale in the following
priority, to payment of (i) first, all sums expended under the terms
of the Loan Documents, not then repaid, with accrued interest at the
Default Rate; (ii) second, the Debt in such order as Lender
determines; and (iii) the remainder, if any to the person or persons
legally entitled to it.
(d) Trustee may postpone sale of all or any portion of the
Property as permitted by Law, and without further notice make such
sale at the time fixed by the last postponement, or may, in its
discretion, give a new notice of sale.
(e) A sale of less than the whole of the Property or any
defective or irregular sale made under this Deed of Trust will not
exhaust the power of sale provided for in this Deed of Trust; and
subsequent sales may be made until the Obligations have been
satisfied, or the entire Property sold, without defect or
irregularity.
Section 14.5. General Provisions Pertaining to Mortgagee-in-
Possession or Receiver.
(a) If an Event of Default occurs and without notice to
Borrower, any court of competent jurisdiction will, upon application
by Lender, appoint a Receiver as designated in the application and
issue an injunction prohibiting Borrower from interfering with the
Receiver, collecting Rents, disposing of any Rents or any part of the
Property, committing waste or doing any other act that will tend to
affect the preservation of the Leases, the Rents and the Property and
Borrower approves the appointment of the designated Receiver or any
other Receiver appointed by the court. By execution of this Deed of
Trust, Borrower irrevocably consents to the appointment of a receiver
to be made ex parte and as a matter of right to Lender or Trustee,
either before or after sale of the Property, without further notice,
and without regard to the solvency or insolvency, at the time of
application for the Receiver, of the person or persons, if any, liable
for the payment of any portion of the Debt and the performance of any
portion of the Obligations and without regard to the value of the
Property or whether the Property is occupied as a homestead and
without bond being required of the applicant.
(b) The Receiver will be vested with the fullest powers
permitted by Law including all powers necessary or usual in similar
cases for the protection, possession and operation of the Property and
all the powers and duties of Lender as a mortgagee-in-possession as
provided in this Deed of Trust and may continue to exercise all the
usual powers and duties until the Receiver is discharged by the court.
(c) In addition to the Remedies and all other available
rights, Lender or the Receiver may take any of the following actions:
(i) take exclusive possession, custody and control
of the Property and manage the Property so as to
prevent waste;
(ii) require Borrower to deliver to Lender or the
Receiver all keys, security deposits, operating
accounts, prepaid Rents, past due Rents, the
Books and Records and all original counterparts
of the Leases and the Property Documents;
(iii) collect, sue for and give receipts for the
Rents and, after paying all expenses of
collection, including reasonable
receiver's, broker's and attorney's fees,
apply the net collections to any portion of
the Debt selected by Lender in its sole
discretion,
(iv) enter into, modify, extend, enforce, terminate,
renew or accept surrender of Leases and evict
tenants except that in the case of a Receiver,
such actions may be taken only with the written
consent of Lender as provided in this Deed of
Trust and in the Assignment;
(v) enter into, modify, extend, enforce, terminate
or renew Property Documents except that in the
case of a Receiver, such actions may be taken
only with the written consent of Lender as
provided in this Deed of Trust and in the
Assignment;
(vi) appear in and defend any Proceeding brought in
connection with the Property and bring any
Proceeding to protect the Property as well as
Borrower's and Lender's respective interests in
the Property (unless any such Proceeding has
been assigned previously to Lender in the
Assignment, or if so assigned, Lender has not
expressly assigned such Proceeding to the
Receiver and consented to such appearance or
defense by Receiver); and
(vii) perform any act in the place of Borrower
that Lender or the Receiver deems necessary
(A) to preserve the value, marketability or
rentability of the Property; (B) to
increase the gross receipts from the
Property; or (C) otherwise to protect
Borrower's and Lender's respective
interests in the Property.
(d) Borrower appoints Lender as Borrower's attorney-in-
fact, at Lender's election, to perform any actions and to execute and
record any instruments necessary to effectuate the actions described
in this Section, in each instance only at Lender's election and only
to the extent Borrower has failed to comply with the provisions of
this Section.
Section 14.6. General Provisions Pertaining to Foreclosures
and the Power of Sale. The following provisions will apply to any
Proceeding to foreclose and to any sale of the Property by power of
sale or pursuant to a judgment of foreclosure and sale:
(i) Lender's or Trustee's right to institute a
Proceeding to foreclose or to sell by power of
sale will not be exhausted by a Proceeding or a
sale that is defective or not completed or by
conducting separate sales of portions of the
Property;
(ii) any sale may be postponed or adjourned by Lender
by public announcement at the time and place
appointed for the sale without further notice;
(iii) with respect to sale pursuant to a judgment
of foreclosure and sale, the Property may
be sold as an entirety or in parcels, at
one or more sales, at the time and place,
on terms and in the order that Lender deems
expedient in its sole discretion;
(iv) if a portion of the Property is sold pursuant to
this Article, the Loan Documents will remain in
full force and effect with respect to any
unmatured portion of the Debt and this Deed of
Trust will continue as a valid and enforceable
first lien on and security interest in the
remaining portion of the Property, subject only
to the Permitted Exceptions, without loss of
priority and without impairment of any of
Lender's or Trustee's rights and remedies with
respect to the unmatured portion of the Debt;
(v) Lender may bid for and acquire the Property at a
sale and, in lieu of paying cash, may credit the
amount of Lender's bid against any portion of
the Debt selected by Lender in its sole
discretion after deducting from the amount of
Lender's bid the expenses of the sale, costs of
enforcement and other amounts that Lender is
authorized to deduct at Law, in equity or
otherwise; and
(vi) Lender's receipt of the proceeds of a sale will
be sufficient consideration for the portion of
the Property sold and Lender will apply the
proceeds as set forth in this Deed of Trust.
Section 14.7. Application of Proceeds. Lender may apply the
proceeds of any sale of the Property pursuant to a judgment of
foreclosure and sale and any other amounts collected by Lender in
connection with the exercise of the Remedies to payment of the Debt in
such priority and proportions as Lender may determine in its sole
discretion or in such priority and proportions as required by Law.
Section 14.8. Power of Attorney. Borrower appoints Lender as
Borrower's attorney-in-fact to perform any actions necessary and
incidental to exercising the Remedies.
Section 14.9. Tenant at Sufferance. If Lender, Trustee or a
Receiver enters the Property in the exercise of the Remedies and
Borrower is allowed to remain in occupancy of the Property, Borrower
will pay to Lender, Trustee or the Receiver, as the case may be, in
advance, a reasonable rent for the Property occupied by Borrower. If
Borrower fails to pay the rent, Borrower may be dispossessed by the
usual Proceedings available against defaulting tenants.
ARTICLE XV
LIMITATION OF LIABILITY
Section 15.1. Limitation of Liability.
(a) Notwithstanding any provision in the Loan Documents to
the contrary, except as set forth in subsections (b) and (c), if
Lender seeks to enforce the collection of the Debt, Lender will
foreclose this Deed of Trust instead of instituting suit on the Note.
If a lesser sum is realized from a foreclosure of this Deed of Trust
and sale of the Property than the then outstanding Debt, Lender will
not institute any Proceeding against Borrower or Borrower's general
partners, if any, for or on account of the deficiency, except as set
forth in subsections (b) and (c).
(b) The limitation of liability in subsection (a) will not
affect or impair (i) the lien of this Deed of Trust or Lender's other
rights and Remedies under the Loan Documents, including Lender's right
as mortgagee or secured party to commence an action to foreclose any
lien or security interest Lender has under the Loan Documents; (ii)
the validity of the Loan Documents or the Obligations; (iii) Lender's
rights under any Loan Document that are not expressly non-recourse; or
(iv) Lender's right to present and collect on any letter of credit or
other credit enhancement document held by Lender in connection with
the Obligations.
(c) The following are excluded and excepted from the
limitation of liability in subsection (a) and Lender may recover
personally against Borrower and its general partners, if any, for the
following:
(i) all losses suffered and liabilities and expenses
incurred by Lender relating to any fraud or
intentional misrepresentation or omission by
Borrower or any of Borrower's partners, members,
officers, directors, shareholders or principals
in connection with (A) the performance of any of
the conditions to Lender making the Loan; (B)
any inducements to Lender to make the Loan; (C)
the execution and delivery of the Loan
Documents; (D) any certificates, representations
or warranties given in connection with the Loan
(including, but not limited to, Estoppel
Certificates executed by Borrower and
representations made by Borrower related to
Property); or (E) Borrower's performance of the
Obligations;
(ii) all Rents derived from the Property after a
default under the Loan Documents which default
is a basis of a Proceeding by Lender to enforce
collection of the Debt and all moneys that, on
the date such a default occurs, are on deposit
in one or more accounts used by or on behalf of
Borrower relating to the operation of the
Property, except to the extent properly applied
to payment of Debt Service Payments,
Impositions, Insurance Premiums and any
reasonable and customary expenses incurred by
Borrower in the operation, maintenance and
leasing of the Property or delivered to Lender;
(iii) the cost of remediation of any
Environmental Activity affecting the
Property, any diminution in the value of
the Property arising from any Environmental
Activity affecting the Property and any
other losses suffered and liabilities and
expenses incurred by Lender relating to a
default under the Article entitled
"Environmental";
(iv) all security deposits collected by Borrower or
any of Borrower's predecessors and not refunded
to Tenants in accordance with their respective
Leases, applied in accordance with the Leases or
Law or delivered to Lender, and all advance
rents collected by Borrower or any of Borrower's
predecessors and not applied in accordance with
the Leases or delivered to Lender;
(v) the replacement cost of any Fixtures or Personal
Property removed from the Property after a
default occurs;
(vi) all losses suffered and liabilities and expenses
incurred by Lender relating to any acts or
omissions by Borrower that result in waste
(including economic and non-physical waste) on
the Property;
(vii) all protective advances and other payments
made by Lender pursuant to express
provisions of the Loan Documents to protect
Lender's security interest in the Property
or to protect the assignment of the
property described in and effected by the
Assignment, but only to the extent that the
Rents would have been sufficient to permit
Borrower to make the payment and Borrower
failed to do so;
(viii) all mechanics' or similar liens relating to
work performed on or materials delivered to
the Property prior to a foreclosure sale of
the Property, but only to the extent Lender
had advanced funds to pay for the work or
materials;
(ix) all Proceeds that are not applied in accordance
with this Deed of Trust or not paid to Lender as
required under this Deed of Trust;
(x) all losses suffered and liabilities and expenses
incurred by Lender relating to a Transfer that
is not permitted under the Section entitled
"Permitted Transfers";
(xi) all losses suffered and liabilities and expenses
incurred by Lender relating to forfeiture or
threatened forfeiture of the Property to the
Government; and
(xii) all losses suffered and liabilities and
expenses incurred by Lender relating to any
default by Borrower under any of the
provisions of this Deed of Trust relating
to ERISA including the prohibition on any
Transfer that results in a violation of
ERISA.
(d) Nothing under subsection (a) above will be deemed to
be a waiver of any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the Bankruptcy Code or
under any other Law relating to bankruptcy or insolvency to file a
claim for the full amount of the Debt or to require that all
collateral will continue to secure all of the Obligations in
accordance with the Loan Documents.
ARTICLE XVI
WAIVERS
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. BORROWER
WAIVES THE RIGHT TO CLAIM ANY STATUTE OF LIMITATIONS AS A DEFENSE TO
BORROWER'S PAYMENT AND PERFORMANCE OF THE OBLIGATIONS.
Section 16.2. WAIVER OF NOTICE. BORROWER WAIVES THE RIGHT TO
RECEIVE ANY NOTICE FROM LENDER OR TRUSTEE WITH RESPECT TO THE LOAN
DOCUMENTS EXCEPT FOR THOSE NOTICES THAT LENDER OR TRUSTEE IS EXPRESSLY
REQUIRED TO DELIVER PURSUANT TO THE LOAN DOCUMENTS.
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS.
BORROWER WAIVES THE BENEFIT OF ANY RIGHTS OF MARSHALLING OR ANY OTHER
RIGHT TO DIRECT THE ORDER IN WHICH ANY OF THE PROPERTY WILL BE (i)
SOLD; OR (ii) MADE AVAILABLE TO ANY ENTITY IF THE PROPERTY IS SOLD BY
POWER OF SALE OR PURSUANT TO A JUDGMENT OF FORECLOSURE AND SALE.
BORROWER ALSO WAIVES THE BENEFIT OF ANY LAWS RELATING TO APPRAISEMENT,
VALUATION, STAY, EXTENSION, REINSTATEMENT, MORATORIUM, HOMESTEAD AND
EXEMPTION RIGHTS OR A SALE IN INVERSE ORDER OF ALIENATION.
Section 16.4. WAIVER OF TRIAL BY JURY. BORROWER WAIVES TRIAL
BY JURY IN ANY PROCEEDING BROUGHT BY, OR AGAINST, OR COUNTERCLAIM OR
CROSS-COMPLAINT ASSERTED BY OR AGAINST, LENDER OR TRUSTEE RELATING TO
THE LOAN, THE PROPERTY DOCUMENTS OR THE LEASES.
Section 16.5. WAIVER OF COUNTERCLAIM. BORROWER WAIVES THE
RIGHT TO ASSERT A COUNTERCLAIM OR CROSS-COMPLAINT, OTHER THAN
COMPULSORY OR MANDATORY COUNTERCLAIMS OR CROSS-COMPLAINTS, IN ANY
PROCEEDING LENDER OR TRUSTEE BRINGS AGAINST BORROWER RELATING TO THE
LOAN, INCLUDING ANY PROCEEDING TO ENFORCE REMEDIES.
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING. BORROWER
WAIVES ANY RIGHT BORROWER MAY HAVE UNDER LAW TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED
BY THE LOAN DOCUMENTS TO LENDER AND BORROWER WAIVES THE RIGHTS, IF
ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN
ACCORDANCE WITH THE PROVISIONS OF THE LOAN DOCUMENTS ON THE GROUND (IF
SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR
JUDICIAL HEARING.
Section 16.7. WAIVER OF SUBROGATION. BORROWER WAIVES ALL
RIGHTS OF SUBROGATION TO LENDER'S RIGHTS OR CLAIMS RELATED TO OR
AFFECTING THE PROPERTY OR ANY OTHER SECURITY FOR THE LOAN UNTIL THE
LOAN IS PAID IN FULL AND ALL FUNDING OBLIGATIONS UNDER THE LOAN
DOCUMENTS HAVE BEEN TERMINATED.
Section 16.8. GENERAL WAIVER. BORROWER ACKNOWLEDGES THAT (i)
BORROWER AND BORROWER'S PARTNERS, MEMBERS OR PRINCIPALS, AS THE CASE
MAY BE, ARE KNOWLEDGEABLE BORROWERS OF COMMERCIAL FUNDS AND
EXPERIENCED REAL ESTATE DEVELOPERS OR INVESTORS WHO UNDERSTAND FULLY
THE EFFECT OF THE ABOVE PROVISIONS; (ii) LENDER WOULD NOT MAKE THE
LOAN WITHOUT THE PROVISIONS OF THIS ARTICLE; (iii) THE LOAN IS A
COMMERCIAL OR BUSINESS LOAN UNDER THE LAWS OF THE STATE OR
COMMONWEALTH WHERE THE PROPERTY IS LOCATED NEGOTIATED BY LENDER AND
BORROWER AND THEIR RESPECTIVE ATTORNEYS AT ARMS LENGTH; AND (iv) ALL
WAIVERS BY BORROWER IN THIS ARTICLE HAVE BEEN MADE VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY, AFTER BORROWER FIRST HAS BEEN INFORMED
BY COUNSEL OF BORROWER'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE
RIGHTS, AND HAVE BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND
ABANDONMENT OF A KNOWN RIGHT AND PRIVILEGE. THE FOREGOING
ACKNOWLEDGMENT IS MADE WITH THE INTENT THAT LENDER AND ANY SUBSEQUENT
HOLDER OF THE NOTE WILL RELY ON THE ACKNOWLEDGMENT.
ARTICLE XVII
NOTICES
Section 17.1. Notices. All acceptances, approvals, consents,
demands, notices, requests, waivers and other communications (the
"Notices") required or permitted to be given under the Loan Documents
must be in writing and (a) delivered personally by a process server
providing a sworn declaration evidencing the date of service, the
individual served, and the address where the service was made; (b)
sent by certified mail, return receipt requested; or (c) delivered by
nationally recognized overnight delivery service that provides
evidence of the date of delivery, with all charges prepaid (for next
morning delivery if sent by overnight delivery service), addressed to
the appropriate party at its address listed below:
If to Lender: Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017
Attention: Director Portfolio
Management
Mortgage and Real Estate
Application #VR-7
Mortgage #000462600
with a courtesy
copy to: Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017
Attention: Vice President and Chief
Counsel - Mortgage and Real Estate Law
Application #VR-7
Mortgage #000462600
If to Borrower:
Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, California 94549
Attn: Ms. Hanh Kihara
Chief Financial Officer and Senior Vice President
Application #VR-7
Mortgage #000462600
with a courtesy copy to:
Sherman & Sterling
555 California Street, 20th Floor
San Francisco, California 94104
Attn: Emery Mitchell, Esq.
Barbara J.S. McKee, Esq.
TIAA Appl. #VR-7
M-000462600
If to Trustee: First American Title Insurance Company
1850 Mt. Diablo Boulevard, Suite 300
Walnut Creek, California 94596
Attention: Pamela Nicolini
Lender and Borrower each may change from time to time the address to
which Notices must be sent, by notice given in accordance with the
provisions of this Section. All Notices given in accordance with the
provisions of this Section will be deemed to have been received on the
earliest of (i) actual receipt; (ii) Borrower's rejection of delivery;
or (iii) 3 Business Days after having been deposited in any mail
depository regularly maintained by the United States postal service,
if sent by certified mail, or 1 Business Day after having been
deposited with a nationally recognized overnight delivery service, if
sent by overnight delivery or on the date of personal service, if
served by a process server.
Section 17.2. Change in Borrower's Name or Place of Business.
Borrower will immediately notify Lender in writing of any change in
Borrower's name or the place of business set forth in the beginning of
this Deed of Trust.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.
Section 18.2. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.
Section 18.3. Lender's Discretion. Wherever under the Loan
Documents any matter is required to be satisfactory to Lender, Lender
has the right to approve or determine any matter or Lender has an
election, Lender's approval, determination or election will be made in
Lender's reasonable discretion unless expressly provided to the
contrary.
Section 18.4. Unenforceable Provisions. If any provision in
the Loan Documents is found to be illegal or unenforceable or would
operate to invalidate any of the Loan Documents, then the provision
will be deemed expunged and the Loan Documents will be construed as
though the provision was not contained in the Loan Documents and the
remainder of the Loan Documents will remain in full force and effect.
Section 18.5. Survival of Borrower's Obligations. Borrower's
representations, warranties and covenants contained in the Loan
Documents will continue in full force and effect and survive (i)
satisfaction of the Obligations; (ii) reconveyance of the lien of the
Property by Trustee; (iii) assignment or other transfer of all or any
portion of Lender's interest in the Loan Documents or the Property;
(iv) Lender's or Trustee's exercise of any of the Remedies or any of
Lender's or Trustee's other rights under the Loan Documents; (v) a
Transfer; (vi) amendments to the Loan Documents; and (vii) any other
act or omission that might otherwise be construed as a release or
discharge of Borrower.
Section 18.6. Relationship Between Borrower and Lender; No
Third Party Beneficiaries.
(a) Lender is not a partner of or joint venturer with
Borrower or any other entity as a result of the Loan or Lender's
rights under the Loan Documents; the relationship between Lender and
Borrower is strictly that of creditor and debtor. Each Loan Document
is an agreement between the parties to that Loan Document for the
mutual benefit of the parties and no entities other than the parties
to that Loan Document will be a third party beneficiary or will have
any claim against Lender or Borrower by virtue of the Loan Document.
As between Lender and Borrower, any actions taken by Lender under the
Loan Documents will be taken for Lender's protection only, and Lender
has not and will not be deemed to have assumed any responsibility to
Borrower or to any other entity by virtue of Lender's actions.
(b) All conditions to Lender's performance of its
obligations under the Loan Documents are imposed solely for the
benefit of Lender. No entity other than Lender will have standing to
require satisfaction of the conditions in accordance with their
provisions or will be entitled to assume that Lender will refuse to
perform its obligations in the absence of strict compliance with any
of the conditions.
Section 18.7. Partial Reconveyances or Releases, Extensions,
Waivers. Lender may: (i) permit the reconveyance of any part of the
Property or release any entity obligated for the Obligations; (ii)
extend the time for payment or performance of any of the Obligations
or otherwise amend the provisions for payment or performance by
agreement with any entity that is obligated for the Obligations or
that has an interest in the Property; (iii) accept additional security
for the payment and performance of the Obligations; and (iv) waive any
entity's performance of an Obligation, release any entity or
individual now or in the future liable for the performance of the
Obligation or waive the exercise of any Remedy or option. Lender may
exercise any of the foregoing rights without notice, without regard to
the amount of any consideration given, without affecting the priority
of this Deed of Trust, without releasing any entity not specifically
released from its obligations under the Loan Documents, without
releasing any guarantor(s) or surety(ies) of the Obligations, without
effecting a novation of the Loan Documents and, with respect to a
waiver, without waiving future performance of the Obligation or
exercise of the Remedy waived.
Section 18.8. Service of Process. Borrower irrevocably
consents to service of process by registered or certified mail,
postage prepaid, return receipt requested, to Borrower at its address
set forth in the Article entitled "Notices" or any other address to
which such address has been changed as permitted hereunder.
Section 18.9. Entire Agreement. Oral agreements or
commitments between Borrower and Lender to lend money, to extend
credit or to forbear from enforcing repayment of a debt, including
promises to extend or renew the debt, are not enforceable. Any
agreements among Borrower, Lender and Trustee relating to the Loan are
contained in the Loan Documents, which contain the complete and
exclusive statement of the agreements among Borrower, Lender and
Trustee, except as Borrower, Lender and, if applicable, Trustee may
later agree in writing to amend the Loan Documents. The language of
each Loan Document will be construed as a whole according to its fair
meaning and will not be construed against the draftsman.
Section 18.10. No Oral Amendment. The Loan Documents may not
be amended, waived or terminated orally or by any act or omission made
individually by Borrower, Lender or Trustee but may be amended, waived
or terminated only by a written document signed by the party against
which enforcement of the amendment, waiver or termination is sought.
Section 18.11. Severability. The invalidity, illegality or
unenforceability of any provision of any of the Loan Documents will
not affect any other provisions of the Loan Documents, which will be
construed as if the invalid, illegal or unenforceable provision never
had been included.
Section 18.12. Covenants Run with the Land. Subject to the
restrictions on transfer contained in the Article entitled "TRANSFERS,
LIENS AND ENCUMBRANCES", all of the covenants of this Deed of Trust
and the Assignment run with the Land, will bind all parties hereto and
all tenants and subtenants of the Land or the Improvements and their
respective heirs, executors, administrators, successors and assigns,
and all occupants and subsequent owners of the Property, and will
inure to the benefit of Lender and all subsequent holders of the Note
and this Deed of Trust.
Section 18.13. Time of the Essence. Time is of the essence
with respect to Borrower's payment and performance of the Obligations.
Section 18.14. Subrogation. If the Principal or any other
amount advanced by Lender is used directly or indirectly to pay off,
discharge or satisfy all or any part of an encumbrance affecting the
Property, then Lender is subrogated to the encumbrance and to any
security held by the holder of the encumbrance, all of which will
continue in full force and effect in favor of Lender as additional
security for the Obligations.
Section 18.15. Joint and Several Liability. If Borrower
consists of more than one person or entity, the obligations and
liabilities of each such person or entity under this Deed of Trust are
joint and several.
Section 18.16. Successors and Assigns. The Loan Documents bind
the parties to the Loan Documents and their respective successors,
assigns, heirs, administrators, executors, agents and representatives
and inure to the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives and to the
extent applicable inure to the benefit of Trustee and its successors,
assigns, heirs, administrators, executors, agents and representatives.
Section 18.17. Duplicates and Counterparts. Duplicate
counterparts of any of the Loan Documents, other than the Note, may be
executed and together will constitute a single original document.
ARTICLE XIX
TRUSTEE PROVISIONS
Section 19.1 Acceptance of Trust.
(a) Trustee accepts this Trust upon recordation of this
Deed of Trust as provided by Law. Except as provided by Law, Trustee
is not obligated to notify any party of a pending sale under this Deed
of Trust or of a Proceeding in which Borrower, Lender or Trustee is a
party.
(b) Lender may from time to time unilaterally substitute a
successor to Trustee pursuant to a recordable instrument that complies
with Law for substitution of Trustees. The recorded substitution will
be conclusive proof of proper substitution of trustee who will,
without conveyance from predecessor trustee, succeed to all of the
predecessor trustee's title, estate, rights, powers and duties.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Deed of Trust as of the date first set forth above.
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By: /s/ Hanh Kihara
Hanh Kihara, Senior Vice
President
<PAGE>
ACKNOWLEDGMENTS
STATE OF )
) SS:
COUNTY OF )
On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
Signature:
______________________________
Name (Typed or Printed)
STATE OF )
) SS:
COUNTY OF )
On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
Signature:
______________________________
Name (Typed or Printed)
Exhibit A
LEGAL DESCRIPTION
Exhibit A-1
Legal Description of Property #1
13112 Evening Creek Drive South, San Diego, California
Exhibit A-2
Legal Description of Property #2
INTENTIONALLY DELETED
Exhibit A-3
Legal Description of Property #3
2149-2161 O'Toole Avenue, San Jose, California
Exhibit A-4
Legal Description of Property #4
6925 & 6965 Lusk Boulevard, San Diego, California
<PAGE>
Exhibit A-5
Legal Description of Property #5
2545-2557 Napa Valley Corp. Drive, Napa, California
<PAGE>
Exhibit B
DEFINITIONS
"Acceleration" is defined in Section 14.2(a)(i).
"Accumulations" is defined in Section 2.1(xii).
"Accumulations Depositary" is defined in Section 6.2(a).
"Additional Funds" is defined in Section 7.4(v).
"Annual Financial Statement" is defined in Section 10.1(a).
"Assessments" is defined as all assessments now or hereafter levied,
assessed or imposed against the Property.
"Assignment" is defined as the Assignment of Leases and Rents dated of
even date with this Deed of Trust made by Borrower for the benefit of
Lender.
"Bankruptcy Code" means Title 11 of the United States Code.
"Books and Records" is defined in Section 2.1(xi).
"Borrower" is defined in the introductory paragraph.
"Budget" is defined in Section 10.2.
"Business Days" is defined as any day on which commercial banks are
not authorized or required by Law to close in New York, New York.
"Casualty" is defined as damage to or destruction of the Property by
fire or other casualty.
"Code" is defined as the Internal Revenue Code of 1986, as amended and
the regulations promulgated thereunder.
"Condemnation" is defined as the permanent or temporary taking of all
or any portion of the Property, or any interest therein or right
accruing thereto, by the exercise of the right of eminent domain
(including any transfer in lieu of or in anticipation of the exercise
of the right), inverse condemnation or any similar injury or damage to
or decrease in the value of the Property, including severance and
change in the grade of any streets
"Condemnation Awards" is defined in Section 2.1(viii).
"Condemnation Proceeding" is defined as a Proceeding that could result
in a Condemnation.
"CPA" is defined as an independent certified public accountant
satisfactory to Lender.
"Debt" is defined in Section 3.1.
"Debt Service Payments" is defined as the monthly installments of
principal and interest payable by Borrower to Lender as set forth in
the Note.
"Deed of Trust" is defined as this Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing Statement.
"Default Interest Rate" is defined as the lower of 5% per annum over
the Fixed Interest Rate or the Maximum Interest Rate, if any.
"Destruction Event" is defined in Section 7.4.
"Environmental Activity" is defined as any actual, suspected or
threatened abatement, cleanup, disposal, generation, handling,
manufacture, possession, release, remediation, removal, storage,
transportation, treatment or use of any Hazardous Substances. The
actual, suspected or threatened presence of any Hazardous Substances,
or the actual, suspected or threatened noncompliance with any
Environmental Laws, will be deemed Environmental Activity.
"Environmental Laws" is defined as all Laws pertaining to health,
safety, protection of the environment, natural resources,
conservation, wildlife, waste management, Environmental Activities and
pollution.
"Environmental Report" is defined as the report prepared by ICF
Kaiser, dated May 3, 1999 as to the Property described in Exhibits A-5
and A-1, dated April 29, 1999 as to the Property described in Exhibit
A-3, and dated April 22, 1999 as the Property described in Exhibit A-
4, all as amended.
"ERISA" is defined in Section 8.3(a).
"Event of Default" is defined in Section 14.1.
"Existing Shareholder" is defined in Section 12.1(b).
"Expenses" is defined in Section 11.1(a).
"Financial Books and Records" is defined as detailed accounts of the
income and expenses of the Property and of Borrower and all other
data, records and information that either are specifically referred to
in the Article entitled "FINANCIAL REPORTING" or are necessary to the
preparation of any of the statements, reports or certificates required
under such Article and
<PAGE>
includes all supporting schedules prepared or used
by the CPA in auditing the Annual Financial Statement or in issuing its
opinion.
"Fiscal Year" is defined as any calendar year or partial calendar year
during the Term.
"Fixed Interest Rate" is defined as 7.17% per annum.
"Fixtures and Personal Property" is defined in Section 2.1(iv).
"Government" is defined as any federal, state or municipal
governmental or quasi-governmental authority including executive,
legislative or judicial branch, division and any subdivision or agency
of any of them and any entity to which any of them has delegated
authority.
"Hazardous Substances" is defined as (i) any by product, chemical,
compound, material, mixture or substance that is now or hereafter
defined or listed in, or otherwise classified pursuant to, any
Environmental Laws, as a "hazardous substance", "hazardous material",
"hazardous waste", "extremely hazardous waste", infectious waste",
"toxic substance", "toxic pollutant", or any other formulation intended
to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, or "EP toxicity",
(ii) any petroleum, natural gas, natural gas liquid, liquified natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and
such synthetic gas), ash produced by a resource recovery facility
utilizing a municipal solid waste stream, and drilling fluids,
produced waters, and other wastes associated with the exploration,
development or production of crude oil, natural gas, or geothermal
resources, and (iii) any underground storage tanks.
"Imposition Penalty Date" is defined in Section 6.1(a).
"Impositions" is defined as all Taxes, Assessments, ground rent, if
any, water and sewer rents, fees and charges, levies, permit,
inspection and license fees and other dues, charges or impositions,
including all charges and license fees for the use of vaults, chutes
and similar areas adjoining the Land, maintenance and similar charges
and charges for utility services, in each instance whether now or in
the future, directly or indirectly, levied, assessed or imposed on the
Property or Borrower and whether levied, assessed or imposed as
excise, privilege or property taxes.
"Improvements" is defined in Section 2.1(ii).
"Individual Property" is defined in Recital D of the Assignment.
"Insurance Premiums" is defined as all present and future premiums and
other charges due and payable on policies of fire, rental value and
other insurance covering the Property and required pursuant to the
provisions of this Deed of Trust.
"Insurance Proceeds" is defined in Section 2.1(ix).
"Insurers" is defined in Section 7.1(c).
"Institutional Investor" is defined as any bank, savings institution,
charitable foundation, insurance company, real estate investment
trust, pension fund or investment advisor registered under the
Investment Advisors Act of 1940, as amended, and acting as trustee or
agent.
"Interest" is defined as the amount of fixed interest payable under
the Note at the Fixed Interest Rate and any other sums which could be
deemed to be interest under Law.
"Land" is defined in the Recitals.
"Late Charge" is defined in the Note.
"Law" is defined as all present and future codes, constitutions,
cases, opinions, rules, manuals, regulations, determinations, laws,
orders, ordinances, requirements and statutes, as amended, of any
Government that affect or that may be interpreted to affect the
Property, Borrower or the Loan, including amendments and all guidance
documents and publications promulgated thereunder.
"Leases" is defined as all present and future leases, subleases,
licenses and other agreements for the use and occupancy of the Land
and Improvements, any related guarantees and including any use and
occupancy arrangements created pursuant to Section 365 (h) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuation of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar Proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land and Improvements.
"Lender" is defined in the introductory paragraph.
"Loan" is defined in the Recitals.
"Loan Documents" is defined as the Note, this Deed of Trust, the
Assignment and all documents now or hereafter executed by Borrower or
held by Lender or Trustee relating to the Loan, including all
amendments.
"Material Environmental Contamination" is defined as contamination of
the Property with Hazardous Substances (i) that constitutes a
violation of one or more Environmental Laws; (ii) for which there is a
significant possibility that remediation will be required under
Environmental Laws; (iii) that results in a material risk of liability
or expense to Lender; or (iv) that diminishes the value of the
Property.
"Maturity Date" is defined in the Recitals.
"Maximum Interest Rate" is defined as the maximum rate of interest, if
any, permitted by Law to be charged with respect to the Loan as the
maximum rate may be increased or decreased from time to time.
"Note" is defined in the Recitals.
"Note Payments" is defined in the Note.
"Notices" is defined in Section 17.1.
"Obligations" is defined in Section 3.1.
"Permitted Exceptions" is defined as the matters shown in Schedule B,
Part 1 and 2 of the title insurance policy insuring the lien of this
Deed of Trust.
"Permitted Transfers" is defined in Section 12.2(b).
"Permitted Use" is defined as use as first-class commercial office
buildings with respect to the property described in Exhibit A-1, known
as 13112 Evening Creek Drive South, San Diego, California and the
property described in Exhibit A-4, known as 6925 & 6965 Lusk
Boulevard, San Diego, California, as first-class industrial
distribution buildings with respect to the property described in
Exhibit A-5 known as 2545-2557 Napa Valley Corp. Drive, Napa,
California, and as industrial research and development buildings with
respect to the property described in Exhibit A-3 known as 2149-2161
O'Toole Avenue, San Jose, California, and uses incidentally and
directly related to such uses.
"Policies" is defined in Section 7.1(b).
"Prepayment Premium" is defined in the Note.
"Principal" is defined in the Recitals.
"Proceeding" is defined as a pending or threatened action, claim or
litigation before a legal, equitable or administrative tribunal having
proper jurisdiction.
"Proceeds" is defined in Section 7.2(c).
"Property" is defined in Section 2.1.
"Property Documents" is defined in Section 2.1(v).
"Receiver" is defined as a receiver, custodian, trustee, liquidator or
conservator of the Property.
"Release Parcel" is defined in Section 12.4.
"Remedies" is defined in Section 14.2(a).
"Rents" is defined as all present and future rents, prepaid rents,
percentage, participation or contingent rents, issues, profits,
proceeds, parking fees, revenues and other consideration accruing
under the Leases or otherwise derived from the use and occupancy of
the Land or the Improvements, including tenant contributions to
expenses, security deposits, royalties and contingent rent, if any,
all other fees, accounts, accounts receivable or payments paid to or
for the benefit of Borrower, including liquidated damages after a
default under a lease, any premium or other termination fee payable by
tenant after cancellation of a Lease and the proceeds of any rental
insurance, and any payments received pursuant to Section 502(b) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land or the Improvements and all claims as a
creditor in connection with any of the foregoing.
"Restoration" is defined as the restoration of the Property after a
Destruction Event as nearly as possible to its condition immediately
prior to the Destruction Event, in accordance with the plans and
specifications, in a first-class workmanlike manner using materials
substantially equivalent in quality and character to those used for
the original improvements, in accordance with Law and free and clear
of all liens, encumbrances or other charges other than this Deed of
Trust and the Permitted Exceptions.
"Restoration Completion Date" is defined in Section 7.4(viii).
"Restoration Funds" is defined in Section 7.5(b).
"Substitution Property" is defined in Section 12.5.
"Taxes" is defined as all present and future real estate taxes levied,
assessed or imposed against the Property.
"Term" is defined as the scheduled term of this Deed of Trust
commencing on the date Lender makes the first disbursement of the Loan
and terminating on the Maturity Date.
"Transfer" is defined in Section 12.1(a).
"Uniform Commercial Code" is defined as the Uniform Commercial Code in
effect in the jurisdiction where the Land is located.
<PAGE>
Exhibit C
RULES OF CONSTRUCTION
(a) References in any Loan Document to numbered Articles or
Sections are references to the Articles and Sections of that Loan
Document. References in any Loan Document to lettered Exhibits are
references to the Exhibits attached to that Loan Document, all of
which are incorporated in and constitute a part of that Loan Document.
Article, Section and Exhibit captions used in any Loan Document are
for reference only and do not describe or limit the substance, scope
or intent of that Loan Document or the individual Articles, Sections
or Exhibits of that Loan Document.
(b) The terms "include", "including" and similar terms are
construed as if followed by the phrase "without limitation".
(c) The terms "Land", "Improvements", "Fixtures and Personal
Property", "Condemnation Awards", "Insurance Proceeds" and "Property"
are construed as if followed by the phrase "or any part thereof".
(d) Any agreement by or duty imposed on Borrower in any Loan
Document to perform any obligation or to refrain from any act or
omission constitutes a covenant running with the ownership or
occupancy of the Land and the Improvements, which will bind all
parties hereto and their respective successors and assigns, and all
lessees, subtenants and assigns of same, and all occupants and
subsequent owners of the Property, and will inure to the benefit of
Lender and all subsequent holders of the Note and this Deed of Trust
and includes a covenant by Borrower to cause its partners, members,
principals, agents, representatives and employees to perform the
obligation or to refrain from the act or omission in accordance with
the Loan Documents. Any statement or disclosure contained in any Loan
Document about facts or circumstances relating to the Property,
Borrower or the Loan constitutes a representation and warranty by
Borrower made as of the date of the Loan Document in which the
statement or disclosure is contained.
(e) The term "to Borrower's knowledge" is construed as meaning
to the best of Borrower's knowledge after diligent inquiry.
(f) The singular of any word includes the plural and the plural
includes the singular. The use of any gender includes all genders.
(g) The terms "person", "party" and "entity" include natural
persons, firms, partnerships, limited liability companies and
partnerships, corporations and any other public or private legal
entity.
(h) The term "provisions" includes terms, covenants,
conditions, agreements and requirements.
(i) The term "amend" includes modify, supplement, renew,
extend, replace or substitute and the term "amendment" includes
modification, supplement, renewal, extension, replacement and
substitution.
(j) Reference to any specific Law or to any document or
agreement, including the Note, this Deed of Trust, any of the other
Loan Documents, the Leases and the Property Documents, includes any
future amendments to the Law, document or agreement, as the case may
be.
(k) No inference in favor of or against a party with respect to
any provision in any Loan Document may be drawn from the fact that the
party drafted the Loan Document.
(l) The term "certificate" means the sworn, notarized statement
of the entity giving the certificate, made by a duly authorized person
satisfactory to Lender affirming the truth and accuracy of every
statement in the certificate. Any document that is "certified" means
the document has been appended to a certificate of the entity
certifying the document that affirms the truth and accuracy of
everything in the document being certified. In all instances the
entity issuing a certificate must be satisfactory to Lender.
(m) Any appointment of Lender as Borrower's attorney-in-fact is
irrevocable and coupled with an interest. Lender may appoint a
substitute attorney-in-fact. Borrower ratifies all actions taken by
the attorney-in-fact but, nevertheless, if Lender requests, Borrower
will specifically ratify any action taken by the attorney-in-fact by
executing and delivering to the attorney-in-fact or to any entity
designated by the attorney-in-fact all documents necessary to effect
the ratification.
(n) Any document, instrument or agreement to be delivered by
Borrower will be in form and content satisfactory to Lender.
(o) All obligations, rights, remedies and waivers contained in
the Loan Documents will be construed as being limited only to the
extent required to be enforceable under the Law.
(p) The unmodified word "days" means calendar days.
EXHIBIT 10.24
TIAA Appl. #VR-6
M -000462400
PROMISSORY NOTE
Bedford Portfolio #3
$27,350,000 Dated:
May __,
1999
FOR VALUE RECEIVED, BEDFORD PROPERTY INVESTORS, INC., a
Maryland corporation ("Borrower"), having its principal place of
business at 270 Lafayette Circle, Lafayette, California 94549,
promises to pay to TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
AMERICA, a New York corporation ("Lender"), or order, at Lender's
offices at 730 Third Avenue, New York, New York 10017 or at such
other place as Lender designates in writing, the principal sum of
TWENTY SEVEN MILLION THREE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($27,350,000) (the principal sum or so much of the principal sum as
may be advanced and outstanding from time to time, the "Principal"),
in lawful money of the United States of America, with interest on the
Principal from the date of this Promissory Note (this "Note") through
and including June 1, 2005 (the "Maturity Date") at the fixed rate of
seven and seventeen one-hundredths percent (7.17%) per annum (the
"Fixed Interest Rate").
This Note is secured by, among other things, the Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing Statement, Bedford Portfolio #3 - California Properties) and
the Deed of Trust, Assignment of Leases and Rents, Security Agreement,
and Fixture Filing Statement (Bedford Portfolio #3 - Arizona
Properties) (collectively referred to as the "Deed of Trust") dated
the date of this Note made by Borrower for the benefit of Lender as
security for the Loan. All capitalized terms not expressly defined in
this Note will have the definitions set forth in the Deed of Trust.
Section 1. Payments of Principal and Fixed Interest.
(a) Borrower will make monthly installment payments ("Debt
Service Payments") as follows:
(i) On June 1, 1999, a payment of accrued interest on the
Principal at the Fixed Interest Rate; and
(ii) On July 1, 1999 and on the first day of each succeeding
calendar month through and including June 1, 2005, payments in
the amount of One Hundred Ninety Six Thousand Two Hundred Eighty
and 23/100 Dollars ($196,280.23), each of which will be applied
first to accrued interest on the Principal at the Fixed Interest
Rate and then to the Principal.
(b) On the Maturity Date, Borrower will pay the Principal in
full together with accrued interest at the Fixed Interest Rate and all
other amounts due under the Loan Documents.
Section 2. Prepayment Provisions.
(a) The following definitions apply:
"Discount Rate" means the yield on a U.S. Treasury issue selected by
Lender, as published in the Wall Street Journal, two weeks prior to
prepayment, having a maturity date corresponding (or most closely
corresponding, if not identical) to the Maturity Date, and, if
applicable, a coupon rate corresponding (or most closely
corresponding, if not identical) to the Fixed Interest Rate.
"Default Discount Rate" means the Discount Rate less 300 basis points.
"Discounted Value" means the Discounted Value of a Note Payment based
on the following formula:
NP
(1 + R/12)n = Discounted Value
NP = Amount of Note Payment
R = Discount Rate or Default Discount Rate as the case may
be.
n = The number of months between the date of prepayment
and the scheduled date of the Note Payment being
discounted rounded to the nearest integer.
"Note Payments" means (i) the scheduled Debt Service Payments for the
period from the date of prepayment through the Maturity Date and (ii)
the scheduled repayment of Principal, if any, on the Maturity Date.
"Prepayment Date Principal" means the Principal on the date of
prepayment.
(b) This Note may not be prepaid in full or in part before June
1, 2001. Commencing on June 1, 2001, provided there is no Event of
Default that is not cured within the applicable cure period, Borrower
may prepay this Note in full, but not in part, on the first day of any
calendar month, upon 90 days prior notice to Lender and upon payment
in full of the Debt which will include a payment (the "Prepayment
Premium") equal to the greater of (i) an amount equal to 1% (the
"Prepayment Percentage") times the Prepayment Date Principal or (ii)
the amount by which the sum of the Discounted Values of Note Payments,
calculated at the Discount Rate plus 50 basis points, exceeds the
Prepayment Date Principal. Provided there is no Event of Default that
is not cured within the applicable cure period, this Note may be
prepaid in full without payment of the Prepayment Premium during the
last 90 days of the Term. This Note may not be prepaid without
simultaneous prepayment in full of any other notes secured by the Loan
Documents.
(c) After an Event of Default or upon any prepayment not
permitted by the Loan Documents, any tender of payment of the amount
necessary to satisfy all or any part of the Debt, any decree of
foreclosure, any statement of the amount due at the time of
foreclosure (including foreclosure by power of sale) and any tender of
payment during any redemption period after foreclosure, will include
an amount (the "Evasion Premium") equal to the greater of (i) an
amount equal to the product of the Prepayment Premium plus 300 basis
points times the Prepayment Date Principal, or (ii) the amount by
which the sum of the Discounted Values of the Note Payments,
calculated at the Default Discount Rate, exceeds the Prepayment Date
Principal.
(d) Borrower acknowledges that:
(i) a prepayment will cause damage to Lender;
(ii) the Evasion Premium is intended to compensate Lender for
the loss of its investment and the expense incurred and time and
effort associated with making the Loan, which will not be fully
repaid if the Loan is prepaid;
(iii) it will be extremely difficult and impractical to
ascertain the extent of Lender's damages caused by a prepayment
after an Event of Default or any other prepayment not permitted
by the Loan Documents; and
(iv) the Evasion Premium represents Lender and Borrower's
reasonable estimate of Lender's damages for the prepayment and
is not a penalty.
(e) BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT LENDER WOULD
NOT LEND TO BORROWER THE LOAN EVIDENCED BY THIS NOTE WITHOUT
BORROWER'S AGREEMENT, AS SET FORTH ABOVE, TO PAY LENDER A PREPAYMENT
PREMIUM UPON THE SATISFACTION OF ALL OR ANY PORTION OF THE PRINCIPAL
INDEBTEDNESS EVIDENCED FOLLOWING THE ACCELERATION OF THE MATURITY DATE
HEREOF BY REASON OF A DEFAULT HEREUNDER OR UNDER THE DEED OF TRUST
INCLUDING, WITHOUT LIMITATION, A DEFAULT ARISING FROM THE CONVEYANCE
OF ANY RIGHT, TITLE OR INTEREST IN THE PROPERTY ENCUMBERED BY THE DEED
OF TRUST AND BORROWER ACKNOWLEDGES THAT (I) THE GENERAL PARTNERS,
PRINCIPALS OR MEMBERS, AS THE CASE MAY BE, OF BORROWER ARE
KNOWLEDGEABLE REAL ESTATE DEVELOPERS OR INVESTORS, (II) BORROWER FULLY
UNDERSTANDS THE EFFECT OF THE ABOVE WAIVER, (III) THE MAKING OF THE
LOAN BY LENDER AT THE RATE SET FORTH ABOVE IS SUFFICIENT CONSIDERATION
FOR SUCH WAIVER, AND (IV) LENDER WOULD NOT MAKE THE LOAN WITHOUT SUCH
WAIVER, AND BORROWER HAS CAUSED THOSE PERSONS SIGNING THIS NOTE ON
BORROWER'S BEHALF TO SEPARATELY INITIAL THE AGREEMENT CONTAINED IN
THIS PARAGRAPH BY PLACING THEIR INITIALS BELOW.
INITIALS:____________
Section 3. Events of Default:
(a) It is an "Event of Default" under this Note:
(i) if Borrower fails to pay any amount due, as and when
required, under this Note or any other Loan Document and the
failure continues for a period of 5 days; or
(ii) if an Event of Default occurs under any other Loan
Document.
(b) If an Event of Default occurs, Lender may declare all or
any portion of the Debt immediately due and payable ("Acceleration")
and exercise any of the other Remedies.
Section 4. Interest on the Principal will accrue at the
Default Interest Rate from the date an Event of Default occurs.
Section 5. Late Charges.
(a) If Borrower fails to pay any Debt Service Payment when due
and the failure continues for a period of 5 days or more or fails to
pay any amount due under the Loan Documents on the Maturity Date,
Borrower agrees to pay to Lender an amount (a "Late Charge") equal to
five cents ($.05) for each one dollar ($1.00) of the delinquent
payment.
(b) Borrower acknowledges that:
(i) a delinquent payment will cause damage to Lender;
(ii) the Late Charge is intended to compensate Lender for loss
of use of the delinquent payment and the expense incurred and
time and effort associated with recovering the delinquent
payment;
(iii) it will be extremely difficult and impractical to
ascertain the extent of Lender's damages caused by the
delinquency; and
(iv) the Late Charge represents Lender and Borrower's
reasonable estimate of Lender's damages from the delinquency and
is not a penalty.
Section 6. Limitation of Liability. This Note is subject
to the limitations on liability set forth in the Article of the Deed
of Trust entitled "Limitation of Liability".
Section 7. WAIVERS. IN ADDITION TO THE WAIVERS SET FORTH
IN THE ARTICLE OF THE DEED OF TRUST ENTITLED "WAIVERS", BORROWER
WAIVES PRESENTMENT FOR PAYMENT, DEMAND, DISHONOR AND, EXCEPT AS
EXPRESSLY SET FORTH IN THE LOAN DOCUMENTS, NOTICE OF ANY OF THE
FOREGOING. BORROWER FURTHER WAIVES ANY PROTEST, LACK OF DILIGENCE OR
DELAY IN COLLECTION OF THE DEBT OR ENFORCEMENT OF THE LOAN DOCUMENTS.
BORROWER AND ALL INDORSERS, SURETIES AND GUARANTORS OF THE OBLIGATIONS
CONSENT TO ANY EXTENSIONS OF TIME, RENEWALS, WAIVERS AND MODIFICATIONS
THAT LENDER MAY GRANT WITH RESPECT TO THE OBLIGATIONS AND TO THE
RELEASE OF ANY SECURITY FOR THIS NOTE AND AGREE THAT ADDITIONAL
BORROWERS MAY BECOME PARTIES TO THIS NOTE AND ADDITIONAL INDORSERS,
GUARANTORS OR SURETIES MAY BE ADDED WITHOUT NOTICE AND WITHOUT
AFFECTING THE LIABILITY OF THE ORIGINAL BORROWER OR ANY ORIGINAL
INDORSER, SURETY OR GUARANTOR.
Section 8. Commercial Loan. The Loan is made for the
purpose of carrying on a business or commercial activity or acquiring
real or personal property as an investment or carrying on an
investment activity and not for personal or household purposes.
Section 9. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.
Section 10. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to the parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property
Section 11. Time of the Essence. Time is of the essence
with respect to the payment and performance of the Obligations.
Section 12. Cross-Default. A default under any other note
now or hereafter secured by the Loan Documents or under any loan
document related to such other note constitutes a default under this
Note and under the other Loan Documents. When the default under the
other note constitutes an Event of Default under that note or the
related loan document, an Event of Default also will exist under this
Note and the other Loan Documents.
Section 13. Construction. Unless expressly provided
otherwise in this Note, this Note will be construed in accordance with
the Exhibit attached to the Deed of Trust entitled "Rules of
Construction".
Section 14. Deed of Trust Provisions Incorporated. To the
extent not otherwise set forth in this Note, the provisions of the
Articles of the Deed of Trust entitled "Expenses and Duty to Defend",
"Waivers", "Notices", and "Miscellaneous" are applicable to this Note
and deemed incorporated by reference as if set forth at length in this
Note.
Section 15. Joint and Several Liability; Successors and
Assigns. If Borrower consists of more than one entity, the
obligations and liabilities of each such entity will be joint and
several. This Note binds Borrower and successors, assigns, heirs,
administrators, executors, agents and representatives and inures to
the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives.
Section 16. Absolute Obligation. Except for the Section of
this Note entitled "Limitation of Liability", no reference in this
Note to the other Loan Documents and no other provision of this Note
or of the other Loan Documents will impair or alter the obligation of
Borrower, which is absolute and unconditional, to pay the Principal,
interest at the Fixed Interest Rate and any other amounts due and
payable under this Note, as and when required.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Note as of the date first set forth above.
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By: /s/ Hanh Kihara
Hanh Kihara, Senior Vice President
TIAA Appl. #VR-6
M-000462400
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT
Bedford Portfolio #3 - Arizona Properties
by and between
BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
as Borrower
and
FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation
as Trustee
for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation
as Lender
Properties Known As
Westech Business Center, 4602-4640 E. Elwood Street, Phoenix Arizona
Westech Business Center II, 4710 E. Elwood Street, Phoenix, Arizona
8125 North 23rd Street, Phoenix, Arizona
After Recordation This Deed of Trust Should Be Returned To:
Beverly J. Quail, Esquire
Ballard Spahr Andrews & Ingersoll LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
TABLE OF CONTENTS
Page
RECITALS:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION. . . . . . . . . . . . . .1
Section 1.1. Definitions . . . . . . . . . . . . . . .1
Section 1.2. Rules of Construction . . . . . . . . . .2
ARTICLE II
GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.1. Encumbered Property . . . . . . . . . . .2
Section 2.2. Habendum Clause . . . . . . . . . . . . .4
Section 2.3. Security Agreement. . . . . . . . . . . .5
Section 2.4. Conditions to Grant . . . . . . . . . . .5
ARTICLE III
OBLIGATIONS SECURED. . . . . . . . . . . . . . . . . . . . . . .5
Section 3.1. The Obligations . . . . . . . . . . . . .5
ARTICLE IV
TITLE AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . .6
Section 4.1. Title to the Property . . . . . . . . . .6
Section 4.2. Authority . . . . . . . . . . . . . . . .6
Section 4.3. No Foreign Person . . . . . . . . . . . .6
Section 4.4. Litigation. . . . . . . . . . . . . . . .7
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES. . . . . . . . . . . . .7
Section 5.1. Status of the Property. . . . . . . . . .7
Section 5.2. Maintenance of the Property . . . . . . .7
Section 5.3. Change in Use . . . . . . . . . . . . . .8
Section 5.4. Waste . . . . . . . . . . . . . . . . . .8
Section 5.5. Inspection of the Property. . . . . . . .8
Section 5.6. Leases and Rents. . . . . . . . . . . . .8
Section 5.7. Parking . . . . . . . . . . . . . . . . .8
Section 5.8. Separate Tax Lot. . . . . . . . . . . . .9
Section 5.9. Changes in Zoning or Restrictive Covenants9
Section 5.10. Lender's Right to Appear. . . . . . . . .9
Section 5.11. Community Facilities District . . . . . . . . . .9
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS. . . . . . . . . . . . . . . . . 10
Section 6.1. Impositions . . . . . . . . . . . . . . 10
Section 6.2. Accumulations . . . . . . . . . . . . . 11
Section 6.3. Changes in Tax Laws . . . . . . . . . . 12
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.1. Insurance Coverages . . . . . . . . . . 13
Section 7.2. Casualty and Condemnation . . . . . . . 14
Section 7.3. Application of Proceeds . . . . . . . . 15
Section 7.4. Conditions to Availability of Proceeds for Restoration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.5. Restoration . . . . . . . . . . . . . . 17
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS . . . . . . . . . . . . . . 19
Section 8.1. Compliance with Law . . . . . . . . . . 19
Section 8.2. Compliance with Agreements. . . . . . . 19
Section 8.3. ERISA Compliance. . . . . . . . . . . . 19
Section 8.4. Section 6045(e) Filing. . . . . . . . . 20
ARTICLE IX
ENVIRONMENTAL. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.1. Environmental Representations and Warranties20
Section 9.2. Environmental Covenants . . . . . . . . 20
ARTICLE X
FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . 22
Section 10.1. Financial Reporting . . . . . . . . . . 22
Section 10.2. Annual Budget . . . . . . . . . . . . . 22
ARTICLE XI
EXPENSES AND DUTY TO DEFEND. . . . . . . . . . . . . . . . . . 23
Section 11.1. Payment of Expenses . . . . . . . . . . 23
Section 11.2. Duty to Defend. . . . . . . . . . . . . 23
ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES. . . . . . . . . . . . . . . 24
Section 12.1. Prohibitions on Transfers, Liens and Encumbrances24
Section 12.2. Permitted Transfers . . . . . . . . . . 24
Section 12.3. Right to Contest Lien . . . . . . . . . 26
Section 12.4. Reconveyance Rights . . . . . . . . . . 27
Section 12.5. Substitution. . . . . . . . . . . . . . 29
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . 30
Section 13.1. Further Assurances. . . . . . . . . . . 30
Section 13.2. Estoppel Certificates . . . . . . . . . 31
ARTICLE XIV
DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 31
Section 14.1. Events of Default . . . . . . . . . . . 31
Section 14.2. Remedies. . . . . . . . . . . . . . . . 33
Section 14.3. General Provisions Pertaining to Remedies34
Section 14.4. Foreclosure by Power of Sale. . . . . . 35
Section 14.5. General Provisions Pertaining to Receiver and other
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 14.6. General Provisions Pertaining to Foreclosures and the
Power of Sale. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 14.7. Application of Proceeds . . . . . . . . 38
Section 14.8. Power of Attorney . . . . . . . . . . . 38
Section 14.9. Tenant at Sufferance. . . . . . . . . . 38
ARTICLE XV
LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . 38
Section 15.1. Limitation of Liability . . . . . . . . 38
ARTICLE XVI
WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. . . . 41
Section 16.2. WAIVER OF NOTICE. . . . . . . . . . . . 41
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS 41
Section 16.4. WAIVER OF TRIAL BY JURY . . . . . . . . 41
Section 16.5. WAIVER OF COUNTERCLAIM. . . . . . . . . 41
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING . 42
Section 16.7. WAIVER OF SUBROGATION . . . . . . . . . 42
Section 16.8. GENERAL WAIVER. . . . . . . . . . . . . 42
ARTICLE XVII
NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 17.1. Notices . . . . . . . . . . . . . . . . 43
Section 17.2. Change in Borrower's Name or Place of Business44
ARTICLE XVIII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 18.1. Applicable Law. . . . . . . . . . . . . 44
Section 18.2. Usury Limitations . . . . . . . . . . . 45
Section 18.3. Lender's Discretion . . . . . . . . . . 45
Section 18.4. Unenforceable Provisions. . . . . . . . 45
Section 18.5. Survival of Borrower's Obligations. . . 45
Section 18.6. Relationship Between Borrower and Lender; No Third
Party Beneficiaries
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 18.7. Partial Reconveyances or Releases, Extensions, Waivers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 18.8. Service of Process. . . . . . . . . . . 46
Section 18.9. Entire Agreement. . . . . . . . . . . . 46
Section 18.10. No Oral Amendment. . . . . . . . . . . 46
Section 18.11. Severability. . . . . . . . . . . . . . 47
Section 18.12. Covenants Run with the Land . . . . . . 47
Section 18.13. Time of the Essence . . . . . . . . . . 47
Section 18.14. Subrogation . . . . . . . . . . . . . . 47
Section 18.15. Joint and Several Liability. . . . . . 47
Section 18.16. Successors and Assigns. . . . . . . . . 47
Section 18.17. Duplicates and Counterparts . . . . . . 47
Section 18.18. Deed of Trust as Mortgage. . . . . . . . . . . 47
ARTICLE XIX
TRUSTEE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 47
Section 19.1 Acceptance of Trust . . . . . . . . . . 48
Exhibit A
LEGAL DESCRIPTION. . . . . . . . . . . . . . . . . . . . . . . 50
Exhibit B
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 53
Exhibit C
RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . . 59
TIAA Appl. #VR-6
M-000462400
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Bedford Portfolio # 3 - Arizona Properties
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT made this ____ day of
May, l999, by BEDFORD PROPERTY INVESTORS, INC. ("Borrower"), a
Maryland corporation, having its principal place of business at 270
Lafayette Circle, Lafayette, California 94549, FIRST AMERICAN TITLE
INSURANCE COMPANY, a California corporation ("Trustee"), having an
address of P.O. Box 3915, Phoenix, Arizona 85030, for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA ("Lender"), a
New York corporation, having an address at 730 Third Avenue, New York,
New York l0017.
RECITALS:
A. Lender agreed to make and Borrower agreed to accept a
loan (the "Loan") in the maximum principal amount of $27,350,000.
B. To evidence the Loan, Borrower executed and delivered
to Lender a promissory note (the "Note"), dated the date of this Deed
of Trust, in the principal amount of TWENTY SEVEN MILLION THREE
HUNDRED FIFTY THOUSAND AND NO/100 Dollars ($27,350,000)(that amount or
so much as is outstanding from time to time is referred to as the
"Principal"), promising to pay the Principal with interest thereon to
the order of Lender as set forth in the Note and with the balance, if
any, of the Debt being due and payable on June 1, 2005 (the "Maturity
Date").
C. To secure the Note and the Obligations, this Deed of
Trust conveys, among other things, Borrower's fee interest in the real
property located in the City of Phoenix, County of Maricopa, State of
Arizona more particularly described in Exhibits A-1, A-2 and A-3 (the
"Land").
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. Capitalized terms used in this
Deed of Trust are defined in Exhibit B or in the text with a cross-
reference in Exhibit B.
Section 1.2. Rules of Construction. This Deed of Trust will
be interpreted in accordance with the rules of construction set forth
in Exhibit C.
ARTICLE II
GRANTING CLAUSES
Section 2.1. Encumbered Property. Borrower irrevocably
grants, mortgages, warrants, sells, conveys, assigns and pledges to
Trustee for the benefit of Lender in trust, WITH POWER OF SALE, and
grants to Trustee for the benefit of Lender a security interest in,
any and all of the following property, rights, interests and estates
now or in the future owned or held by Borrower (the "Property") for
the uses and purposes set forth in this Deed of Trust:
(i) the Land;
(ii) all buildings and improvements located on the
Land (the "Improvements");
(iii) all easements; rights of way or use,
including any rights of ingress and egress;
streets, roads, ways, sidewalks, alleys and
passages; strips and gores; sewer rights;
water, water rights, water courses,
riparian rights and drainage rights; air
rights and development rights; oil and
mineral rights; and tenements,
hereditaments and appurtenances, in each
instance adjoining or otherwise appurtenant
to or benefitting the Land or the
Improvements;
(iv) all materials intended for construction, re-
construction, alteration or repair of the
Improvements, such materials to be deemed
included in the Land and the Improvements
immediately on delivery to the Land; all
fixtures and personal property that are attached
to, contained in or used in connection with the
Land or the Improvements (excluding personal
property owned by tenants), including:
furniture; furnishings; machinery; motors;
elevators; fittings; microwave ovens;
refrigerators; office systems and equipment;
plumbing, heating, ventilating and air
conditioning systems and equipment; maintenance
and landscaping equipment; lighting, cooking,
laundry, dry cleaning, refrigerating,
incinerating and sprinkler systems and
equipment; telecommunications systems and
equipment; computer or word processing systems
and equipment; security systems and equipment;
and equipment leases for any of the property
described in this subsection (the "Fixtures and
Personal Property");
(v) all agreements, ground leases, grants of
easements or rights-of-way, permits,
declarations of covenants, conditions and
restrictions, disposition and development
agreements, planned unit development agreements,
cooperative, condominium or similar ownership or
conversion plans, management, leasing, brokerage
or parking agreements or other material
documents affecting Borrower or the Land, the
Improvements or the Fixtures and Personal
Property, but expressly excluding the Leases
(the "Property Documents");
(vi) all inventory (including all goods, merchandise,
raw materials, incidentals, office supplies and
packaging materials) held for sale, lease or
resale or furnished or to be furnished under
contracts of service, or used or consumed in the
ownership, use or operation of the Land, the
Improvements or the Fixtures and Personal
Property, all documents of title evidencing any
part of any of the foregoing and all returned or
repossessed goods arising from or relating to
any sale or disposition of inventory;
(vii) all intangible personal property relating
to the Land, the Improvements or the
Fixtures and Personal Property, including
choses in action and causes of action
(except those personal to Borrower),
corporate and other business records,
inventions, designs, promotional materials,
blueprints, plans, specifications, patents,
patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, claims
for refunds or rebates of taxes, insurance
surpluses, refunds or rebates of taxes and
any letter of credit, guarantee, claim,
security interest or other security held by
or granted to Borrower to secure payment by
an account debtor of any of the accounts of
Borrower arising out of the ownership, use
or operation of the Land, the Improvements
or the Fixtures and Personal Property, and
documents covering all of the foregoing;
all accounts, accounts receivable,
documents, instruments, money, deposit
accounts, funds deposited in accounts
established with a bank, savings and loan
association, trust company or other
financial institution in connection with
the ownership, use or operation of the
Land, the Improvements or the Fixtures and
Personal Property, including any reserve
accounts or escrow accounts, and all
investments of the funds and all other
general intangibles;
(viii) all awards and other compensation paid
after the date of this Deed of Trust for
any Condemnation (the "Condemnation
Awards");
(ix) all proceeds of and all unearned premiums on the
Policies (the "Insurance Proceeds");
(x) all licenses, certificates of occupancy,
contracts, management agreements, operating
agreements, operating covenants, franchise
agreements, permits and variances relating to
the Land, the Improvements or the Fixtures and
Personal Property;
(xi) all books, records and other information,
wherever located, which are in Borrower's
possession, custody or control or to which
Borrower is entitled at law or in equity and
which are related to the Property, including all
computer or other equipment used to record,
store, manage, manipulate or access the
information (the "Books and Records");
(xii) all deposits and letters of credit held
from time to time by the Accumulations
Depositary to provide reserves for Taxes
and Assessments together with interest
thereon, if any (the "Accumulations") and
the account or accounts in which such
deposits are or may be held; and
(xiii) all after-acquired title to or remainder or
reversion in any of the property described
in this Section; all additions, accessions
and extensions to, improvements of and
substitutions or replacements for any of
such property; all products and all cash
and non-cash proceeds, immediate or remote,
of any sale or other disposition of any of
such property, excluding sales or other
dispositions of inventory in the ordinary
course of the business of operating the
Land or the Improvements; and all
additional lands, estates, interests,
rights or other property acquired by
Borrower after the date of this Deed of
Trust for use in connection with the Land
and Improvements, all without the need for
any additional mortgage, assignment, pledge
or conveyance to Lender but Borrower will
execute and deliver to Lender, upon
Lender's request, any documents reasonably
requested by Lender to further evidence the
foregoing.
Section 2.2. Habendum Clause. The Property is conveyed to
Trustee, TO HAVE AND TO HOLD the Property IN TRUST, FOREVER, for the
purpose of securing the Note and the Obligations.
Section 2.3. Security Agreement.
(a) This Deed of Trust is a real property mortgage and
also a "security agreement" and a "financing statement" within the
meaning of the Uniform Commercial Code. The Property includes both
real and personal property and all of Borrower's other right, title
and interest, whether tangible or intangible, in the Property. By
executing and delivering this Deed of Trust, Borrower grants to
Trustee, as security for the Obligations, a security interest in the
Property to the full extent that any of the Property may be subject to
the Uniform Commercial Code.
(b) Borrower desires and intends that this Deed of Trust
also constitute a Fixture Filing between Borrower as debtor and Lender
as secured party, as defined in the Uniform Commercial Code. To this
end, Borrower acknowledges that (i) this Deed of Trust covers goods
which are or are to become fixtures on the Land; (ii) this financing
statement is to be recorded; (iii) Borrower is the record owner of
such property; (iv) products of collateral are also covered. Except
as otherwise provided in the Loan Documents, no financing statement in
favor of any secured party other than Lender covering the personal
property described herein or any portion thereof is on file in any
public office. Provided that obsolete and worn-out articles may be
removed concurrently with the replacement or renewal thereof with
property of at least equal value or usefulness in the operation of the
Property; Borrower will not otherwise remove or permit the removal of
the collateral or any part thereof without the prior written
permission of Lender.
Section 2.4. Conditions to Grant. This Deed of Trust is made
on the express condition that if Borrower pays and performs the
Obligations in full in accordance with the Loan Documents, then unless
expressly provided otherwise in the Loan Documents, the Loan Documents
will be released at Borrower's expense.
ARTICLE III
OBLIGATIONS SECURED
Section 3.1. The Obligations. This Deed of Trust secures the
Principal, the Interest, the Late Charges, the Prepayment Premiums,
the Expenses, any additional advances made by Lender in connection
with the Property or the Loan and all other amounts payable under the
Loan Documents (the "Debt") and also secures both the timely payment
of the Debt as and when required and the timely performance of all
other obligations and covenants to be performed under the Loan
Documents (the "Obligations").
ARTICLE IV
TITLE AND AUTHORITY
Section 4.1. Title to the Property.
(a) Subject to the conveyance effectuated by this Deed of
Trust, Borrower has and will continue to have good and marketable
title in fee simple absolute to the Land and the Improvements and good
and marketable title to the Fixtures and Personal Property, in each
case, free and clear of liens, encumbrances and charges except the
Permitted Exceptions. To Borrower's knowledge, there are no facts or
circumstances that might give rise to a lien, encumbrance or charge on
the Property.
(b) Borrower owns and will continue to own all of the
other Property free and clear of all liens, encumbrances and charges
except the Permitted Exceptions.
(c) This Deed of Trust is and will remain a valid and
enforceable first lien on and security interest in the Property,
subject only to the Permitted Exceptions.
Section 4.2. Authority.
(a) Borrower is and will continue to be (i) duly
organized, validly existing and in good standing under the Laws of the
state or commonwealth in which it was organized or incorporated and
(ii) duly qualified to conduct business, in good standing, in the
state or commonwealth where the Property is located.
(b) Borrower has and will continue to have all approvals
required by Law or otherwise and full right, power and authority to
(i) own and operate the Property and carry on Borrower's business as
now conducted or as proposed to be conducted; (ii) execute and deliver
the Loan Documents; (iii) grant, mortgage, warrant the title to,
convey, assign and pledge the Property to Lender pursuant to the
provisions of this Deed of Trust; and (iv) perform the Obligations.
(c) The execution and delivery of the Loan Documents and
the performance of the Obligations do not and will not conflict with
or result in a default under any Laws or any Leases or Property
Documents and do not and will not conflict with or result in a default
under any agreement binding upon any party to the Loan Documents.
(d) The Loan Documents constitute and will continue to
constitute legal, valid and binding obligations of all parties to the
Loan Documents enforceable in accordance with their respective terms.
Section 4.3. No Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
Section 4.4. Litigation. There are no Proceedings or, to
Borrower's knowledge, investigations against or affecting Borrower or
the Property and, to Borrower's knowledge, there are no facts or
circumstances that might give rise to a Proceeding or an investigation
against or affecting Borrower or the Property. Borrower will give
Lender prompt notice of the commencement of any Proceeding or
investigation against or affecting the Property or Borrower which
could have a material adverse effect on the Property or on Lender's
interests in the Property or under the Loan Documents. Borrower also
will deliver to Lender such additional information relating to the
Proceeding or investigation as Lender may request from time to time.
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES
Section 5.1. Status of the Property.
(a) Borrower has obtained and will maintain in full force
and effect all certificates, licenses, permits and approvals that are
issued or required by Law or by any entity having jurisdiction over
the Property or over Borrower or that are necessary for the Permitted
Use, for occupancy and operation of the Property for the conveyance
described in this Deed of Trust and for the conduct of Borrower's
business on the Property in accordance with the Permitted Use.
(b) The Property is and will continue to be serviced by
all public utilities required for the Permitted Use of the Property.
(c) All roads and streets necessary for service of and
access to the Property for the current or contemplated use of the
Property have been completed and are and will continue to be
serviceable, physically open and dedicated to and accepted by the
Government for use by the public.
(d) The Property is free from damage caused by a Casualty.
(e) Except as disclosed in writing to Lender, all costs
and expenses of labor, materials, supplies and equipment used in the
construction of the Improvements have been paid in full.
Section 5.2. Maintenance of the Property. Borrower will
maintain the Property in thorough repair and good and safe condition,
suitable for the Permitted Use, including, to the extent necessary,
replacing the Fixtures and Personal Property with property at least
equal in quality and condition to that being replaced and free of
liens. Borrower will not erect any new buildings, building additions
or other structures on the Land or otherwise materially alter the
Improvements without Lender's prior consent which may be withheld in
Lender's sole discretion. Lender shall be deemed to have consented if
it has not responded within 30 days of receipt of Borrower's written
request to the Lender at the addresses set forth herein. In the event
that Borrower does not manage the Property itself, the Property will
be managed by a property manager satisfactory to Lender pursuant to a
management agreement satisfactory to Lender and terminable by Borrower
upon 30 days notice to the property manager.
Section 5.3. Change in Use. Borrower will use and permit the
use of the Property for the Permitted Use and for no other purpose.
Section 5.4. Waste. Borrower will not commit or permit any
waste (including economic and non-physical waste), impairment or
deterioration of the Property or any alteration, demolition or removal
of any of the Property, excluding any tenant alterations of a non-
structural nature, without Lender's prior consent which may be
withheld in Lender's sole discretion. Lender shall be deemed to have
consented if it has not responded within 30 days of receipt of
Borrower's written request to the Lender at the addresses set forth
herein.
Section 5.5. Inspection of the Property. Subject to the
rights of tenants under the Leases, Lender has the right to enter and
inspect the Property on reasonable prior notice, except during the
existence of an Event of Default, when no prior notice is required.
Lender has the right to engage an independent expert to review and
report on Borrower's compliance with Borrower's obligations under this
Deed of Trust to maintain the Property, comply with Law and refrain
from waste, impairment or deterioration of the Property and the
alteration, demolition or removal of any of the Property except as may
be permitted by the provisions of this Deed of Trust. If the
independent expert's report discloses material failure to comply with
such obligations or if Lender engages the independent expert after the
occurrence of an Event of Default, then the independent expert's
review and report will be at Borrower's expense, payable within 3 days
after demand.
Section 5.6. Leases and Rents.
(a) Borrower assigns the Leases and the Rents to Lender
absolutely and unconditionally and not merely as additional collateral
or security for the payment and performance of the Obligations, but
subject to a license back to Borrower of the right to collect the
Rents unless and until an Event of Default occurs at which time the
license will terminate automatically, all as more particularly set
forth in the Assignment, the provisions of which are incorporated in
this Deed of Trust by reference.
(b) Borrower appoints Lender as Borrower's attorney-in-
fact to execute unilaterally and record, at Lender's election, a
document subordinating this Deed of Trust to the Leases, provided that
the subordination will not affect (i) the priority of Lender's
entitlement to Insurance Proceeds or Condemnation Awards or (ii) the
priority of this Deed of Trust over intervening liens or liens arising
under or with respect to the Leases.
Section 5.7. Parking. Borrower will provide, maintain,
monitor and light parking areas within the Property, including any
sidewalks, aisles, streets, driveways, sidewalk cuts and rights-of-way
to and from the adjacent public streets, in a manner consistent with
the Permitted Use and sufficient to accommodate the greatest of: (i)
the number of parking spaces required by Law; or (ii) the number of
parking spaces required by the Leases and the Property Documents. The
parking areas will be reserved and used exclusively for ingress,
egress and parking for Borrower and the tenants under the Leases and
their respective employees, customers and invitees and in accordance
with the Leases and the Property Documents.
Section 5.8. Separate Tax Lot. The Property is and will
remain assessed for real estate tax purposes as one or more wholly
independent tax lots, separate from any property that is not part of
the Property.
Section 5.9. Changes in Zoning or Restrictive Covenants.
Borrower will not (i) initiate, join in or consent to any change in
any Laws pertaining to zoning, any restrictive covenant or other
restriction which would restrict the Permitted Uses for the Property;
(ii) permit the Property to be used to fulfil any requirements of Law
for the construction or maintenance of any improvements on property
that is not part of the Property; (iii) permit the Property to be used
for any purpose not included in the Permitted Use; or (iv) impair the
integrity of the Property as a single, legally subdivided zoning lot
separate from all other property.
Section 5.10. Lender's Right to Appear. If Lender determines,
in its sole discretion, that Borrower is not adequately protecting
Lender's interest in the Property, upon written notice to Borrower,
except in the case of an emergency, Lender has the right to appear in
and defend any Proceeding brought regarding the Property and to bring
any Proceeding, in the name and on behalf of Borrower or in Lender's
name.
Section 5.11. Community Facilities District. Without obtaining
the prior written
consent of Lender, Borrower shall not consent to, or vote in favor of,
the inclusion of all or any part of the Property in any Community
Facilities District formed pursuant to the Community Facilities
District Act, A.R.S. Section 48-701, et seq., as amended from time to
time. Borrower shall immediately give notice to Lender of any
notification or advice that Borrower may receive from any municipality
or other third party of any intent or proposal to include all or any
part of the Property in a Community Facilities District. Lender shall
have the right to file a written objection to the inclusion of all or
any part of the Property in a Community Facilities District, either in
its own name or in the name of Borrower, and to appear at, and
participate in, any hearing with respect to the formation of any such
district.
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS
Section 6.1. Impositions.
(a) Borrower will pay each Imposition, unless the
Imposition is payable directly by the tenant, at least 15 days before
the date (the "Imposition Penalty Date") that is the earlier of (i)
the date on which the Imposition becomes delinquent and (ii) the date
on which any penalty, interest or charge for non-payment of the
Imposition accrues. If the Imposition is to be paid directly by a
tenant, Borrower shall deliver to Lender proof, in form and content
acceptable to Lender, of tenant's payment of such Impositions 15 days
before the Imposition Penalty Date.
(b) At least 10 days before each Imposition Penalty Date,
Borrower will deliver to Lender a receipted bill or other evidence of
payment.
(c) Borrower, at its own expense, may contest any Taxes or
Assessments, provided that the following conditions are met:
(i) not less than 30 days prior to the Imposition
Penalty Date, Borrower delivers to Lender notice
of the proposed contest;
(ii) the contest is by a Proceeding promptly
initiated and conducted diligently and in good
faith;
(iii) there is no Event of Default;
(iv) the Proceeding suspends the collection of the
contested Taxes or Assessments;
(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Documents;
(vi) the Proceeding precludes imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit; and
(vii) Borrower either deposits with the
Accumulations Depositary reserves or
furnishes a bond or other security
satisfactory to Lender, in either case in
an amount sufficient to pay the contested
Taxes or Assessments, together with all
interest and penalties or Borrower pays all
of the contested Taxes or Assessments under
protest.
(d) Installment Payments. If any future Assessment is
payable in installments, Borrower will nevertheless pay the Assessment
in its entirety on the day the first installment becomes due and
payable or a lien, unless Lender, in its sole discretion, approves
payment of the Assessment in installments.
Section 6.2. Accumulations.
(a) If required by Lender pursuant to Subsection 6.2(j)
hereof, Borrower will make an initial deposit with either Lender or a
mortgage servicer or financial institution designated or approved by
Lender from time to time to receive, hold and disburse the
Accumulations in accordance with this Section (the "Accumulations
Depositary"). On the first day of each calendar month during the
Term, Borrower will deposit with the Accumulations Depositary an
amount equal to one-twelfth (1/12) of the annual Taxes and Assessments
as determined by Lender or its designee. At least 45 days before each
Imposition Penalty Date, Borrower will deliver to the Accumulations
Depositary any bills and other documents that are necessary to pay the
Taxes and Assessments.
(b) The Accumulations will be applied to the payment of
Taxes and Assessments. Any excess Accumulations after payment of
Taxes and Assessments will be returned to Borrower or credited against
future payments of the Accumulations, at Lender's election or as
required by Law. If the Accumulations are not sufficient to pay Taxes
and Assessments, Borrower will pay the deficiency to the Accumulations
Depositary within 5 days of demand. At any time after an Event of
Default occurs, Lender may apply the Accumulations as a credit against
any portion of the Debt selected by Lender in its sole discretion.
(c) The Accumulations Depositary will hold the
Accumulations as additional security for the Obligations until applied
in accordance with the provisions of this Deed of Trust. If Lender is
not the Accumulations Depositary, the Accumulations Depositary will
deliver the Accumulations to Lender upon Lender's demand at any time
after an Event of Default.
(d) If the Property is sold or conveyed, other than by
foreclosure or transfer in lieu of foreclosure, and the Property
remains subject to this Deed of Trust, all right, title and interest
of Borrower to the Accumulations will automatically, and without
necessity of further assignment, be held for the account of the new
owner, subject to the provisions of this Section and Borrower will
have no further interest in the Accumulations.
(e) Borrower waives all right to demand, receive or
collect any interest or other return on the Accumulations which will
be held in a non-interest bearing account (except as required by Law)
and may be commingled with other monies held by the Accumulations
Depositary and will not be held in trust.
(f) Lender has the right to pay, or to direct the
Accumulations Depositary to pay, any Taxes or Assessments unless
Borrower is contesting the Taxes or Assessments in accordance with the
provisions of this Deed of Trust, in which event any payment of the
contested Taxes or Assessments will be made under protest in the
manner prescribed by Law or, at Lender's election, will be withheld.
(g) If Lender assigns this Deed of Trust, Lender will pay,
or cause the Accumulations Depositary to pay, the unapplied balance of
the Accumulations to or at the direction of the assignee.
Simultaneously with the payment, Lender and the Accumulations
Depositary will be released from all liability with respect to the
Accumulations and Borrower will look solely to the assignee with
respect to the Accumulations. When the Obligations have been fully
satisfied, any unapplied balance of the Accumulations will be returned
to Borrower.
(h) Notwithstanding the requirements set forth in
subsections (a) through (g) of this Section 6.2 and provided Borrower
pays the Taxes and Assessments to the taxing authority when due, as an
alternative to the requirements set forth in subsections (a) through
(g), subject to the limitation in subsection 6.2(j) hereof, at
Closing, Borrower shall, at Borrower's option, either (1) deposit an
amount equal to the annual real estate taxes for the Property next due
in an interest bearing account with an agent acceptable to Lender or
approved by Lender or (2) deposit a Letter of Credit equal to such
amount in a form satisfactory to Lender, which Letter of Credit shall
be renewed from time to time at least 30 days prior to the expiration
date thereof, pursuant to an agreement satisfactory to Lender to be
held by a depository, satisfactory to Lender, in Lender's sole
discretion. The amount deposited pursuant to this Subsection 6.2(h)
shall be held as additional security for the Obligations for the term
of the Loan. So long as there is no default under the Loan Documents
and so long as Borrower has deposited the required amount or provided
Lender with an acceptable Letter of Credit, Borrower shall pay real
estate taxes for the Property directly to the appropriate tax
authority.
(i) So long as there is no default under the Loan
Documents, real estate tax escrows will not be required for any tenant
with a credit rating equivalent to a Standard and Poors rating of BBB-
if the tenant's lease states that real estate taxes are to be paid
directly by the tenant and Borrower provides Lender written evidence
within 30 days after payment verifying payment of real estate taxes.
(j) If there is an Event of Default, Lender may, in
Lender's sole discretion, in addition to all of its other rights and
remedies under the Loan Documents, draw down on the deposited amount
or Letter of Credit, as the case may be, to pay the real estate taxes
and require Borrower to comply with the provisions set forth in
subsections 6.2(a) through (g) hereof rather than the provisions of
Subsection 6.2(h) hereof, and the requirement to make such deposits
shall not relieve Borrower of the obligation to remedy and cure the
Event of Default.
Section 6.3. Changes in Tax Laws. If a Law requires the
deduction of the Debt from the value of the Property for the purpose
of taxation or imposes a tax, either directly or indirectly, on the
Debt, any Loan Document or Lender's interest in the Property, Borrower
will pay the tax with interest and penalties, if any. If Lender
determines that Borrower's payment of the tax may be unlawful,
unenforceable, usurious or taxable to Lender, the Debt will become
immediately due and payable on 60 days' prior notice unless the tax
must be paid within the 60-day period, in which case, the Debt will be
due and payable within the lesser period in accordance with this
Section 6.3. Notwithstanding anything herein to the contrary, no
Prepayment Premium or Evasion Premium (as such terms are defined in
the Note) shall be due or payable in the event that all or any portion
of the Debt is prepaid as a result of the payment to Lender of the
Debt pursuant to this Section 6.3.
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION
Section 7.1. Insurance Coverages.
(a) Borrower will maintain such insurance coverages and
endorsements in form and substance and in amounts as Lender may
require in its sole discretion, from time to time. Until Lender
notifies Borrower of changes in Lender's requirements, Borrower will
maintain not less than the insurance coverages and endorsements Lender
required for closing of the Loan for all insurance except earthquake
insurance. Borrower will maintain not less than a $20,000,000
earthquake insurance policy.
(b) The insurance, including renewals, required under this
Section will be issued on valid and enforceable policies and
endorsements satisfactory to Lender (the "Policies"). Each Policy
will contain a standard waiver of subrogation and a replacement cost
endorsement and will provide that Lender will receive not less than 30
days' prior written notice of any cancellation, termination or non-
renewal of a Policy or any material change other than an increase in
coverage and that Lender will be named under a standard mortgage
endorsement as loss payee.
(c) The insurance companies issuing the Policies (the
"Insurers") must be authorized to do business in the State or
Commonwealth where the Property is located, must have been in business
for at least 5 years, must carry an A.M. Best Company, Inc. policy
holder rating of A or better and an A.M. Best Company, Inc. financial
category rating of Class X or better and must be otherwise
satisfactory to Lender. Lender may select an alternative credit
rating agency and may impose different credit rating standards for the
Insurers. Notwithstanding Lender's right to approve the Insurers and
to establish credit rating standards for the Insurers, Lender will not
be responsible for the solvency of any Insurer.
(d) Notwithstanding Lender's rights under this Article,
Lender will not be liable for any loss, damage or injury resulting
from the inadequacy or lack of any insurance coverage.
(e) Borrower will comply with the provisions of the
Policies and with the requirements, notices and demands imposed by the
Insurers and applicable to Borrower or the Property.
(f) Borrower will pay the Insurance Premiums for each
Policy not less than 5 days before the expiration date of the Policy
being replaced or renewed and will deliver to Lender an original or,
if a blanket policy, a certified copy of each Policy marked "Paid" not
less than 15 days prior to the expiration date of the Policy being
replaced or renewed.
(g) Borrower will not carry separate insurance concurrent
in kind or form or contributing in the event of loss with any other
insurance carried by Borrower.
(h) Borrower will not carry any of the insurance required
under this Section on a blanket or umbrella policy without in each
instance Lender's prior approval which may be withheld in Lender's
sole discretion. If Lender approves, Borrower will deliver to Lender
a certified copy of the blanket policy which will allocate to the
Property the amount of coverage required under this Section and
otherwise will provide the same coverage and protection as would a
separate policy insuring only the Property. Lender shall be deemed to
have approved the policy if it has not responded within 30 days of
receipt of Borrower's written request to the Lender at the addresses
set forth herein.
(i) Borrower will give the Insurers prompt notice of any
change in ownership or occupancy of the Property. This subsection
does not abrogate the prohibitions on transfers set forth in this Deed
of Trust.
(j) If the Property is sold at a foreclosure sale or
otherwise is transferred so as to extinguish the Obligations, all of
Borrower's right, title and interest in and to the Policies then in
force will be transferred automatically to the purchaser or
transferee.
Section 7.2. Casualty and Condemnation.
(a) Borrower will give Lender notice of any Casualty
promptly after it occurs and will give Lender notice of any
Condemnation Proceeding promptly after Borrower receives notice of
commencement or notice that such a Condemnation Proceeding will be
commencing. Borrower promptly will deliver to Lender copies of all
documents Borrower delivers or receives relating to the Casualty or
the Condemnation Proceeding, as the case may be.
(b) Borrower authorizes Lender, at Lender's option, to act
on Borrower's behalf to collect, adjust and compromise any claims for
loss, damage or destruction under the Policies on such terms as Lender
determines in Lender's sole discretion. If there is no Event of
Default which remains uncured within the applicable cure period,
Lender shall consult with Borrower before collecting, adjusting or
compromising said claims. Borrower authorizes Lender to act, at
Lender's option, on Borrower's behalf in connection with any
Condemnation Proceeding. Borrower will execute and deliver to Lender
all documents requested by Lender and all documents as may be required
by Law to confirm such authorizations. Nothing in this Section will
be construed to limit or prevent Lender from joining with Borrower
either as a co-defendant or as a co-plaintiff in any Condemnation
Proceeding.
(c) If Lender elects not to act on Borrower's behalf as
provided in this Section, then Borrower promptly will file and
prosecute all claims (including Lender's claims) relating to the
Casualty and will prosecute or defend (including defense of Lender's
interest) any Condemnation Proceeding. Borrower will have the
authority to settle or compromise the claims or Condemnation
Proceeding, as the case may be, provided that Lender has approved in
Lender's sole discretion any compromise or settlement that exceeds
$250,000.00. Any check for Insurance Proceeds or Condemnation Awards,
as the case may be (the "Proceeds") will be made payable to Lender and
Borrower. Borrower will endorse the check to Lender immediately upon
Lender presenting the check to Borrower for endorsement or if Borrower
receives the check first, will endorse the check immediately upon
receipt and forward it to Lender. If any Proceeds are paid to
Borrower, Borrower immediately will deposit the Proceeds with Lender,
to be applied or disbursed in accordance with the provisions of this
Deed of Trust. Lender will be responsible for only the Proceeds
actually received by Lender.
Section 7.3. Application of Proceeds. After deducting any
third party and out-of-pocket costs incurred by Lender in collecting
the Proceeds, Lender may, in its sole discretion, (i) apply the
Proceeds as a credit against any portion of the Debt selected by
Lender in its sole discretion of the Debt; (ii) apply the Proceeds to
restore the Improvements, provided that Lender will not be obligated
to see to the proper application of the Proceeds and provided further
that any amounts released for Restoration will not be deemed a payment
on the Debt; or (iii) deliver the Proceeds to Borrower.
Section 7.4. Conditions to Availability of Proceeds for
Restoration. Notwithstanding the preceding Section, after a Casualty
or a Condemnation (a "Destruction Event"), Lender will make the
Proceeds (less any third party and out-of-pocket costs incurred by
Lender in collecting the Proceeds) available for Restoration in
accordance with the conditions for disbursements set forth in the
Section entitled "Restoration", provided that the following conditions
are met:
(i) Bedford Property Investors, Inc. or the
transferee under a Permitted Transfer, if any,
continues to be Borrower at the time of the
Destruction Event and at all times thereafter
until the Proceeds have been fully disbursed;
(ii) no monetary default under the Loan Documents
exists at the time of the Destruction Event and
no Event of Default has occurred during the 12
months prior to the Destruction Event;
(iii) all Leases in effect immediately prior to
the Destruction Event and all Property
Documents in effect immediately prior to
the Destruction Event that are essential to
the use and operation of the Property
continue in full force and effect
notwithstanding the Destruction Event;
(iv) if the Destruction Event is a Condemnation,
Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Improvements can
be restored to an economically and
architecturally viable unit;
(v) Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Proceeds are
sufficient to complete Restoration or if the
Proceeds are insufficient to complete
Restoration, Borrower first deposits with Lender
funds ("Additional Funds") that when added to
the Proceeds will be sufficient to complete
Restoration;
(vi) if the Destruction Event is a Casualty, Borrower
delivers to Lender evidence reasonably
satisfactory to Lender that the Insurer under
each affected Policy has not denied liability
under the Policy as to Borrower or the insured
under the Policy;
(vii) Lender is reasonably satisfied that the
proceeds of any business interruption
insurance in effect together with other
available gross revenues from the Property
are sufficient to pay Debt Service Payments
after paying the Impositions, Insurance
Premiums, reasonable and customary
operating expenses and capital expenditures
until Restoration is complete;
(viii) Lender is reasonably satisfied that
Restoration will be completed on or before
the date (the "Restoration Completion
Date") that is the earliest of: (A) 12
months prior to the Maturity Date; (B) 12
months after the Destruction Event; (C) the
earliest date required for completion of
Restoration under any Lease or any Property
Document; or (D) any date required by Law;
and
(ix) the annual Rents (excluding security deposits)
under Leases in effect on the date of the
Destruction Event are providing debt service
coverage for the annual Debt Service Payments of
1.15 after payment of annual Insurance Premiums,
Impositions and operating expenses of the
Property (including ground rent, if any),
provided that, if the Rents do not provide such
debt service coverage, then Borrower expressly
authorizes and directs Lender to apply an amount
from the Proceeds to reduction of Principal in
order to reduce the annual Debt Service Payments
sufficiently for such debt service coverage to
be achieved. The reduced debt service payments
will be calculated using the Fixed Interest Rate
and an amortization schedule that will achieve
the same proportionate amortization of the
reduced Principal over the then remaining Term
as would have been achieved if the Principal and
the originally scheduled Debt Service Payments
had not been reduced. Borrower will execute any
documentation that Lender deems reasonably
necessary to evidence the reduced Principal and
debt service payments.
Section 7.5. Restoration.
(a) If the total Proceeds for any Destruction Event are
$250,000.00 or less and Lender elects or is obligated by Law or under
this Article to make the Proceeds available for Restoration, Lender
will disburse to Borrower the entire amount received by Lender and
Borrower will commence Restoration promptly after the Destruction
Event and complete Restoration not later than the Restoration
Completion Date.
(b) If the Proceeds for any Destruction Event exceed
$250,000.00 and Lender elects or is obligated by Law or under this
Article to make the Proceeds available for Restoration, Lender will
disburse the Proceeds and any Additional Funds (the "Restoration
Funds") upon Borrower's request as Restoration progresses, generally
in accordance with normal construction lending practices for
disbursing funds for construction costs, provided that the following
conditions are met:
(i) Borrower commences Restoration promptly after
the Destruction Event and completes Restoration
on or before the Restoration Completion Date;
(ii) if Lender requests, Borrower delivers to Lender
prior to commencing Restoration, for Lender's
approval, plans and specifications and a
detailed budget for the Restoration;
(iii) Borrower delivers to Lender reasonably
satisfactory evidence of the costs of
Restoration incurred prior to the date of
the request, and such other documents as
Lender may request including mechanics'
lien, waivers and title insurance
endorsements;
(iv) Borrower pays all costs of Restoration whether
or not the Restoration Funds are sufficient and,
if at any time during Restoration, Lender
determines that the undisbursed balance of the
Restoration Funds is insufficient to complete
Restoration, Borrower shall either: (1) deposit
with Lender, as part of the Restoration Funds,
an amount equal to the deficiency within 30 days
of receiving notice of the deficiency from
Lender; or (2) provide Lender with a letter of
credit, in form and content satisfactory to
Lender, in an amount equal to the deficiency
within 30 days of receiving notice of the
deficiency from Lender ; and
(v) there is no default under the Loan Documents at
the time Borrower requests funds or at the time
Lender disburses funds.
(c) If an Event of Default occurs at any time after the
Destruction Event, then Lender will have no further obligation to make
any remaining Proceeds available for Restoration and may apply any
remaining Proceeds as a credit against any portion of the Debt
selected by Lender in its sole discretion.
(d) Lender may elect at any time prior to commencement of
Restoration or while work is in progress to retain, at Borrower's
expense, an independent engineer or other consultant to review the
plans and specifications, to inspect the work as it progresses and to
provide reports. If any matter included in a report by the engineer
or consultant engaged by Lender is not in compliance with approved
plans and specifications, Lender may suspend disbursement of the
Restoration Funds until the matters contained in the report are
resolved to Lender's satisfaction.
(e) If Borrower fails to commence and complete Restoration
in accordance with the terms of this Article, then in addition to the
Remedies, Lender may elect to restore the Improvements on Borrower's
behalf and reimburse itself out of the Restoration Funds for costs and
expenses incurred by Lender in restoring the Improvements, or Lender
may apply the Restoration Funds as a credit against any portion of the
Debt selected by Lender in its sole discretion.
(f) Lender may commingle the Restoration Funds with its
general assets and will not be liable to pay any interest or other
return on the Restoration Funds unless otherwise required by Law.
Lender will not hold any Restoration Funds in trust. Lender may elect
to deposit the Restoration Funds with a depositary satisfactory to
Lender under a disbursement and security agreement satisfactory to
Lender.
(g) Borrower will pay all of Lender's out-of-pocket and
third party expenses incurred in connection with a Destruction Event
or Restoration. If Borrower fails to do so, then in addition to the
Remedies, Lender may from time to time reimburse itself out of the
Restoration Funds.
(h) Any excess Proceeds, excluding any proceeds from
business interruption insurance maintained by Borrower, remaining
after Restoration less than $100,000, shall be delivered to Borrower.
If the excess Proceeds remaining after Restoration are more than
$100,000, Lender may elect, in its sole discretion to apply any excess
as a credit against any portion of the Debt as selected by Lender in
its sole discretion or to deliver the excess to Borrower.
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS
Section 8.1. Compliance with Law. Borrower, the Property and
the use of the Property comply and will continue to comply with Law
and with all agreements and conditions necessary to preserve and
extend all rights, licenses, permits, privileges, franchises and
concessions (including zoning variances, special exceptions and non-
conforming uses) relating to the Property or Borrower. Borrower will
notify Lender of the commencement of any investigation or Proceeding
relating to a possible violation of Law immediately after Borrower
receives notice thereof and, will deliver promptly to Lender copies of
all documents Borrower receives or delivers in connection with the
investigation or Proceeding. Borrower will not alter the Property in
any manner that would increase Borrower's responsibilities for
compliance with Law.
Section 8.2. Compliance with Agreements. There are no
defaults, events of defaults or events which, with the passage of time
or the giving of notice, would constitute an event of default under
the Property Documents. Borrower will pay and perform all of its
obligations under the Property Documents as and when required by the
Property Documents. Borrower will cause all other parties to the
Property Documents to pay and perform their obligations under the
Property Documents as and when required by the Property Documents.
Borrower will not amend or waive any provisions of the Property
Documents; exercise any options under the Property Documents; give any
approval required or permitted under the Property Documents that would
adversely affect the Property or Lender's rights and interests under
the Loan Documents; cancel or surrender any of the Property Documents;
or release or discharge or permit the release or discharge of any
party to or entity bound by any of the Property Documents, without, in
each instance, Lender's prior approval (excepting therefrom all
service contracts or other agreements entered into in the normal
course of business that are cancelable upon not more than 30 days
notice). Lender shall be deemed to have approved the same if it has
not responded within 90 days of receipt of Borrower's written request
to the Lender at the addresses set forth herein. Borrower will
deliver promptly to Lender copies of any notices of default or of
termination that Borrower receives or delivers relating to any
Property Document.
Section 8.3. ERISA Compliance.
(a) Borrower is not and will continue not to be an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") that is subject to
Title I of ERISA or a "plan" as defined in Section 4975(e)(1) of the
Code that is subject to Section 4975 of the Code, and Borrower's
assets do not and will not constitute "plan assets" of one or more
such plans for purposes of Title I of ERISA or Section 4975 of the
Code.
(b) Borrower is not and will continue not to be a
"governmental plan" within the meaning of Section 3(32) of ERISA and
transactions by or with Borrower are not and will not be subject to
any Laws regulating investments of and fiduciary obligations with
respect to governmental plans.
(c) Borrower will not engage in any transaction which
would cause any obligation or any action under the Loan Documents,
including Lender's exercise of the Remedies, to be a non-exempt
prohibited transaction under ERISA.
Section 8.4. Section 6045(e) Filing. Borrower will supply or
cause to be supplied to Lender either (i) a copy of a completed Form
1099-B, Statement for Recipients of Proceeds from Real Estate, Broker
and Barter Exchange Proceeds prepared by Borrower's attorney or other
person responsible for the preparation of the form, together with a
certificate from the person who prepared the form to the effect that
the form has, to the best of the preparer's knowledge, been accurately
prepared and that the preparer will timely file the form; or (ii) a
certification from Borrower that the Loan is a refinancing of the
Property or is otherwise not required to be reported to the Internal
Revenue Service pursuant to Section 6045(e) of the Code. Under no
circumstances will Lender or Lender's counsel be obligated to file the
reports or returns.
ARTICLE IX
ENVIRONMENTAL
Section 9.1. Environmental Representations and Warranties.
Except as disclosed in the Environmental Report and to
Borrower's knowledge as of the date of this Deed of Trust:
(i) no Environmental Activity has occurred or is
occurring on the Property other than the use,
storage, and disposal of Hazardous Substances
which (A) is in the ordinary course of business
consistent with the Permitted Use; (B) is in
compliance with all Environmental Laws and (C)
has not resulted in Material Environmental
Contamination of the Property; and
(ii) no Environmental Activity has occurred or is
occurring on any property in the vicinity of the
Property which has resulted in Material
Environmental Contamination of the Property.
Section 9.2. Environmental Covenants.
(a) Borrower will not cause or permit any Material
Environmental Contamination of the Property.
(b) No Environmental Activity will occur on the Property
other than the use, storage and disposal of Hazardous Substances which
(A) is in the ordinary course of business consistent with the
Permitted Use; (B) is in compliance with all Environmental Laws; and
(C) does not create a risk of Material Environmental Contamination of
the Property.
(c) Borrower will notify Lender promptly upon Borrower
becoming aware of (i) any Material Environmental Contamination of the
Property or (ii) any Environmental Activity with respect to the
Property that is not in accordance with the preceding subsection (b).
Borrower promptly will deliver to Lender copies of all documents
delivered to or received by Borrower regarding the matters set forth
in this subsection, including notices of Proceedings or investigations
concerning any Material Environmental Contamination of the Property or
Environmental Activity or concerning Borrower's status as a
potentially responsible party (as defined in the Environmental Laws).
Borrower's notification of Lender in accordance with the provisions of
this subsection will not be deemed to excuse any default under the
Loan Documents resulting from the violation of Environmental Laws or
the Material Environmental Contamination of the Property or
Environmental Activity that is the subject of the notice. If Borrower
receives notice of a suspected violation of Environmental Laws in the
vicinity of the Property that poses a risk of Material Environmental
Contamination of the Property, Borrower will give Lender notice and
copies of any documents received relating to such suspected violation.
(d) From time to time at Lender's request, Borrower will
deliver to Lender any information known and documents available to
Borrower relating to the environmental condition of the Property.
(e) Lender may perform or engage an independent consultant
to perform an assessment of the environmental condition of the
Property and of Borrower's compliance with this Section on an annual
basis or at any time for reasonable cause or after an Event of
Default. In connection with the assessment: (i) Lender or consultant
may enter and inspect the Property and perform tests of the air, soil,
ground water and building materials; (ii) Borrower will cooperate and
use best efforts to cause tenants and other occupants of the Property
to cooperate with Lender or consultant; (iii) Borrower will receive a
copy of any final report prepared after the assessment, to be
delivered to Borrower not more than 10 days after Borrower requests a
copy and executes Lender's standard confidentiality and waiver of
liability letter; (iv) Borrower will accept custody of and arrange for
lawful disposal of any Hazardous Substances required to be disposed of
as a result of the tests; (v) Lender will not have liability to
Borrower with respect to the results of the assessment; (vi) Lender
will not be responsible for any damage to the Property resulting from
the tests described in this subsection and Borrower will look solely
to the consultants to reimburse Borrower for any such damage and (vii)
Borrower acknowledges that the results of the assessment are to be
solely for Lender's benefit and Borrower may not rely on such results
for any purpose. The consultant's assessment and reports will be at
Borrower's expense (i) if the reports disclose any material adverse
change in the environmental condition of the Property from that
disclosed in the Environmental Report or any environmental report
previously ordered by Lender; (ii) if Lender engaged the consultant
when Lender had reasonable cause to believe Borrower was not in
compliance with the terms of this Article and, after written notice
from Lender, Borrower failed to provide promptly reasonable evidence
that Borrower is in compliance; or (iii) if Lender engaged the
consultant or after the occurrence of an Event of Default.
(f) If Lender has reasonable cause to believe that there
is Environmental Activity at the Property, Lender may elect in its
sole discretion to direct the Trustee to reconvey any portion of the
Property affected by the Environmental Activity and Borrower will
accept the reconveyance.
ARTICLE X
FINANCIAL REPORTING
Section 10.1. Financial Reporting.
(a) Borrower will deliver to Lender within 90 days after
the close of each Fiscal Year an annual financial statement, certified
by the chief financial officer of Borrower (the "Annual Financial
Statement") for the Property for the Fiscal Year, which will include a
comparative balance sheet, a cash flow statement, an income and
expense statement, a detailed breakdown of all receipts and expenses
and all supporting schedules. Upon request of Lender, Borrower will
also deliver to Lender within 90 days after the close of each Fiscal
Year the Form 10-K Annual Report to the Security and Exchange
Commission for Borrower. The Annual Financial Statement for the
Property will be:
(i) accompanied by an opinion of the CPA that, in
all material respects, the Annual Financial
Statement fairly presents the financial position
of Borrower;
(ii) accompanied by an opinion of the chief financial
officer of Borrower that, in all material
respects, the Annual Financial Statement fairly
presents the financial position of the Property;
(iii) separate and distinct from any consolidated
statement or report for Borrower or any
other entity or any other property.
Section 10.2. Annual Budget. Not less than 30 days prior to
the end of each Fiscal Year, Borrower will deliver to Lender, a
detailed comparative budget (the "Budget") for the Property for the
next succeeding Fiscal Year showing anticipated operating expenses,
Insurance Premiums, Impositions, leasing commissions, capital
improvement costs, tenant improvement costs and any other information
Lender requests. Unless Lender notifies Borrower within 60 days after
Lender receives the Budget that Lender disputes information in the
Budget, the Budget as submitted will constitute the Budget for the
next succeeding Fiscal Year. If Lender concludes in good faith that a
Budget needs material revision, Borrower will submit a revised Budget
to Lender, together with a detailed explanation of the revisions.
Borrower waives any defense or right of offset to the Obligations, and
any claim or counterclaim against Lender, arising out of any
discussions between Borrower and Lender regarding any Budget or
revised Budget delivered to Lender or the resolution of any
disagreements relating to a Budget or revised Budget including any
defense, right of offset, claim or counterclaim alleging in substance,
that by virtue of such delivery, discussions or resolution, Lender has
interfered with, influenced or controlled Borrower or the operations
at the Property.
ARTICLE XI
EXPENSES AND DUTY TO DEFEND
Section 11.1. Payment of Expenses.
(a) Borrower is obligated to pay all fees and expenses
(the "Expenses") incurred by Lender, Trustee or that are otherwise
payable in connection with the Loan, the Property or Borrower,
including attorneys' fees and expenses and any fees and expenses
relating to (i) the preparation, execution, acknowledgment, delivery
and recording or filing of the Loan Documents; (ii) any Proceeding or
other claim asserted against Lender; (iii) any inspection, assessment,
survey and test permitted under the Loan Documents; (iv) any
Destruction Event; (v) the preservation of Trustee's title, Lender's
security and the exercise of any rights or remedies available at Law,
in equity or otherwise; and (vi) the Leases and the Property
Documents.
(b) Borrower will pay the Expenses promptly on demand,
together with any applicable interest, premiums or penalties. If
Lender pays any of the Expenses, Borrower will reimburse Lender the
amount paid by Lender promptly upon demand, together with interest on
such amount at the Fixed Interest Rate from the date Lender paid the
Expenses through the fifth day after demand. Interest on such amount
will be at the Default Interest Rate from the sixth day after demand
through and including the date Borrower reimburses Lender. The
Expenses together with any applicable interest, premiums or penalties
constitute a portion of the Debt secured by this Deed of Trust.
Section 11.2. Duty to Defend. If Lender or any of its
trustees, officers, participants, employees or affiliates is a party
in any Proceeding relating to the Property, Borrower or the Loan,
Borrower will indemnify and hold harmless the party and will defend
the party with attorneys and other professionals retained by Borrower
and approved by Lender. Lender may elect to engage its own attorneys
and other professionals, at Borrower's expense, to defend or to assist
in the defense of the party. In all events, case strategy will be
determined by Lender if Lender so elects and no Proceeding will be
settled without Lender's prior approval which may be withheld in its
sole discretion. Lender shall be deemed to have approved if it has
not responded within 30 days of receipt of Borrower's written request
to the Lender at the addresses set forth herein, provided however,
Lender shall not incur any liability or costs relating to any
settlement pursuant to this Section 11.2.
ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES
Section 12.1. Prohibitions on Transfers, Liens and
Encumbrances.
(a) Borrower acknowledges that in making the Loan, Lender
is relying to a material extent on the business expertise and net
worth of Borrower and Borrower's general partners, members or
principals and on the continuing interest that each of them has,
directly or indirectly, in the Property. Accordingly, except as
specifically set forth in this Deed of Trust, Borrower (i) will not,
and will not permit its partners, members or principals to, effect a
Transfer without Lender's prior approval, which may be withheld in
Lender's sole discretion and (ii) will keep the Property free from all
liens and encumbrances other than the lien of this Deed of Trust and
the Permitted Exceptions. Lender shall be deemed to have approved a
Transfer if it has not responded within 90 days of receipt of
Borrower's written request providing any information required by
Lender as to the proposed Transfer to the Lender at the addresses set
forth herein. A "Transfer" is defined as any sale, grant, lease
(other than bona fide third-party space leases with tenants),
conveyance, assignment or other transfer of, or any encumbrance or
pledge against, the Property, any interest in the Property, any
interest of Borrower's partners, members or principals in the
Property, or any change in Borrower's composition, in each instance
whether voluntary or involuntary, direct or indirect, by operation of
law or otherwise and including the grant of an option or the execution
of an agreement relating to any of the foregoing matters. A Transfer
shall not include the public trading of shares of the Borrower in
accordance with applicable law.
(b) Borrower represents, warrants and covenants that:
(i) Borrower is a publically traded Maryland
corporation whose five largest shareholders as
of March 1999 (the "Existing Shareholders") are:
Bed Preferred No. 1 Limited Partnership, Lend
Lease Rosen Real Estate Securities LLC, PRA
Securities Advisors LP, Heitman PRA Securities
Advisors LLC and Peter B. Bedford.
Section 12.2. Permitted Transfers.
(a) Notwithstanding the prohibitions regarding Transfers,
a Permitted Transfer (as defined in (b) below) may occur, provided
that the following conditions are met:
(i) at least 30 days prior to the proposed Permitted
Transfer, Borrower delivers to Lender a notice
that is sufficiently detailed to enable Lender
to determine that the proposed Permitted
Transfer complies with the terms of this
Section;
(ii) there is no default under the Loan Documents
either when Lender receives the notice or when
the proposed Permitted Transfer occurs;
(iii) the proposed Permitted Transfer will not
result in a violation of any of the
covenants contained in the Section
entitled, "ERISA Compliance" and Borrower
will deliver to Lender such documentation
of compliance as Lender requests in its
sole discretion;
(iv) when Lender receives the notice and when the
proposed Permitted Transfer occurs, the
transferee has never been an adverse party to
Lender in any litigation to which Lender was a
party; the transferee has never defaulted on a
loan from Lender or on any contract or other
agreement with Lender; the transferee has never
threatened litigation against Lender; and the
transferee is free from bankruptcy (for purposes
of this subsection "transferee" includes the
transferee's constituent entities at all levels
and "Lender" includes Lender's subsidiaries);
(v) Borrower pays all of Lender's expenses relating
to the Transfer including Lender's attorneys'
fees regardless of whether or not the proposed
Transfer is consummated; and
(vi) Lender is satisfied that the Property will
continue to be managed by a manager satisfactory
to Lender.
(b) Upon compliance with the conditions set forth in the
preceding subsection, the following Transfers (the "Permitted
Transfers") may occur without Lender's prior consent as provided for
in Section 12.1.
(i) Transfers of shares in Borrower among the
Existing Shareholders;
(ii) Public trading of shares in Borrower in
accordance with applicable law (for public trading of
Borrower's shares, Borrower will not be required to
notify Lender in the event of trading in its shares
and Borrower shall not be required to reimburse the
Lender for the review of trades); and
(iii) A one-time sale of the Property together
with the Property as defined in the Deed of Trust,
Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Bedford Portfolio #3 - California
Property) dated the date of this Deed of Trust,
executed by Borrower and which also secures the Note
("Portfolio #3 California Property"), to one,
unaffiliated, bona fide purchaser, provided that the
following conditions are met:
(A) the transferee has a net worth of at least
$25,000,000;
(B) the transferee is (i) an Institutional
Investor or (ii) a developer or manager of first-class
commercial real estate comparable to the Property and
having a reputation in the industry at least equivalent to
that of Borrower as of the date of this Deed of Trust;
(C) the transferee has expressly assumed the
obligations of Borrower under the Property Documents and
under the Loan Documents; and
(D) subsequent to the Transfer, the Property is
managed by a property manager satisfactory to Lender; and
(E) Borrower pays to Lender a transfer fee of
one-half percent (0.5%) of the outstanding
Principal; provided, however, if, in a single
transaction there is a Transfer to the same
third-party approved by Lender, of the Property
and the Portfolio #3 California Property
together with the properties described in the
Deeds of Trust, Assignments of Leases and Rents,
Security Agreements and Fixture Filings which
secure the Promissory Note - Bedford Portfolio
#1 in the original principal amount of
$43,450,000 dated the date of this Deed of Trust
executed by Borrower pursuant to Lender's Loan
Application and Commitment Agreement #VR-5 for
Lender's Mortgage Number M-000462300 ("Bedford
Portfolio #1 Loan") and the properties described
in the Deeds of Trust, Assignment of Leases and
Rents, Security Agreements and Fixture Filings
which secure the Promissory Note - Bedford
Portfolio #2 in the original principal amount of
$37,200,000 dated the date of this Deed of Trust
executed by Borrower pursuant to Lender's Loan
Application and Commitment Agreement #VR-7 for
Lender's Mortgage Number M-000462600 ("Bedford
Portfolio #2 Loan"), then Borrower pays to
Lender a transfer fee of one-fourth percent
(.25%) of the combined outstanding principal for
the Loan, the Bedford Portfolio #1 Loan and the
Bedford Portfolio #2 Loan.
Section 12.3. Right to Contest Liens. Borrower, at its own
expense, may contest the amount, validity or application, in whole or
in part, of any mechanic's, materialmen's or environmental liens in
which event Lender will refrain from exercising any of the Remedies,
provided that the following conditions are met:
(i) Borrower delivers to Lender notice of the
proposed contest not more than 30 days after the
lien is filed;
(ii) the contest is by a Proceeding promptly
initiated and conducted in good faith and with
due diligence;
(iii) there is no Event of Default other than the
Event of Default arising from the filing of
the lien;
(iv) the Proceeding suspends enforcement of
collection of the lien, imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit;
(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Document;
(vi) Borrower sets aside reserves or furnishes a bond
or other security satisfactory to Lender, in
either case, in an amount sufficient to pay the
claim giving rise to the lien, together with all
interest and penalties, or Borrower pays the
contested lien under protest; and
(vii) with respect to an environmental lien,
Borrower is using best efforts to mitigate
or prevent any deterioration of the
Property resulting from the alleged
violation of any Environmental Laws or the
alleged Environmental Activity.
Section 12.4. Reconveyance Rights. Borrower may obtain the
reconveyance from Trustee of the property listed in Exhibit A-1 or
Exhibit A-2 or Exhibit A-3 and the property listed in Exhibit A-1 or
Exhibit A-2 of the Deed of Trust, Assignment of Leases and Rents,
Security Agreement, and Fixture Filing (Bedford Portfolio #3 -
California Property) dated the date of this Deed of Trust and which
also secures the Note (each of the five described properties being
referred to as a "Release Parcel") at any time more than 24 months
after the execution of this Deed of Trust, provided that the following
conditions are met for each reconveyance:
(i) Borrower shall not be entitled to the
reconveyance of more than two Release Parcels;
one reconveyance of a Release Parcel shall be
solely for the purpose of a sale and a transfer
of the Release Parcel to a bona fide purchaser.
The reconveyance of any Release Parcel shall
occur simultaneously with either the addition of
a new Arizona property to the Property or the
addition of a one or more new properties to
secure the Loan, in accordance with the
provisions of Section 12.5 of this Deed of Trust
and the securing of the lien of the Lender's
mortgage to encumber the Substitution Property
(as defined in Section 12.5);
(ii) not less than 60 days prior to the proposed
date of reconveyance, Borrower delivers to
Lender a notice setting forth (A) the
proposed date of the reconveyance, (B) the
name of the proposed transferee (if the
Release Parcel is adjacent to a property
still covered by this Deed of Trust); (C)
the intended use of the Release Parcel; (D)
any other information reasonably necessary
for Lender to analyze the terms of the
reconveyance. Not less than 30 days prior
to the proposed reconveyance, Borrower will
deliver to Lender a copy of the contract of
sale or ground lease;
(iii) on the date Borrower delivers to Lender
notice of the proposed reconveyance and on
the date of the reconveyance, there is no
default under the Loan Documents on either
the notice date or the release date;
(iv) Borrower delivers to Lender evidence
satisfactory to Lender that Borrower has
complied with any requirements of the Property
Documents or the Leases applicable to the
reconveyance, that the reconveyance does not
violate any of the provisions of the Property
Documents or the Leases and, to the extent
necessary to comply with the Property Documents
or the Leases, that the transferee has assumed
all of Borrower's obligations relating to the
Release Parcel under the Property Documents;
(v) Borrower delivers to Lender an endorsement to
Lender's title insurance policy satisfactory to
Lender that (A) extends the effective date of
the policy to the effective date of the
reconveyance; (B) confirms no change in the
priority of the lien of Lender's Deed of Trust
on the balance of the Property and on the
Portfolio #3 California Property or in the
amount of coverage; (C) consents to the
reconveyance; (D) waives any defense resulting
from the reconveyance; (E) to the extent of the
value of the Release Parcel, waives any right of
subrogation; and (F) includes the Substitution
Property (as defined in Section 12.5) or in the
alternative a separate title insurance policy
that affects the foregoing;
(vi) not less than 10 days prior to the date of the
reconveyance, Borrower delivers to Lender
consents to the reconveyance and substitution by
entities holding liens affecting the Property or
holding any other interest in the Property that
would be affected by the reconveyance and
substitution, including parties to any Property
Documents or to any Leases;
(vii) Borrower pays all expenses relating to the
reconveyance of the Release Parcel and the
addition of the Substitution Property,
including Lender's reasonable attorney's
fees if outside counsel is engaged by
Lender;
(viii) Borrower delivers to Lender copies of the
executed documents evidencing the transfer
of the Release Parcel as provided in
subsection (i) above;
(ix) Borrower delivers to Lender any other
information, approvals and documents reasonably
required by Lender relating to the reconveyance
and the substitution;
(x) The remaining Property together with the
remaining Portfolio #3 California Property
together with the Substitution Property must
have a loan to value ratio of no more than 70%
and provide a debt service coverage ratio of at
least 1.50 times the debt service coverage (in a
manner reasonably determined by Lender); and
(xi) Borrower must prepay 110% of the difference
between the Principal of the Loan allocable to
the Release Parcel that is being released and
70% of the appraised value for the Substitution
Property with a prepayment premium equal to the
Prepayment Percentage (as defined in the Note)
times the resulting difference. For purposes of
this Subsection 12.4 (xi) only, if the
prepayment premium payable hereunder is
calculated on the Discounted Value (defined in
the Note), then the discount rate used to
calculate the prepayment premium shall equal the
Discount Rate (defined in the Note) plus 50
basis points. Allocation of the original
outstanding principal balance will be determined
by Lender's appraisal at Closing. The
additional 10% principal proceeds from a
prepayment pursuant to this Subsection 12.4(xi)
shall be applied at par to a pro-rata reduction
of the Principal balance of the Loan allocated
among the remaining Property, the remaining
Portfolio #1 Arizona Property and the
Substitution Property.
Section 12.5. Substitution. In conjunction with the
reconveyance of a Release Parcel (described in Section 12.4),
Borrower shall provide to Lender, as security for the Loan, the
replacement and substitution of one or more new properties to secure
the Loan, as provided herein (the "Substitution Property"). In
connection with providing the Substitution Property, Borrower shall,
at Borrower's expense, execute and deliver to Lender loan documents,
including an additional deed of trust or mortgage, an assignment of
leases, a UCC-1 financing statement, and any other document, including
title policy, that Lender may require, in form and content acceptable
to Lender in Lender's sole discretion, necessary in order to add the
Substitution Property as collateral for the Loan. Borrower shall also
provide for the Substitution Property all items required for the
Property by the Loan Application and Commitment Agreement dated
February 26, 1999 by and between Lender and Borrower for the Loan.
Lender shall have the sole and absolute discretion to either approve
or disapprove any proposed substitution, provided that such approval
shall not be unreasonably withheld so long as the Substitution
Property is (i) of comparable quality as the Release Parcel being
replaced, and (ii) Borrower demonstrates to Lender's satisfaction that
the Substitution Property has a fair market value of no less than 90%
of the fair market value of the Release Parcel immediately prior to
substitution. Lender shall be deemed to have approved the proposed
substitution if it has not responded within 90 days of Borrower's
written request providing all information required by Lender as to the
proposed substitution at the addresses set forth herein. In all
cases, Lender shall have 90 days to respond from the date of Lender's
receipt of the last information provided by Borrower. Any
substitutions shall be on terms and conditions acceptable to Lender
and shall be subject to Lender's internal approval process. The
Substitution Property together with the other properties comprising
the Property and the Portfolio #3 California Property shall be subject
to a maximum loan-to-value ratio of 70%, have, at a minimum, a debt
service coverage ratio equal to 1.50, and a lease expiration profile
acceptable to Lender. Furthermore, Lender will not approve a
substitution that would negatively impact the loan portfolio with
regard to its geographic diversity, credit risk, leasing pro formas,
tenant quality, lease expiration risk and other similar factors,
including the ability to legally cross-default and cross-collateralize
the Substitution Property with the remainder of the portfolio, to be
determined in Lender's sole discretion. Borrower shall provide Lender
with such information and documentation (including leases and other
property documents) as Lender shall deem necessary to make an informed
decision and properly evaluate the proposed substitution. The
Substitution Property will be required to have a value of not less
than 90% of the fair market value of the Release Parcel to be
reconveyed. Borrower shall be responsible for all costs and expenses,
including, without limitation, reasonable attorney's fees (if outside
counsel is engaged by Lender), incurred by Lender in connection with
any proposed transaction along with title insurance premium and
engineering, environmental and appraisal reports associated with such
substitution.
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 13.1. Further Assurances.
(a) Borrower will execute, acknowledge and deliver to
Lender or to any other entity Lender designates any additional or
replacement documents and perform any additional actions that Lender
determines are reasonably necessary to evidence, perfect or protect
Lender's first lien on and prior security interest in the Property or
to carry out the intent or facilitate the performance of the
provisions of the Loan Documents.
(b) Borrower appoints Lender as Borrower's attorney-in-
fact to perform, at Lender's election, any actions and to execute and
record any of the additional or replacement documents referred to in
this Section, in each instance only at Lender's election and only to
the extent Borrower has failed 3 days after written notice to Borrower
to comply with the terms of this Section.
Section 13.2. Estoppel Certificates.
(a) Within 10 days of Lender's request, but in no case
more often that twice in any 18 month period, except where Lender is
selling all or part of the Loan Borrower will deliver to Lender or to
any entity Lender designates a certificate certifying (i) the original
principal amount of the Note; (ii) the unpaid principal amount of the
Note; (iii) the Fixed Interest Rate; (iv) the amount of the then
current Debt Service Payments; (v) the Maturity Date; (vi) the date a
Debt Service Payment was last made; (vii) that, except as may be
disclosed in the statement, there are no defaults or events which,
with the passage of time or the giving of notice, would constitute an
Event of Default; and (viii) there are no offsets or defenses against
any portion of the Obligations except as may be disclosed in the
statement.
(b) If Lender requests, Borrower promptly will deliver to
Lender or to any entity Lender designates a certificate from each
party to any Property Document, certifying that the Property Document
is in full force and effect with no defaults or events which, with the
passage of time or the giving of notice, would constitute an event of
default under the Property Document and that there are no defenses or
offsets against the performance of its obligations under the Property
Document.
(c) If Lender requests, Borrower promptly will deliver to
Lender, or to any entity Lender designates, a certificate from each
tenant under a Lease then affecting the Property, certifying to any
facts regarding the Lease as Lender may require, including that the
Lease is in full force and effect with no defaults or events which,
with the passage of time or the giving of notice, would constitute an
event of default under the Lease by any party, that the rent has not
been paid more than one month in advance and that the tenant claims no
defense or offset against the performance of its obligations under the
Lease.
ARTICLE XIV
DEFAULTS AND REMEDIES
Section 14.1. Events of Default. The term "Event of Default"
means the occurrence of any of the following events:
(i) if Borrower fails to pay any amount due, as and
when required, under any Loan Document and the
failure continues for a period of 5 days;
(ii) if Borrower makes a general assignment for the
benefit of creditors or generally is not paying,
or is unable to pay, or admits in writing its
inability to pay, its debts as they become due;
or if Borrower or any other party commences any
Proceeding (A) relating to bankruptcy,
insolvency, reorganization, conservatorship or
relief of debtors, in each instance with respect
to Borrower; (B) seeking to have an order for
relief entered with respect to Borrower; (C)
seeking attachment, distraint or execution of a
judgment with respect to Borrower; (D) seeking
to adjudicate Borrower as bankrupt or insolvent;
(E) seeking reorganization, arrangement,
adjustment, winding-up, liquidation,
dissolution, composition or other relief with
respect to Borrower or Borrower's debts; or (F)
seeking appointment of a Receiver, trustee,
custodian, conservator or other similar official
for Borrower or for all or any substantial part
of Borrower's assets, provided that if the
Proceeding is commenced by a party other than
Borrower or any of Borrower's general partners
or members, Borrower will have 120 days to have
the Proceeding dismissed or discharged before an
Event of Default occurs;
(iii) if Borrower is in default beyond any
applicable grace and cure period under any
other mortgage, deed of trust, deed to
secure debt or other security agreement
encumbering the Property whether junior or
senior to the lien of this Deed of Trust;
(iv) if Borrower is in default beyond any applicable
grace and cure period under the loan documents
described in the Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture
Filing (Bedford Portfolio #3 - California
Property) evidencing and securing the Loan made
by Lender in favor of Borrower pursuant to the
Note and encumbering the Portfolio #3 -
California Property;
(v) if a Transfer occurs except in accordance with
the provisions of this Deed of Trust;
(vi) if Borrower abandons the Property or ceases to
conduct its business at the Property;
(vii) if there is a default in the performance of
any other provision of any Loan Document or
if there is any inaccuracy or falsehood in
any representation or warranty contained in
any Loan Document which is not remedied
within 30 days after Borrower receives
notice thereof, provided that if the
default, inaccuracy or falsehood is of a
nature that it cannot be cured within the
30-day period and during that period
Borrower commences to cure, and thereafter
diligently continues to cure, the default,
inaccuracy or falsehood, then the 30-day
period will be extended for a reasonable
period not to exceed 120 days after the
notice to Borrower; or
(viii) if Borrower fails to provide Lender with
the Leasing Letter of Credit (defined
below) or if Borrower fails to renew the
Leasing Letter of Credit; the "Leasing
Letter of Credit" shall mean the Letter of
Credit in the amount of Two Million Seven
Hundred Thousand and No/100 Dollars
($2,700,000) that Borrower is required to
provide and renew pursuant to Section 6.4
of the Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture
Filing Statement (Bedford Portfolio #1 -
Colorado Properties) dated the date of this
Deed of Trust, executed by Borrower for the
benefit of Lender pursuant to TIAA
Application #VR-5, M-000462300.
Section 14.2. Remedies.
(a) If an Event of Default occurs, Lender may take any of
the following actions (the "Remedies") without notice to Borrower:
(i) declare all or any portion of the Debt
immediately due and payable ("Acceleration");
(ii) pay or perform any Obligation;
(iii) institute a Proceeding for the specific
performance of any Obligation;
(iv) apply for and obtain the appointment of a
Receiver to be vested with the fullest powers
permitted by Law, without bond being required,
which appointment may be made ex parte, as a
matter of right and without regard to the value
of the Property, the amount of the Debt or the
solvency of Borrower or any other person liable
for the payment or performance of any portion of
the Obligations;
(v) directly, by its agents or representatives or
through a Receiver appointed by a court of
competent jurisdiction, enter on the Land and
Improvements, take possession of the Property,
dispossess Borrower and exercise Borrower's
rights with respect to the Property, either in
Borrower's name or otherwise;
(vi) institute a Proceeding for the foreclosure of
this Deed of Trust or, if applicable, sell by
power of sale, all or any portion of the
Property, in any court of competent
jurisdiction;
(vii) institute proceedings for the partial
foreclosure of this Deed of Trust for the
portion of the Debt then due and payable,
subject to the continuing lien of this Deed
of Trust for the balance of the Debt not
then due;
(viii) cause Trustee to commence sale of
Borrower's interest in the Property
pursuant to applicable law;
(ix) exercise any and all rights and remedies granted
to a secured party under the Uniform Commercial
Code; and
(x) pursue any other right or remedy available to
Lender at Law, in equity or otherwise.
(b) If an Event of Default occurs, the license granted to
Borrower in the Loan Documents to collect Rents will terminate
automatically without any action required of Lender.
Section 14.3. General Provisions Pertaining to Remedies.
(a) The Remedies are cumulative and may be pursued by
Lender or Trustee concurrently or otherwise, at such time and in such
order as Lender or Trustee may determine in their sole discretion and
without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by Borrower.
(b) The enumeration in the Loan Documents of specific
rights or powers will not be construed to limit any general rights or
powers or impair Lender's or Trustee's rights with respect to the
Remedies.
(c) If Lender or Trustee exercises any of the Remedies,
Lender will not be deemed a mortgagee-in-possession unless Lender has
elected affirmatively to be a mortgagee-in-possession.
(d) Lender and Trustee will not be liable for any act or
omission of Lender or Trustee in connection with the exercise of the
Remedies.
(e) Lender's and Trustee's right to exercise any Remedy
will not be impaired by any delay in exercising or failure to exercise
the Remedy and the delay or failure will not be construed as extending
any cure period or constitute a waiver of the default or Event of
Default.
(f) If an Event of Default occurs, Lender's payment or
performance or acceptance of payment or performance will not be deemed
a waiver or cure of the Event of Default.
(g) Lender's acceptance of partial payment or receipt of
Rents will not extend or affect any grace period or constitute a
waiver of a default or Event of Default or constitute a rescission of
Acceleration.
Section 14.4. Foreclosure by Power of Sale.
(a) Should Lender elect, following an Event of Default, to
foreclose this Deed of Trust by exercise of the power of sale
contained in this Deed of Trust, Lender will notify Trustee and
deposit, if required by Trustee, with Trustee this Deed of Trust, the
Note and such of the other Loan Documents as Trustee may require.
(b) Upon receipt of the notice from Lender, Trustee will
have recorded, published and delivered to Borrower any notice of
default as is then required by Law. Trustee will, without demand on
Borrower after lapse of any time as may then be required by Law and
after notice of sale having been given as required by Law, sell the
Property at the time and place of sale fixed by it in the notice of
sale, either as a whole, or in separate lots or parcels or items and
in such order as Lender may direct Trustee so to do, at public auction
to the highest bidder as provided by Law. Trustee will deliver to the
purchaser of the Property a good and sufficient deed or deeds
conveying the Property so sold, but without any covenant or warranty,
express or implied. The recitals in the deed of any matter or fact
will be conclusive proof of the truthfulness of the recitals. Any
person, including Borrower, Trustee or Lender may purchase at the
sale, and Borrower will warrant and defend the title of the purchaser.
(c) After deducting all costs, fees and expenses of Lender
and Trustee, including costs of evidence of title in connection with
sale, Lender will apply the proceeds of sale in the following
priority, to payment of (i) first, all sums expended under the terms
of the Loan Documents, not then repaid, with accrued interest at the
Default Rate; (ii) second, the Debt in such order as Lender
determines; and (iii) the remainder, if any to the person or persons
legally entitled to it.
(d) Trustee may postpone sale of all or any portion of the
Property as permitted by Law, and without further notice make such
sale at the time fixed by the last postponement, or may, in its
discretion, give a new notice of sale.
(e) A sale of less than the whole of the Property or any
defective or irregular sale made under this Deed of Trust will not
exhaust the power of sale provided for in this Deed of Trust; and
subsequent sales may be made until the Obligations have been
satisfied, or the entire Property sold, without defect or
irregularity.
Section 14.5. General Provisions Pertaining to Receiver and
other Remedies.
(a) If an Event of Default occurs and without notice to
Borrower, any court of competent jurisdiction will, upon application
by Lender, appoint a Receiver as designated in the application and
issue an injunction prohibiting Borrower from interfering with the
Receiver, collecting Rents, disposing of any Rents or any part of the
Property, committing waste or doing any other act that will tend to
affect the preservation of the Leases, the Rents and the Property and
Borrower approves the appointment of the designated Receiver or any
other Receiver appointed by the court. By execution of this Deed of
Trust, Borrower irrevocably consents to the appointment of a receiver
to be made ex parte and as a matter of right to Lender or Trustee,
either before or after sale of the Property, without further notice,
and without regard to the solvency or insolvency, at the time of
application for the Receiver, of the person or persons, if any, liable
for the payment of any portion of the Debt and the performance of any
portion of the Obligations and without regard to the value of the
Property or whether the Property is occupied as a homestead and
without bond being required of the applicant.
(b) The Receiver will be vested with the fullest powers
permitted by Law including all powers necessary or usual in similar
cases for the protection, possession and operation of the Property and
all the powers and duties of Lender as a mortgagee-in-possession as
provided in this Deed of Trust and may continue to exercise all the
usual powers and duties until the Receiver is discharged by the court.
(c) In addition to the Remedies and all other available
rights, Lender or the Receiver may take any of the following actions:
(i) take exclusive possession, custody and control
of the Property and manage the Property so as to
prevent waste;
(ii) require Borrower to deliver to Lender or the
Receiver all keys, security deposits, operating
accounts, prepaid Rents, past due Rents, the
Books and Records and all original counterparts
of the Leases and the Property Documents;
(iii) collect, sue for and give receipts for the
Rents and, after paying all expenses of
collection, including reasonable
receiver's, broker's and attorney's fees,
apply the net collections to any portion of
the Debt selected by Lender in its sole
discretion,
(iv) enter into, modify, extend, enforce, terminate,
renew or accept surrender of Leases and evict
tenants except that in the case of a Receiver,
such actions may be taken only with the written
consent of Lender as provided in this Deed of
Trust and in the Assignment;
(v) enter into, modify, extend, enforce, terminate
or renew Property Documents except that in the
case of a Receiver, such actions may be taken
only with the written consent of Lender as
provided in this Deed of Trust and in the
Assignment;
(vi) appear in and defend any Proceeding brought in
connection with the Property and bring any
Proceeding to protect the Property as well as
Borrower's and Lender's respective interests in
the Property (unless any such Proceeding has
been assigned previously to Lender in the
Assignment, or if so assigned, Lender has not
expressly assigned such Proceeding to the
Receiver and consented to such appearance or
defense by Receiver); and
(vii) perform any act in the place of Borrower
that Lender or the Receiver deems necessary
(A) to preserve the value, marketability or
rentability of the Property; (B) to
increase the gross receipts from the
Property; or (C) otherwise to protect
Borrower's and Lender's respective
interests in the Property.
(d) Borrower appoints Lender as Borrower's attorney-in-
fact, at Lender's election, to perform any actions and to execute and
record any instruments necessary to effectuate the actions described
in this Section, in each instance only at Lender's election and only
to the extent Borrower has failed to comply with the provisions of
this Section.
Section 14.6. General Provisions Pertaining to Foreclosures
and the Power of Sale. The following provisions will apply to any
Proceeding to foreclose and to any sale of the Property by power of
sale or pursuant to a judgment of foreclosure and sale:
(i) Lender's or Trustee's right to institute a
Proceeding to foreclose or to sell by power of
sale will not be exhausted by a Proceeding or a
sale that is defective or not completed or by
conducting separate sales of portions of the
Property;
(ii) any sale may be postponed or adjourned by Lender
by public announcement at the time and place
appointed for the sale without further notice;
(iii) with respect to sale pursuant to a judgment
of foreclosure and sale, the Property may
be sold as an entirety or in parcels, at
one or more sales, at the time and place,
on terms and in the order that Lender deems
expedient in its sole discretion;
(iv) if a portion of the Property is sold pursuant to
this Article, the Loan Documents will remain in
full force and effect with respect to any
unmatured portion of the Debt and this Deed of
Trust will continue as a valid and enforceable
first lien on and security interest in the
remaining portion of the Property, subject only
to the Permitted Exceptions, without loss of
priority and without impairment of any of
Lender's or Trustee's rights and remedies with
respect to the unmatured portion of the Debt;
(v) Lender may bid for and acquire the Property at a
sale and, in lieu of paying cash, may credit the
amount of Lender's bid against any portion of
the Debt selected by Lender in its sole
discretion after deducting from the amount of
Lender's bid the expenses of the sale, costs of
enforcement and other amounts that Lender is
authorized to deduct at Law, in equity or
otherwise; and
(vi) Lender's receipt of the proceeds of a sale will
be sufficient consideration for the portion of
the Property sold and Lender will apply the
proceeds as set forth in this Deed of Trust.
Section 14.7. Application of Proceeds. Lender may apply the
proceeds of any sale of the Property pursuant to a judgment of
foreclosure and sale and any other amounts collected by Lender in
connection with the exercise of the Remedies to payment of the Debt in
such priority and proportions as Lender may determine in its sole
discretion or in such priority and proportions as required by Law.
Section 14.8. Power of Attorney. Borrower appoints Lender as
Borrower's attorney-in-fact to perform any actions necessary and
incidental to exercising the Remedies.
Section 14.9. Tenant at Sufferance. If Lender, Trustee, or a
Receiver enters the Property in the exercise of the Remedies and
Borrower is allowed to remain in occupancy of the Property, Borrower
will pay to Lender, Trustee, or the Receiver, as the case may be, in
advance, a reasonable rent for the Property occupied by Borrower. If
Borrower fails to pay the rent, Borrower may be dispossessed by the
usual Proceedings available against defaulting tenants.
ARTICLE XV
LIMITATION OF LIABILITY
Section 15.1. Limitation of Liability.
(a) Notwithstanding any provision in the Loan Documents to
the contrary, except as set forth in subsections (b) and (c), if
Lender seeks to enforce the collection of the Debt, Lender will
foreclose this Deed of Trust instead of instituting suit on the Note.
If a lesser sum is realized from a foreclosure of this Deed of Trust
and sale of the Property than the then outstanding Debt, Lender will
not institute any Proceeding against Borrower or Borrower's general
partners, if any, for or on account of the deficiency, except as set
forth in subsections (b) and (c).
(b) The limitation of liability in subsection (a) will not
affect or impair (i) the lien of this Deed of Trust or Lender's other
rights and Remedies under the Loan Documents, including Lender's right
as mortgagee or secured party to commence an action to foreclose any
lien or security interest Lender has under the Loan Documents; (ii)
the validity of the Loan Documents or the Obligations; (iii) Lender's
rights under any Loan Document that are not expressly non-recourse; or
(iv) Lender's right to present and collect on any letter of credit or
other credit enhancement document held by Lender in connection with
the Obligations.
(c) The following are excluded and excepted from the
limitation of liability in subsection (a) and Lender may recover
personally against Borrower and its general partners, if any, for the
following:
(i) all losses suffered and liabilities and expenses
incurred by Lender relating to any fraud or
intentional misrepresentation or omission by
Borrower or any of Borrower's partners, members,
officers, directors, shareholders or principals
in connection with (A) the performance of any of
the conditions to Lender making the Loan; (B)
any inducements to Lender to make the Loan; (C)
the execution and delivery of the Loan
Documents; (D) any certificates, representations
or warranties given in connection with the Loan
(including, but not limited to, Estoppel
Certificates executed by Borrower and
representations made by Borrower related to
Property); or (E) Borrower's performance of the
Obligations;
(ii) all Rents derived from the Property after a
default under the Loan Documents which default
is a basis of a Proceeding by Lender to enforce
collection of the Debt and all moneys that, on
the date such a default occurs, are on deposit
in one or more accounts used by or on behalf of
Borrower relating to the operation of the
Property, except to the extent properly applied
to payment of Debt Service Payments,
Impositions, Insurance Premiums and any
reasonable and customary expenses incurred by
Borrower in the operation, maintenance and
leasing of the Property or delivered to Lender;
(iii) the cost of remediation of any
Environmental Activity affecting the
Property, any diminution in the value of
the Property arising from any Environmental
Activity affecting the Property and any
other losses suffered and liabilities and
expenses incurred by Lender relating to a
default under the Article entitled
"Environmental";
(iv) all security deposits collected by Borrower or
any of Borrower's predecessors and not refunded
to Tenants in accordance with their respective
Leases, applied in accordance with the Leases or
Law or delivered to Lender, and all advance
rents collected by Borrower or any of Borrower's
predecessors and not applied in accordance with
the Leases or delivered to Lender;
(v) the replacement cost of any Fixtures or Personal
Property removed from the Property after a
default occurs;
(vi) all losses suffered and liabilities and expenses
incurred by Lender relating to any acts or
omissions by Borrower that result in waste
(including economic and non-physical waste) on
the Property;
(vii) all protective advances and other payments
made by Lender pursuant to express
provisions of the Loan Documents to protect
Lender's security interest in the Property
or to protect the assignment of the
property described in and effected by the
Assignment, but only to the extent that the
Rents would have been sufficient to permit
Borrower to make the payment and Borrower
failed to do so;
(viii) all mechanics' or similar liens relating to
work performed on or materials delivered to
the Property prior to a foreclosure sale of
the Property, but only to the extent Lender
had advanced funds to pay for the work or
materials;
(ix) all Proceeds that are not applied in accordance
with this Deed of Trust or not paid to Lender as
required under this Deed of Trust;
(x) all losses suffered and liabilities and expenses
incurred by Lender relating to a Transfer that
is not permitted under the Section entitled
"Permitted Transfers".
(xi) all losses suffered and liabilities and expenses
incurred by Lender relating to forfeiture or
threatened forfeiture of the Property to the
Government; and
(xii) all losses suffered and liabilities and
expenses incurred by Lender relating to any
default by Borrower under any of the
provisions of this Deed of Trust relating
to ERISA including the prohibition on any
Transfer that results in a violation of
ERISA.
(d) Nothing under subsection (a) above will be deemed to
be a waiver of any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the Bankruptcy Code or
under any other Law relating to bankruptcy or insolvency to file a
claim for the full amount of the Debt or to require that all
collateral will continue to secure all of the Obligations in
accordance with the Loan Documents.
ARTICLE XVI
WAIVERS
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. BORROWER
WAIVES THE RIGHT TO CLAIM ANY STATUTE OF LIMITATIONS AS A DEFENSE TO
BORROWER'S PAYMENT AND PERFORMANCE OF THE OBLIGATIONS.
Section 16.2. WAIVER OF NOTICE. BORROWER WAIVES THE RIGHT TO
RECEIVE ANY NOTICE FROM LENDER OR TRUSTEE WITH RESPECT TO THE LOAN
DOCUMENTS EXCEPT FOR THOSE NOTICES THAT LENDER OR TRUSTEE IS EXPRESSLY
REQUIRED TO DELIVER PURSUANT TO THE LOAN DOCUMENTS.
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS.
BORROWER WAIVES THE BENEFIT OF ANY RIGHTS OF MARSHALLING OR ANY OTHER
RIGHT TO DIRECT THE ORDER IN WHICH ANY OF THE PROPERTY WILL BE (i)
SOLD; OR (ii) MADE AVAILABLE TO ANY ENTITY IF THE PROPERTY IS SOLD BY
POWER OF SALE OR PURSUANT TO A JUDGMENT OF FORECLOSURE AND SALE.
BORROWER ALSO WAIVES THE BENEFIT OF ANY LAWS RELATING TO APPRAISEMENT,
VALUATION, STAY, EXTENSION, REINSTATEMENT, MORATORIUM, HOMESTEAD AND
EXEMPTION RIGHTS OR A SALE IN INVERSE ORDER OF ALIENATION.
Section 16.4. WAIVER OF TRIAL BY JURY. BORROWER WAIVES TRIAL
BY JURY IN ANY PROCEEDING BROUGHT BY, OR AGAINST, OR COUNTERCLAIM OR
CROSS-COMPLAINT ASSERTED BY OR AGAINST, LENDER OR TRUSTEE RELATING TO
THE LOAN, THE PROPERTY DOCUMENTS OR THE LEASES.
Section 16.5. WAIVER OF COUNTERCLAIM. BORROWER WAIVES THE
RIGHT TO ASSERT A COUNTERCLAIM OR CROSS-COMPLAINT, OTHER THAN
COMPULSORY OR MANDATORY COUNTERCLAIMS OR CROSS-COMPLAINTS, IN ANY
PROCEEDING LENDER OR TRUSTEE BRINGS AGAINST BORROWER RELATING TO THE
LOAN, INCLUDING ANY PROCEEDING TO ENFORCE REMEDIES.
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING. BORROWER
WAIVES ANY RIGHT BORROWER MAY HAVE UNDER LAW TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED
BY THE LOAN DOCUMENTS TO LENDER AND BORROWER WAIVES THE RIGHTS, IF
ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN
ACCORDANCE WITH THE PROVISIONS OF THE LOAN DOCUMENTS ON THE GROUND (IF
SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR
JUDICIAL HEARING.
Section 16.7. WAIVER OF SUBROGATION. BORROWER WAIVES ALL
RIGHTS OF SUBROGATION TO LENDER'S RIGHTS OR CLAIMS RELATED TO OR
AFFECTING THE PROPERTY OR ANY OTHER SECURITY FOR THE LOAN UNTIL THE
LOAN IS PAID IN FULL AND ALL FUNDING OBLIGATIONS UNDER THE LOAN
DOCUMENTS HAVE BEEN TERMINATED.
Section 16.8. GENERAL WAIVER. BORROWER ACKNOWLEDGES THAT (A)
BORROWER AND BORROWER'S PARTNERS, MEMBERS OR PRINCIPALS, AS THE CASE
MAY BE, ARE KNOWLEDGEABLE BORROWERS OF COMMERCIAL FUNDS AND
EXPERIENCED REAL ESTATE DEVELOPERS OR INVESTORS WHO UNDERSTAND FULLY
THE EFFECT OF THE ABOVE PROVISIONS; (B) LENDER WOULD NOT MAKE THE LOAN
WITHOUT THE PROVISIONS OF THIS ARTICLE; (C) THE LOAN IS A COMMERCIAL
OR BUSINESS LOAN UNDER THE LAWS OF THE STATE OR COMMONWEALTH WHERE THE
PROPERTY IS LOCATED NEGOTIATED BY LENDER AND BORROWER AND THEIR
RESPECTIVE ATTORNEYS AT ARMS LENGTH; AND (D) ALL WAIVERS BY BORROWER
IN THIS ARTICLE HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND
KNOWINGLY, AFTER BORROWER FIRST HAS BEEN INFORMED BY COUNSEL OF
BORROWER'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE RIGHTS, AND HAVE
BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND ABANDONMENT OF A KNOWN
RIGHT AND PRIVILEGE. THE FOREGOING ACKNOWLEDGMENT IS MADE WITH THE
INTENT THAT LENDER AND ANY SUBSEQUENT HOLDER OF THE NOTE WILL RELY ON
THE ACKNOWLEDGMENT.
ARTICLE XVII
NOTICES
Section 17.1. Notices. All acceptances, approvals, consents,
demands, notices, requests, waivers and other communications (the
"Notices") required or permitted to be given under the Loan Documents
must be in writing and (a) delivered personally by a process server
providing a sworn declaration evidencing the date of service, the
individual served, and the address where the service was made; (b)
sent by certified mail, return receipt requested; or (c) delivered by
nationally recognized overnight delivery service that provides
evidence of the date of delivery, with all charges prepaid (for next
morning delivery if sent by overnight delivery service), addressed to
the appropriate party at its address listed below:
If to Borrower:
Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, California 94549
Attn: Ms. Hanh Kihara
Chief Financial Officer and Senior Vice President
Application #VR-6
Mortgage #000462400
with a courtesy copy to:
Sherman & Sterling
555 California Street, 20th Floor
San Francisco, California 94104
Attn: Emery Mitchell, Esq.
Barbara J.S. McKee, Esq.
Application #VR-6
Mortgage #000462400
If to Lender:
Teachers Insurance and Annuity
Association
730 Third Avenue
New York, New York 10017
Attn: Director of Portfolio Management
for Mortgage and Real Estate Division
Region: Midwest
TIAA Appl. # VR-6
M - 000462400
with a courtesy copy to:
Teachers Insurance and Annuity
Association
730 Third Avenue
New York, New York 10017
Attn: Vice President and Chief Counsel,
Mortgage and Real Estate Law
TIAA Appl. # VR-6
M - 000462400
If to Trustee: First American Title Insurance Company
P.O. Box 3915
Phoenix, Arizona 85030
Attention: __________________
Lender and Borrower each may change from time to time the address to
which Notices must be sent, by notice given in accordance with the
provisions of this Section. All Notices given in accordance with the
provisions of this Section will be deemed to have been received on the
earliest of (i) actual receipt; (ii) Borrower's rejection of delivery;
or (iii) 3 Business Days after having been deposited in any mail
depository regularly maintained by the United States postal service,
if sent by certified mail, or 1 Business Day after having been
deposited with a nationally recognized overnight delivery service, if
sent by overnight delivery or on the date of personal service, if
served by a process server.
Section 17.2. Change in Borrower's Name or Place of Business.
Borrower will immediately notify Lender in writing of any change in
Borrower's name or the place of business set forth in the beginning of
this Deed of Trust.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to the parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.
Section 18.2. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.
Section 18.3. Lender's Discretion. Wherever under the Loan
Documents any matter is required to be satisfactory to Lender, Lender
has the right to approve or determine any matter or Lender has an
election, Lender's approval, determination or election will be made in
Lender's reasonable discretion unless expressly provided to the
contrary.
Section 18.4. Unenforceable Provisions. If any provision in
the Loan Documents is found to be illegal or unenforceable or would
operate to invalidate any of the Loan Documents, then the provision
will be deemed expunged and the Loan Documents will be construed as
though the provision was not contained in the Loan Documents and the
remainder of the Loan Documents will remain in full force and effect.
Section 18.5. Survival of Borrower's Obligations. Borrower's
representations, warranties and covenants contained in the Loan
Documents will continue in full force and effect and survive (i)
satisfaction of the Obligations; (ii) reconveyance of the lien of this
property by Trustee; (iii) assignment or other transfer of all or any
portion of Lender's interest in the Loan Documents or the Property;
(iv) Lender's or Trustee's exercise of any of the Remedies or any of
Lender's or Trustee's other rights under the Loan Documents; (v) a
Transfer; (vi) amendments to the Loan Documents; and (vii) any other
act or omission that might otherwise be construed as a release or
discharge of Borrower.
Section 18.6. Relationship Between Borrower and Lender; No
Third Party Beneficiaries.
(a) Lender is not a partner of or joint venturer with
Borrower or any other entity as a result of the Loan or Lender's
rights under the Loan Documents; the relationship between Lender and
Borrower is strictly that of creditor and debtor. Each Loan Document
is an agreement between the parties to that Loan Document for the
mutual benefit of the parties and no entities other than the parties
to that Loan Document will be a third party beneficiary or will have
any claim against Lender or Borrower by virtue of the Loan Document.
As between Lender and Borrower, any actions taken by Lender under the
Loan Documents will be taken for Lender's protection only, and Lender
has not and will not be deemed to have assumed any responsibility to
Borrower or to any other entity by virtue of Lender's actions.
(b) All conditions to Lender's performance of its
obligations under the Loan Documents are imposed solely for the
benefit of Lender. No entity other than Lender will have standing to
require satisfaction of the conditions in accordance with their
provisions or will be entitled to assume that Lender will refuse to
perform its obligations in the absence of strict compliance with any
of the conditions.
Section 18.7. Partial Reconveyances or Releases, Extensions,
Waivers. Lender may: (i) permit the reconveyance of any part of the
Property or release any entity obligated for the Obligations; (ii)
extend the time for payment or performance of any of the Obligations
or otherwise amend the provisions for payment or performance by
agreement with any entity that is obligated for the Obligations or
that has an interest in the Property; (iii) accept additional security
for the payment and performance of the Obligations; and (iv) waive any
entity's performance of an Obligation, release any entity or
individual now or in the future liable for the performance of the
Obligation or waive the exercise of any Remedy or option. Lender may
exercise any of the foregoing rights without notice, without regard to
the amount of any consideration given, without affecting the priority
of the Loan Documents, without releasing any entity not specifically
released from its obligations under the Loan Documents, without
releasing any guarantor(s) or surety(ies) of the Obligations, without
effecting a novation of the Loan Documents and, with respect to a
waiver, without waiving future performance of the Obligation or
exercise of the Remedy waived.
Section 18.8. Service of Process. Borrower irrevocably
consents to service of process by registered or certified mail,
postage prepaid, return receipt requested, to Borrower at its address
set forth in the Article entitled "Notices" or any other address to
which such address has been changed as permitted hereunder.
Section 18.9. Entire Agreement. Oral agreements or
commitments between Borrower and Lender to lend money, to extend
credit or to forbear from enforcing repayment of a debt, including
promises to extend or renew the debt, are not enforceable. Any
agreements among Borrower, Lender and Trustee relating to the Loan are
contained in the Loan Documents, which contain the complete and
exclusive statement of the agreements among Borrower, Lender and
Trustee, except as Borrower, Lender and, if applicable, Trustee may
later agree in writing to amend the Loan Documents. The language of
each Loan Document will be construed as a whole according to its fair
meaning and will not be construed against the draftsman.
Section 18.10. No Oral Amendment. The Loan Documents may not
be amended, waived or terminated orally or by any act or omission made
individually by Borrower, Lender or Trustee but may be amended, waived
or terminated only by a written document signed by the party against
which enforcement of the amendment, waiver or termination is sought.
Section 18.11. Severability. The invalidity, illegality or
unenforceability of any provision of any of the Loan Documents will
not affect any other provisions of the Loan Documents, which will be
construed as if the invalid, illegal or unenforceable provision never
had been included.
Section 18.12. Covenants Run with the Land. Subject to the
restrictions on transfer contained in the Article entitled "TRANSFERS,
LIENS AND ENCUMBRANCES", all of the covenants of this Deed of Trust
and the Assignment run with the Land, will bind all parties hereto and
all tenants and subtenants of the Land or the Improvements and their
respective heirs, executors, administrators, successors and assigns,
and all occupants and subsequent owners of the Property, and will
inure to the benefit of Lender and all subsequent holders of the Note
and this Deed of Trust.
Section 18.13. Time of the Essence. Time is of the essence
with respect to Borrower's payment and performance of the Obligations.
Section 18.14. Subrogation. If the Principal or any other
amount advanced by Lender is used directly or indirectly to pay off,
discharge or satisfy all or any part of an encumbrance affecting the
Property, then Lender is subrogated to the encumbrance and to any
security held by the holder of the encumbrance, all of which will
continue in full force and effect in favor of Lender as additional
security for the Obligations.
Section 18.15. Joint and Several Liability. If Borrower
consists of more than one person or entity, the obligations and
liabilities of each such person or entity under this Deed of Trust are
joint and several.
Section 18.16. Successors and Assigns. The Loan Documents bind
the parties to the Loan Documents and their respective successors,
assigns, heirs, administrators, executors, agents and representatives
and inure to the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives and to the
extent applicable inure to the benefit of Trustee and its successors,
assigns, heirs, administrators, executors, agents and representatives.
Section 18.17. Duplicates and Counterparts. Duplicate
counterparts of any of the Loan Documents, other than the Note, may be
executed and together will constitute a single original document.
Section 18.18. Deed of Trust as Mortgage. If for any reason
this Deed of Trust shall be
ineffective as a Deed of Trust, it shall be construed and enforced as
a realty mortgage with Borrower being the Mortgagor and Lender being
the Mortgagee.
ARTICLE XIX
TRUSTEE PROVISIONS
Section 19.1 Acceptance of Trust.
(a) Trustee accepts this Trust upon recordation of this
Deed of Trust as provided by Law. Except as provided by Law, Trustee
is not obligated to notify any party of a pending sale under this Deed
of Trust or of a Proceeding in which Borrower, Lender or Trustee is a
party.
(b) Lender may from time to time unilaterally substitute a
successor to Trustee pursuant to a recordable instrument that complies
with Law for substitution of Trustees. The recorded substitution will
be conclusive proof of proper substitution of trustee who will,
without conveyance from predecessor trustee, succeed to all of the
predecessor trustee's title, estate, rights, powers and duties.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Deed of Trust as of the date first set forth above.
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By: /s/ Hanh Kihara
Hanh Kihara, Senior Vice
President
<PAGE>
ACKNOWLEDGMENTS
STATE OF )
) SS:
COUNTY OF )
On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
Signature:
______________________________
Name (Typed or Printed)
STATE OF )
) SS:
COUNTY OF )
On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
Signature:
______________________________
Name (Typed or Printed)
Exhibit A
LEGAL DESCRIPTIONS
Exhibit A-1
Legal Description of Property #2
Westech Business Center
4602-4640 E. Elwood Street, Phoenix, Arizona
Exhibit A-2
Legal Description of Property #3
Westech Business Center II
4710 E. Elwood Street, Phoenix, Arizona
Exhibit A-3
Legal Description of Property #5
8125 North 23rd Street, Phoenix, Arizona
<PAGE>
Exhibit B
DEFINITIONS
"Acceleration" is defined in Section 14.2(a)(i).
"Accumulations" is defined in Section 2.1(xii).
"Accumulations Depositary" is defined in Section 6.2(a).
"Additional Funds" is defined in Section 7.4(v).
"Annual Financial Statement" is defined in Section 10.1(a).
"Assessments" is defined as all assessments now or hereafter levied,
assessed or imposed against the Property.
"Assignment" is defined as the Assignment of Leases and Rents dated of
even date with this Deed of Trust made by Borrower for the benefit of
Lender.
"Bankruptcy Code" means Title 11 of the United States Code.
"Books and Records" is defined in Section 2.1(xi).
"Borrower" is defined in the introductory paragraph.
"Budget" is defined in Section 10.2.
"Business Days" is defined as any day on which commercial banks are
not authorized or required by Law to close in New York, New York.
"Casualty" is defined as damage to or destruction of the Property by
fire or other casualty.
"Code" is defined as the Internal Revenue Code of 1986, as amended and
the regulations promulgated thereunder.
"Condemnation" is defined as the permanent or temporary taking of all
or any portion of the Property, or any interest therein or right
accruing thereto, by the exercise of the right of eminent domain
(including any transfer in lieu of or in anticipation of the exercise
of the right), inverse condemnation or any similar injury or damage to
or decrease in the value of the Property, including severance and
change in the grade of any streets
"Condemnation Awards" is defined in Section 2.1(viii).
"Condemnation Proceeding" is defined as a Proceeding that could result
in a Condemnation.
"CPA" is defined as an independent certified public accountant
satisfactory to Lender.
"Debt" is defined in Section 3.1.
"Debt Service Payments" is defined as the monthly installments of
principal and interest payable by Borrower to Lender as set forth in
the Note.
"Deed of Trust" is defined as this Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing Statement.
"Default Interest Rate" is defined as the lower of 5% per annum over
the Fixed Interest Rate or the Maximum Interest Rate, if any.
"Destruction Event" is defined in Section 7.4.
"Environmental Activity" is defined as any actual, suspected or
threatened abatement, cleanup, disposal, generation, handling,
manufacture, possession, release, remediation, removal, storage,
transportation, treatment or use of any Hazardous Substances. The
actual, suspected or threatened presence of any Hazardous Substances,
or the actual, suspected or threatened noncompliance with any
Environmental Laws, will be deemed Environmental Activity.
"Environmental Laws" is defined as all Laws pertaining to health,
safety, protection of the environment, natural resources,
conservation, wildlife, waste management, Environmental Activities and
pollution.
"Environmental Report" is defined as the report prepared by ICF
Kaiser, dated April 30, 1999 as to the Property described in Exhibit
A-3 and dated April 22, 1999 as to the Property described in Exhibits
A-1 and A-2, all as amended.
"ERISA" is defined in Section 8.3(a).
"Event of Default" is defined in Section 14.1.
"Existing Shareholder" is defined in Section 12.1(b).
"Expenses" is defined in Section 11.1(a).
"Financial Books and Records" is defined as detailed accounts of the
income and expenses of the Property and of Borrower and all other
data, records and information that either are specifically referred to
in the Article entitled "FINANCIAL REPORTING" or are necessary to the
preparation of any of the statements, reports or certificates required
under such Article and includes all supporting schedules prepared or
used by the CPA in auditing the Annual Financial Statement or in
issuing its opinion.
"Fiscal Year" is defined as any calendar year or partial calendar year
during the Term.
"Fixed Interest Rate" is defined as 7.17% per annum.
"Fixtures and Personal Property" is defined in Section 2.1(iv).
"Government" is defined as any federal, state or municipal
governmental or quasi-governmental authority including executive,
legislative or judicial branch, division and any subdivision or agency
of any of them and any entity to which any of them has delegated
authority.
"Hazardous Substances" is defined as (i) any by product, chemical,
compound, material, mixture or substance that is now or hereafter
defined or listed in, or otherwise classified pursuant to, any
Environmental Laws, as a "hazardous substance", "hazardous material",
"hazardous waste", "extremely hazardous waste", infectious waste",
"toxic substance", "toxic pollutant", or any other formulation intended
to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, or "EP toxicity",
(ii) any petroleum, natural gas, natural gas liquid, liquified natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and
such synthetic gas), ash produced by a resource recovery facility
utilizing a municipal solid waste stream, and drilling fluids,
produced waters, and other wastes associated with the exploration,
development or production of crude oil, natural gas, or geothermal
resources, and (iii) any underground storage tanks.
"Imposition Penalty Date" is defined in Section 6.1(a).
"Impositions" is defined as all Taxes, Assessments, ground rent, if
any, water and sewer rents, fees and charges, levies, permit,
inspection and license fees and other dues, charges or impositions,
including all charges and license fees for the use of vaults, chutes
and similar areas adjoining the Land, maintenance and similar charges
and charges for utility services, in each instance whether now or in
the future, directly or indirectly, levied, assessed or imposed on the
Property or Borrower and whether levied, assessed or imposed as
excise, privilege or property taxes.
"Improvements" is defined in Section 2.1(ii).
"Individual Property" is defined in Recital D of the Assignment.
"Insurance Premiums" is defined as all present and future premiums and
other charges due and payable on policies of fire, rental value and
other insurance covering the Property and required pursuant to the
provisions of this Deed of Trust.
"Insurance Proceeds" is defined in Section 2.1(ix).
"Insurers" is defined in Section 7.1(c).
"Institutional Investor" is defined as any bank, savings institution,
charitable foundation, insurance company, real estate investment
trust, pension fund or investment advisor registered under the
Investment Advisors Act of 1940, as amended, and acting as trustee or
agent.
"Interest" is defined as the amount of fixed interest payable under
the Note at the Fixed Interest Rate and any other sums which could be
deemed to be interest under Law.
"Land" is defined in the Recitals.
"Late Charge" is defined in the Note.
"Law" is defined as all present and future codes, constitutions,
cases, opinions, rules, manuals, regulations, determinations, laws,
orders, ordinances, requirements and statutes, as amended, of any
Government that affect or that may be interpreted to affect the
Property, Borrower or the Loan, including amendments and all guidance
documents and publications promulgated thereunder.
"Leases" is defined as all present and future leases, subleases,
licenses and other agreements for the use and occupancy of the Land
and Improvements, any related guarantees and including any use and
occupancy arrangements created pursuant to Section 365 (h) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuation of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar Proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land and Improvements.
"Lender" is defined in the introductory paragraph.
"Loan" is defined in the Recitals.
"Loan Documents" is defined as the Note, this Deed of Trust, the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement (Bedford Portfolio #3 - California Property)
dated the date of this Deed of Trust and securing the Note, the
Assignment, the Assignment of Leases and Rents (Bedford Portfolio #3 -
California Properties) dated the date of this Deed of Trust and
securing the Note and all documents now or hereafter executed by
Borrower or held by Lender or Trustee relating to the Loan, including
all amendments.
"Material Environmental Contamination" is defined as contamination of
the Property with Hazardous Substances (i) that constitutes a
violation of one or more Environmental Laws; (ii) for which there is a
significant possibility that remediation will be required under
Environmental Laws; (iii) that results in a material risk of liability
or expense to Lender; or (iv) that diminishes the value of the
Property.
"Maturity Date" is defined in the Recitals.
"Maximum Interest Rate" is defined as the maximum rate of interest, if
any, permitted by Law to be charged with respect to the Loan as the
maximum rate may be increased or decreased from time to time.
"Note" is defined in the Recitals.
"Note Payments" is defined in the Note.
"Notices" is defined in Section 17.1.
"Obligations" is defined in Section 3.1.
"Permitted Exceptions" is defined as the matters shown in Schedule B,
Part 1 and 2 of the title insurance policy insuring the lien of this
Deed of Trust.
"Permitted Transfers" is defined in Section 12.2(b).
"Permitted Use" is defined as use as first-class commercial office
buildings with respect to the property described in Exhibit A-3, known
as 8125 North 23rd Street, Phoenix, Arizona, and as industrial research
and development buildings with respect to the properties described in
Exhibit A-1 known as Westech Business Center, 4602-4640 E. Elwood
Street, Phoenix, Arizona and Exhibit A-2 known as Westech Business
Center II, 4710 E. Elwood Street, Phoenix, Arizona, and uses
incidentally and directly related to such uses.
"Policies" is defined in Section 7.1(b).
"Prepayment Premium" is defined in the Note.
"Principal" is defined in the Recitals.
"Proceeding" is defined as a pending or threatened action, claim or
litigation before a legal, equitable or administrative tribunal having
proper jurisdiction.
"Proceeds" is defined in Section 7.2(c).
"Property" is defined in Section 2.1.
"Property Documents" is defined in Section 2.1(v).
"Receiver" is defined as a receiver, custodian, trustee, liquidator or
conservator of the Property.
"Release Parcel" is defined in Section 12.4.
"Remedies" is defined in Section 14.2(a).
"Rents" is defined as all present and future rents, prepaid rents,
percentage, participation or contingent rents, issues, profits,
proceeds, parking fees, revenues and other consideration accruing
under the Leases or otherwise derived from the use and occupancy of
the Land or the Improvements, including tenant contributions to
expenses, security deposits, royalties and contingent rent, if any,
all other fees, accounts, accounts receivable or payments paid to or
for the benefit of Borrower, including liquidated damages after a
default under a lease, any premium or other termination fee payable by
tenant after cancellation of a Lease and the proceeds of any rental
insurance, and any payments received pursuant to Section 502(b) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land or the Improvements and all claims as a
creditor in connection with any of the foregoing.
"Restoration" is defined as the restoration of the Property after a
Destruction Event as nearly as possible to its condition immediately
prior to the Destruction Event, in accordance with the plans and
specifications, in a first-class workmanlike manner using materials
substantially equivalent in quality and character to those used for
the original improvements, in accordance with Law and free and clear
of all liens, encumbrances or other charges other than this Deed of
Trust and the Permitted Exceptions.
"Restoration Completion Date" is defined in Section 7.4(viii).
"Restoration Funds" is defined in Section 7.5(b).
"Substitution Property" is defined in Section 12.5.
"Taxes" is defined as all present and future real estate taxes levied,
assessed or imposed against the Property.
"Term" is defined as the scheduled term of this Deed of Trust
commencing on the date Lender makes the first disbursement of the Loan
and terminating on the Maturity Date.
"Transfer" is defined in Section 12.1(a).
"Uniform Commercial Code" is defined as the Uniform Commercial Code in
effect in the jurisdiction where the Land is located.
<PAGE>
Exhibit C
RULES OF CONSTRUCTION
(a) References in any Loan Document to numbered Articles or
Sections are references to the Articles and Sections of that Loan
Document. References in any Loan Document to lettered Exhibits are
references to the Exhibits attached to that Loan Document, all of
which are incorporated in and constitute a part of that Loan Document.
Article, Section and Exhibit captions used in any Loan Document are
for reference only and do not describe or limit the substance, scope
or intent of that Loan Document or the individual Articles, Sections
or Exhibits of that Loan Document.
(b) The terms "include", "including" and similar terms are
construed as if followed by the phrase "without limitation".
(c) The terms "Land", "Improvements", "Fixtures and Personal
Property", "Condemnation Awards", "Insurance Proceeds" and "Property"
are construed as if followed by the phrase "or any part thereof".
(d) Any agreement by or duty imposed on Borrower in any Loan
Document to perform any obligation or to refrain from any act or
omission constitutes a covenant running with the ownership or
occupancy of the Land and the Improvements, which will bind all
parties hereto and their respective successors and assigns, and all
lessees, subtenants and assigns of same, and all occupants and
subsequent owners of the Property, and will inure to the benefit of
Lender and all subsequent holders of the Note and this Deed of Trust
and includes a covenant by Borrower to cause its partners, members,
principals, agents, representatives and employees to perform the
obligation or to refrain from the act or omission in accordance with
the Loan Documents. Any statement or disclosure contained in any Loan
Document about facts or circumstances relating to the Property,
Borrower or the Loan constitutes a representation and warranty by
Borrower made as of the date of the Loan Document in which the
statement or disclosure is contained.
(e) The term "to Borrower's knowledge" is construed as meaning
to the best of Borrower's knowledge after diligent inquiry.
(f) The singular of any word includes the plural and the plural
includes the singular. The use of any gender includes all genders.
(g) The terms "person", "party" and "entity" include natural
persons, firms, partnerships, limited liability companies and
partnerships, corporations and any other public or private legal
entity.
(h) The term "provisions" includes terms, covenants,
conditions, agreements and requirements.
(i) The term "amend" includes modify, supplement, renew,
extend, replace or substitute and the term "amendment" includes
modification, supplement, renewal, extension, replacement and
substitution.
(j) Reference to any specific Law or to any document or
agreement, including the Note, this Deed of Trust, any of the other
Loan Documents, the Leases and the Property Documents, includes any
future amendments to the Law, document or agreement, as the case may
be.
(k) No inference in favor of or against a party with respect to
any provision in any Loan Document may be drawn from the fact that the
party drafted the Loan Document.
(l) The term "certificate" means the sworn, notarized statement
of the entity giving the certificate, made by a duly authorized person
satisfactory to Lender affirming the truth and accuracy of every
statement in the certificate. Any document that is "certified" means
the document has been appended to a certificate of the entity
certifying the document that affirms the truth and accuracy of
everything in the document being certified. In all instances the
entity issuing a certificate must be satisfactory to Lender.
(m) Any appointment of Lender as Borrower's attorney-in-fact is
irrevocable and coupled with an interest. Lender may appoint a
substitute attorney-in-fact. Borrower ratifies all actions taken by
the attorney-in-fact but, nevertheless, if Lender requests, Borrower
will specifically ratify any action taken by the attorney-in-fact by
executing and delivering to the attorney-in-fact or to any entity
designated by the attorney-in-fact all documents necessary to effect
the ratification.
(n) Any document, instrument or agreement to be delivered by
Borrower will be in form and content satisfactory to Lender.
(o) All obligations, rights, remedies and waivers contained in
the Loan Documents will be construed as being limited only to the
extent required to be enforceable under the Law.
(p) The unmodified word "days" means calendar days.
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT
Bedford Portfolio #3 - California Properties
by
BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
as Borrower
and
FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation
as Trustee
for the benefit of
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA, a New York corporation
as Lender
Properties Known As
Fujitsu Building, 598 Gibraltar Drive, Milpitas, California
201-215 Fourier Avenue, Fremont, California
After Recordation This Deed of Trust Should Be Returned To:
Beverly J. Quail, Esquire
c/o Ballard Spahr Andrews & Ingersoll LLP
1225 17th Street, Suite 2300
Denver, Colorado 80202
<PAGE>
TABLE OF CONTENTS
Page
RECITALS:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION. . . . . . . . . . . . . .2
Section 1.1. Definitions . . . . . . . . . . . . . . .2
Section 1.2. Rules of Construction . . . . . . . . . .2
ARTICLE II
GRANTING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . .2
Section 2.1. Encumbered Property . . . . . . . . . . .2
Section 2.2. Habendum Clause . . . . . . . . . . . . .5
Section 2.3. Security Agreement. . . . . . . . . . . .5
Section 2.4. Conditions to Grant . . . . . . . . . . .5
ARTICLE III
OBLIGATIONS SECURED. . . . . . . . . . . . . . . . . . . . . . .6
Section 3.1. The Obligations . . . . . . . . . . . . .6
ARTICLE IV
TITLE AND AUTHORITY. . . . . . . . . . . . . . . . . . . . . . .6
Section 4.1. Title to the Property . . . . . . . . . .6
Section 4.2. Authority . . . . . . . . . . . . . . . .6
Section 4.3. No Foreign Person . . . . . . . . . . . .7
Section 4.4. Litigation. . . . . . . . . . . . . . . .7
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES. . . . . . . . . . . . .7
Section 5.1. Status of the Property. . . . . . . . . .7
Section 5.2. Maintenance of the Property . . . . . . .8
Section 5.3. Change in Use . . . . . . . . . . . . . .8
Section 5.4. Waste . . . . . . . . . . . . . . . . . .8
Section 5.5. Inspection of the Property. . . . . . . .8
Section 5.6. Leases and Rents. . . . . . . . . . . . .8
Section 5.7. Parking . . . . . . . . . . . . . . . . .9
Section 5.8. Separate Tax Lot. . . . . . . . . . . . .9
Section 5.9. Changes in Zoning or Restrictive Covenants9
Section 5.10. Lender's Right to Appear. . . . . . . . .9
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS. . . . . . . . . . . . . . . . . 10
Section 6.1. Impositions . . . . . . . . . . . . . . 10
Section 6.2. Accumulations . . . . . . . . . . . . . 11
Section 6.3. Changes in Tax Laws . . . . . . . . . . 12
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.1. Insurance Coverages . . . . . . . . . . 13
Section 7.2. Casualty and Condemnation . . . . . . . 14
Section 7.3. Application of Proceeds . . . . . . . . 15
Section 7.4. Conditions to Availability of Proceeds for Restoration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 7.5. Restoration . . . . . . . . . . . . . . 17
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS . . . . . . . . . . . . . . 19
Section 8.1. Compliance with Law . . . . . . . . . . 19
Section 8.2. Compliance with Agreements. . . . . . . 19
Section 8.3. ERISA Compliance. . . . . . . . . . . . 19
Section 8.4. Section 6045(e) Filing. . . . . . . . . 20
ARTICLE IX
ENVIRONMENTAL. . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 9.1. Environmental Representations and Warranties20
Section 9.2. Environmental Covenants . . . . . . . . 20
ARTICLE X
FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . 22
Section 10.1. Financial Reporting . . . . . . . . . . 22
Section 10.2. Annual Budget . . . . . . . . . . . . . 22
ARTICLE XI
EXPENSES AND DUTY TO DEFEND. . . . . . . . . . . . . . . . . . 23
Section 11.1. Payment of Expenses . . . . . . . . . . 23
Section 11.2. Duty to Defend. . . . . . . . . . . . . 23
ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES. . . . . . . . . . . . . . . 24
Section 12.1. Prohibitions on Transfers, Liens and Encumbrances24
Section 12.2. Permitted Transfers . . . . . . . . . . 24
Section 12.3. Right to Contest Lien . . . . . . . . . 26
Section 12.4. Reconveyance Rights . . . . . . . . . . 27
Section 12.5. Substitution. . . . . . . . . . . . . . 29
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . 30
Section 13.1. Further Assurances. . . . . . . . . . . 30
Section 13.2. Estoppel Certificates . . . . . . . . . 31
ARTICLE XIV
DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 31
Section 14.1. Events of Default . . . . . . . . . . . 31
Section 14.2. Remedies. . . . . . . . . . . . . . . . 33
Section 14.3. General Provisions Pertaining to Remedies34
Section 14.4. Foreclosure by Power of Sale. . . . . . 35
Section 14.5. General Provisions Pertaining to Mortgagee-in-
Possession or Receiver
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 14.6. General Provisions Pertaining to Foreclosures and the
Power of Sale. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 14.7. Application of Proceeds . . . . . . . . 38
Section 14.8. Power of Attorney . . . . . . . . . . . 38
Section 14.9. Tenant at Sufferance. . . . . . . . . . 38
ARTICLE XV
LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . . . . 38
Section 15.1. Limitation of Liability . . . . . . . . 38
ARTICLE XVI
WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. . . . 41
Section 16.2. WAIVER OF NOTICE. . . . . . . . . . . . 41
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS 41
Section 16.4. WAIVER OF TRIAL BY JURY . . . . . . . . 41
Section 16.5. WAIVER OF COUNTERCLAIM. . . . . . . . . 41
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING . 41
Section 16.7. WAIVER OF SUBROGATION . . . . . . . . . 42
Section 16.8. GENERAL WAIVER. . . . . . . . . . . . . 42
ARTICLE XVII
NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 17.1. Notices . . . . . . . . . . . . . . . . 42
Section 17.2. Change in Borrower's Name or Place of Business44
ARTICLE XVIII
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 18.1. Applicable Law. . . . . . . . . . . . . 44
Section 18.2. Usury Limitations . . . . . . . . . . . 44
Section 18.3. Lender's Discretion . . . . . . . . . . 45
Section 18.4. Unenforceable Provisions. . . . . . . . 45
Section 18.5. Survival of Borrower's Obligations. . . 45
Section 18.6. Relationship Between Borrower and Lender; No Third
Party Beneficiaries
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 18.7. Partial Reconveyances or Releases, Extensions, Waivers
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 18.8. Service of Process. . . . . . . . . . . 46
Section 18.9. Entire Agreement. . . . . . . . . . . . 46
Section 18.10. No Oral Amendment. . . . . . . . . . . 46
Section 18.11. Severability. . . . . . . . . . . . . . 46
Section 18.12. Covenants Run with the Land . . . . . . 46
Section 18.13. Time of the Essence . . . . . . . . . . 47
Section 18.14. Subrogation . . . . . . . . . . . . . . 47
Section 18.15. Joint and Several Liability. . . . . . 47
Section 18.16. Successors and Assigns. . . . . . . . . 47
Section 18.17. Duplicates and Counterparts. . . . . . . . . . 47
ARTICLE XIX
TRUSTEE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 47
Section 19.1 Acceptance of Trust . . . . . . . . . . 47
Exhibit A
LEGAL DESCRIPTION. . . . . . . . . . . . . . . . . . . . . . .A-1
Exhibit B
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .B-1
Exhibit C
RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . .C-1
DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Bedford Portfolio # 3 - California Properties
THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING STATEMENT made this ____ day of
May, l999, by BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation
("Borrower"), having its principal place of business at 270 Lafayette
Circle, Lafayette, California 94549, and FIRST AMERICAN TITLE
INSURANCE COMPANY ("Trustee"), a California corporation, having an
office at 1850 Mt. Diablo Boulevard, Walnut Creek, California 94596,
for the benefit of TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
AMERICA, a New York corporation ("Lender"), having an address at 730
Third Avenue, New York, New York l0017.
RECITALS:
A. Lender agreed to make and Borrower agreed to accept a
loan (the "Loan") in the maximum principal amount of $27,350,000.
B. To evidence the Loan, Borrower executed and delivered
to Lender a promissory note (the "Note"), dated the date of this Deed
of Trust, in the principal amount of TWENTY-SEVEN MILLION THREE
HUNDRED FIFTY THOUSAND AND NO/100 Dollars ($27,350,000) (that amount
or so much as is outstanding from time to time is referred to as the
"Principal"), promising to pay the Principal with interest thereon to
the order of Lender as set forth in the Note and with the balance, if
any, of the Debt being due and payable on June 1, 2005 (the "Maturity
Date").
C. To secure the Note and the Obligations, this Deed of
Trust conveys, among other things, Borrower's fee interest in the real
property located in the Cities of Milpitas and Fremont, Counties of
Santa Clara and Alameda, State of California more particularly
described in Exhibits A-1 and A-2, (the "Land").
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. Capitalized terms used in this
Deed of Trust are defined in Exhibit B or in the text with a cross-
reference in Exhibit B.
Section 1.2. Rules of Construction. This Deed of Trust will
be interpreted in accordance with the rules of construction set forth
in Exhibit C.
ARTICLE II
GRANTING CLAUSES
Section 2.1. Encumbered Property. Borrower irrevocably
grants, mortgages, warrants, sells, conveys, assigns and pledges to
Trustee in trust, WITH POWER OF SALE, and grants to Trustee a security
interest in any and all of the following property, rights, interests
and estates now or in the future owned or held by Borrower (the
"Property") for the uses and purposes set forth in this Deed of Trust:
(i) the Land;
(ii) all buildings and improvements located on the
Land (the "Improvements");
(iii) all easements; rights of way or use,
including any rights of ingress and egress;
streets, roads, ways, sidewalks, alleys and
passages; strips and gores; sewer rights;
water, water rights, water courses,
riparian rights and drainage rights; air
rights and development rights; oil and
mineral rights; and tenements,
hereditaments and appurtenances, in each
instance adjoining or otherwise appurtenant
to or benefitting the Land or the
Improvements;
(iv) all materials intended for construction, re-
construction, alteration or repair of the
Improvements, such materials to be deemed
included in the Land and the Improvements
immediately on delivery to the Land; all
fixtures and personal property that are attached
to, contained in or used in connection with the
Land or the Improvements (excluding personal
property owned by tenants), including:
furniture; furnishings; machinery; motors;
elevators; fittings; microwave ovens;
refrigerators; office systems and equipment;
plumbing, heating, ventilating and air
conditioning systems and equipment; maintenance
and landscaping equipment; lighting, cooking,
laundry, dry cleaning, refrigerating,
incinerating and sprinkler systems and
equipment; telecommunications systems and
equipment; computer or word processing systems
and equipment; security systems and equipment;
and equipment leases for any of the property
described in this subsection (the "Fixtures and
Personal Property");
(v) all agreements, ground leases, grants of
easements or rights-of-way, permits,
declarations of covenants, conditions and
restrictions, disposition and development
agreements, planned unit development agreements,
cooperative, condominium or similar ownership or
conversion plans, management, leasing, brokerage
or parking agreements or other material
documents affecting Borrower or the Land, the
Improvements or the Fixtures and Personal
Property, but expressly excluding the Leases
(the "Property Documents");
(vi) all inventory (including all goods, merchandise,
raw materials, incidentals, office supplies and
packaging materials) held for sale, lease or
resale or furnished or to be furnished under
contracts of service, or used or consumed in the
ownership, use or operation of the Land, the
Improvements or the Fixtures and Personal
Property, all documents of title evidencing any
part of any of the foregoing and all returned or
repossessed goods arising from or relating to
any sale or disposition of inventory;
(vii) all intangible personal property relating
to the Land, the Improvements or the
Fixtures and Personal Property, including
choses in action and causes of action
(except those personal to Borrower),
corporate and other business records,
inventions, designs, promotional materials,
blueprints, plans, specifications, patents,
patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, claims
for refunds or rebates of taxes, insurance
surpluses, refunds or rebates of taxes and
any letter of credit, guarantee, claim,
security interest or other security held by
or granted to Borrower to secure payment by
an account debtor of any of the accounts of
Borrower arising out of the ownership, use
or operation of the Land, the Improvements
or the Fixtures and Personal Property, and
documents covering all of the foregoing;
all accounts, accounts receivable,
documents, instruments, money, deposit
accounts, funds deposited in accounts
established with a bank, savings and loan
association, trust company or other
financial institution in connection with
the ownership, use or operation of the
Land, the Improvements or the Fixtures and
Personal Property, including any reserve
accounts or escrow accounts, and all
investments of the funds and all other
general intangibles;
(viii) all awards and other compensation paid
after the date of this Deed of Trust for
any Condemnation (the "Condemnation
Awards");
(ix) all proceeds of and all unearned premiums on the
Policies (the "Insurance Proceeds");
(x) all licenses, certificates of occupancy,
contracts, management agreements, operating
agreements, operating covenants, franchise
agreements, permits and variances relating to
the Land, the Improvements or the Fixtures and
Personal Property;
(xi) all books, records and other information,
wherever located, which are in Borrower's
possession, custody or control or to which
Borrower is entitled at law or in equity and
which are related to the Property, including all
computer or other equipment used to record,
store, manage, manipulate or access the
information (the "Books and Records");
(xii) all deposits and letters of credit held
from time to time by the Accumulations
Depositary to provide reserves for Taxes
and Assessments together with interest
thereon, if any (the "Accumulations") and
the account or accounts in which such
deposits are or may be held; and
(xiii) all after-acquired title to or remainder or
reversion in any of the property described
in this Section; all additions, accessions
and extensions to, improvements of and
substitutions or replacements for any of
such property; all products and all cash
and non-cash proceeds, immediate or remote,
of any sale or other disposition of any of
such property, excluding sales or other
dispositions of inventory in the ordinary
course of the business of operating the
Land or the Improvements; and all
additional lands, estates, interests,
rights or other property acquired by
Borrower after the date of this Deed of
Trust for use in connection with the Land
and Improvements, all without the need for
any additional mortgage, assignment, pledge
or conveyance to Lender but Borrower will
execute and deliver to Lender, upon
Lender's request, any documents reasonably
requested by Lender to further evidence the
foregoing.
Section 2.2. Habendum Clause. The Property is conveyed to
Trustee, TO HAVE AND TO HOLD the Property IN TRUST, FOREVER, for the
purpose of securing the Note and the Obligations.
Section 2.3. Security Agreement.
(a) This Deed of Trust is a real property deed of trust
and also a "security agreement" and a "financing statement" within the
meaning of the Uniform Commercial Code. The Property includes both
real and personal property and all of Borrower's other right, title
and interest, whether tangible or intangible, in the Property. By
executing and delivering this Deed of Trust, Borrower grants to
Trustee, as security for the Obligations, a security interest in the
Property to the full extent that any of the Property may be subject to
the Uniform Commercial Code.
(b) Borrower desires and intends that this Deed of Trust
also constitute a Fixture Filing between Borrower as debtor and Lender
as secured party, as defined in the Uniform Commercial Code. To this
end, Borrower acknowledges that (i) this Deed of Trust covers goods
which are or are to become fixtures on the Land; (ii) this financing
statement is to be recorded; (iii) Borrower is the record owner of
such property; (iv) products of collateral are also covered; (v) the
debtor is Bedford Property Investors, Inc., a Maryland corporation
whose address is 270 Lafayette Circle, Lafayette, California 94549;
(vi) the secured party is Teachers Insurance and Annuity Association
of America, a New York corporation, whose address is 730 Third Avenue,
New York, New York 10070; (vii) the record owner of the Property is
Bedford Property Investors, Inc., a Maryland corporation, whose
address is stated above. Except as otherwise provided in the Loan
Documents, no financing statement in favor of any secured party other
than Lender covering the personal property described herein or any
portion thereof is on file in any public office. Provided that
obsolete and worn-out articles may be removed concurrently with the
replacement or renewal thereof with property of at least equal value
or usefulness in the operation of the Property; Borrower will not
otherwise remove or permit the removal of the collateral or any part
thereof without the prior written permission of Lender.
Section 2.4. Conditions to Grant. This Deed of Trust is made
on the express condition that if Borrower pays and performs the
Obligations in full in accordance with the Loan Documents, then unless
expressly provided otherwise in the Loan Documents, the Loan Documents
will be released at Borrower's expense.
ARTICLE III
OBLIGATIONS SECURED
Section 3.1. The Obligations. This Deed of Trust secures the
Principal, the Interest, the Late Charges, the Prepayment Premiums,
the Expenses, any additional advances made by Lender in connection
with the Property or the Loan and all other amounts payable under the
Loan Documents (the "Debt") and also secures both the timely payment
of the Debt as and when required and the timely performance of all
other obligations and covenants to be performed under the Loan
Documents (the "Obligations").
ARTICLE IV
TITLE AND AUTHORITY
Section 4.1. Title to the Property.
(a) Subject to the conveyance effectuated by this Deed of
Trust, Borrower has and will continue to have good and marketable
title in fee simple absolute to the Land and the Improvements and good
and marketable title to the Fixtures and Personal Property, in each
case, free and clear of liens, encumbrances and charges except the
Permitted Exceptions. To Borrower's knowledge, there are no facts or
circumstances that might give rise to a lien, encumbrance or charge on
the Property.
(b) Borrower owns and will continue to own all of the
other Property free and clear of all liens, encumbrances and charges
except the Permitted Exceptions.
(c) This Deed of Trust is and will remain a valid and
enforceable first lien on and security interest in the Property,
subject only to the Permitted Exceptions.
Section 4.2. Authority.
(a) Borrower is and will continue to be (i) duly
organized, validly existing and in good standing under the Laws of the
state or commonwealth in which it was organized or incorporated and
(ii) duly qualified to conduct business, in good standing, in the
state or commonwealth where the Property is located.
(b) Borrower has and will continue to have all approvals
required by Law or otherwise and full right, power and authority to
(i) own and operate the Property and carry on Borrower's business as
now conducted or as proposed to be conducted; (ii) execute and deliver
the Loan Documents; (iii) grant, mortgage, warrant the title to,
convey, assign and pledge the Property to Lender pursuant to the
provisions of this Deed of Trust; and (iv) perform the Obligations.
(c) The execution and delivery of the Loan Documents and
the performance of the Obligations do not and will not conflict with
or result in a default under any Laws or any Leases or Property
Documents and do not and will not conflict with or result in a default
under any agreement binding upon any party to the Loan Documents.
(d) The Loan Documents constitute and will continue to
constitute legal, valid and binding obligations of all parties to the
Loan Documents enforceable in accordance with their respective terms.
Section 4.3. No Foreign Person. Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Code.
Section 4.4. Litigation. There are no Proceedings or, to
Borrower's knowledge, investigations against or affecting Borrower or
the Property and, to Borrower's knowledge, there are no facts or
circumstances that might give rise to a Proceeding or an investigation
against or affecting Borrower or the Property. Borrower will give
Lender prompt notice of the commencement of any Proceeding or
investigation against or affecting the Property or Borrower which
could have a material adverse effect on the Property or on Lender's
interests in the Property or under the Loan Documents. Borrower also
will deliver to Lender such additional information relating to the
Proceeding or investigation as Lender may request from time to time.
ARTICLE V
PROPERTY STATUS, MAINTENANCE AND LEASES
Section 5.1. Status of the Property.
(a) Borrower has obtained and will maintain in full force
and effect all certificates, licenses, permits and approvals that are
issued or required by Law or by any entity having jurisdiction over
the Property or over Borrower or that are necessary for the Permitted
Use, for occupancy and operation of the Property for the conveyance
described in this Deed of Trust and for the conduct of Borrower's
business on the Property in accordance with the Permitted Use.
(b) The Property is and will continue to be serviced by
all public utilities required for the Permitted Use of the Property.
(c) All roads and streets necessary for service of and
access to the Property for the current or contemplated use of the
Property have been completed and are and will continue to be
serviceable, physically open and dedicated to and accepted by the
Government for use by the public.
(d) The Property is free from damage caused by a Casualty.
(e) Except as disclosed in writing to Lender, all costs
and expenses of labor, materials, supplies and equipment used in the
construction of the Improvements have been paid in full.
Section 5.2. Maintenance of the Property. Borrower will
maintain the Property in thorough repair and good and safe condition,
suitable for the Permitted Use, including, to the extent necessary,
replacing the Fixtures and Personal Property with property at least
equal in quality and condition to that being replaced and free of
liens. Borrower will not erect any new buildings, building additions
or other structures on the Land or otherwise materially alter the
Improvements without Lender's prior consent which may be withheld in
Lender's sole discretion. Lender shall be deemed to have consented if
it has not responded within 30 days of receipt of Borrower's written
request to the Lender at the addresses set forth herein. In the event
that Borrower does not manage the Property itself, the Property will
be managed by a property manager satisfactory to Lender pursuant to a
management agreement satisfactory to Lender and terminable by Borrower
upon 30 days notice to the property manager.
Section 5.3. Change in Use. Borrower will use and permit the
use of the Property for the Permitted Use and for no other purpose.
Section 5.4. Waste. Borrower will not commit or permit any
waste (including economic and non-physical waste), impairment or
deterioration of the Property or any alteration, demolition or removal
of any of the Property, excluding any tenant alterations of a non-
structural nature, without Lender's prior consent which may be
withheld in Lender's sole discretion. Lender shall be deemed to have
consented if it has not responded within 30 days of receipt of
Borrower's written request to the Lender at the addresses set forth
herein.
Section 5.5. Inspection of the Property. Subject to the
rights of tenants under the Leases, Lender has the right to enter and
inspect the Property on reasonable prior notice, except during the
existence of an Event of Default, when no prior notice is required.
Lender has the right to engage an independent expert to review and
report on Borrower's compliance with Borrower's obligations under this
Deed of Trust to maintain the Property, comply with Law and refrain
from waste, impairment or deterioration of the Property and the
alteration, demolition or removal of any of the Property except as may
be permitted by the provisions of this Deed of Trust. If the
independent expert's report discloses material failure to comply with
such obligations or if Lender engages the independent expert after the
occurrence of an Event of Default, then the independent expert's
review and report will be at Borrower's expense, payable within 3 days
after demand.
Section 5.6. Leases and Rents.
(a) Borrower assigns the Leases and the Rents to Lender
absolutely and unconditionally and not merely as additional collateral
or security for the payment and performance of the Obligations, but
subject to a license back to Borrower of the right to collect the
Rents unless and until an Event of Default occurs at which time the
license will terminate automatically, all as more particularly set
forth in the Assignment, the provisions of which are incorporated in
this Deed of Trust by reference.
(b) Borrower appoints Lender as Borrower's attorney-in-
fact to execute unilaterally and record, at Lender's election, a
document subordinating this Deed of Trust to the Leases, provided that
the subordination will not affect (i) the priority of Lender's
entitlement to Insurance Proceeds or Condemnation Awards or (ii) the
priority of this Deed of Trust over intervening liens or liens arising
under or with respect to the Leases.
Section 5.7. Parking. Borrower will provide, maintain,
monitor and light parking areas within the Property, including any
sidewalks, aisles, streets, driveways, sidewalk cuts and rights-of-way
to and from the adjacent public streets, in a manner consistent with
the Permitted Use and sufficient to accommodate the greatest of: (i)
the number of parking spaces required by Law; or (ii) the number of
parking spaces required by the Leases and the Property Documents. The
parking areas will be reserved and used exclusively for ingress,
egress and parking for Borrower and the tenants under the Leases and
their respective employees, customers and invitees and in accordance
with the Leases and the Property Documents.
Section 5.8. Separate Tax Lot. The Property is and will
remain assessed for real estate tax purposes as one or more wholly
independent tax lots, separate from any property that is not part of
the Property.
Section 5.9. Changes in Zoning or Restrictive Covenants.
Borrower will not (i) initiate, join in or consent to any change in
any Laws pertaining to zoning, any restrictive covenant or other
restriction which would restrict the Permitted Uses for the Property;
(ii) permit the Property to be used to fulfil any requirements of Law
for the construction or maintenance of any improvements on property
that is not part of the Property; (iii) permit the Property to be used
for any purpose not included in the Permitted Use; or (iv) impair the
integrity of the Property as a single, legally subdivided zoning lot
separate from all other property.
Section 5.10. Lender's Right to Appear. If Lender determines,
in its sole discretion, that Borrower is not adequately protecting
Lender's interest in the Property, upon written notice to Borrower,
except in the case of an emergency, Lender has the right to appear in
and defend any Proceeding brought regarding the Property and to bring
any Proceeding, in the name and on behalf of Borrower or in Lender's
name.
ARTICLE VI
IMPOSITIONS AND ACCUMULATIONS
Section 6.1. Impositions.
(a) Borrower will pay each Imposition, unless the
Imposition is payable directly by the tenant, at least 15 days before
the date (the "Imposition Penalty Date") that is the earlier of (i)
the date on which the Imposition becomes delinquent and (ii) the date
on which any penalty, interest or charge for non-payment of the
Imposition accrues. If the Imposition is to be paid directly by a
tenant, Borrower shall deliver to Lender proof, in form and content
acceptable to Lender, of tenant's payment of such Imposition 15 days
before the Imposition Penalty Date.
(b) At least 10 days before each Imposition Penalty Date,
Borrower will deliver to Lender a receipted bill or other evidence of
payment.
(c) Borrower, at its own expense, may contest any Taxes or
Assessments, provided that the following conditions are met:
(i) not less than 30 days prior to the Imposition
Penalty Date, Borrower delivers to Lender notice
of the proposed contest;
(ii) the contest is by a Proceeding promptly
initiated and conducted diligently and in good
faith;
(iii) there is no Event of Default;
(iv) Borrower pays the contested Taxes or Assessments
under protest;
(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Documents;
(vi) the Proceeding precludes imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit; and
(vii) Borrower either (a) deposits with the
Accumulations Depositary reserves or
furnishes a bond or other security
satisfactory to Lender, in either case in
an amount sufficient to pay the contested
Taxes or Assessments, together with all
interest and penalties, or (b) Borrower
pays all of the contested Taxes or
Assessments under protest.
(d) Installment Payments. If any future Assessment is
payable in installments, Borrower will nevertheless pay the Assessment
in its entirety on the day the first installment becomes due and
payable or a lien, unless Lender, in its sole discretion, approves
payment of the Assessment in installments.
Section 6.2. Accumulations.
(a) If required by Lender pursuant to Subsection 6.2 (j)
hereof, Borrower will make an initial deposit with either Lender or a
mortgage servicer or financial institution designated or approved by
Lender from time to time to receive, hold and disburse the
Accumulations in accordance with this Section (the "Accumulations
Depositary"). On the first day of each calendar month during the Term
Borrower will deposit with the Accumulations Depositary an amount
equal to one-twelfth (1/12) of the annual Taxes and Assessments as
determined by Lender or its designee. At least 45 days before each
Imposition Penalty Date, Borrower will deliver to the Accumulations
Depositary any bills and other documents that are necessary to pay the
Taxes and Assessments.
(b) The Accumulations will be applied to the payment of
Taxes and Assessments. Any excess Accumulations after payment of
Taxes and Assessments will be returned to Borrower or credited against
future payments of the Accumulations, at Lender's election or as
required by Law. If the Accumulations are not sufficient to pay Taxes
and Assessments, Borrower will pay the deficiency to the Accumulations
Depositary within 5 days of demand. At any time after an Event of
Default occurs, Lender may apply the Accumulations as a credit against
any portion of the Debt selected by Lender in its sole discretion.
(c) The Accumulations Depositary will hold the
Accumulations as additional security for the Obligations until applied
in accordance with the provisions of this Deed of Trust. If Lender is
not the Accumulations Depositary, the Accumulations Depositary will
deliver the Accumulations to Lender upon Lender's demand at any time
after an Event of Default.
(d) If the Property is sold or conveyed, other than by
foreclosure or transfer in lieu of foreclosure, and the Property
remains subject to this Deed of Trust, all right, title and interest
of Borrower to the Accumulations will automatically, and without
necessity of further assignment, be held for the account of the new
owner, subject to the provisions of this Section and Borrower will
have no further interest in the Accumulations.
(e) Borrower waives all right to demand, receive or
collect any interest or other return on the Accumulations which will
be held in a non-interest bearing account (except as required by Law)
and may be commingled with other monies held by the Accumulations
Depositary and will not be held in trust.
(f) Lender has the right to pay, or to direct the
Accumulations Depositary to pay, any Taxes or Assessments unless
Borrower is contesting the Taxes or Assessments in accordance with the
provisions of this Deed of Trust, in which event any payment of the
contested Taxes or Assessments will be made under protest in the
manner prescribed by Law or, at Lender's election, will be withheld.
(g) If Lender assigns this Deed of Trust, Lender will pay,
or cause the Accumulations Depositary to pay, the unapplied balance of
the Accumulations to or at the direction of the assignee.
Simultaneously with the payment, Lender and the Accumulations
Depositary will be released from all liability with respect to the
Accumulations and Borrower will look solely to the assignee with
respect to the Accumulations. When the Obligations have been fully
satisfied, any unapplied balance of the Accumulations will be returned
to Borrower.
(h) Notwithstanding the requirements set forth in
subsections (a) through (g) of this Section 6.2 and provided Borrower
pays the Taxes and Assessments to the taxing authority when due, as an
alternative to the requirements set forth in subsections (a) through
(g), subject to the limitation in subsection 6.2(j) hereof, at
Closing, Borrower shall, at Borrower's option, either (1) deposit an
amount equal to the annual real estate taxes for the Property next due
in an interest bearing account with an agent acceptable to Lender or
approved by Lender or (2) deposit a Letter of Credit equal to such
amount in a form satisfactory to Lender, which Letter of Credit shall
be renewed from time to time at least 30 days prior to the expiration
date thereof, pursuant to an agreement satisfactory to Lender to be
held by a depository, satisfactory to Lender, in Lender's sole
discretion. The amount deposited pursuant to this Subsection 6.2(h)
shall be held as additional security for the Obligations for the term
of the Loan. So long as there is no default under the Loan Documents
and so long as Borrower has deposited the required amount or provided
Lender with an acceptable Letter of Credit, Borrower shall pay real
estate taxes for the Property directly to the appropriate tax
authority.
(i) So long as there is no default under the Loan
Documents, real estate tax escrows will not be required for any tenant
with a credit rating equivalent to a Standard and Poors rating of BBB-
if the tenant's lease states that real estate taxes are to be paid
directly by the tenant and Borrower provides Lender written evidence
within 30 days after payment verifying payment of real estate taxes.
(j) If there is an Event of Default, Lender may, in
Lender's sole discretion, in addition to all of its other rights and
remedies under the Loan Documents, draw down on the deposited amount
or Letter of Credit, as the case may be, to pay the real estate taxes
and require Borrower to comply with the provisions set forth in
subsections 6.2(a) through (g) hereof rather than the provisions of
Subsection 6.2(h) hereof, and the requirement to make such deposits
shall not relieve Borrower of the obligation to remedy and cure the
Event of Default.
Section 6.3. Changes in Tax Laws. If a Law requires the
deduction of the Debt from the value of the Property for the purpose
of taxation or imposes a tax, either directly or indirectly, on the
Debt, any Loan Document or Lender's interest in the Property, Borrower
will pay the tax with interest and penalties, if any. If Lender
determines that Borrower's payment of the tax may be unlawful,
unenforceable, usurious or taxable to Lender, the Debt will become
immediately due and payable on 60 days' prior notice unless the tax
must be paid within the 60-day period, in which case, the Debt will be
due and payable within the lesser period in accordance with this
Section 6.3. Notwithstanding anything herein to the contrary, no
Prepayment Premium or Evasion Premium (as such terms are defined in
the Note) shall be due or payable in the event that all or any portion
of the Debt is prepaid as a result of the payment to Lender of the
Debt pursuant to this Section 6.3.
ARTICLE VII
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION
Section 7.1. Insurance Coverages.
(a) Borrower will maintain such insurance coverages and
endorsements in form and substance and in amounts as Lender may
require in its sole discretion, from time to time. Until Lender
notifies Borrower of changes in Lender's requirements, Borrower will
maintain not less than the insurance coverages and endorsements Lender
required for closing of the Loan for all insurance except earthquake
insurance. Borrower will maintain not less than a $20,000,000
earthquake insurance policy.
(b) The insurance, including renewals, required under this
Section will be issued on valid and enforceable policies and
endorsements satisfactory to Lender (the "Policies"). Each Policy
will contain a standard waiver of subrogation and a replacement cost
endorsement and will provide that Lender will receive not less than 30
days' prior written notice of any cancellation, termination or non-
renewal of a Policy or any material change other than an increase in
coverage and that Lender will be named under a standard mortgage
endorsement as loss payee.
(c) The insurance companies issuing the Policies (the
"Insurers") must be authorized to do business in the State or
Commonwealth where the Property is located, must have been in business
for at least 5 years, must carry an A.M. Best Company, Inc. policy
holder rating of A or better and an A.M. Best Company, Inc. financial
category rating of Class X or better and must be otherwise
satisfactory to Lender. Lender may select an alternative credit
rating agency and may impose different credit rating standards for the
Insurers. Notwithstanding Lender's right to approve the Insurers and
to establish credit rating standards for the Insurers, Lender will not
be responsible for the solvency of any Insurer.
(d) Notwithstanding Lender's rights under this Article,
Lender will not be liable for any loss, damage or injury resulting
from the inadequacy or lack of any insurance coverage.
(e) Borrower will comply with the provisions of the
Policies and with the requirements, notices and demands imposed by the
Insurers and applicable to Borrower or the Property.
(f) Borrower will pay the Insurance Premiums for each
Policy not less than 5 days before the expiration date of the Policy
being replaced or renewed and will deliver to Lender an original or,
if a blanket policy, a certified copy of each Policy marked "Paid" not
less than 15 days prior to the expiration date of the Policy being
replaced or renewed.
(g) Borrower will not carry separate insurance concurrent
in kind or form or contributing in the event of loss with any other
insurance carried by Borrower.
(h) Borrower will not carry any of the insurance required
under this Section on a blanket or umbrella policy without in each
instance Lender's prior approval which may be withheld in Lender's
sole discretion. If Lender approves, Borrower will deliver to Lender
a certified copy of the blanket policy which will allocate to the
Property the amount of coverage required under this Section and
otherwise will provide the same coverage and protection as would a
separate policy insuring only the Property. Lender shall be deemed to
have approved the policy if it has not responded within 30 days of
receipt of Borrower's written request to the Lender at the addresses
set forth herein.
(i) Borrower will give the Insurers prompt notice of any
change in ownership or occupancy of the Property. This subsection
does not abrogate the prohibitions on transfers set forth in this Deed
of Trust.
(j) If the Property is sold at a foreclosure sale or
otherwise is transferred so as to extinguish the Obligations, all of
Borrower's right, title and interest in and to the Policies then in
force will be transferred automatically to the purchaser or
transferee.
Section 7.2. Casualty and Condemnation.
(a) Borrower will give Lender notice of any Casualty
promptly after it occurs and will give Lender notice of any
Condemnation Proceeding promptly after Borrower receives notice of
commencement or notice that such a Condemnation Proceeding will be
commencing. Borrower promptly will deliver to Lender copies of all
documents Borrower delivers or receives relating to the Casualty or
the Condemnation Proceeding, as the case may be.
(b) Borrower authorizes Lender, at Lender's option, to act
on Borrower's behalf to collect, adjust and compromise any claims for
loss, damage or destruction under the Policies on such terms as Lender
determines in Lender's sole discretion. If there is no Event of
Default which remains uncured within the applicable cure period,
Lender shall consult with Borrower before collecting, adjusting or
compromising said claims. Borrower authorizes Lender to act, at
Lender's option, on Borrower's behalf in connection with any
Condemnation Proceeding. Borrower will execute and deliver to Lender
all documents requested by Lender and all documents as may be required
by Law to confirm such authorizations. Nothing in this Section will
be construed to limit or prevent Lender from joining with Borrower
either as a co-defendant or as a co-plaintiff in any Condemnation
Proceeding.
(c) If Lender elects not to act on Borrower's behalf as
provided in this Section, then Borrower promptly will file and
prosecute all claims (including Lender's claims) relating to the
Casualty and will prosecute or defend (including defense of Lender's
interest) any Condemnation Proceeding. Borrower will have the
authority to settle or compromise the claims or Condemnation
Proceeding, as the case may be, provided that Lender has approved in
Lender's sole discretion any compromise or settlement that exceeds
$250,000.00. Any check for Insurance Proceeds or Condemnation Awards,
as the case may be (the "Proceeds") will be made payable to Lender and
Borrower. Borrower will endorse the check to Lender immediately upon
Lender presenting the check to Borrower for endorsement or if Borrower
receives the check first, will endorse the check immediately upon
receipt and forward it to Lender. If any Proceeds are paid to
Borrower, Borrower immediately will deposit the Proceeds with Lender,
to be applied or disbursed in accordance with the provisions of this
Deed of Trust. Lender will be responsible for only the Proceeds
actually received by Lender.
Section 7.3. Application of Proceeds. After deducting any
third party and out-of-pocket costs incurred by Lender in collecting
the Proceeds, Lender may, in its sole discretion, (i) apply the
Proceeds as a credit against any portion of the Debt selected by
Lender in its sole discretion of the Debt; (ii) apply the Proceeds to
restore the Improvements, provided that Lender will not be obligated
to see to the proper application of the Proceeds and provided further
that any amounts released for Restoration will not be deemed a payment
on the Debt; or (iii) deliver the Proceeds to Borrower.
Section 7.4. Conditions to Availability of Proceeds for
Restoration. Notwithstanding the preceding Section, after a Casualty
or a Condemnation (a "Destruction Event"), Lender will make the
Proceeds (less any third party and out-of-pocket costs incurred by
Lender in collecting the Proceeds) available for Restoration in
accordance with the conditions for disbursements set forth in the
Section entitled "Restoration", provided that the following conditions
are met:
(i) Bedford Property Investors, Inc. or the
transferee under a Permitted Transfer, if any,
continues to be Borrower at the time of the
Destruction Event and at all times thereafter
until the Proceeds have been fully disbursed;
(ii) no monetary default under the Loan Documents
exists at the time of the Destruction Event and
no Event of Default has occurred during the 12
months prior to the Destruction Event;
(iii) all Leases in effect immediately prior to
the Destruction Event and all Property
Documents in effect immediately prior to
the Destruction Event that are essential to
the use and operation of the Property
continue in full force and effect
notwithstanding the Destruction Event;
(iv) if the Destruction Event is a Condemnation,
Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Improvements can
be restored to an economically and
architecturally viable unit;
(v) Borrower delivers to Lender evidence reasonably
satisfactory to Lender that the Proceeds are
sufficient to complete Restoration or if the
Proceeds are insufficient to complete
Restoration, Borrower first deposits with Lender
funds ("Additional Funds") that when added to
the Proceeds will be sufficient to complete
Restoration;
(vi) if the Destruction Event is a Casualty, Borrower
delivers to Lender evidence reasonably
satisfactory to Lender that the Insurer under
each affected Policy has not denied liability
under the Policy as to Borrower or the insured
under the Policy;
(vii) Lender is reasonably satisfied that the
proceeds of any business interruption
insurance in effect together with other
available gross revenues from the Property
are sufficient to pay Debt Service Payments
after paying the Impositions, Insurance
Premiums, reasonable and customary
operating expenses and capital expenditures
until Restoration is complete;
(viii) Lender is reasonably satisfied that
Restoration will be completed on or before
the date (the "Restoration Completion
Date") that is the earliest of: (A) 12
months prior to the Maturity Date; (B) 12
months after the Destruction Event; (C) the
earliest date required for completion of
Restoration under any Lease or any Property
Document; or (D) any date required by Law;
and
(ix) the annual Rents (excluding security deposits)
under Leases in effect on the date of the
Destruction Event are providing debt service
coverage for the annual Debt Service Payments of
1.15 after payment of annual Insurance Premiums,
Impositions and operating expenses of the
Property (including ground rent, if any),
provided that, if the Rents do not provide such
debt service coverage, then Borrower expressly
authorizes and directs Lender to apply an amount
from the Proceeds to reduction of Principal in
order to reduce the annual Debt Service Payments
sufficiently for such debt service coverage to
be achieved. The reduced debt service payments
will be calculated using the Fixed Interest Rate
and an amortization schedule that will achieve
the same proportionate amortization of the
reduced Principal over the then remaining Term
as would have been achieved if the Principal and
the originally scheduled Debt Service Payments
had not been reduced. Borrower will execute any
documentation that Lender deems reasonably
necessary to evidence the reduced Principal and
debt service payments.
Section 7.5. Restoration.
(a) If the total Proceeds for any Destruction Event are
$250,000.00 or less and Lender elects or is obligated by Law or under
this Article to make the Proceeds available for Restoration, Lender
will disburse to Borrower the entire amount received by Lender and
Borrower will commence Restoration promptly after the Destruction
Event and complete Restoration not later than the Restoration
Completion Date.
(b) If the Proceeds for any Destruction Event exceed
$250,000.00 and Lender elects or is obligated by Law or under this
Article to make the Proceeds available for Restoration, Lender will
disburse the Proceeds and any Additional Funds (the "Restoration
Funds") upon Borrower's request as Restoration progresses, generally
in accordance with normal construction lending practices for
disbursing funds for construction costs, provided that the following
conditions are met:
(i) Borrower commences Restoration promptly after
the Destruction Event and completes Restoration
on or before the Restoration Completion Date;
(ii) if Lender requests, Borrower delivers to Lender
prior to commencing Restoration, for Lender's
approval, plans and specifications and a
detailed budget for the Restoration;
(iii) Borrower delivers to Lender reasonably
satisfactory evidence of the costs of
Restoration incurred prior to the date of
the request, and such other documents as
Lender may request including mechanics'
lien waivers and title insurance
endorsements;
(iv) Borrower pays all costs of Restoration whether
or not the Restoration Funds are sufficient and,
if at any time during Restoration, Lender
determines that the undisbursed balance of the
Restoration Funds is insufficient to complete
Restoration, Borrower shall either: (1) deposit
with Lender, as part of the Restoration Funds,
an amount equal to the deficiency within 30 days
of receiving notice of the deficiency from
Lender or (2) provide Lender with a letter of
credit, in form and content satisfactory to
Lender, in an amount equal to the deficiency
within 30 days of receiving notice of the
deficiency from Lender; and
(v) there is no default under the Loan Documents at
the time Borrower requests funds or at the time
Lender disburses funds.
(c) If an Event of Default occurs at any time after the
Destruction Event, then Lender will have no further obligation to make
any remaining Proceeds available for Restoration and may apply any
remaining Proceeds as a credit against any portion of the Debt
selected by Lender in its sole discretion.
(d) Lender may elect at any time prior to commencement of
Restoration or while work is in progress to retain, at Borrower's
expense, an independent engineer or other consultant to review the
plans and specifications, to inspect the work as it progresses and to
provide reports. If any matter included in a report by the engineer
or consultant engaged by Lender is not in compliance with approved
plans and specifications, Lender may suspend disbursement of the
Restoration Funds until the matters contained in the report are
resolved to Lender's satisfaction.
(e) If Borrower fails to commence and complete Restoration
in accordance with the terms of this Article, then in addition to the
Remedies, Lender may elect to restore the Improvements on Borrower's
behalf and reimburse itself out of the Restoration Funds for costs and
expenses incurred by Lender in restoring the Improvements, or Lender
may apply the Restoration Funds as a credit against any portion of the
Debt selected by Lender in its sole discretion.
(f) Lender may commingle the Restoration Funds with its
general assets and will not be liable to pay any interest or other
return on the Restoration Funds unless otherwise required by Law.
Lender will not hold any Restoration Funds in trust. Lender may elect
to deposit the Restoration Funds with a depositary satisfactory to
Lender under a disbursement and security agreement satisfactory to
Lender.
(g) Borrower will pay all of Lender's out-of-pocket and
third party expenses incurred in connection with a Destruction Event
or Restoration. If Borrower fails to do so, then in addition to the
Remedies, Lender may from time to time reimburse itself out of the
Restoration Funds.
(h) Any excess Proceeds, excluding any proceeds from
business interruption insurance maintained by Borrower, remaining
after Restoration less than $100,000 shall be delivered to Borrower.
If the excess Proceeds remaining after Restoration are more than
$100,000, Lender may elect, in its sole discretion to apply any excess
as a credit against any portion of the Debt as selected by Lender in
its sole discretion or to deliver the excess to Borrower.
ARTICLE VIII
COMPLIANCE WITH LAW AND AGREEMENTS
Section 8.1. Compliance with Law. Borrower, the Property and
the use of the Property comply and will continue to comply with Law
and with all agreements and conditions necessary to preserve and
extend all rights, licenses, permits, privileges, franchises and
concessions (including zoning variances, special exceptions and non-
conforming uses) relating to the Property or Borrower. Borrower will
notify Lender of the commencement of any investigation or Proceeding
relating to a possible violation of Law immediately after Borrower
receives notice thereof and, will deliver promptly to Lender copies of
all documents Borrower receives or delivers in connection with the
investigation or Proceeding. Borrower will not alter the Property in
any manner that would increase Borrower's responsibilities for
compliance with Law.
Section 8.2. Compliance with Agreements. There are no
defaults, events of defaults or events which, with the passage of time
or the giving of notice, would constitute an event of default under
the Property Documents. Borrower will pay and perform all of its
obligations under the Property Documents as and when required by the
Property Documents. Borrower will cause all other parties to the
Property Documents to pay and perform their obligations under the
Property Documents as and when required by the Property Documents.
Borrower will not amend or waive any provisions of the Property
Documents; exercise any options under the Property Documents; give any
approval required or permitted under the Property Documents that would
adversely affect the Property or Lender's rights and interests under
the Loan Documents; cancel or surrender any of the Property Documents;
or release or discharge or permit the release or discharge of any
party to or entity bound by any of the Property Documents, without, in
each instance, Lender's prior approval (excepting therefrom all
service contracts or other agreements entered into in the normal
course of business that are cancelable upon not more than 30 days
notice). Lender shall be deemed to have approved the same if it has
not responded within 90 days of receipt of Borrower's written request
to Lender at the addresses set forth herein. Borrower will deliver
promptly to Lender copies of any notices of default or of termination
that Borrower receives or delivers relating to any Property Document.
Section 8.3. ERISA Compliance.
(a) Borrower is not and will continue not to be an
"employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") that is subject to
Title I of ERISA or a "plan" as defined in Section 4975(e)(1) of the
Code that is subject to Section 4975 of the Code, and Borrower's
assets do not and will not constitute "plan assets" of one or more
such plans for purposes of Title I of ERISA or Section 4975 of the
Code.
(b) Borrower is not and will continue not to be a
"governmental plan" within the meaning of Section 3(32) of ERISA, and
transactions by or with Borrower are not and will not be subject to
any Laws regulating investments of and fiduciary obligations with
respect to governmental plans.
(c) Borrower will not engage in any transaction which
would cause any obligation or any action under the Loan Documents,
including Lender's exercise of the Remedies, to be a non-exempt
prohibited transaction under ERISA.
Section 8.4. Section 6045(e) Filing. Borrower will supply or
cause to be supplied to Lender either (i) a copy of a completed Form
1099-B, Statement for Recipients of Proceeds from Real Estate, Broker
and Barter Exchange Proceeds prepared by Borrower's attorney or other
person responsible for the preparation of the form, together with a
certificate from the person who prepared the form to the effect that
the form has, to the best of the preparer's knowledge, been accurately
prepared and that the preparer will timely file the form; or (ii) a
certification from Borrower that the Loan is a refinancing of the
Property or is otherwise not required to be reported to the Internal
Revenue Service pursuant to Section 6045(e) of the Code. Under no
circumstances will Lender or Lender's counsel be obligated to file the
reports or returns.
ARTICLE IX
ENVIRONMENTAL
Section 9.1. Environmental Representations and Warranties.
Except as disclosed in the Environmental Report and to
Borrower's knowledge as of the date of this Deed of Trust:
(i) no Environmental Activity has occurred or is
occurring on the Property other than the use,
storage, and disposal of Hazardous Substances
which (A) is in the ordinary course of business
consistent with the Permitted Use; (B) is in
compliance with all Environmental Laws and (C)
has not resulted in Material Environmental
Contamination of the Property; and
(ii) no Environmental Activity has occurred or is
occurring on any property in the vicinity of the
Property which has resulted in Material
Environmental Contamination of the Property.
Section 9.2. Environmental Covenants.
(a) Borrower will not cause or permit any Material
Environmental Contamination of the Property.
(b) No Environmental Activity will occur on the Property
other than the use, storage and disposal of Hazardous Substances which
(A) is in the ordinary course of business consistent with the
Permitted Use; (B) is in compliance with all Environmental Laws; and
(C) does not create a risk of Material Environmental Contamination of
the Property.
(c) Borrower will notify Lender promptly upon Borrower
becoming aware of (i) any Material Environmental Contamination of the
Property or (ii) any Environmental Activity with respect to the
Property that is not in accordance with the preceding subsection (b).
Borrower promptly will deliver to Lender copies of all documents
delivered to or received by Borrower regarding the matters set forth
in this subsection, including notices of Proceedings or investigations
concerning any Material Environmental Contamination of the Property or
Environmental Activity or concerning Borrower's status as a
potentially responsible party (as defined in the Environmental Laws).
Borrower's notification of Lender in accordance with the provisions of
this subsection will not be deemed to excuse any default under the
Loan Documents resulting from the violation of Environmental Laws or
the Material Environmental Contamination of the Property or
Environmental Activity that is the subject of the notice. If Borrower
receives notice of a suspected violation of Environmental Laws in the
vicinity of the Property that poses a risk of Material Environmental
Contamination of the Property, Borrower will give Lender notice and
copies of any documents received relating to such suspected violation.
(d) From time to time at Lender's request, Borrower will
deliver to Lender any information known and documents available to
Borrower relating to the environmental condition of the Property.
(e) Lender may perform or engage an independent consultant
to perform an assessment of the environmental condition of the
Property and of Borrower's compliance with this Section on an annual
basis or at any time for reasonable cause or after an Event of
Default. In connection with the assessment: (i) Lender or consultant
may enter and inspect the Property and perform tests of the air, soil,
ground water and building materials; (ii) Borrower will cooperate and
use best efforts to cause tenants and other occupants of the Property
to cooperate with Lender or consultant; (iii) Borrower will receive a
copy of any final report prepared after the assessment, to be
delivered to Borrower not more than 10 days after Borrower requests a
copy and executes Lender's standard confidentiality and waiver of
liability letter; (iv) Borrower will accept custody of and arrange for
lawful disposal of any Hazardous Substances required to be disposed of
as a result of the tests; (v) Lender will not have liability to
Borrower with respect to the results of the assessment; (vi) Lender
will not be responsible for any damage to the Property resulting from
the tests described in this subsection and Borrower will look solely
to the consultants to reimburse Borrower for any such damage; and
(vii) Borrower acknowledges that the results of the assessment are to
be solely for Lender's benefit and Borrower may not rely on such
results for any purpose. The consultant's assessment and reports will
be at Borrower's expense (i) if the reports disclose any material
adverse change in the environmental condition of the Property from
that disclosed in the Environmental Report or any environmental report
previously ordered by Lender; (ii) if Lender engaged the consultant
when Lender had reasonable cause to believe Borrower was not in
compliance with the terms of this Article and, after written notice
from Lender, Borrower failed to provide promptly reasonable evidence
that Borrower is in compliance; or (iii) if Lender engaged the
consultant or after the occurrence of an Event of Default.
(f) If Lender has reasonable cause to believe that there
is Environmental Activity at the Property, Lender may elect in its
sole discretion to direct the Trustee to reconvey any portion of the
Property affected by the Environmental Activity and Borrower will
accept the reconveyance.
ARTICLE X
FINANCIAL REPORTING
Section 10.1. Financial Reporting.
(a) Borrower will deliver to Lender within 90 days after
the close of each Fiscal Year an annual financial statement, certified
by the chief financial officer of Borrower (the "Annual Financial
Statement") for the Property for the Fiscal Year, which will include a
comparative balance sheet, a cash flow statement, an income and
expense statement, a detailed breakdown of all receipts and expenses
and all supporting schedules. Upon request of Lender, Borrower will
also deliver to Lender within 90 days after the close of each Fiscal
Year the Form 10-K Annual Report to the Security and Exchange
Commission for Borrower. The Annual Financial Statement for the
Property will be:
(i) accompanied by an opinion of the CPA that, in
all material respects, the Annual Financial Statement fairly
presents the financial position of Borrower;
(ii) accompanied by an opinion of the chief
financial officer of Borrower that, in all material respects,
the Annual Financial Statement fairly presents the financial
position of the Property; and
(iii) separate and distinct from any consolidated
statement or report for Borrower or any other entity or any
other property.
Section 10.2. Annual Budget. Not less than 30 days prior to
the end of each Fiscal Year, Borrower will deliver to Lender, a
detailed comparative budget (the "Budget") for the Property for the
next succeeding Fiscal Year showing anticipated operating expenses,
Insurance Premiums, Impositions, leasing commissions, capital
improvement costs, tenant improvement costs and any other information
Lender requests. Unless Lender notifies Borrower within 60 days after
Lender receives the Budget that Lender disputes information in the
Budget, the Budget as submitted will constitute the Budget for the
next succeeding Fiscal Year. If Lender concludes in good faith that a
Budget needs material revision, Borrower will submit a revised Budget
to Lender, together with a detailed explanation of the revisions.
Borrower waives any defense or right of offset to the Obligations, and
any claim or counterclaim against Lender, arising out of any
discussions between Borrower and Lender regarding any Budget or
revised Budget delivered to Lender or the resolution of any
disagreements relating to a Budget or revised Budget including any
defense, right of offset, claim or counterclaim alleging in substance,
that by virtue of such delivery, discussions or resolution, Lender has
interfered with, influenced or controlled Borrower or the operations
at the Property.
ARTICLE XI
EXPENSES AND DUTY TO DEFEND
Section 11.1. Payment of Expenses.
(a) Borrower is obligated to pay all fees and expenses
(the "Expenses") incurred by Lender, Trustee or that are otherwise
payable in connection with the Loan, the Property or Borrower,
including attorneys' fees and expenses and any fees and expenses
relating to (i) the preparation, execution, acknowledgment, delivery
and recording or filing of the Loan Documents; (ii) any Proceeding or
other claim asserted against Lender; (iii) any inspection, assessment,
survey and test permitted under the Loan Documents; (iv) any
Destruction Event; (v) the preservation of Trustee's title, Lender's
security and the exercise of any rights or remedies available at Law,
in equity or otherwise; and (vi) the Leases and the Property
Documents.
(b) Borrower will pay the Expenses promptly on demand,
together with any applicable interest, premiums or penalties. If
Lender pays any of the Expenses, Borrower will reimburse Lender the
amount paid by Lender promptly upon demand, together with interest on
such amount at the Fixed Interest Rate from the date Lender paid the
Expenses through the fifth day after demand. Interest on such amount
will be at the Default Interest Rate from the sixth day after demand
through and including the date Borrower reimburses Lender. The
Expenses together with any applicable interest, premiums or penalties
constitute a portion of the Debt secured by this Deed of Trust.
Section 11.2. Duty to Defend. If Lender or any of its
trustees, officers, participants, employees or affiliates is a party
in any Proceeding relating to the Property, Borrower or the Loan,
Borrower will indemnify and hold harmless the party and will defend
the party with attorneys and other professionals retained by Borrower
and approved by Lender. Lender may elect to engage its own attorneys
and other professionals, at Borrower's expense, to defend or to assist
in the defense of the party. In all events, case strategy will be
determined by Lender if Lender so elects and no Proceeding will be
settled without Lender's prior approval which may be withheld in its
sole discretion. Lender shall be deemed to have approved if it has
not yet responded within 30 days of receipt of Borrower's written
request to Lender at the addresses set forth herein, provided however,
Lender shall not incur any liability or costs relating to any
settlement pursuant to this Section 11.2.
ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES
Section 12.1. Prohibitions on Transfers, Liens and
Encumbrances.
(a) Borrower acknowledges that in making the Loan, Lender
is relying to a material extent on the business expertise and net
worth of Borrower and Borrower's general partners, members or
principals and on the continuing interest that each of them has,
directly or indirectly, in the Property. Accordingly, except as
specifically set forth in this Deed of Trust, Borrower (i) will not,
and will not permit its partners, members or principals to, effect a
Transfer without Lender's prior approval, which may be withheld in
Lender's sole discretion and (ii) will keep the Property free from all
liens and encumbrances other than the lien of this Deed of Trust and
the Permitted Exceptions. Lender shall be deemed to have approved a
Transfer if it has not responded within 90 days of receipt of
Borrower's written request providing any information required by
Lender as to the proposed Transfer to the Lender at the addresses set
forth herein. A "Transfer" is defined as any sale, grant, lease
(other than bona fide third-party space leases with tenants),
conveyance, assignment or other transfer of, or any encumbrance or
pledge against, the Property, any interest in the Property, any
interest of Borrower's partners, members or principals in the
Property, or any change in Borrower's composition, in each instance
whether voluntary or involuntary, direct or indirect, by operation of
law or otherwise and including the grant of an option or the execution
of an agreement relating to any of the foregoing matters. A Transfer
shall not include the public trading of shares of the Borrower in
accordance with applicable law.
(b) Borrower represents, warrants and covenants that:
(i) Borrower is a publically traded Maryland
corporation whose five largest shareholders as
of March 1999 (the "Existing Shareholders") are:
Bed Preferred No. 1 Limited Partnership, Lend
Lease Rosen Real Estate Securities LLC, PRA
Securities Advisors LP, Heitman PRA Securities
Advisors LLC and Peter B. Bedford.
Section 12.2. Permitted Transfers.
(a) Notwithstanding the prohibitions regarding Transfers,
a Permitted Transfer (as defined in (b) below) may occur, provided
that the following conditions are met:
(i) at least 30 days prior to the proposed Permitted
Transfer, Borrower delivers to Lender a notice
that is sufficiently detailed to enable Lender
to determine that the proposed Permitted
Transfer complies with the terms of this
Section;
(ii) there is no default under the Loan Documents
either when Lender receives the notice or when
the proposed Permitted Transfer occurs;
(iii) the proposed Permitted Transfer will not
result in a violation of any of the
covenants contained in the Section
entitled, "ERISA Compliance" and Borrower
will deliver to Lender such documentation
of compliance as Lender requests in its
sole discretion;
(iv) when Lender receives the notice and when the
proposed Permitted Transfer occurs, the
transferee has never been an adverse party to
Lender in any litigation to which Lender was a
party; the transferee has never defaulted on a
loan from Lender or on any contract or other
agreement with Lender; the transferee has never
threatened litigation against Lender; and the
transferee is free from bankruptcy (for purposes
of this subsection "transferee" includes the
transferee's constituent entities at all levels
and "Lender" includes Lender's subsidiaries);
(v) Borrower pays all of Lender's expenses relating
to the Transfer including Lender's attorneys'
fees regardless of whether or not the proposed
Transfer is consummated; and
(vi) Lender is satisfied that the Property will
continue to be managed by a manager satisfactory
to Lender.
(b) Upon compliance with the conditions set forth in the
preceding subsection, the following Transfers (the "Permitted
Transfers") may occur without Lender's prior consent as provided for
in Section 12.1:
(i) Transfers of shares in Borrower among the
Existing Shareholders;
(ii) Public trading of shares in Borrower in
accordance with applicable law (for public trading of
Borrower's shares, Borrower will not be required to
notify Lender in the event of trading in its shares
and Borrower shall not be required to reimburse the
Lender for the review of trades); and
(iii) A one-time sale of the Property together
with the Property as defined in the Deed of Trust,
Assignment of Leases and Rents, Security Agreement and
Fixture Filing (Bedford Portfolio #3 - Arizona
Property) dated the date of this Deed of Trust,
executed by Borrower and which also secures the Note
("Portfolio #3 Arizona Property") to one,
unaffiliated, bona fide purchaser, provided that the
following conditions are met:
(A) the transferee has a net worth of at least
$25,000,000;
(B) the transferee is (i) an Institutional
Investor or (ii) a developer or manager of first-class
commercial real estate comparable to the Property and
having a reputation in the industry at least equivalent to
that of Borrower as of the date of this Deed of Trust;
(C) the transferee has expressly assumed the
obligations of Borrower under the Property Documents and
under the Loan Documents; and
(D) subsequent to the Transfer, the Property is
managed by a property manager satisfactory to Lender; and
(E) Borrower pays to Lender a transfer fee of
one-half percent
(0.5%) of the outstanding Principal; provided, however, if,
in a single transaction there is a Transfer to the same
third-party approved by Lender, of the Property, and the
Portfolio #3 Arizona Property together with the properties
described in the Deeds of Trust, Assignments of Leases and
Rents, Security Agreements and Fixture Filings which secure
the Promissory Note - Bedford Portfolio #1 in the original
principal amount of $43,450,000 dated the date of this Deed
of Trust executed by Borrower pursuant to Lender's Loan
Application and Commitment Agreement #VR-5 for Lender's
Mortgage Number M-000462300 ("Bedford Portfolio #1 Loan")
and the properties described in the Deeds of Trust,
Assignment of Leases and Rents, Security Agreements and
Fixture Filings which secure the Promissory Note - Bedford
Portfolio #2 in the original principal amount of
$37,200,000 dated the date of this Deed of Trust executed
by Borrower pursuant to Lender's Loan Application and
Commitment Agreement #VR-7 for Lender's Mortgage Number M-
000462600 ("Bedford Portfolio #2 Loan"), then Borrower pays
to Lender a transfer fee of one-fourth percent (.25%) of
the combined outstanding principal for the Loan, the
Bedford Portfolio #1 Loan and the Bedford Portfolio #2
Loan.
Section 12.3. Right to Contest Liens. Borrower, at its own
expense, may contest the amount, validity or application, in whole or
in part, of any mechanic's, materialmen's or environmental liens in
which event Lender will refrain from exercising any of the Remedies,
provided that the following conditions are met:
(i) Borrower delivers to Lender notice of the
proposed contest not more than 30 days after the
lien is filed;
(ii) the contest is by a Proceeding promptly
initiated and conducted in good faith and with
due diligence;
(iii) there is no Event of Default other than the
Event of Default arising from the filing of
the lien;
(iv) the Proceeding suspends enforcement of
collection of the lien, imposition of criminal
or civil penalties and sale or forfeiture of the
Property and Lender will not be subject to any
civil suit;
(v) the Proceeding is permitted under and is
conducted in accordance with the Leases and the
Property Document;
(vi) Borrower sets aside reserves or furnishes a bond
or other security satisfactory to Lender, in
either case in an amount sufficient to pay the
claim giving rise to the lien, together with all
interest and penalties, or Borrower pays the
contested lien under protest; and
(vii) with respect to an environmental lien,
Borrower is using best efforts to mitigate
or prevent any deterioration of the
Property resulting from the alleged
violation of any Environmental Laws or the
alleged Environmental Activity.
Section 12.4. Reconveyance Rights. Borrower may obtain the
reconveyance from Trustee of the property listed in Exhibit A-1 or
Exhibit A-2 and the property listed in Exhibit A-1, Exhibit A-2 or
Exhibit A-3 of the Deed of Trust, Assignment of Leases and Rents,
Security Agreement, and Fixture Filing (Bedford Portfolio #3 - Arizona
Property) dated the date of this Deed of Trust and which also secures
the Note (each of the five described properties being referred to as a
"Release Parcel") at any time more than 24 months after the execution
of this Deed of Trust, provided that the following conditions are met
for each reconveyance:
(i) Borrower shall not be entitled to the
reconveyance of more than two Release Parcels;
one reconveyance of a Release Parcel shall be
solely for the purpose of a sale and a transfer
of the Release Parcel to a bona fide purchaser.
The reconveyance of any Release Parcel shall
occur simultaneously with the addition of one or
more new properties to secure the Loan, in
accordance with the provisions of Section 12.5
of this Deed of Trust and the securing of the
lien of the Lender's mortgage to encumber the
Substitution Property (as defined in Section
12.5);
(ii) not less than 60 days prior to the proposed
date of reconveyance, Borrower delivers to
Lender a notice setting forth (A) the
proposed date of the reconveyance, (B) the
name of the proposed transferee (if the
Release Parcel is adjacent to a property
still covered by this Deed of Trust); (C)
the intended use of the Release Parcel; and
(D) any other information reasonably
necessary for Lender to analyze the terms
of the reconveyance. Not less than 30
days prior to the proposed reconveyance,
Borrower will deliver to Lender a copy of
the contract of sale or ground lease;
(iii) on the date Borrower delivers to Lender
notice of the proposed reconveyance and on
the date of the reconveyance, there is no
default under the Loan Documents on either
the notice date or the release date;
(iv) Borrower delivers to Lender evidence
satisfactory to Lender that Borrower has
complied with any requirements of the Property
Documents or the Leases applicable to the
reconveyance, that the reconveyance does not
violate any of the provisions of the Property
Documents or the Leases and, to the extent
necessary to comply with the Property Documents
or the Leases, that the transferee has assumed
all of Borrower's obligations relating to the
Release Parcel under the Property Documents;
(v) Borrower delivers to Lender an endorsement to
Lender's title insurance policy satisfactory to
Lender that (A) extends the effective date of
the policy to the effective date of the
reconveyance; (B) confirms no change in the
priority of the lien of Lender's Deed of Trust
on the balance of the Property and on the
Portfolio #3 Arizona Property or in the amount
of coverage; (C) consents to the reconveyance;
(D) waives any defense resulting from the
reconveyance; (E) to the extent of the value of
the Release Parcel, waives any right of
subrogation; and (F) includes the Substitution
Property (as defined in Section 12.5) or in the
alternative a separate title insurance policy
that affects the foregoing;
(vi) not less than 10 days prior to the date of the
reconveyance, Borrower delivers to Lender
consents to the reconveyance and substitution by
entities holding liens affecting the Property or
holding any other interest in the Property that
would be affected by the reconveyance and
substitution, including parties to any Property
Documents or to any Leases;
(vii) Borrower pays all expenses relating to the
reconveyance of the Release Parcel and the
addition of the Substitution Property,
including Lender's reasonable attorney's
fees if outside counsel is engaged by
Lender;
(viii) Borrower delivers to Lender copies of the
executed documents evidencing the transfer
of the Release Parcel as provided in
subsection (i) above;
(ix) Borrower delivers to Lender any other
information, approvals and documents reasonably
required by Lender relating to the reconveyance
and the substitution;
(x) The remaining Property together with the
remaining Portfolio #3 Arizona Property together
with the Substitution Property must have a loan
to value ratio of no more than 70% and provide a
debt service coverage ratio of at least 1.50
times the debt service coverage (in a manner
reasonably determined by Lender); and
(xi) Borrower must prepay 110% of the difference
between the Principal of the Loan allocable to
the Release Parcel that is being released and
70% of the appraised value for the Substitution
Property with a prepayment premium equal to the
Prepayment Percentage (as defined in the Note)
times the resulting difference. For purposes of
this Subsection 12.4 (xi) only, if the
prepayment premium payable hereunder is
calculated on the Discounted Value (defined in
the Note), then the discount rate used to
calculate the prepayment premium shall equal the
Discount Rate (defined in the Note) plus 50
basis points. Allocation of the original
outstanding principal balance will be determined
by Lender's appraisal at Closing. The
additional 10% principal proceeds from a
prepayment pursuant to this Subsection 12.4(xi)
shall be applied at par to a pro-rata reduction
of the Principal balance of the Loan allocated
among the remaining Property, the remaining
Portfolio #3 Arizona Property and the
Substitution Property.
Section 12.5. Substitution. In conjunction with the
reconveyance of a Release Parcel (described in Section 12.4),
Borrower shall provide to Lender, as security for the Loan, the
replacement and substitution of one or more new properties to secure
the Loan, as provided herein (the "Substitution Property"). In
connection with providing the Substitution Property, Borrower shall,
at Borrower's expense, execute and deliver to Lender loan documents,
including an additional deed of trust or mortgage, an assignment of
leases, a UCC-1 financing statement, and any other document, including
title policy, that Lender may require, in form and content acceptable
to Lender in Lender's sole discretion, necessary in order to add the
Substitution Property as collateral for the Loan. Borrower shall also
provide for the Substitution Property all items required for the
Property by the Loan Application and Commitment Agreement dated
February 26, 1999 by and between Lender and Borrower for the Loan.
Lender shall have the sole and absolute discretion to either approve
or disapprove any proposed substitution, provided that such approval
shall not be unreasonably withheld so long as the Substitution
Property is (i) of comparable quality as the Release Parcel being
replaced, and (ii) Borrower demonstrates to Lender's satisfaction that
the Substitution Property has a fair market value of no less than 90%
of the fair market value of the Release Parcel immediately prior to
substitution. Lender shall be deemed to have approved the proposed
substitution if it has not responded within 90 days of Borrower's
written request providing all information required by Lender as to the
proposed substitution at the addresses set forth herein. In all
cases, Lender shall have 90 days to respond from the date of Lender's
receipt of the last information provided by Borrower. Any
substitutions shall be on terms and conditions acceptable to Lender
and shall be subject to Lender's internal approval process. The
Substitution Property together with the other properties comprising
the Property and the Portfolio #3 Arizona Property shall be subject to
a maximum loan-to-value ratio of 70%, have, at a minimum, a debt
service coverage ratio equal to 1.50, and a lease expiration profile
acceptable to Lender. Furthermore, Lender will not approve a
substitution that would negatively impact the loan portfolio with
regard to its geographic diversity, credit risk, leasing pro formas,
tenant quality, lease expiration risk and other similar factors,
including the ability to legally cross-default and cross-collateralize
the Substitution Property with the remainder of the portfolio, to be
determined in Lender's sole discretion. Borrower shall provide Lender
with such information and documentation (including leases and other
property documents) as Lender shall deem necessary to make an informed
decision and properly evaluate the proposed substitution. The
Substitution Property will be required to have a value of not less
than 90% of the fair market value of the Release Parcel to be
reconveyed. Borrower shall be responsible for all costs and expenses,
including, without limitation, reasonable attorney's fees (if outside
counsel is engaged by Lender), incurred by Lender in connection with
any proposed transaction along with title insurance premium and
engineering, environmental and appraisal reports associated with such
substitution.
ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 13.1. Further Assurances.
(a) Borrower will execute, acknowledge and deliver to
Lender or to any other entity Lender designates any additional or
replacement documents and perform any additional actions that Lender
determines are reasonably necessary to evidence, perfect or protect
Lender's first lien on and prior security interest in the Property or
to carry out the intent or facilitate the performance of the
provisions of the Loan Documents.
(b) Borrower appoints Lender as Borrower's attorney-in-
fact to perform, at Lender's election, any actions and to execute and
record any of the additional or replacement documents referred to in
this Section, in each instance only at Lender's election and only to
the extent Borrower has failed 3 days after written notice to Borrower
to comply with the terms of this Section.
Section 13.2. Estoppel Certificates.
(a) Within 10 days of Lender's request, but in no case
more often that twice in any 18 month period, except where Lender is
selling all or part of the Loan Borrower will deliver to Lender or to
any entity Lender designates a certificate certifying (i) the original
principal amount of the Note; (ii) the unpaid principal amount of the
Note; (iii) the Fixed Interest Rate; (iv) the amount of the then
current Debt Service Payments; (v) the Maturity Date; (vi) the date a
Debt Service Payment was last made; (vii) that, except as may be
disclosed in the statement, there are no defaults or events which,
with the passage of time or the giving of notice, would constitute an
Event of Default; and (viii) there are no offsets or defenses against
any portion of the Obligations except as may be disclosed in the
statement.
(b) If Lender requests, Borrower promptly will deliver to
Lender or to any entity Lender designates a certificate from each
party to any Property Document, certifying that the Property Document
is in full force and effect with no defaults or events which, with the
passage of time or the giving of notice, would constitute an event of
default under the Property Document and that there are no defenses or
offsets against the performance of its obligations under the Property
Document.
(c) If Lender requests, Borrower promptly will deliver to
Lender, or to any entity Lender designates, a certificate from each
tenant under a Lease then affecting the Property, certifying to any
facts regarding the Lease as Lender may require, including that the
Lease is in full force and effect with no defaults or events which,
with the passage of time or the giving of notice, would constitute an
event of default under the Lease by any party, that the rent has not
been paid more than one month in advance and that the tenant claims no
defense or offset against the performance of its obligations under the
Lease.
ARTICLE XIV
DEFAULTS AND REMEDIES
Section 14.1. Events of Default. The term "Event of Default"
means the occurrence of any of the following events:
(i) if Borrower fails to pay any amount due, as and
when required, under any Loan Document and the
failure continues for a period of 5 days;
(ii) if Borrower makes a general assignment for the
benefit of creditors or generally is not paying,
or is unable to pay, or admits in writing its
inability to pay, its debts as they become due;
or if Borrower or any other party commences any
Proceeding (A) relating to bankruptcy,
insolvency, reorganization, conservatorship or
relief of debtors, in each instance with respect
to Borrower; (B) seeking to have an order for
relief entered with respect to Borrower; (C)
seeking attachment, distraint or execution of a
judgment with respect to Borrower; (D) seeking
to adjudicate Borrower as bankrupt or insolvent;
(E) seeking reorganization, arrangement,
adjustment, winding-up, liquidation,
dissolution, composition or other relief with
respect to Borrower or Borrower's debts; or (F)
seeking appointment of a Receiver, trustee,
custodian, conservator or other similar official
for Borrower or for all or any substantial part
of Borrower's assets, provided that if the
Proceeding is commenced by a party other than
Borrower or any of Borrower's general partners
or members, Borrower will have 120 days to have
the Proceeding dismissed or discharged before an
Event of Default occurs;
(iii) if Borrower is in default beyond any
applicable grace and cure period under any
other mortgage, deed of trust, deed to
secure debt or other security agreement
encumbering the Property whether junior or
senior to the lien of this Deed of Trust;
(iv) if Borrower is in default beyond any applicable
grace and cure period under the loan documents
described in the Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture
Filing (Bedford Portfolio #3 - Arizona Property)
evidencing and securing the Loan made by Lender
in favor of Borrower pursuant to the Note and
encumbering the Portfolio #3 - Arizona Property;
(v) if a Transfer occurs except in accordance with
the provisions of this Deed of Trust;
(vi) if Borrower abandons the Property or ceases to
conduct its business at the Property;
(vii) if there is a default in the performance of
any other provision of any Loan Document or
if there is any inaccuracy or falsehood in
any representation or warranty contained in
any Loan Document which is not remedied
within 30 days after Borrower receives
notice thereof, provided that if the
default, inaccuracy or falsehood is of a
nature that it cannot be cured within the
30-day period and during that period
Borrower commences to cure, and thereafter
diligently continues to cure, the default,
inaccuracy or falsehood, then the 30-day
period will be extended for a reasonable
period not to exceed 120 days after the
notice to Borrower; or
(vii) if Borrower fails to provide Lender with
the Leasing Letter of Credit (defined
below) or if Borrower fails to renew the
Leasing Letter of Credit; the "Leasing
Letter of Credit" shall mean the Letter of
Credit in the amount of Two Million Seven
Hundred Thousand and No/100 Dollars
($2,700,000) that Borrower is required to
provide and renew pursuant to Section 6.4
of the Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture
Filing Statement (Bedford Portfolio #1 -
Colorado Properties) dated the date of this
Deed of Trust, executed by Borrower for the
benefit of Lender pursuant to TIAA
Application #VR-5, M-000462300.
Section 14.2. Remedies.
(a) If an Event of Default occurs, Lender may take any of
the following actions (the "Remedies") without notice to Borrower:
(i) declare all or any portion of the Debt
immediately due and payable ("Acceleration");
(ii) pay or perform any Obligation;
(iii) institute a Proceeding for the specific
performance of any Obligation;
(iv) apply for and obtain the appointment of a
Receiver to be vested with the fullest powers
permitted by Law, without bond being required,
which appointment may be made ex parte, as a
matter of right and without regard to the value
of the Property, the amount of the Debt or the
solvency of Borrower or any other person liable
for the payment or performance of any portion of
the Obligations;
(v) directly, by its agents or representatives or
through a Receiver appointed by a court of
competent jurisdiction, enter on the Land and
Improvements, take possession of the Property,
dispossess Borrower and exercise Borrower's
rights with respect to the Property, either in
Borrower's name or otherwise;
(vi) institute a Proceeding for the foreclosure of
this Deed of Trust or, if applicable, sell by
power of sale all or any portion of the
Property, in any court of competent
jurisdiction;
(vii) institute proceedings for the partial
foreclosure of this Deed of Trust for the
portion of the Debt then due and payable,
subject to the continuing lien of this Deed
of Trust for the balance of the Debt not
then due;
(viii) deliver to Trustee a declaration of default
and demand for sale and a notice of default
and election to cause Borrower's interest
in the Property to be sold, which notice
Trustee or Lender will file in the official
records of the county in which the Property
is located;
(ix) exercise any and all rights and remedies granted
to a secured party under the Uniform Commercial
Code; and
(x) pursue any other right or remedy available to
Lender at Law, in equity or otherwise.
(b) If an Event of Default occurs, the license granted to
Borrower in the Loan Documents to collect Rents will terminate
automatically without any action required of Lender.
Section 14.3. General Provisions Pertaining to Remedies.
(a) The Remedies are cumulative and may be pursued by
Lender or Trustee concurrently or otherwise; at such time and in such
order as Lender or Trustee may determine in their sole discretion and
without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by Borrower.
(b) The enumeration in the Loan Documents of specific
rights or powers will not be construed to limit any general rights or
powers or impair Lender's or Trustee's rights with respect to the
Remedies.
(c) If Lender or Trustee exercises any of the Remedies,
Lender will not be deemed a mortgagee-in-possession unless Lender has
elected affirmatively to be a mortgagee-in-possession.
(d) Lender and Trustee will not be liable for any act or
omission of Lender or Trustee in connection with the exercise of the
Remedies.
(e) Lender's and Trustee's right to exercise any Remedy
will not be impaired by any delay in exercising or failure to exercise
the Remedy and the delay or failure will not be construed as extending
any cure period or constitute a waiver of the default or Event of
Default.
(f) If an Event of Default occurs, Lender's payment or
performance or acceptance of payment or performance will not be deemed
a waiver or cure of the Event of Default.
(g) Lender's acceptance of partial payment or receipt of
Rents will not extend or affect any grace period or constitute a
waiver of a default or Event of Default or constitute a rescission of
Acceleration.
Section 14.4. Foreclosure by Power of Sale.
(a) Should Lender elect, following an Event of Default, to
foreclose this Deed of Trust by exercise of the power of sale
contained in this Deed of Trust, Lender will notify Trustee and
deposit, if required by Trustee, with Trustee this Deed of Trust, the
Note and such of the other Loan Documents as Trustee may require.
(b) Upon receipt of the notice from Lender, Trustee will
have recorded, published and delivered to Borrower any notice of
default as is then required by Law. Trustee will, without demand on
Borrower after lapse of any time as may then be required by Law and
after notice of sale having been given as required by Law, sell the
Property at the time and place of sale fixed by it in the notice of
sale, either as a whole, or in separate lots or parcels or items and
in such order as Lender may direct Trustee so to do, at public auction
to the highest bidder as provided by Law. Trustee will deliver to the
purchaser of the Property a good and sufficient deed or deeds
conveying the Property so sold, but without any covenant or warranty,
express or implied. The recitals in the deed of any matter or fact
will be conclusive proof of the truthfulness of the recitals. Any
person, including Borrower, Trustee or Lender may purchase at the
sale, and Borrower will warrant and defend the title of the purchaser.
(c) After deducting all costs, fees and expenses of Lender
and Trustee, including costs of evidence of title in connection with
sale, Lender will apply the proceeds of sale in the following
priority, to payment of (i) first, all sums expended under the terms
of the Loan Documents, not then repaid, with accrued interest at the
Default Rate; (ii) second, the Debt in such order as Lender
determines; and (iii) the remainder, if any to the person or persons
legally entitled to it.
(d) Trustee may postpone sale of all or any portion of the
Property as permitted by Law, and without further notice make such
sale at the time fixed by the last postponement, or may, in its
discretion, give a new notice of sale.
(e) A sale of less than the whole of the Property or any
defective or irregular sale made under this Deed of Trust will not
exhaust the power of sale provided for in this Deed of Trust; and
subsequent sales may be made until the Obligations have been
satisfied, or the entire Property sold, without defect or
irregularity.
Section 14.5. General Provisions Pertaining to Mortgagee-in-
Possession or Receiver.
(a) If an Event of Default occurs and without notice to
Borrower, any court of competent jurisdiction will, upon application
by Lender, appoint a Receiver as designated in the application and
issue an injunction prohibiting Borrower from interfering with the
Receiver, collecting Rents, disposing of any Rents or any part of the
Property, committing waste or doing any other act that will tend to
affect the preservation of the Leases, the Rents and the Property and
Borrower approves the appointment of the designated Receiver or any
other Receiver appointed by the court. By execution of this Deed of
Trust, Borrower irrevocably consents to the appointment of a receiver
to be made ex parte and as a matter of right to Lender or Trustee,
either before or after sale of the Property, without further notice,
and without regard to the solvency or insolvency, at the time of
application for the Receiver, of the person or persons, if any, liable
for the payment of any portion of the Debt and the performance of any
portion of the Obligations and without regard to the value of the
Property or whether the Property is occupied as a homestead and
without bond being required of the applicant.
(b) The Receiver will be vested with the fullest powers
permitted by Law including all powers necessary or usual in similar
cases for the protection, possession and operation of the Property and
all the powers and duties of Lender as a mortgagee-in-possession as
provided in this Deed of Trust and may continue to exercise all the
usual powers and duties until the Receiver is discharged by the court.
(c) In addition to the Remedies and all other available
rights, Lender or the Receiver may take any of the following actions:
(i) take exclusive possession, custody and control
of the Property and manage the Property so as to
prevent waste;
(ii) require Borrower to deliver to Lender or the
Receiver all keys, security deposits, operating
accounts, prepaid Rents, past due Rents, the
Books and Records and all original counterparts
of the Leases and the Property Documents;
(iii) collect, sue for and give receipts for the
Rents and, after paying all expenses of
collection, including reasonable
receiver's, broker's and attorney's fees,
apply the net collections to any portion of
the Debt selected by Lender in its sole
discretion,
(iv) enter into, modify, extend, enforce, terminate,
renew or accept surrender of Leases and evict
tenants except that in the case of a Receiver,
such actions may be taken only with the written
consent of Lender as provided in this Deed of
Trust and in the Assignment;
(v) enter into, modify, extend, enforce, terminate
or renew Property Documents except that in the
case of a Receiver, such actions may be taken
only with the written consent of Lender as
provided in this Deed of Trust and in the
Assignment;
(vi) appear in and defend any Proceeding brought in
connection with the Property and bring any
Proceeding to protect the Property as well as
Borrower's and Lender's respective interests in
the Property (unless any such Proceeding has
been assigned previously to Lender in the
Assignment, or if so assigned, Lender has not
expressly assigned such Proceeding to the
Receiver and consented to such appearance or
defense by Receiver); and
(vii) perform any act in the place of Borrower
that Lender or the Receiver deems necessary
(A) to preserve the value, marketability or
rentability of the Property; (B) to
increase the gross receipts from the
Property; or (C) otherwise to protect
Borrower's and Lender's respective
interests in the Property.
(d) Borrower appoints Lender as Borrower's attorney-in-
fact, at Lender's election, to perform any actions and to execute and
record any instruments necessary to effectuate the actions described
in this Section, in each instance only at Lender's election and only
to the extent Borrower has failed to comply with the provisions of
this Section.
Section 14.6. General Provisions Pertaining to Foreclosures
and the Power of Sale. The following provisions will apply to any
Proceeding to foreclose and to any sale of the Property by power of
sale or pursuant to a judgment of foreclosure and sale:
(i) Lender's or Trustee's right to institute a
Proceeding to foreclose or to sell by power of
sale will not be exhausted by a Proceeding or a
sale that is defective or not completed or by
conducting separate sales of portions of the
Property;
(ii) any sale may be postponed or adjourned by Lender
by public announcement at the time and place
appointed for the sale without further notice;
(iii) with respect to sale pursuant to a judgment
of foreclosure and sale, the Property may
be sold as an entirety or in parcels, at
one or more sales, at the time and place,
on terms and in the order that Lender deems
expedient in its sole discretion;
(iv) if a portion of the Property is sold pursuant to
this Article, the Loan Documents will remain in
full force and effect with respect to any
unmatured portion of the Debt and this Deed of
Trust will continue as a valid and enforceable
first lien on and security interest in the
remaining portion of the Property, subject only
to the Permitted Exceptions, without loss of
priority and without impairment of any of
Lender's or Trustee's rights and remedies with
respect to the unmatured portion of the Debt;
(v) Lender may bid for and acquire the Property at a
sale and, in lieu of paying cash, may credit the
amount of Lender's bid against any portion of
the Debt selected by Lender in its sole
discretion after deducting from the amount of
Lender's bid the expenses of the sale, costs of
enforcement and other amounts that Lender is
authorized to deduct at Law, in equity or
otherwise; and
(vi) Lender's receipt of the proceeds of a sale will
be sufficient consideration for the portion of
the Property sold and Lender will apply the
proceeds as set forth in this Deed of Trust.
Section 14.7. Application of Proceeds. Lender may apply the
proceeds of any sale of the Property pursuant to a judgment of
foreclosure and sale and any other amounts collected by Lender in
connection with the exercise of the Remedies to payment of the Debt in
such priority and proportions as Lender may determine in its sole
discretion or in such priority and proportions as required by Law.
Section 14.8. Power of Attorney. Borrower appoints Lender as
Borrower's attorney-in-fact to perform any actions necessary and
incidental to exercising the Remedies.
Section 14.9. Tenant at Sufferance. If Lender, Trustee or a
Receiver enters the Property in the exercise of the Remedies and
Borrower is allowed to remain in occupancy of the Property, Borrower
will pay to Lender, Trustee or the Receiver, as the case may be, in
advance, a reasonable rent for the Property occupied by Borrower. If
Borrower fails to pay the rent, Borrower may be dispossessed by the
usual Proceedings available against defaulting tenants.
ARTICLE XV
LIMITATION OF LIABILITY
Section 15.1. Limitation of Liability.
(a) Notwithstanding any provision in the Loan Documents to
the contrary, except as set forth in subsections (b) and (c), if
Lender seeks to enforce the collection of the Debt, Lender will
foreclose this Deed of Trust instead of instituting suit on the Note.
If a lesser sum is realized from a foreclosure of this Deed of Trust
and sale of the Property than the then outstanding Debt, Lender will
not institute any Proceeding against Borrower or Borrower's general
partners, if any, for or on account of the deficiency, except as set
forth in subsections (b) and (c).
(b) The limitation of liability in subsection (a) will not
affect or impair (i) the lien of this Deed of Trust or Lender's other
rights and Remedies under the Loan Documents, including Lender's right
as mortgagee or secured party to commence an action to foreclose any
lien or security interest Lender has under the Loan Documents; (ii)
the validity of the Loan Documents or the Obligations; (iii) Lender's
rights under any Loan Document that are not expressly non-recourse; or
(iv) Lender's right to present and collect on any letter of credit or
other credit enhancement document held by Lender in connection with
the Obligations.
(c) The following are excluded and excepted from the
limitation of liability in subsection (a) and Lender may recover
personally against Borrower and its general partners, if any, for the
following:
(i) all losses suffered and liabilities and expenses
incurred by Lender relating to any fraud or
intentional misrepresentation or omission by
Borrower or any of Borrower's partners, members,
officers, directors, shareholders or principals
in connection with (A) the performance of any of
the conditions to Lender making the Loan; (B)
any inducements to Lender to make the Loan; (C)
the execution and delivery of the Loan
Documents; (D) any certificates, representations
or warranties given in connection with the Loan
(including, but not limited to, Estoppel
Certificates executed by Borrower and
representations made by Borrower related to
Property); or (E) Borrower's performance of the
Obligations;
(ii) all Rents derived from the Property after a
default under the Loan Documents which default
is a basis of a Proceeding by Lender to enforce
collection of the Debt and all moneys that, on
the date such a default occurs, are on deposit
in one or more accounts used by or on behalf of
Borrower relating to the operation of the
Property, except to the extent properly applied
to payment of Debt Service Payments,
Impositions, Insurance Premiums and any
reasonable and customary expenses incurred by
Borrower in the operation, maintenance and
leasing of the Property or delivered to Lender;
(iii) the cost of remediation of any
Environmental Activity affecting the
Property, any diminution in the value of
the Property arising from any Environmental
Activity affecting the Property and any
other losses suffered and liabilities and
expenses incurred by Lender relating to a
default under the Article entitled
"Environmental";
(iv) all security deposits collected by Borrower or
any of Borrower's predecessors and not refunded
to Tenants in accordance with their respective
Leases, applied in accordance with the Leases or
Law or delivered to Lender, and all advance
rents collected by Borrower or any of Borrower's
predecessors and not applied in accordance with
the Leases or delivered to Lender;
(v) the replacement cost of any Fixtures or Personal
Property removed from the Property after a
default occurs;
(vi) all losses suffered and liabilities and expenses
incurred by Lender relating to any acts or
omissions by Borrower that result in waste
(including economic and non-physical waste) on
the Property;
(vii) all protective advances and other payments
made by Lender pursuant to express
provisions of the Loan Documents to protect
Lender's security interest in the Property
or to protect the assignment of the
property described in and effected by the
Assignment, but only to the extent that the
Rents would have been sufficient to permit
Borrower to make the payment and Borrower
failed to do so;
(viii) all mechanics' or similar liens relating to
work performed on or materials delivered to
the Property prior to a foreclosure sale of
the Property, but only to the extent Lender
had advanced funds to pay for the work or
materials;
(ix) all Proceeds that are not applied in accordance
with this Deed of Trust or not paid to Lender as
required under this Deed of Trust;
(x) all losses suffered and liabilities and expenses
incurred by Lender relating to a Transfer that
is not permitted under the Section entitled
"Permitted Transfers";
(xi) all losses suffered and liabilities and expenses
incurred by Lender relating to forfeiture or
threatened forfeiture of the Property to the
Government; and
(xii) all losses suffered and liabilities and
expenses incurred by Lender relating to any
default by Borrower under any of the
provisions of this Deed of Trust relating
to ERISA including the prohibition on any
Transfer that results in a violation of
ERISA.
(d) Nothing under subsection (a) above will be deemed to
be a waiver of any right which Lender may have under Section 506(a),
506(b), 1111(b) or any other provisions of the Bankruptcy Code or
under any other Law relating to bankruptcy or insolvency to file a
claim for the full amount of the Debt or to require that all
collateral will continue to secure all of the Obligations in
accordance with the Loan Documents.
ARTICLE XVI
WAIVERS
Section 16.1. WAIVER OF STATUTE OF LIMITATIONS. BORROWER
WAIVES THE RIGHT TO CLAIM ANY STATUTE OF LIMITATIONS AS A DEFENSE TO
BORROWER'S PAYMENT AND PERFORMANCE OF THE OBLIGATIONS.
Section 16.2. WAIVER OF NOTICE. BORROWER WAIVES THE RIGHT TO
RECEIVE ANY NOTICE FROM LENDER OR TRUSTEE WITH RESPECT TO THE LOAN
DOCUMENTS EXCEPT FOR THOSE NOTICES THAT LENDER OR TRUSTEE IS EXPRESSLY
REQUIRED TO DELIVER PURSUANT TO THE LOAN DOCUMENTS.
Section 16.3. WAIVER OF MARSHALLING AND OTHER MATTERS.
BORROWER WAIVES THE BENEFIT OF ANY RIGHTS OF MARSHALLING OR ANY OTHER
RIGHT TO DIRECT THE ORDER IN WHICH ANY OF THE PROPERTY WILL BE (i)
SOLD; OR (ii) MADE AVAILABLE TO ANY ENTITY IF THE PROPERTY IS SOLD BY
POWER OF SALE OR PURSUANT TO A JUDGMENT OF FORECLOSURE AND SALE.
BORROWER ALSO WAIVES THE BENEFIT OF ANY LAWS RELATING TO APPRAISEMENT,
VALUATION, STAY, EXTENSION, REINSTATEMENT, MORATORIUM, HOMESTEAD AND
EXEMPTION RIGHTS OR A SALE IN INVERSE ORDER OF ALIENATION.
Section 16.4. WAIVER OF TRIAL BY JURY. BORROWER WAIVES TRIAL
BY JURY IN ANY PROCEEDING BROUGHT BY, OR AGAINST, OR COUNTERCLAIM OR
CROSS-COMPLAINT ASSERTED BY OR AGAINST, LENDER OR TRUSTEE RELATING TO
THE LOAN, THE PROPERTY DOCUMENTS OR THE LEASES.
Section 16.5. WAIVER OF COUNTERCLAIM. BORROWER WAIVES THE
RIGHT TO ASSERT A COUNTERCLAIM OR CROSS-COMPLAINT, OTHER THAN
COMPULSORY OR MANDATORY COUNTERCLAIMS OR CROSS-COMPLAINTS, IN ANY
PROCEEDING LENDER OR TRUSTEE BRINGS AGAINST BORROWER RELATING TO THE
LOAN, INCLUDING ANY PROCEEDING TO ENFORCE REMEDIES.
Section 16.6. WAIVER OF JUDICIAL NOTICE AND HEARING. BORROWER
WAIVES ANY RIGHT BORROWER MAY HAVE UNDER LAW TO NOTICE OR TO A
JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED
BY THE LOAN DOCUMENTS TO LENDER AND BORROWER WAIVES THE RIGHTS, IF
ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN
ACCORDANCE WITH THE PROVISIONS OF THE LOAN DOCUMENTS ON THE GROUND (IF
SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR
JUDICIAL HEARING.
Section 16.7. WAIVER OF SUBROGATION. BORROWER WAIVES ALL
RIGHTS OF SUBROGATION TO LENDER'S RIGHTS OR CLAIMS RELATED TO OR
AFFECTING THE PROPERTY OR ANY OTHER SECURITY FOR THE LOAN UNTIL THE
LOAN IS PAID IN FULL AND ALL FUNDING OBLIGATIONS UNDER THE LOAN
DOCUMENTS HAVE BEEN TERMINATED.
Section 16.8. GENERAL WAIVER. BORROWER ACKNOWLEDGES THAT (i)
BORROWER AND BORROWER'S PARTNERS, MEMBERS OR PRINCIPALS, AS THE CASE
MAY BE, ARE KNOWLEDGEABLE BORROWERS OF COMMERCIAL FUNDS AND
EXPERIENCED REAL ESTATE DEVELOPERS OR INVESTORS WHO UNDERSTAND FULLY
THE EFFECT OF THE ABOVE PROVISIONS; (ii) LENDER WOULD NOT MAKE THE
LOAN WITHOUT THE PROVISIONS OF THIS ARTICLE; (iii) THE LOAN IS A
COMMERCIAL OR BUSINESS LOAN UNDER THE LAWS OF THE STATE OR
COMMONWEALTH WHERE THE PROPERTY IS LOCATED NEGOTIATED BY LENDER AND
BORROWER AND THEIR RESPECTIVE ATTORNEYS AT ARMS LENGTH; AND (iv) ALL
WAIVERS BY BORROWER IN THIS ARTICLE HAVE BEEN MADE VOLUNTARILY,
INTELLIGENTLY AND KNOWINGLY, AFTER BORROWER FIRST HAS BEEN INFORMED
BY COUNSEL OF BORROWER'S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE
RIGHTS, AND HAVE BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND
ABANDONMENT OF A KNOWN RIGHT AND PRIVILEGE. THE FOREGOING
ACKNOWLEDGMENT IS MADE WITH THE INTENT THAT LENDER AND ANY SUBSEQUENT
HOLDER OF THE NOTE WILL RELY ON THE ACKNOWLEDGMENT.
ARTICLE XVII
NOTICES
Section 17.1. Notices. All acceptances, approvals, consents,
demands, notices, requests, waivers and other communications (the
"Notices") required or permitted to be given under the Loan Documents
must be in writing and (a) delivered personally by a process server
providing a sworn declaration evidencing the date of service, the
individual served, and the address where the service was made; (b)
sent by certified mail, return receipt requested; or (c) delivered by
nationally recognized overnight delivery service that provides
evidence of the date of delivery, with all charges prepaid (for next
morning delivery if sent by overnight delivery service), addressed to
the appropriate party at its address listed below:
If to Lender: Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017
Attention: Director Portfolio
Management
Mortgage and Real Estate
Application #VR-6
Mortgage #000462400
with a courtesy
copy to: Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017
Attention: Vice President and Chief
Counsel - Mortgage and Real Estate Law
Application #VR-6
Mortgage #000462400
If to Borrower:
Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, California 94549
Attn: Ms. Hanh Kihara
Chief Financial Officer and Senior Vice President
Application #VR-6
Mortgage #000462400
with a courtesy copy to:
Sherman & Sterling
555 California Street, 20th Floor
San Francisco, California 94104
Attn: Emery Mitchell, Esq.
Barbara J.S. McKee, Esq.
Application #VR-6
Mortgage #000462400
If to Trustee: First American Title Insurance Company
1850 Mt. Diablo Boulevard, Suite 300
Walnut Creek, California 94596
Attention: Pamela Nicolini
Lender and Borrower each may change from time to time the address to
which Notices must be sent, by notice given in accordance with the
provisions of this Section. All Notices given in accordance with the
provisions of this Section will be deemed to have been received on the
earliest of (i) actual receipt; (ii) Borrower's rejection of delivery;
or (iii) 3 Business Days after having been deposited in any mail
depository regularly maintained by the United States postal service,
if sent by certified mail, or 1 Business Day after having been
deposited with a nationally recognized overnight delivery service, if
sent by overnight delivery or on the date of personal service, if
served by a process server.
Section 17.2. Change in Borrower's Name or Place of Business.
Borrower will immediately notify Lender in writing of any change in
Borrower's name or the place of business set forth in the beginning of
this Deed of Trust.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1. Applicable Law. The Loan Documents shall be
governed by and will be construed in accordance with the Laws of the
State of New York, without regard to conflicts of laws principles,
except as set forth below. The parties acknowledge that the State of
New York is the principal place of business of Lender and has a
substantial relationship to the underlying transactions relating to
the Loan and to parties involved. Notwithstanding the foregoing,
Borrower and Lender agree that the laws of the State in which the
Property is located shall govern the creation and perfection of liens
on the Property and the procedures for enforcing remedies directly
related to the Property including the appointment of trustees, the
foreclosure or foreclosure sale of the Property, the appointment of
receiver and any other remedy with respect to the Property.
Section 18.2. Usury Limitations. Borrower and Lender intend
to comply with all Laws with respect to the charging and receiving of
interest. Any amounts charged or received by Lender for the use or
forbearance of the Principal to the extent permitted by Law, will be
amortized and spread throughout the Term until payment in full so that
the rate or amount of interest charged or received by Lender on
account of the Principal does not exceed the Maximum Interest Rate.
If any amount charged or received under the Loan Documents that is
deemed to be interest is determined to be in excess of the amount
permitted to be charged or received at the Maximum Interest Rate, the
excess will be deemed to be a prepayment of Principal when paid,
without premium, and any portion of the excess not capable of being so
applied will be refunded to Borrower. If during the Term the Maximum
Interest Rate, if any, is eliminated, then for purposes of the Loan,
there will be no Maximum Interest Rate.
Section 18.3. Lender's Discretion. Wherever under the Loan
Documents any matter is required to be satisfactory to Lender, Lender
has the right to approve or determine any matter or Lender has an
election, Lender's approval, determination or election will be made in
Lender's reasonable discretion unless expressly provided to the
contrary.
Section 18.4. Unenforceable Provisions. If any provision in
the Loan Documents is found to be illegal or unenforceable or would
operate to invalidate any of the Loan Documents, then the provision
will be deemed expunged and the Loan Documents will be construed as
though the provision was not contained in the Loan Documents and the
remainder of the Loan Documents will remain in full force and effect.
Section 18.5. Survival of Borrower's Obligations. Borrower's
representations, warranties and covenants contained in the Loan
Documents will continue in full force and effect and survive (i)
satisfaction of the Obligations; (ii) reconveyance of the lien of the
Property by Trustee; (iii) assignment or other transfer of all or any
portion of Lender's interest in the Loan Documents or the Property;
(iv) Lender's or Trustee's exercise of any of the Remedies or any of
Lender's or Trustee's other rights under the Loan Documents; (v) a
Transfer; (vi) amendments to the Loan Documents; and (vii) any other
act or omission that might otherwise be construed as a release or
discharge of Borrower.
Section 18.6. Relationship Between Borrower and Lender; No
Third Party Beneficiaries.
(a) Lender is not a partner of or joint venturer with
Borrower or any other entity as a result of the Loan or Lender's
rights under the Loan Documents; the relationship between Lender and
Borrower is strictly that of creditor and debtor. Each Loan Document
is an agreement between the parties to that Loan Document for the
mutual benefit of the parties and no entities other than the parties
to that Loan Document will be a third party beneficiary or will have
any claim against Lender or Borrower by virtue of the Loan Document.
As between Lender and Borrower, any actions taken by Lender under the
Loan Documents will be taken for Lender's protection only, and Lender
has not and will not be deemed to have assumed any responsibility to
Borrower or to any other entity by virtue of Lender's actions.
(b) All conditions to Lender's performance of its
obligations under the Loan Documents are imposed solely for the
benefit of Lender. No entity other than Lender will have standing to
require satisfaction of the conditions in accordance with their
provisions or will be entitled to assume that Lender will refuse to
perform its obligations in the absence of strict compliance with any
of the conditions.
Section 18.7. Partial Reconveyances or Releases, Extensions,
Waivers. Lender may: (i) permit the reconveyance of any part of the
Property or release any entity obligated for the Obligations; (ii)
extend the time for payment or performance of any of the Obligations
or otherwise amend the provisions for payment or performance by
agreement with any entity that is obligated for the Obligations or
that has an interest in the Property; (iii) accept additional security
for the payment and performance of the Obligations; and (iv) waive any
entity's performance of an Obligation, release any entity or
individual now or in the future liable for the performance of the
Obligation or waive the exercise of any Remedy or option. Lender may
exercise any of the foregoing rights without notice, without regard to
the amount of any consideration given, without affecting the priority
of this Deed of Trust, without releasing any entity not specifically
released from its obligations under the Loan Documents, without
releasing any guarantor(s) or surety(ies) of the Obligations, without
effecting a novation of the Loan Documents and, with respect to a
waiver, without waiving future performance of the Obligation or
exercise of the Remedy waived.
Section 18.8. Service of Process. Borrower irrevocably
consents to service of process by registered or certified mail,
postage prepaid, return receipt requested, to Borrower at its address
set forth in the Article entitled "Notices" or any other address to
which such address has been changed as permitted hereunder.
Section 18.9. Entire Agreement. Oral agreements or
commitments between Borrower and Lender to lend money, to extend
credit or to forbear from enforcing repayment of a debt, including
promises to extend or renew the debt, are not enforceable. Any
agreements among Borrower, Lender and Trustee relating to the Loan are
contained in the Loan Documents, which contain the complete and
exclusive statement of the agreements among Borrower, Lender and
Trustee, except as Borrower, Lender and, if applicable, Trustee may
later agree in writing to amend the Loan Documents. The language of
each Loan Document will be construed as a whole according to its fair
meaning and will not be construed against the draftsman.
Section 18.10. No Oral Amendment. The Loan Documents may not
be amended, waived or terminated orally or by any act or omission made
individually by Borrower, Lender or Trustee but may be amended, waived
or terminated only by a written document signed by the party against
which enforcement of the amendment, waiver or termination is sought.
Section 18.11. Severability. The invalidity, illegality or
unenforceability of any provision of any of the Loan Documents will
not affect any other provisions of the Loan Documents, which will be
construed as if the invalid, illegal or unenforceable provision never
had been included.
Section 18.12. Covenants Run with the Land. Subject to the
restrictions on transfer contained in the Article entitled "TRANSFERS,
LIENS AND ENCUMBRANCES", all of the covenants of this Deed of Trust
and the Assignment run with the Land, will bind all parties hereto and
all tenants and subtenants of the Land or the Improvements and their
respective heirs, executors, administrators, successors and assigns,
and all occupants and subsequent owners of the Property, and will
inure to the benefit of Lender and all subsequent holders of the Note
and this Deed of Trust.
Section 18.13. Time of the Essence. Time is of the essence
with respect to Borrower's payment and performance of the Obligations.
Section 18.14. Subrogation. If the Principal or any other
amount advanced by Lender is used directly or indirectly to pay off,
discharge or satisfy all or any part of an encumbrance affecting the
Property, then Lender is subrogated to the encumbrance and to any
security held by the holder of the encumbrance, all of which will
continue in full force and effect in favor of Lender as additional
security for the Obligations.
Section 18.15. Joint and Several Liability. If Borrower
consists of more than one person or entity, the obligations and
liabilities of each such person or entity under this Deed of Trust are
joint and several.
Section 18.16. Successors and Assigns. The Loan Documents bind
the parties to the Loan Documents and their respective successors,
assigns, heirs, administrators, executors, agents and representatives
and inure to the benefit of Lender and its successors, assigns, heirs,
administrators, executors, agents and representatives and to the
extent applicable inure to the benefit of Trustee and its successors,
assigns, heirs, administrators, executors, agents and representatives.
Section 18.17. Duplicates and Counterparts. Duplicate
counterparts of any of the Loan Documents, other than the Note, may be
executed and together will constitute a single original document.
ARTICLE XIX
TRUSTEE PROVISIONS
Section 19.1 Acceptance of Trust.
(a) Trustee accepts this Trust upon recordation of this
Deed of Trust as provided by Law. Except as provided by Law, Trustee
is not obligated to notify any party of a pending sale under this Deed
of Trust or of a Proceeding in which Borrower, Lender or Trustee is a
party.
(b) Lender may from time to time unilaterally substitute a
successor to Trustee pursuant to a recordable instrument that complies
with Law for substitution of Trustees. The recorded substitution will
be conclusive proof of proper substitution of trustee who will,
without conveyance from predecessor trustee, succeed to all of the
predecessor trustee's title, estate, rights, powers and duties.
IN WITNESS WHEREOF, Borrower has executed and delivered this
Deed of Trust as of the date first set forth above.
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By: /s/ Hanh Kihara
Hanh Kihara, Senior Vice President
ACKNOWLEDGMENTS
STATE OF )
) SS:
COUNTY OF )
On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
Signature:
______________________________
Name (Typed or Printed)
STATE OF )
) SS:
COUNTY OF )
On ____________________, before me, the undersigned, a Notary Public
in and for said State, personally appeared _____________________,
personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed
the instrument.
WITNESS my hand and official seal.
Signature:
______________________________
Name (Typed or Printed)
Exhibit A
LEGAL DESCRIPTION
Exhibit A-1
Legal Description of Property #1
Fujitsu Building, 598 Gibraltar Drive, Milpitas, California
Exhibit A-2
Legal Description of Property #2
201-215 Fourier Avenue, Fremont, California
Exhibit B
DEFINITIONS
"Acceleration" is defined in Section 14.2(a)(i).
"Accumulations" is defined in Section 2.1(xii).
"Accumulations Depositary" is defined in Section 6.2(a).
"Additional Funds" is defined in Section 7.4(v).
"Annual Financial Statement" is defined in Section 10.1(a).
"Assessments" is defined as all assessments now or hereafter levied,
assessed or imposed against the Property.
"Assignment" is defined as the Assignment of Leases and Rents dated of
even date with this Deed of Trust made by Borrower for the benefit of
Lender.
"Bankruptcy Code" means Title 11 of the United States Code.
"Books and Records" is defined in Section 2.1(xi).
"Borrower" is defined in the introductory paragraph.
"Budget" is defined in Section 10.2.
"Business Days" is defined as any day on which commercial banks are
not authorized or required by Law to close in New York, New York.
"Casualty" is defined as damage to or destruction of the Property by
fire or other casualty.
"Code" is defined as the Internal Revenue Code of 1986, as amended and
the regulations promulgated thereunder.
"Condemnation" is defined as the permanent or temporary taking of all
or any portion of the Property, or any interest therein or right
accruing thereto, by the exercise of the right of eminent domain
(including any transfer in lieu of or in anticipation of the exercise
of the right), inverse condemnation or any similar injury or damage to
or decrease in the value of the Property, including severance and
change in the grade of any streets
"Condemnation Awards" is defined in Section 2.1(viii).
"Condemnation Proceeding" is defined as a Proceeding that could result
in a Condemnation.
"CPA" is defined as an independent certified public accountant
satisfactory to Lender.
"Debt" is defined in Section 3.1.
"Debt Service Payments" is defined as the monthly installments of
principal and interest payable by Borrower to Lender as set forth in
the Note.
"Deed of Trust" is defined as this Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing Statement.
"Default Interest Rate" is defined as the lower of 5% per annum over
the Fixed Interest Rate or the Maximum Interest Rate, if any.
"Destruction Event" is defined in Section 7.4.
"Environmental Activity" is defined as any actual, suspected or
threatened abatement, cleanup, disposal, generation, handling,
manufacture, possession, release, remediation, removal, storage,
transportation, treatment or use of any Hazardous Substances. The
actual, suspected or threatened presence of any Hazardous Substances,
or the actual, suspected or threatened noncompliance with any
Environmental Laws, will be deemed Environmental Activity.
"Environmental Laws" is defined as all Laws pertaining to health,
safety, protection of the environment, natural resources,
conservation, wildlife, waste management, Environmental Activities and
pollution.
"Environmental Report" is defined as the report prepared by ICF
Kaiser, dated April 28, 1999 as to the Property described in Exhibit
A-2 and dated April 27, 1999 as to the Property described in Exhibit
A-1, all as amended.
"ERISA" is defined in Section 8.3(a).
"Event of Default" is defined in Section 14.1.
"Existing Shareholder" is defined in Section 12.1(b).
"Expenses" is defined in Section 11.1(a).
"Financial Books and Records" is defined as detailed accounts of the
income and expenses of the Property and of Borrower and all other
data, records and information that either are specifically referred to
in the Article entitled "FINANCIAL REPORTING" or are necessary to the
preparation of any of the statements, reports or certificates required
under such Article and includes all supporting schedules prepared or
used by the CPA in auditing the Annual Financial Statement or in
issuing its opinion.
"Fiscal Year" is defined as any calendar year or partial calendar year
during the Term.
"Fixed Interest Rate" is defined as 7.17% per annum.
"Fixtures and Personal Property" is defined in Section 2.1(iv).
"Government" is defined as any federal, state or municipal
governmental or quasi-governmental authority including executive,
legislative or judicial branch, division and any subdivision or agency
of any of them and any entity to which any of them has delegated
authority.
"Hazardous Substances" is defined as (i) any by product, chemical,
compound, material, mixture or substance that is now or hereafter
defined or listed in, or otherwise classified pursuant to, any
Environmental Laws, as a "hazardous substance", "hazardous material",
"hazardous waste", "extremely hazardous waste", infectious waste",
"toxic substance", "toxic pollutant", or any other formulation intended
to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, or "EP toxicity",
(ii) any petroleum, natural gas, natural gas liquid, liquified natural
gas, synthetic gas usable for fuel (or mixtures of natural gas and
such synthetic gas), ash produced by a resource recovery facility
utilizing a municipal solid waste stream, and drilling fluids,
produced waters, and other wastes associated with the exploration,
development or production of crude oil, natural gas, or geothermal
resources, and (iii) any underground storage tanks.
"Imposition Penalty Date" is defined in Section 6.1(a).
"Impositions" is defined as all Taxes, Assessments, ground rent, if
any, water and sewer rents, fees and charges, levies, permit,
inspection and license fees and other dues, charges or impositions,
including all charges and license fees for the use of vaults, chutes
and similar areas adjoining the Land, maintenance and similar charges
and charges for utility services, in each instance whether now or in
the future, directly or indirectly, levied, assessed or imposed on the
Property or Borrower and whether levied, assessed or imposed as
excise, privilege or property taxes.
"Improvements" is defined in Section 2.1(ii).
"Individual Property" is defined in Recital D of the Assignment.
"Insurance Premiums" is defined as all present and future premiums and
other charges due and payable on policies of fire, rental value and
other insurance covering the Property and required pursuant to the
provisions of this Deed of Trust.
"Insurance Proceeds" is defined in Section 2.1(ix).
"Insurers" is defined in Section 7.1(c).
"Institutional Investor" is defined as any bank, savings institution,
charitable foundation, insurance company, real estate investment
trust, pension fund or investment advisor registered under the
Investment Advisors Act of 1940, as amended, and acting as trustee or
agent.
"Interest" is defined as the amount of fixed interest payable under
the Note at the Fixed Interest Rate and any other sums which could be
deemed to be interest under Law.
"Land" is defined in the Recitals.
"Late Charge" is defined in the Note.
"Law" is defined as all present and future codes, constitutions,
cases, opinions, rules, manuals, regulations, determinations, laws,
orders, ordinances, requirements and statutes, as amended, of any
Government that affect or that may be interpreted to affect the
Property, Borrower or the Loan, including amendments and all guidance
documents and publications promulgated thereunder.
"Leases" is defined as all present and future leases, subleases,
licenses and other agreements for the use and occupancy of the Land
and Improvements, any related guarantees and including any use and
occupancy arrangements created pursuant to Section 365 (h) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuation of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar Proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land and Improvements.
"Lender" is defined in the introductory paragraph.
"Loan" is defined in the Recitals.
"Loan Documents" is defined as the Note, this Deed of Trust, the Deed
of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing Statement (Bedford Portfolio #3 Arizona Property) dated
the date of this Deed of Trust and securing the Note, the Assignment,
the Assignment of Leases and Rents (Bedford Portfolio #3 - Arizona
Properties) dated the date of this Deed of Trust and securing the Note
and all documents now or hereafter executed by Borrower or held by
Lender or Trustee relating to the Loan, including all amendments.
"Material Environmental Contamination" is defined as contamination of
the Property with Hazardous Substances (i) that constitutes a
violation of one or more Environmental Laws; (ii) for which there is a
significant possibility that remediation will be required under
Environmental Laws; (iii) that results in a material risk of liability
or expense to Lender; or (iv) that diminishes the value of the
Property.
"Maturity Date" is defined in the Recitals.
"Maximum Interest Rate" is defined as the maximum rate of interest, if
any, permitted by Law to be charged with respect to the Loan as the
maximum rate may be increased or decreased from time to time.
"Note" is defined in the Recitals.
"Note Payments" is defined in the Note.
"Notices" is defined in Section 17.1.
"Obligations" is defined in Section 3.1.
"Permitted Exceptions" is defined as the matters shown in Schedule B,
Part 1 and 2 of the title insurance policy insuring the lien of this
Deed of Trust.
"Permitted Transfers" is defined in Section 12.2(b).
"Permitted Use" is defined as use as first-class commercial office
buildings with respect to the property described in Exhibit A-1, known
as 598 Gibraltar Drive, Milpitas, California and as a first-class
commercial office building and research and development building with
respect to the property described in Exhibit A-2 known as 201-215
Fourier Avenue, Fremont, California and uses incidentally and directly
related to such uses.
"Policies" is defined in Section 7.1(b).
"Prepayment Premium" is defined in the Note.
"Principal" is defined in the Recitals.
"Proceeding" is defined as a pending or threatened action, claim or
litigation before a legal, equitable or administrative tribunal having
proper jurisdiction.
"Proceeds" is defined in Section 7.2(c).
"Property" is defined in Section 2.1.
"Property Documents" is defined in Section 2.1(v).
"Receiver" is defined as a receiver, custodian, trustee, liquidator or
conservator of the Property.
"Release Parcel" is defined in Section 12.4.
"Remedies" is defined in Section 14.2(a).
"Rents" is defined as all present and future rents, prepaid rents,
percentage, participation or contingent rents, issues, profits,
proceeds, parking fees, revenues and other consideration accruing
under the Leases or otherwise derived from the use and occupancy of
the Land or the Improvements, including tenant contributions to
expenses, security deposits, royalties and contingent rent, if any,
all other fees, accounts, accounts receivable or payments paid to or
for the benefit of Borrower, including liquidated damages after a
default under a lease, any premium or other termination fee payable by
tenant after cancellation of a Lease and the proceeds of any rental
insurance, and any payments received pursuant to Section 502(b) of the
Bankruptcy Code or otherwise in connection with the commencement or
continuance of any bankruptcy, reorganization, arrangement,
insolvency, dissolution, receivership or similar proceedings, or any
assignment for the benefit of creditors, in respect of any tenant or
other occupant of the Land or the Improvements and all claims as a
creditor in connection with any of the foregoing.
"Restoration" is defined as the restoration of the Property after a
Destruction Event as nearly as possible to its condition immediately
prior to the Destruction Event, in accordance with the plans and
specifications, in a first-class workmanlike manner using materials
substantially equivalent in quality and character to those used for
the original improvements, in accordance with Law and free and clear
of all liens, encumbrances or other charges other than this Deed of
Trust and the Permitted Exceptions.
"Restoration Completion Date" is defined in Section 7.4(viii).
"Restoration Funds" is defined in Section 7.5(b).
"Substitution Property" is defined in Section 12.5.
"Taxes" is defined as all present and future real estate taxes levied,
assessed or imposed against the Property.
"Term" is defined as the scheduled term of this Deed of Trust
commencing on the date Lender makes the first disbursement of the Loan
and terminating on the Maturity Date.
"Transfer" is defined in Section 12.1(a).
"Uniform Commercial Code" is defined as the Uniform Commercial Code in
effect in the jurisdiction where the Land is located.
<PAGE>
Exhibit C
RULES OF CONSTRUCTION
(a) References in any Loan Document to numbered Articles or
Sections are references to the Articles and Sections of that Loan
Document. References in any Loan Document to lettered Exhibits are
references to the Exhibits attached to that Loan Document, all of
which are incorporated in and constitute a part of that Loan Document.
Article, Section and Exhibit captions used in any Loan Document are
for reference only and do not describe or limit the substance, scope
or intent of that Loan Document or the individual Articles, Sections
or Exhibits of that Loan Document.
(b) The terms "include", "including" and similar terms are
construed as if followed by the phrase "without limitation".
(c) The terms "Land", "Improvements", "Fixtures and Personal
Property", "Condemnation Awards", "Insurance Proceeds" and "Property"
are construed as if followed by the phrase "or any part thereof".
(d) Any agreement by or duty imposed on Borrower in any Loan
Document to perform any obligation or to refrain from any act or
omission constitutes a covenant running with the ownership or
occupancy of the Land and the Improvements, which will bind all
parties hereto and their respective successors and assigns, and all
lessees, subtenants and assigns of same, and all occupants and
subsequent owners of the Property, and will inure to the benefit of
Lender and all subsequent holders of the Note and this Deed of Trust
and includes a covenant by Borrower to cause its partners, members,
principals, agents, representatives and employees to perform the
obligation or to refrain from the act or omission in accordance with
the Loan Documents. Any statement or disclosure contained in any Loan
Document about facts or circumstances relating to the Property,
Borrower or the Loan constitutes a representation and warranty by
Borrower made as of the date of the Loan Document in which the
statement or disclosure is contained.
(e) The term "to Borrower's knowledge" is construed as meaning
to the best of Borrower's knowledge after diligent inquiry.
(f) The singular of any word includes the plural and the plural
includes the singular. The use of any gender includes all genders.
(g) The terms "person", "party" and "entity" include natural
persons, firms, partnerships, limited liability companies and
partnerships, corporations and any other public or private legal
entity.
(h) The term "provisions" includes terms, covenants,
conditions, agreements and requirements.
(i) The term "amend" includes modify, supplement, renew,
extend, replace or substitute and the term "amendment" includes
modification, supplement, renewal, extension, replacement and
substitution.
(j) Reference to any specific Law or to any document or
agreement, including the Note, this Deed of Trust, any of the other
Loan Documents, the Leases and the Property Documents, includes any
future amendments to the Law, document or agreement, as the case may
be.
(k) No inference in favor of or against a party with respect to
any provision in any Loan Document may be drawn from the fact that the
party drafted the Loan Document.
(l) The term "certificate" means the sworn, notarized statement
of the entity giving the certificate, made by a duly authorized person
satisfactory to Lender affirming the truth and accuracy of every
statement in the certificate. Any document that is "certified" means
the document has been appended to a certificate of the entity
certifying the document that affirms the truth and accuracy of
everything in the document being certified. In all instances the
entity issuing a certificate must be satisfactory to Lender.
(m) Any appointment of Lender as Borrower's attorney-in-fact is
irrevocable and coupled with an interest. Lender may appoint a
substitute attorney-in-fact. Borrower ratifies all actions taken by
the attorney-in-fact but, nevertheless, if Lender requests, Borrower
will specifically ratify any action taken by the attorney-in-fact by
executing and delivering to the attorney-in-fact or to any entity
designated by the attorney-in-fact all documents necessary to effect
the ratification.
(n) Any document, instrument or agreement to be delivered by
Borrower will be in form and content satisfactory to Lender.
(o) All obligations, rights, remedies and waivers contained in
the Loan Documents will be construed as being limited only to the
extent required to be enforceable under the Law.
(p) The unmodified word "days" means calendar days.