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LOAN AGREEMENT
by and between
CATELLUS FINANCE 1, L.L.C.,
a Delaware limited liability company
and
PRUDENTIAL MORTGAGE CAPITAL COMPANY, INC.,
a Delaware corporation
Dated as of October 26, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................1
1.1 Defined Terms..............................................1
1.2 Exhibits and Schedules Incorporated........................7
ARTICLE II LOAN...................................................7
2.1 Loan.......................................................7
2.2 Interest Rate; Payment of Interest.........................7
2.3 Loan Documents.............................................7
2.4 Closing Date...............................................7
2.5 Anticipated Repayment Date.................................7
2.6 Maturity Date..............................................7
2.7 Full Repayment and Reconveyance............................7
2.8 Limitation on Borrower's Liability.........................7
2.9 Prepayment.................................................8
2.10 Defeasance.................................................8
2.11 Assignment and Assumption of Interest in Borrower;
Transfer of Properties.....................................8
2.12 Substitution of Properties.................................9
2.13 Build to Suit Properties..................................13
2.14 Letters of Credit - Leasing...............................14
2.15 Expansion Rights..........................................15
2.16 GATX-Woodridge Property...................................17
ARTICLE III CONDITIONS OF LENDER'S OBLIGATION TO FUND LOAN........19
3.1 Conditions Precedent......................................19
(a) Representations and Warranties True at Closing...19
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TABLE OF CONTENTS
(continued)
Page
(b) No Default or Event of Default...................19
(c) Performance......................................19
(d) Loan Documents...................................19
(e) Zoning Compliance; Certificates of Compliance....19
(f) Hazardous Materials..............................19
(g) Property Inspection and Report...................20
(h) Earthquake Report................................20
(i) Title Insurance..................................20
(j) Survey...........................................20
(k) UCC-3 Certificate; Litigation and Bankruptcy
Searches.........................................21
(l) Documents........................................21
(m) Insurance........................................21
(n) Appraisal........................................21
(o) Consents.........................................21
(p) Financial Statements.............................21
(q) Payment of Fees and Expenses.....................21
(r) Leases...........................................21
(s) Management Agreements............................22
(t) Cash Management Agreement........................22
(u) Reserve Accounts.................................22
(v) Enforceability Opinions of Borrower's Counsel....22
(w) Bankruptcy Nonconsolidation Opinion..............23
(x) No Material Adverse Change.......................23
(y) [Intentionally Deleted]..........................23
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TABLE OF CONTENTS
(continued)
Page
(z) Funding of Deposits..............................24
ARTICLE IV INSURANCE.............................................24
4.1 Insurance.................................................24
ARTICLE V REPRESENTATIONS AND WARRANTIES........................27
5.1 Warranties of Borrower....................................27
(a) Organization and Existence.......................27
(b) Authorization....................................28
(c) Valid Execution and Delivery.....................28
(d) Enforceability...................................28
(e) No Defenses......................................28
(f) Defense of Usury.................................28
(g) No Conflict/Violation of Law.....................28
(h) Compliance with Applicable Laws and Regulations..28
(i) Consents Obtained................................29
(j) No Litigation....................................29
(k) Title............................................29
(l) Permitted Exceptions.............................30
(m) First Lien.......................................30
(n) ERISA............................................30
(o) Contingent Liabilities...........................30
(p) No Other Obligations.............................30
(q) Fraudulent Conveyance............................30
(r) Investment Company Act...........................31
(s) Access/Utilities.................................31
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TABLE OF CONTENTS
(continued)
Page
(t) Taxes Paid.......................................31
(u) Single Tax Lot...................................31
(v) Special Assessments..............................31
(w) Flood Zone.......................................31
(x) Seismic Exposure.................................31
(y) Misstatements of Fact............................32
(z) Condition of Improvements........................32
(aa) No Insolvency or Judgment........................32
(bb) No Condemnation..................................32
(cc) No Labor or Materialmen Claims...................32
(dd) No Purchase Options..............................32
(ee) Leases...........................................33
(ff) Appraisal........................................33
(gg) Boundary Lines...................................33
(hh) Survey...........................................34
(ii) Forfeiture.......................................34
(jj) No Broker........................................34
(kk) Conviction of Criminal Acts......................34
(ll) Security Agreement...............................34
(mm) Homestead........................................34
ARTICLE VI ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES...........34
6.1 Representations and Warranties............................34
6.2 Notice of Violations Under Environmental Laws.............36
6.3 Transportation of Hazardous Substances....................36
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TABLE OF CONTENTS
(continued)
Page
6.4 Compliance with Environmental Laws........................36
6.5 Notice to Lender..........................................36
6.6 Indemnification...........................................37
6.7 Hazardous Substances Audit................................38
6.8 Maintenance Program.......................................38
6.9 Existing Remediation and Monitoring Programs..............39
ARTICLE VII ADDITIONAL REPRESENTATIONS AND WARRANTIES AND
COVENANTS OF BORROWER.................................39
7.1 Expenses..................................................39
7.2 Compliance with Loan Documents............................39
7.3 Representations, Warranties and Covenants with Respect to
Indebtedness, Operations and Fundamental Changes
of Borrower; Maintenance of Separate Existence............39
7.4 Payment of Taxes..........................................42
7.5 Litigation................................................42
7.6 Indemnification of Lender.................................42
7.7 Change in Position........................................43
7.9 Further Assurances........................................43
7.10 Assignment................................................43
7.11 Management Agreements.....................................43
ARTICLE VIII REPORTING COVENANTS...................................44
8.1 Financial Statements and Books and Records................44
8.2 Representations and Warranties............................45
ARTICLE IX CASH MANAGEMENT AGREEMENT; RESERVE AND IMPOUND
ACCOUNTS..............................................45
9.1 Cash Management Agreement.................................45
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TABLE OF CONTENTS
(continued)
Page
9.2 Tax and Insurance Impound Account.........................45
9.3 Repair and Remediation Reserve............................46
9.4 Replacement Reserve; Tenant Improvements and Leasing
Commissions Reserve.......................................48
9.5 Environmental Reserve.....................................50
9.6 Prepaid Rent Reserve......................................51
9.7 Interest Payable by Lender................................51
9.8 Pledge of Security Interest in Impound and Reserve
Accounts..................................................51
ARTICLE X DEFAULTS AND REMEDIES.................................53
10.1 Events of Default.........................................53
10.2 Acceleration Upon Event of Default; Remedies..............55
10.3 Further Remedies..........................................55
10.4 Repayment of Funds Advanced...............................55
10.5 Rights Cumulative, No Waiver..............................55
ARTICLE XI MISCELLANEOUS PROVISIONS..............................56
11.1 No Third Parties Benefited................................56
11.2 Notices...................................................56
11.3 Payment of Costs; Reimbursement to Lender.................56
11.4 Relationship of Parties...................................57
11.5 Delay Outside Lender's Control............................58
11.6 Attorneys' Fees...........................................58
11.7 Loan Sales and Securitization; Disclosure of Information..58
11.8 Certain Rights of Lender..................................59
11.9 Waiver; Discontinuance of Proceedings.....................59
11.10 Application of the Proceeds of the Note...................59
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
11.11 Tax Service...............................................60
11.12 Severability..............................................60
11.13 Heirs, Successors and Assigns.............................60
11.14 Time......................................................60
11.15 Headings..................................................60
11.16 Governing Law.............................................60
11.17 Consent to Jurisdiction...................................61
11.18 Integration: Interpretation...............................61
11.19 Joint and Several Liability...............................61
11.20 Counterparts..............................................61
11.21 Advertising...............................................61
11.22 Maximum Interest..........................................61
11.23 WAIVER OF RIGHT TO TRIAL BY JURY..........................62
EXHIBIT A - LIST OF PROPERTIES..............................................A-1
EXHIBIT B - FORM OF PROMISSORY NOTE.........................................B-1
EXHIBIT C - DOCUMENTS C-1
EXHIBIT D - FORM OF CERTIFICATION...........................................D-1
EXHIBIT E - FORM OF TENANT ESTOPPEL.........................................E-1
EXHIBIT F - FORM OF SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT...........F-1
EXHIBIT G Legal Description of GATX-Woodridge Property.....................G-1
SCHEDULE 1 FAIR MARKET VALUES, NOI AND ALLOCATED LOAN AMOUNTS..............S1-1
SCHEDULE 2 MAJOR TENANTS/LEASES............................................S2-1
SCHEDULE 3 Reserve Calculations for Cash Management Periods................S3-1
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TABLE OF CONTENTS
(continued)
Page
Schedule 4 Deferred Maintenance.............................................S4-1
SCHEDULE 5.1(w) Flood Zones...........................................S5.1(w)-1
SCHEDULE 5.1(ee)(ii) Lease Defaults..............................S5.1(ee)(ii)-1
SCHEDULE 5.1(ee)(iii) Rent Paid More than 30 Days in Advance....S5.1(ee)(iii)-1
SCHEDULE 5.1(ee)(v) Tenants Not in Occupancy.................. ...S5.1(ee)(v)-1
SCHEDULE 5.1(ee)(ix) Tenant Affiliated Leases.....................S5.(ee)(ix)-1
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<PAGE>
EXHIBIT 4.3
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is executed as of October 26,
1998, by and between CATELLUS FINANCE 1, L.L.C., a Delaware limited liability
company ("Borrower") and PRUDENTIAL MORTGAGE CAPITAL COMPANY, INC., a Delaware
corporation ("Lender").
RECITALS
A. Borrower is the owner in fee simple of certain real properties
(collectively, the "Land") and all present and future improvements thereon (but
with respect to certain ground leased properties, Borrower's interest to the
improvements may be limited to a conditional future interest) (collectively, the
"Improvements") more particularly described in Exhibit A hereto (the Land and
the Improvements are collectively referred to as the "Properties").
B. Borrower has applied to Lender for a loan to be made to Borrower and
to be secured by the Properties and Lender is willing to make the loan to
Borrower upon the terms and conditions hereinafter set forth and in full
reliance upon the representations, warranties and covenants made by Borrower in
this Agreement.
NOW, THEREFORE, Borrower and Lender in consideration of the mutual
covenants hereinafter set forth and intending to be legally bound hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. The following capitalized terms generally used in
this Agreement shall have the meanings defined or referenced below. Certain
other capitalized terms used only in specific Sections of this Agreement are
defined in such Sections.
"Agreement" means this Loan Agreement as hereafter amended,
supplemented, replaced, modified or amended and restated from time to time.
"Allocated Loan Amount" means the principal amount of the Loan
allocated by Lender as Lender shall determine as to each individual Property
included within the Property Pool and as set forth on Schedule 1 attached
hereto, as revised from time to time to reflect any Properties added pursuant to
a Substitution.
"Anticipated Repayment Date" means the date set forth in Section 2.5 of
this Agreement.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978 (11 USC ss.
101-1330) as hereinafter amended or recodified.
"Borrower" means Catellus Finance 1, L.L.C., a Delaware limited
liability company.
"Business Day" shall mean any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banks in California or New York are
authorized or required by law to
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close. All references in this Agreement to a "day" or a "date" shall be to a
calendar day unless specifically referenced as a Business Day.
"Cash Management Agreement" means that certain Cash Management
Agreement of even date herewith executed by and among Borrower, Lender, and
Manager.
"Closing Date" means the date Lender releases or authorizes the escrow
to release the Loan proceeds to Borrower.
"Collateral" means all of the personal property collateral as described
in the Mortgages.
"Construction Letters of Credit" has the meaning given to such term in
Section 2.13 of this Agreement.
"DCR" means Duff & Phelps Credit Rating Co.
"Default" means an event or circumstance which with the passage of time
or the giving of notice or both, would constitute an Event of Default.
"Default Interest Rate" has the meaning given to such term in Section
1.07 of the Note.
"Defeasance Period" has the meaning given to such term in Section 1.03
of the Note.
"DSCR" means the ratio of the Underwritten Net Cash Flow to annual debt
service on the Loan, as determined by the Lender.
"Environmental Indemnity Agreement" means that certain Hazardous
Substances Indemnity Agreement of even date herewith executed by Borrower and
Guarantor, for the benefit of Lender.
"Environmental Laws" has the meaning given to such term in Section 6.1
of this Agreement.
"Environmental Reports" has the meaning given to such terms in Section
6.1 of this Agreement.
"Event of Default" has the meaning given to such term in Section 10.1
of this Agreement.
"Extended Term Rate" has the meaning given to such term in Section
4.03(b) of the Note.
"FMV" means the appraised value of a Property, from time to time, as
determined by a current third-party MAI appraisal reasonably satisfactory to
Lender. Such MAI appraisal must be dated no more than six (6) months prior to
the applicable FMV determination date and must be prepared by Cushman &
Wakefield or other nationally recognized appraisal company.
"Governmental Authority" means any domestic or foreign national, state
or local government, any political subdivision thereof, any department, agency,
authority or bureau of
2
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any of the foregoing, or any other entity lawfully exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including the Federal Deposit Insurance Corporation, the Federal
Reserve Board, the Comptroller of the Currency, any central bank or any
comparable authority.
"Governmental Rule" means any law, rule, regulation, ordinance, order,
code interpretation, judgment, decree, directive, guidelines, policy or similar
form of decision of any Governmental Authority.
"Gross Income" means all income actually received pursuant to any
Lease, except security deposits, rents paid more than thirty (30) days in
advance and not ratably allocable to the period under measurement, interest
income and refunds.
"Ground Leased Properties" means Properties owned in fee simple by
Borrower and leased by Borrower to a tenant pursuant to a ground lease as more
particularly identified on Exhibit A attached hereto.
"Guarantor" means Catellus Development Corporation, a Delaware
corporation.
"Hazardous Substances" has the meaning given to such term in Section
6.1 of this Agreement.
"Impound Account" has the meaning given to such term in Section 9.2 of
this Agreement.
"Improvements" means all the improvements as described in the
Mortgages.
"Indemnity and Guaranty Agreement" means that certain Indemnity and
Guaranty Agreement dated of even date herewith executed by Guarantor in favor of
Lender.
"Independent Director" has the meaning given to such term in Section
7.3(x) of this Agreement.
"Initial Term Interest Rate" has the meaning given to such term in
Section 4.03(c) of the Note.
"Leases" has the meaning given to such term in Section 3.1(r) of this
Agreement.
"Lender" means Prudential Mortgage Capital Company, Inc., a Delaware
corporation, its successors and/or assigns, including, but not limited to, a
trustee for certificateholders in connection with a Securitization, which
trustee would thereupon be a "Lender" for purposes of this Agreement.
"Lender's Office" means (a) initially, Lender's office located at 100
Mulberry Street, Gateway Center Four, 9th Floor, Newark, New Jersey 07102-4069,
Attention: Shane Tucker, SVP, and (b) subsequently, such other office designated
as such in writing by Lender to Borrower.
3
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"Loan" means the principal sum that Lender agrees to lend and Borrower
agrees to borrow pursuant to the terms and conditions of this Agreement and the
Loan Documents, which amount is THREE HUNDRED SEVENTY-THREE MILLION AND
00/100THS DOLLARS ($373,000,000.00), and as evidenced by the Note.
"Loan Commitment" means the Loan Commitment dated August 28, 1998,
executed by Lender and accepted by Borrower and Guarantor on August 28, 1998.
"Loan Documents" means those documents, as hereafter amended,
supplemented, replaced, modified or amended and restated, properly executed and
in recordable form, if necessary, listed in Exhibit C as Loan Documents (and
solely for purposes of Borrower's and Guarantor's representations and warranties
contained herein and, as applicable, in the Other Related Documents), and any
other documents evidencing or securing the Loan (excluding the Other Related
Documents except as provided above).
"Lock-out Period" has the meaning given to such term in Section 1.02(a)
of the Note.
"Management Agreements" has the meaning given to such term in Section
3.1(s) of this Agreement.
"Manager" has the meaning given to such term in Section 3.1(s) of this
Agreement.
"Major Tenants" has the meaning given to such term in Section 3.1(r) of
this Agreement.
"Maturity Date" means November 11, 2028.
"Minimum Coverage Ratio" has the meaning given to such term in Section
9.1 of this Agreement.
"Monthly Payment Amount" has the meaning given to such term in Section
1.01(b) of the Note.
"Moody's" means Moody's Investors Service, Inc.
"Mortgages" means those Mortgages, Assignment of Leases and Rents,
Security Agreement and Fixture Filing of even date herewith executed by
Borrower, as mortgagor, for the benefit of Lender, as mortgagee, and those Deeds
of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
of even date herewith executed by Borrower, as trustor, for the benefit of
Lender, as beneficiary, encumbering the Properties, as hereafter amended,
supplemented, replaced, modified or amended and restated.
"Net Cash Flow" has the meaning given to such term in the Cash
Management Agreement.
"NOI" means, except as otherwise provided in the last paragraph of
Section 2.12 below, the annual Gross Income realized from ongoing and continuing
operations for a given Property or Properties, as applicable, for the twelve
(12) month period prior to the Closing Date or such other applicable twelve (12)
month period, as reasonably determined by Lender, less all
4
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necessary and ordinary operating expenses (both fixed and variable) for
such twelve (12) month period, including, without limitation, utilities,
administrative, cleaning, landscaping, security, repairs and maintenance, ground
rent payments, management fees (computed at the higher of the actual management
fees or at 3 1/2% of Gross Income), replacement reserves, real estate and other
taxes, assessments and insurance, but excluding any deduction for federal, state
and other income taxes, debt service expenses (except for assessment bonds),
depreciation or amortization of capital expenditures, and other similar non-cash
items. For purposes of determining NOI, ordinary operating expenses which have
been prepaid will nonetheless be treated as a cost to be incurred. Documentation
and calculation of NOI shall be certified by an officer of Borrower and shall be
reasonably satisfactory to Lender.
"Note" means that certain Promissory Note of even date herewith and in
the form of Exhibit B to this Agreement, in the original principal amount of the
Loan, executed by Borrower in favor of Lender, as hereafter amended,
supplemented, replaced, modified or amended and restated.
"Other Related Documents" means those documents, as hereafter amended,
supplemented, replaced, modified or amended and restated, properly executed and
in recordable form, if necessary, listed in Exhibit C as Other Related
Documents.
"Payment Date" has the meaning given to such term in Section 1.01(b) of
the Note.
"Permitted Exceptions" has the meaning given to such term in Section
3.1(i) of this Agreement.
"Permitted Investments" has the meaning given to such term in the Cash
Management Agreement.
"Person" shall mean any individual, sole proprietorship, partnership,
limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
entity, party or government (whether territorial, national, federal, state,
county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Properties" means the Properties described in Exhibit A (excluding as
of the date hereof the Gillette Property and the GATX-Stockton Property as such
terms are defined in Section 2.13 of this Agreement until such time as such
Properties are included under the Mortgages, together with the Improvements
thereon and such other real properties as may from time to time be added in the
Property Pool.
"Property" means any one of the Properties in the Property Pool from
time to time.
"Property Condition Report" has the meaning given to such term in
Section 3.1(g) of this Agreement.
"Property Pool" shall mean all of the Properties from time to time
serving as security for the Loan.
5
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"Prudential" means Prudential Mortgage Capital Company, Inc., a
Delaware corporation, and/or any affiliated or related entity.
"Rating Agencies" means the nationally recognized statistical rating
organizations from time to time rating the securities issued in connection with
the Securitization of the Loan or any portion thereof, which are expected to be
Moody's and DCR. Requirements of the Rating Agencies under this Agreement shall
be deemed to mean the requirements of Moody's and DCR or such other Rating
Agency, as applicable.
"Rating Confirmation," with respect to the matter in question, shall
mean that as a condition thereto the Rating Agencies shall have confirmed in
writing that (i) such investment, replacement or action shall not result, in and
of itself, in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding securities (if the Securitization has occurred), or
(ii) such investment, replacement or action would not result, in and of itself,
in a reduction, withdrawal or qualification of any rating for proposed
securities then under consideration by the Rating Agencies (if the
Securitization has not yet occurred); provided that if the Securitization has
not taken (or as certified by Lender, will not take) the form of a transaction
rated by the Rating Agencies, then "Rating Confirmation" shall instead mean that
the matter in question shall be subject to the prior approval of the Lender,
which approval shall not be unreasonably withheld or delayed unless otherwise
provided.
"Replaced Properties" has the meaning given to such term in Section
2.12 of this Agreement.
"Replacement Reserve" has the meaning given to such term in Section
9.4(a) of this Agreement.
"Reserves" has the meaning given to such term in Section 9.8 of this
Agreement.
"Secured Obligations" has the meaning given to such term in the
Mortgages.
"Securitization" has the meaning given to such term in Section 11.7 of
this Agreement.
"Substitute Property" has the meaning given to such term in Section
2.12 of this Agreement.
"Substitution" has the meaning given to such term in Section 2.12 of
this Agreement.
"TI/LC Reserve" has the meaning given to such term in Section 9.4(b) of
this Agreement.
"Title Policies" has the meaning given to such term in Section 3.1(i)
of this Agreement.
"Underwritten Net Cash Flow" means aggregate NOI from the Property or
the Properties less deductions for normalized capital expenditures and capital
expenditures reserves (but without duplication of replacement reserves as
described in the NOI definition), tenant improvement costs and leasing
commissions, and any reserves established with respect thereto.
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Underwritten Net Cash Flow shall be determined by Lender pursuant to its
customary practices and consistently applied for "CMBS" loans similar to the
Loan.
"Yield Maintenance Charge" has the meaning given to such term in
Section 1.02(c) of the Note.
1.2 Exhibits and Schedules Incorporated. All exhibits and
schedules attached hereto, are hereby incorporated into this Agreement.
ARTICLE II
LOAN
2.1 Loan. By and subject to the terms of this Agreement, Lender agrees
to lend and Borrower agrees to borrow the principal sum of THREE HUNDRED
SEVENTY-THREE MILLION AND 00/100THS DOLLARS ($373,000,000.00), said sum to be
evidenced by the Note. The Note shall be secured by, among other things, the
Mortgages and the Cash Management Agreement.
2.2 Interest Rate; Payment of Interest. Borrower shall pay interest on
the principal balance of the Loan outstanding from time to time under the Note
at the rate and in accordance with the terms set forth in the Note.
2.3 Loan Documents. Borrower shall deliver to Lender concurrently with
this Agreement each of the Loan Documents, properly executed and in recordable
form, as applicable.
2.4 Closing Date. The date of this Agreement and of the other Loan
Documents is for reference purposes only. The delivery and transfer to Lender of
the security under the Loan Documents and of Borrower's and Lender's obligations
under the Loan Documents shall be effective on the Closing Date.
2.5 Anticipated Repayment Date. The Anticipated Repayment Date of the
Loan shall be November 11, 2008.
2.6 Maturity Date. On the Maturity Date, all outstanding principal,
together with all accrued and unpaid interest and all other sums due and owing
under the Note and under this Agreement and the other Loan Documents shall be
repaid in full. All payments due under this Agreement at the Maturity Date shall
be paid in immediately available funds.
2.7 Full Repayment and Reconveyance. Upon receipt of all sums owing and
outstanding under the Loan, Lender shall cause the Properties and the related
Collateral to be released from the lien of the Mortgages and the other Loan
Documents; provided, however, that Lender shall have received all escrow,
closing and recording costs, the costs of preparing and delivering such
reconveyance and any sums then due and payable under the Loan Documents.
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2.8 Limitation on Borrower's Liability. Borrower shall have no personal
liability for the repayment of the Loan or performance under the Loan Documents
except as expressly provided in Section 1.05 of the Note, which provisions are
incorporated herein by reference.
2.9 Prepayment. Borrower may not prepay the Loan in whole or in part
except as otherwise expressly provided in the Note.
2.10 Defeasance. Borrower may cause all or a portion of the Properties
to be released from the lien of the Mortgages in accordance with the provisions
of Section 1.03 of the Note.
2.11 Assignment and Assumption of Interest in Borrower; Transfer of
Properties. The obligations of Borrower under this Agreement and the other Loan
Documents may not be assigned by Borrower or assumed by any third party. The
receipt of loan payments, the cashing of such payment checks, or such similar
acts by Lender shall not constitute a waiver of this prohibition. None of the
Properties, nor any direct or indirect interest therein, nor in Borrower, may be
transferred, except that, as long as no Default or Event of Default has occurred
and is continuing, there shall be a one-time right to transfer 100% of the
beneficial interest in Borrower (the "REIT Transfer") to a REIT (the "REIT
Transferee"), provided that and immediately subsequent to such transfer, the
REIT Transferee shall have a book value net worth of no less than
$150,000,000.00 or a market value equity of no less than $150,000,000.00 as
reasonably determined by Lender based on asset values established by third-party
MAI appraisals of the Properties acceptable to Lender in its reasonable
discretion less all existing liabilities and debts of the REIT Transferee, and
Guarantor shall reaffirm (and shall not be released from) its guarantor
obligations and liabilities under any guaranty or indemnity agreement executed
by Guarantor in connection with the Loan and the REIT Transferee executes new
guaranty and indemnity agreements substantially in the form of the Other Related
Documents. In addition, the following conditions to the REIT Transfer must be
satisfied: (a) Guarantor owns at least 51% of the economic interest in the REIT
Transferee at the time of the REIT Transfer and the REIT Transferee is managed
and controlled directly or indirectly by Guarantor and shall continue to be so
owned, managed and controlled, (b) Guarantor expressly covenants in writing that
so long as any part of the Loan remains outstanding it shall continue to own at
least 51% of the economic interest in the REIT Transferee and shall continue to
manage and directly or indirectly control the REIT Transferee, (c) at the time
of the REIT Transfer, the Loan shall have a ratio of (i) aggregate NOI from the
Properties for the prior twelve (12) month period (adjusted by Lender to the
extent Lender reasonably determines that such aggregate NOI will not continue
for the next twelve (12) months) to (ii) annual debt service on the Loan, of no
less than 1.65:1.00 and Lender reasonably believes that the loan-to-value ratio
of the Loan is no higher than 72.5%, and (d) the Rating Agencies are provided
with an opinion of counsel acceptable to the Rating Agencies (or to Lender if
the Loan has not been securitized) providing that as a result of such transfer,
Borrower remains a single-purpose, bankruptcy remote entity. Borrower shall also
deliver such other documents, certificates and opinions as required by the
Rating Agencies or the Lender, including, but not limited to, a
non-consolidation opinion acceptable to the Rating Agencies and Lender. In
addition to a $100,000 (the "Base Review Fee") non-refundable processing fee for
the REIT Transfer and for any transfer requiring Lender's consent or Rating
Confirmation, Borrower shall pay (in addition to the Base Review Fee, where
applicable) the fees and expenses relating to the review and processing of all
transfers (other than incidental share transfers in Guarantor), including, but
not limited to, the reasonable costs of Lender's
8
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outside legal counsel and Rating Agency fees, cost and expenses (including,
without limitation, legal expenses). Whether or not the proposed transfer is
approved, Lender will retain the Base Review Fee and Borrower shall remain
liable for all other fees and expenses. Following such a permitted assumption of
the Loan, Borrower or the approved assignee shall have no further right to
assign the Loan.
Notwithstanding the foregoing, transfers of shareholder interests in Guarantor
shall be permitted unless such transfer causes a "Change of Control" in which
case, prior to Securitization, Lender's prior written consent shall be required
(which may include consideration of the impact such transfer will have on the
Rating Agencies review, analysis and concerns in connection with a
Securitization) and, after the Securitization, Lender shall require a Rating
Confirmation and it shall be a further pre-condition to the transfer that causes
a Change in Control that Prudential (so long as Prudential holds a majority of
the face value of the securities issued in connection with the Securitization)
provides its prior written consent. Borrower acknowledges and agrees that
Prudential's decision to approve or disapprove of any transfer shall be in
Prudential's sole and absolute discretion. For purposes of this Section 2.11, a
------------
"Change of Control" shall be deemed to occur in the event that any one or more
of the following events shall occur: (a) more than 45% of the legal or
beneficial voting shareholder interests in Guarantor are acquired in one
transfer or over time, in related transfers to or at the direction of one or
more affiliated Persons or their designees, (b) during any consecutive eighteen
(18) month period, individuals who at the beginning of such period constituted
the board of directors of Guarantor (together with any new directors whose
election to such board of directors or whose nomination for election was made or
approved by a vote of the majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the board of directors of Guarantor then in office, or
(c) the stockholders of Guarantor approve a merger or consolidation (unless
Guarantor is the surviving entity) or liquidation, dissolution or the sale of
substantially all of Guarantor's assets.
The failure to obtain Lender's prior written consent to any transfer where
Lender's prior written consent is required hereunder shall give Lender the
right, at Lender's sole option, to declare an Event of Default, to accelerate
the Loan and to declare the Loan immediately due and payable.
2.12 Substitution of Properties. From and after the date twelve (12)
months after the Closing Date, Borrower from time to time (not to exceed six (6)
occasions) may offer to Lender as collateral for the Loan (a "Substitution") one
or more substitute properties (each, a "Substitute Property" and, collectively,
"Substitute Properties"; each Substitute Property to be considered a Property
for all purposes of this Agreement) as replacements for Properties ("Replaced
Properties"), subject to there then being no Default or Event of Default
(excepting non-monetary defaults relating solely to the Replaced Property,
including, but not limited to, a breach of one or more representations or
warranties, but not excepting any default relating to financial statements or
their delivery or representations or warranties in respect thereof) and subject
further to the satisfaction of all the conditions set forth below with respect
to each Substitution and to Borrower making the representations and warranties
in Section 5.1 hereof as to each Substitute Property and to Borrower satisfying
the closing conditions of Section 3.1 hereof as to each Substitute Property. Any
proposed Substitution shall be submitted by Borrower to Lender in writing,
together with copies of all reports and other due diligence materials necessary
to enable
9
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Lender to ascertain compliance with the conditions below, at least
ninety (90) days prior to the proposed date of Substitution. No Substitute
Property may qualify as a Replaced Property and, after giving effect to the
Substitution, no Property may share its tax parcel with any property not secured
by the applicable Mortgage. No Property may be substituted if it includes
property which is needed to comply with a tenant's expansion right from an
adjoining Property onto such Property unless all of the Properties related to
the tenant's expansion right are contemporaneously substituted.
(a) For each Substitution, the Substitute Property or
Substitute Properties must have an aggregate NOI of not less than the greater of
(i) the aggregate NOI of the Replaced Property or Properties as of the Closing
Date as set forth on Schedule 1 attached hereto, and (ii) the aggregate NOI of
the Replaced Property or Replaced Properties for the immediately preceding 12
month period;
(b) For each Substitution, the Substitute Property or
Substitute Properties must have an aggregate FMV of not less than the greater of
(i) the FMV of the Replaced Property or Replaced Properties as of the Closing
Date as set forth on Schedule 1 attached hereto, and (ii) the FMV of the
Replaced Property or Replaced Properties immediately prior to the Substitution;
(c) As evidenced by estoppel certificates reasonably
acceptable to Lender and the Rating Agencies, all tenants in each Substitute
Property that lease more than 20,000 s.f. (or whose rent constitute greater than
thirty percent (30%) of the Gross Income for the Substitute Property) must be
occupying their space, open for business and paying rent (after any free rent,
credit or rent abatement periods) and not in arrears more than 30 days, and all
free rent or rental grace periods shall have expired, and the tenants shall not
be in bankruptcy (provided, however, the impact of any tenant not qualifying
under this subparagraph (c) would be the disqualification of the income
associated with that tenant for purposes of calculating NOI, or establishing FMV
for the affected Substitute Property, not the elimination of the property as a
potential Substitute Property);
(d) With respect to each Substitute Property, leases affecting
at least 90% of the net rentable area must have average remaining terms of five
(5) years or more, as of the date of Substitution;
(e) Borrower must hold fee title to the Substitute Properties
and the Substitute Properties must be free of all encumbrances, easements and
other title exceptions (except those expressly permitted by Lender in its
reasonable discretion);
(f) Borrower must continue to be a bankruptcy-remote single
purpose entity and, immediately prior to each such Substitution, Borrower shall
deliver bankruptcy (including, but not necessarily limited to,
non-consolidation) and other legal opinions as reasonably required by Lender;
(g) Borrower must deliver an environmental report for each
Substitute Property in form, findings and substance acceptable to Lender in its
reasonable discretion and the Rating Agencies;
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<PAGE>
(h) Borrower must (i) deliver to Lender and the Rating
Agencies an engineering report (including, but not limited to, analysis of
seismic risk for any Substitute Property situated in a seismic zone, and which
analysis must show that the Substitute Property does not have a probable maximum
loss percentage that exceeds the probable maximum loss percentage of the
Replaced Property and in no event shall such Substitute Property have a probable
maximum loss of more than 15%) in form, findings and substance acceptable to
Lender and the Rating Agencies in their reasonable discretion, and (ii) deposit
125% of estimated deferred maintenance cost (if any) into a reserve account with
Lender where the estimated cost of such deferred maintenance exceeds $100,000
per Substitute Property;
(i) Each Substitute Property must comply with all title, land
use, legal, environmental and insurance requirements provided in the Loan
Documents, and Lender must receive title insurance, surveys, casualty insurance,
and other due diligence items, all acceptable to Lender in its reasonable
discretion; and with respect to the remaining Properties encumbered by the
applicable Mortgage, Borrower shall provide Lender with title insurance
endorsements reasonably acceptable to Lender to the effect that such release
will not impair the priority of such Mortgage on the remaining Properties
encumbered by the Mortgage;
(j) After giving effect to the Substitution, not more than
sixty (60%) percent of the rentable square footage of the Property Pool would be
located in Los Angeles, Riverside, San Bernardino and Orange Counties in
California;
(k) The Rating Agencies must have confirmed in writing that
such Substitution would not result in a downgrade, qualification, or withdrawal
of the ratings of the securities issued pursuant to any Securitization. Except
as provided in Subsection 2.12 (m) and Section 2.15 below, however, Rating
Agency confirmation shall not be so required if all of the following conditions
are satisfied:
(i) The Replaced Property's Allocated Loan Amount is
not among that of the top ten (10) Properties ranked by Allocated Loan Amount
as set forth on Schedule 1 attached hereto;
(ii) The Allocated Loan Amount of the Replaced Property
is less than five percent (5%) of the then-current principal amount of the
Loan immediately preceding the proposed Substitution; and
(iii) After giving effect to the proposed Substitution,
the aggregate Allocated Loan Amount for all Substitute Properties substituted
since the Closing Date is less than 15% of the original principal amount of
the Loan for all Properties as of the Closing Date.
If the Substitution is to occur prior to the Securitization, the Substitution is
subject to Lender's prior written consent. Borrower acknowledges and agrees that
Lender's decision to approve or disapprove of any Substitution shall be in
Lender's reasonable discretion, which may include consideration of the impact
such Substitution will have on the Rating Agencies review, analysis and concerns
in connection with a Securitization.
(l) The Substitute Property must be income producing and
developed property and similar in quality, nature and property type to the
Replaced Property ("Like for
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Like") (except for the Property at 224 South Michigan Avenue, Chicago,
Illinois and the Properties known as Home Depot, Pak N' Save and Kmart, all
located in Emeryville, California (identified as Properties numbered 67, 69, 70
and 71, respectively, on Exhibit A attached hereto) for which Substitute
Properties may be either industrial, office (except office Properties may not be
substituted for retail Properties), research & development or grocery anchored
retail properties);
(m) Notwithstanding the "Like for Like" provisions of
Subsection 2.12 (l), above, up to 30% of the Allocated Loan Amounts of the
Ground Leased Properties and the "credit tenant properties" (i.e., those
Properties substantially leased to a tenant whose credit is rated BBB- or better
by one of the Rating Agencies) may be replaced by other Substitute Properties,
provided in all such Substitutions (i.e., notwithstanding any provision in the
Loan Documents to the contrary), Rating Confirmation is obtained.
(n) Borrower shall deliver certain other closing documents as
may be described in the applicable private placement memorandum or other
disclosure documents and shall execute required Loan Documents (including, but
not limited to, such mortgages, deeds of trust, and UCC-1 financing statements
as may be necessary to encumber the Substitute Properties in a manner consistent
with the other Properties in the Property Pool) and revisions thereto and to
deliver other documents, opinions and certificates reasonably required by
Lender;
(o) At the time of each Substitution request, Borrower shall
pay a non-refundable Substitution servicing fee of $15,000 per building per
Substitute Property;
(p) Upon giving effect to the Substitution, the aggregate
Allocated Loan Amount of the Replaced Properties as of the Closing Date shall
not exceed thirty percent (30%) of the principal amount of the Loan as of the
Closing Date; and
(q) After giving effect to the Substitution, and unless Rating
Confirmation is otherwise obtained, there shall remain in the Property Pool a
minimum total of at least ninety-five (95) Properties less the number of
Properties which were released pursuant to a Partial Defeasance in accordance
with Section 1.03 of the Note.
(r) Borrower shall deliver to Lender and the Rating Agencies
an opinion of counsel for Borrower or Lender, at Borrower's expense, in form and
substance and delivered by counsel reasonably satisfactory to Lender and the
Rating Agencies, that the Substitution will not cause the Trust (as defined in
the Note) to (i) fail to qualify as a "real estate mortgage investment conduit"
(a "REMIC"), within the meaning of Section 860D of the Internal Revenue Code of
1986, as amended from time to time or any successor statute (the "Code"), or
(ii) be subject to any "prohibited transaction" tax as defined in Section 860F
of the Code.
Borrower shall pay all fees, costs and expenses, including, but not limited to,
legal fees, incurred by Lender and the Rating Agencies, in connection with the
matters set forth in this Section 2.12.
------------
For purposes of this Section 2.12, the definition of NOI as set forth in Section
-------
1.1 above, shall be used, except that (x) the applicable twelve (12) month
---
period referred to in said definition shall be the twelve (12) month period
prior to the Substitution and (y) stabilized occupancy, as
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<PAGE>
reasonably determined by Lender, shall be assumed for the purposes of
calculating operating expenses.
With respect to any Substitution, no more than two (2) Replaced Properties may
be substituted for any one (1) Substitute Property unless Rating Confirmation is
obtained. In the event that the Substitution involves one (1) Replaced Property
for one (1) Substitute Property, the Substitute Property shall be assigned the
Allocated Loan Amount of the Replaced Property. In the event that the
Substitution involves more Replaced Properties than Substitute Properties, or
more Substitute Properties than Replaced Properties, than the total Allocated
Loan Amounts of the Replaced Properties shall be reallocated proportionately
among the Substitute Properties based on the FMV of the Substitute Properties at
the time of Substitution and as adjusted by Lender in its reasonable discretion
based on DSCR of the Substitute Properties.
Notwithstanding anything in this Section 2.12, Section 2.15 or Section 2.16 to
the contrary, in determining whether the conditions for a Substitution or a
Release, as applicable, have been satisfied under this Section 2.12 (or under
Section 3.1 to the extent incorporated herein), Section 2.15, or under Section
2.16, if at the time the Substitution or Release occurs the Loan is held by a
REMIC or by an entity that qualifies for treatment as a "grantor trust" under
the Code, all conditions contained herein (or under Section 3.1 to the extent
incorporated herein), Section 2.15 or under Section 2.16, which provide for the
exercise of discretion by the Lender (i.e., by requiring that documents or other
items be "reasonably acceptable to the Lender" or "acceptable to the Lender in
its reasonable discretion" or "acceptable to Lender in its sole discretion", or
through use of words with similar import) shall be construed as permitting the
Lender to reject a document or other item only if such document or other item
fails to satisfy generally-applicable underwriting standards for securitized
commercial mortgage loans, determined at the time such Substitution or Release
occurs.
2.13 Build to Suit Properties. With respect to each of the Gillette
build-to-suit property in Romeoville, Illinois (identified as Property #54 on
Exhibit A attached hereto and herein the "Gillette Property") and the GATX
property in Stockton, California (identified as Property #52 on Exhibit A
attached hereto and herein the "GATX-Stockton Property"), Borrower shall provide
to Lender on the Closing Date, irrevocable, unconditional letters of credit in
the amount of $16,400,000 for the Gillette Property (the "Gillette Letter of
Credit") and $13,600,000 for the GATX-Stockton Property (the "GATX-Stockton
Letter of Credit" and together with the Gillette Letter of Credit, the
"Construction Letters of Credit"), which Construction Letters of Credit must be
from an issuer, must have an account party and expiry date (which must provide
that, prior to its expiration from time to time, it shall be automatically
extended for another term if the Return Conditions have not yet been satisfied
at such time), and in all other respects must be in form and substance,
acceptable to Lender and the Rating Agencies. Without limiting the foregoing,
the issuer of the Construction Letters of Credit as well as the Leasing Letters
of Credit (as defined below) must be and continue to be from issuers rated at
least "A" by DCR and at least "Aa2" by Moody's, or, if not rated by DCR and
Moody's, correspondingly by at least two (2) Rating Agencies, or otherwise
acceptable to DCR and Moody's. If there is no Event of Default, and provided the
following conditions (including there being no Event of Default, the "Return
Conditions") are satisfied prior to December 31, 1999 or, with respect to the
Gillette Letter of Credit, prior to March 31, 2000 (the "Return Dates") in the
event the tenant under the Gillette Property lease exercises its option to have
the additional improvements constructed pursuant to
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Section 18 of the lease on the Gillette Property, the applicable
Construction Letter of Credit shall be returned upon (a) completion of
construction related to such respective property, as evidenced by a certificate
of occupancy acceptable to Lender, (b) acceptance and occupancy of the
respective property by the tenants thereof, (c) commencement of rent payments by
the tenants (after the expiration of any free rent, credit or grace period), (d)
receipt of an estoppel certificate and, if requested by Lender, a subordination,
non-disturbance agreement, from the tenants thereof in form and substance
reasonably acceptable to Lender, (e) Lender obtaining a valid first mortgage
lien on the respective property which would be cross-defaulted and
cross-collateralized with the other Properties in the Property Pool, (f) title
to the respective property shall be vested in Borrower, (g) title insurance
endorsements and other reasonable evidence that all streets and roads reasonably
necessary for access to and full use, occupancy and operation of the respective
property have been completed, have been dedicated and accepted by the
appropriate municipal authority and are open and available, and (h) delivery to
Lender of acceptable title insurance (which shall provide, among other things,
affirmative coverage as to mechanics' liens and that such property does not
share its tax parcel with any other property), survey, property insurance, legal
opinions and such other certificates, opinions and documents reasonably
requested by Lender, including, but not limited to, third party engineering,
environmental and MAI appraisals (if not previously delivered), and payment to
Lender and the Rating Agencies of all fees, costs and expenses (including, but
not limited to, legal fees and expenses) incurred by Lender and the Rating
Agencies in respect of the matters set forth in this Section. In the event the
Return Conditions are not or will not be satisfied as to either or both of the
respective properties on or prior to the respective Return Date, Borrower shall
have the option to make a Substitution with respect to the applicable property
in accordance with Section 2.12 above to the same extent as if the applicable
property were in the Property Pool, and such Substitution shall reduce the
number of remaining Substitutions available to Borrower accordingly. A
Substitution exercised pursuant to this Section shall require Rating
Confirmation. Borrower must exercise such option by providing written notice to
Lender at least one-hundred (100) days prior to the applicable Return Date. If
Borrower fails to timely exercise its Substitution option or fails to fully
satisfy all of the requirements for a Substitution in accordance with Section
2.12 above after exercising its option at least ten (10) Business Days prior to
the applicable Return Date, Borrower shall make a partial prepayment of the Loan
in an amount equal to: (i) 125% of the Allocated Loan Amount for the applicable
Properties, plus (ii) a Yield Maintenance Charge (as defined in the Note). If
Borrower fails to make such prepayment prior to the applicable Return Date,
Lender shall be entitled to draw on the respective Construction Letter of Credit
and apply the proceeds thereof to the Loan and to the Yield Maintenance Charge.
Borrower agrees that in the event the amount of a Construction Letter of Credit
is insufficient to satisfy the amount due in connection with such partial
prepayment as set forth in clauses (i) and (ii) above, Borrower shall
immediately pay to Lender additional funds to satisfy such shortfall. If the
letters of credit described in Sections 2.13 and 2.14 are not extended, Lender
may draw upon them to avoid their expiration. Similarly, the letters of credit
described in Sections 2.13 and 2.14 may be drawn upon in the event that the
requisite issuer ratings as hereinabove set forth are not maintained and the
letters of credit described in Sections 2.13 and 2.14 are not promptly replaced
after written notice from Lender (with replacements acceptable to Lender and the
Rating Agencies).
2.14 Letters of Credit - Leasing . With respect to each of the Union
City, California property located at 2900 Faber Street (identified as Property
#5 on Exhibit A attached hereto and herein the "Union City Property") and the
Tustin, California property (identified as Property #44
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on Exhibit A attached hereto and herein the "Tustin Property"), Borrower
shall provide to Lender on the Closing Date, irrevocable, unconditional letters
of credit in the amount of $2,500,000 for the Union City Property (the "Union
City Letter of Credit") and $1,100,000 for the Tustin Property (the "Tustin
Letter of Credit" and together with the Union City Letter of Credit, the
"Leasing Letters of Credit"), which Leasing Letters of Credit must be from an
issuer, must have an account party and expiry date, and in all other respects
must be in form and substance, acceptable to Lender and the Rating Agencies.
Each Leasing Letter of Credit must have a term of no less than twelve (12)
months, and must provide that prior to its expiration it shall be automatically
extended for one or more terms of another twelve (12) months each if the Leasing
Return Conditions have not yet been satisfied at such time. If there is no Event
of Default, and provided the following conditions (including there being no
Event of Default, the "Leasing Return Conditions") are satisfied prior to March
1, 2000 or, if Borrower, at Lender's option, is required to extend the terms of
either or both Leasing Letters of Credit for an additional term of twelve (12)
months, prior to March 1, 2001 (as applicable, the "Leasing Return Dates"),
provided that all of the Leasing Return Conditions shall have been satisfied
prior to such extended date, the applicable Leasing Letter of Credit shall be
returned upon (a) the leasing to unaffiliated third parties of no less than
ninety percent (90%) of the space at the respective Property, with a lease term
of no less than five (5) years (taking into account termination options, if
any), and at rents no less than the then prevailing market rental rate for the
area in which the Property is situated, (b) acceptance and occupancy of the
respective Property by the tenants thereof, (c) commencement of rent payments by
the tenants (after the expiration of any free rent, credit or grace period), (d)
receipt of an estoppel certificate from the tenants thereof in form and
substance reasonably acceptable to Lender and the Rating Agencies, and (e)
payment to Lender and the Rating Agencies of all fees, costs and expenses
(including, but not limited to, legal fees and expenses) incurred by Lender and
the Rating Agencies in respect of the matters set forth in this Section. In the
event the Leasing Return Conditions are not or will not be satisfied as to
either or both of the respective Properties on or prior to the Leasing Return
Date, Borrower shall have the option to make a Substitution with respect to the
applicable property subject to and in accordance with Section 2.12 above and
such Substitution shall reduce the number of remaining Substitutions available
to Borrower accordingly. Borrower must exercise such option by providing written
notice to Lender at least one-hundred (100) days prior to the applicable Leasing
Return Date. If Borrower fails to exercise its Substitution option or fails to
fully satisfy all of the requirements for a Substitution in accordance with
Section 2.12 above after exercising its option at least ten (10) Business Days
prior to the applicable Leasing Return Date, Borrower shall make a partial
prepayment of the Loan in an amount equal to: (i) 125% of the Allocated Loan
Amount for the applicable Properties, plus (ii) a Yield Maintenance Charge (as
defined in the Note). If Borrower fails to make such prepayment prior to the
applicable Leasing Return Date, Lender shall be entitled to draw on the
respective Leasing Letter of Credit and apply the proceeds thereof to the Loan
and to the Yield Maintenance Charge. Borrower agrees that in the event the
amount of a Leasing Letter of Credit is insufficient to satisfy the amount due
in connection with such partial prepayment as set forth in clauses (i) and (ii)
above, Borrower shall immediately pay to Lender additional funds to satisfy such
shortfall.
2.15 Expansion Rights.
(a) If any tenant under a Lease exercises its option as
presently set forth in its lease to lease additional land and/or improvements
(the "Expansion Land" and the portion of
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<PAGE>
each of such Properties excluding the Expansion Land is hereinafter the
"Remaining Property") presently constituting a portion of any of those
Properties designated on Exhibit A hereto as IL1970104 (Gillette/IL), CA0712430
(Pepsi/Ontario, CA), CA0010612 (Office Depot/Fremont, CA) and IL1970335
(GATX/IL) (collectively, the "Expansion Properties") and to have Borrower
construct thereon additional improvements (such improvements being hereinafter
referred to as the "Expansion Improvements", and the Expansion Land and the
Expansion Improvements being hereinafter referred to as the "Expansion
Premises"), Borrower shall have the right, exercised by written notice to
Lender, to have the Expansion Premises considered Substitute Properties and to
have Properties designated by Borrower released from the Property Pool as if
such Properties were Replaced Properties (subject to the limitations, exceptions
and conditions set forth below in this Section 2.15(a) and Section 2.12 above)
provided (i) no Event of Default exists as of the date of the Substitution, (ii)
the Expansion Improvements have been completed as evidenced by a certificate of
occupancy reasonably acceptable to Lender, (iii) the Expansion Improvements have
been accepted and occupied by the tenant thereof, (iv) commencement of rent
payments by the tenant (after the expiration of any free rent, credit or grace
period) has occurred, (v) Lender has received an estoppel certificate from the
tenant thereof in form and substance reasonably acceptable to Lender, (vi) title
to the Expansion Improvements shall be vested in Borrower, (vii) Borrower
delivers to Lender title insurance endorsements or other evidence reasonably
acceptable to Lender that all mechanics and materialmen have been paid in
connection with the construction and that no mechanics' liens exist with respect
to the Expansion Premises and (viii) Lender shall have received a Rating
Confirmation in respect of the Substitution involving the Expansion Premises.
Borrower shall have the right to exercise the option granted in this Section
with respect to the Expansion Premises of one or more tenants in a single
Substitution; provided, however, that all Substitutions under this Section shall
reduce the number of remaining Substitutions available to Borrower accordingly.
The terms and conditions for Substitution set forth in Section 2.12 hereof shall
apply with respect to Substitutions applicable to Expansion Premises.
Determination of NOI and FMV, and the allocation thereof as between the
Expansion Premises and the balance of the Property of which the Expansion
Premises are a part, shall be made by Lender exercising reasonable discretion.
(b) If any tenant with the option to lease Expansion Land
waives its option, or the option is otherwise terminated or expires, which
waiver, termination or expiration is evidenced by a tenant estoppel reasonably
acceptable to Lender, Borrower shall have the right, exercised by written notice
to Lender, to have the Expansion Land considered a potential Replaced Property
and to have such Expansion Land designated by Borrower released from the
Property Pool as if such Expansion Land was a Replaced Property (subject to the
limitations, exceptions and conditions set forth below in this Section 2.15(b),
2.15(c) below and Section 2.12 above) provided (i) no Event of Default exists as
of the date of the Substitution, (ii) Lender shall have received a Rating
Confirmation in respect of the Substitution involving the Expansion Land, and
(iii) Section 2.12(l) shall not be applicable; however, the Substitute
Properties must be income producing industrial, office/research and development
or grocery anchored retail properties. Borrower shall have the right to exercise
the option granted in this Section with respect to the Expansion Land of one or
more tenants in a single Substitution; provided, however, that all Substitutions
under this Section shall reduce the number of remaining Substitutions available
to Borrower accordingly. The terms and conditions for Substitution set forth in
Section 2.12 hereof shall apply with respect to Substitutions applicable to
Expansion Land. Determination of NOI, FMV and the Allocated Loan Amount, and the
allocation thereof
16
<PAGE>
as between the Expansion Land and the balance of the Property of which the
Expansion Land is a part, shall be made by Lender exercising reasonable
discretion.
(c) The Remaining Property and/or Borrower shall be in
compliance with the following as an additional condition precedent to
Substitutions applicable to Expansion Land:
(i) The Remaining Property shall comply with all
applicable zoning, land use and similar laws, rules, regulations and ordinances
of all Governmental Authorities having or claiming jurisdiction thereover, and
all other applicable laws, with each such determination assuming the separate
ownership and operation of the Remaining Property;
(ii) Borrower must provide evidence reasonably
acceptable to Lender that (1) all zoning and subdivision approvals of
Governmental Authorities having jurisdiction as necessary to create legally
identifiable tracts of real property, and separate tax and zoning lots for all
real property taxes, have been granted in respect of the Remaining Property; and
(2) from and after the Substitution of the Replaced Property, no acts relating
to development, further subdivision, construction or use on the Replaced
Property can affect in any respect the compliance of the Remaining Property with
all Governmental Rules;
(iii) Borrower must provide evidence reasonably
satisfactory to Lender that, following any such Substitution, the Remaining
Property shall have available to it all necessary utility and other services for
the development, use, occupancy and operation of the Remaining Property, and
adequate, free, unimpeded and unencumbered access for pedestrian and vehicular
ingress and egress onto all adjacent public roads;
(iv) Borrower must provide Lender with an updated
survey of the Remaining Property, reasonably satisfactory to Lender,
prepared by a registered land surveyor for the state in which the Remaining
Property is located, and certified to the Lender, its successors and assigns,
and the title insurer in form reasonably acceptable to Lender, containing metes
and bounds legal descriptions of the Remaining Property;
(v) Borrower provides Lender with an opinion of
counsel reasonably satisfactory to Lender, which opinion shall be in form
and substance reasonably satisfactory to Lender, or other evidence reasonably
satisfactory to Lender, that the lien of the applicable Mortgage is and
continues to constitute a valid lien on the Remaining Property; and
(vi) Borrower shall procure from the title insurer
insuring the lien of the Mortgages an endorsement to Lender's title
insurance policy reasonably acceptable to Lender which shall provide, inter
alia, that the lien and priority of the applicable Mortgage on the Remaining
Property shall be unaffected as a result of the release of the Replaced
Property.
2.16 GATX-Woodridge Property. Upon satisfaction of the following terms
and conditions, Lender shall release from the Mortgages (the "Release") that
certain parcel (the "Outparcel") consisting of a portion of the Property known
as the GATX-Woodridge Property (identified as Property #53 on Exhibit A hereto),
which Outparcel is further described on Exhibit G hereto:
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(a) The Outparcel is not required to be included within the
GATX-Woodridge Property for purposes of any Governmental Rule or necessary or
appropriate to satisfy or facilitate the requirements or terms of any Lease;
(b) The Outparcel is simultaneously with the Release being
transferred (the "Conveyance") to a third party, including, without limitation,
Guarantor;
(c) Borrower shall have given to Lender a written request for
the Release accompanied by all evidence, information and other items required by
this Section, not less than sixty (60) days prior to the desired Release date;
(d) Each of the Outparcel and the remaining portion of the
GATX-Woodridge Property (the "Remaining GATX-Woodridge Property"), including,
but not limited to, all improvements thereon, and the Release and the Conveyance
shall be in compliance with all applicable zoning, land use and other
Governmental Rules of all Governmental Authorities, with each assuming that the
result of the Conveyance is the separate ownership and operation of the
Outparcel and the Remaining GATX-Woodridge Property (collectively, the "GATX
Properties");
(e) Following the Release the Remaining GATX-Woodridge
Property will retain the Allocated Loan Amount of the GATX-Woodridge Property;
(f) Borrower provides Lender with evidence reasonably
acceptable to Lender that (i) all zoning and subdivision approvals of
Governmental Authorities have been granted so that each of the GATX Properties
constitute separate legal and real estate tax parcels and lots, and (ii) from
and after the Release, no acts relating to development, subdivision,
construction or use on the Outparcel can affect in any respect the compliance of
the Remaining GATX-Woodridge Property with all applicable Governmental Rules;
(g) Borrower provides evidence reasonably satisfactory to
Lender that, following the Release, the Remaining GATX-Woodridge Property shall
have available to it all necessary utility and other services for the
development, use, occupancy and operation of the Remaining GATX-Woodridge
Property, and adequate, free, unimpeded and unencumbered access for pedestrian
and vehicular ingress and egress onto all adjacent public roads at such
locations as are reasonably necessary for the development, use, occupancy and
operation of the Remaining GATX-Woodridge Property;
(h) Borrower provides Lender with an updated survey of the
Remaining GATX-Woodridge Property reasonably satisfactory to Lender, prepared by
a registered Illinois land surveyor and certified to Lender, its successors and
assigns, and the title insurer in form reasonably acceptable to Lender,
containing (i) only such encroachments, exceptions and state of facts as are (A)
set forth in the Title Policy insuring the applicable Mortgage or (B) approved
by Lender in writing in its reasonable discretion; and (ii) metes and bounds
legal descriptions of each of the Outparcel and the Remaining GATX-Woodridge
Property;
(i) Borrower shall procure from the Title Company insuring the
lien of the applicable Mortgage an endorsement to Lender's title insurance
policy reasonably acceptable to Lender which shall provide, inter alia, that the
lien and priority of the applicable Mortgage on the
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Remaining GATX-Woodridge Property shall be unaffected as a result of the
Release of the Outparcel and continues to constitute a valid first lien,
together with such other matters as Lender shall reasonably require;
(j) No Event of Default exists under the Loan Documents;
and
(k) Borrower pays all of Lender's fees and expenses
(including, without limitation, attorneys' fees and expenses) incurred in
connection with the Release of such Outparcel.
ARTICLE III
CONDITIONS OF LENDER'S OBLIGATION TO FUND LOAN
3.1 Conditions Precedent. Lender's obligation to fund the Loan
hereunder is subject to the fulfillment to Lender's satisfaction of each of the
following conditions precedent:
(a) Representations and Warranties True at Closing. The
representations and warranties contained in Article V of this Agreement or
otherwise made by or on behalf of Borrower in any of the Loan Documents or in
any certificate, written statement or other writing given in connection with the
Loan (including, but not limited to, all financial and operating statements),
taken as a whole, shall be true and correct on and as of the Closing Date with
the same effect as if made at such time.
(b) No Default or Event of Default. There shall exist no
Default or Event of Default, as defined in this Agreement.
(c) Performance. Borrower shall have performed and complied
with all agreements and conditions contained herein required to be performed and
complied with by Borrower prior to or on the Closing Date.
(d) Loan Documents. Lender shall have received all Loan
Documents, Other Related Documents, instruments, policies, and forms of evidence
or other materials required or requested by Lender under the terms of this
Agreement or any of the Loan Documents.
(e) Zoning Compliance; Certificates of Compliance. Borrower
shall have delivered to Lender, and Lender shall have received and approved the
following items: (i) zoning compliance letters from the proper zoning authority
or other evidence reasonably acceptable to Lender as to each Property's
compliance with zoning or use restriction laws; and (ii) copies of a certificate
of occupancy acceptable to Lender and such other evidence of completion
reasonably acceptable to Lender in accordance with the applicable building laws
pertaining to each Property.
(f) Hazardous Materials. With respect to each of the
Properties, Lender shall have received a Phase I environmental assessment report
and such other additional reports (including, without limitation, a Phase II
environmental assessment report) requested by Lender based on the findings of
the Phase I environmental assessment report from a licensed engineer acceptable
to Lender, all in form and substance satisfactory to Lender in its sole
discretion.
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(g) Property Inspection and Report. Lender shall have received
and approved from a professional building inspector acceptable to Lender,
reports (the "Property Condition Report") stating that each of the Properties is
structurally sound and is in good order and repair, and setting forth
recommendations of remedial repairs, capital improvements and replacements which
should be undertaken.
(h) Earthquake Report. Lender shall have received and approved
from licensed engineers acceptable to Lender, reports with respect to the
Properties designated by Lender stating the maximum probable loss to such
Property resulting from seismic events. The reports should include, but shall
not be limited to, a soil analysis, structural analysis, and soil-structure
interaction analysis, proximity to known faults and seismic history.
(i) Title Insurance. Borrower shall have delivered to Lender
surveys acceptable to Lender and lender's A.L.T.A. extended coverage policies of
title insurance with Form 1 coverage, together with such endorsements and
reinsurance as required by Lender (such policies, endorsements and reinsurance
being hereinafter referred to as the "Title Policies"), in the amount of the
Loan and issued by First American Title Insurance Company (the "Title Company"),
fully paid and in form and substance reasonably satisfactory to Lender, insuring
that Borrower is the owner of the Properties in fee simple, and that the
Mortgages are valid first liens on the Properties in favor of Lender, free and
clear of all liens, encumbrances and exceptions to title whatsoever, other than
(i) current real property taxes not delinquent, and (ii) such exceptions to
title which appear in the final Title Policies accepted by Lender in connection
with the closing of the Loan (excepting therefrom all pre-printed and/or
standard exceptions) or as are otherwise approved in writing by Lender
(collectively, the "Permitted Exceptions"). The Title Policies shall effect full
coverage against losses arising out of encroachments on boundary, setback lines
or easements, against losses from existing mechanics' or materialmen's liens and
subsequent mechanics' and materialmen's liens which may gain priority over the
Mortgages and against such other losses with respect to which Lender may request
coverage, and shall be issued without any creditors' rights exception, general
survey exception, or general exception as to rights of parties in possession.
The title insurance policy shall include, in addition to all coverages required
by Lender after review of title matters, the following endorsements (if
available in the jurisdiction of the Property) or coverages: ALTA Form 9
comprehensive endorsements; ALTA Form 3.1 zoning completed structure (with
parking) endorsement; omission of creditors' rights exclusion; damage to
improvements situated on easements (similar to CLTA 103.1 and 103.3); access
endorsement (similar to CLTA Form 103.7); contiguity endorsement (similar to
CLTA Form 116.4), Aggregation Endorsement (ALTA Form 12), First Loss
Endorsement, and where appropriate; separate tax lot endorsement; survey
reading, and land same as survey endorsement (similar to CLTA Form 116.1);
Subdivision Map Act (CLTA 116.7); usury endorsement; variable rate loan
endorsement; mechanic's lien coverage; gap coverage; tie-in coverage, a waiver
of arbitration; and such other endorsements as Lender may require.
(j) Survey. Borrower shall have furnished to Lender four (4)
copies of a survey with respect to each of the Properties (i) prepared and dated
not more than two (2) months prior to the Closing Date by a registered surveyor
reasonably satisfactory to Lender, (ii) certified as correct and otherwise
meeting the detailed survey requirements set forth in Attachment 2 of the Loan
Commitment, and (iii) sufficient to allow the Title Company to issue the Title
Policy without a general survey exception.
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(k) UCC-3 Certificate; Litigation and Bankruptcy Searches.
Lender shall have received a Certificate(s) of the Secretary of State of each
state in which the Properties are located responding to a UCC-3 Request(s) for
Information and certifying that there is not on file with the Secretary of
State's Office any effective financing statements, statements of assignments,
federal or state tax liens, attachment liens or other security interests
perfectible by the filing of a UCC-1 financing statement with respect to
Borrower, Guarantor, the Collateral or the Properties. Lender shall also have
received litigation and bankruptcy searches with respect to Borrower and
Guarantor in each county in which any of the Properties are located as Lender
shall require.
(l) Documents. Lender shall have received from Borrower, such
certificates, opinions and other documents as Lender may reasonably request and
as are consistent with the provisions of this Agreement and the other Loan
Documents, including, but not limited to, documents evidencing the organization,
existence and authority of Borrower and Guarantor, and the authority of the
persons executing this Agreement and the other Loan Documents to execute the
same for and on behalf of Borrower and Guarantor.
(m) Insurance. Borrower shall have delivered to Lender an
original ACORD 27 (Evidence of Property Insurance) and an ACORD 25 (Certificate
of Insurance) or other Lender approved equivalent listing all coverages and
policies of insurance for the Properties as required by Article IV of this
Agreement.
(n) Appraisal. Lender shall have received a third-party MAI
appraisal of each of the Properties satisfactory to Lender in its sole
discretion.
(o) Consents. Borrower shall have furnished to Lender evidence
reasonably satisfactory to Lender establishing that Borrower has obtained or
will apply for in a timely manner and in the ordinary course of business all
consents, permits and approvals from any and all Governmental Authorities having
jurisdiction over Borrower and/or the Properties, which are required in
connection with the Properties.
(p) Financial Statements. Lender shall have received
originally signed and dated, audited annual financial statements for Guarantor
dated as of December 31, 1997 and unaudited monthly financial statements for
Guarantor dated as of September 30, 1998.
(q) Payment of Fees and Expenses. Borrower shall have paid to
Lender on or before the Closing Date all fees and the expenses required by
Lender in connection with the Loan as provided in the Loan Commitment.
(r) Leases. Borrower shall have provided Lender with copies of
all leases, concessions, licenses, occupancy agreements, and the like in effect
with respect to the Properties (the "Leases"), and any amendments and lease
guarantees thereto, and a schedule (certified by Borrower to be complete and
correct) setting forth the income, rents, prepaid rentals, security deposits,
guarantees or evidence of security or guarantee paid or given in connection
therewith, expiration dates, extension options and all other information
pertaining to such leases as Lender shall require. Borrower shall cause all
tenants, concessionaires, licensees, occupants, and the like to provide estoppel
certificates and, if required by Lender, shall obtain lease
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subordination/attornment agreements (which certificates and agreements shall be
in form and substance acceptable to Lender in its sole discretion). Borrower and
Guarantor shall have exercised (i) their best commercially reasonable efforts to
cause to be provided to Lender estoppel certificates (in the form set forth as
Exhibit E hereto and made a part hereof) acceptable to Lender from all tenants
in respect of the Properties, and (ii) in any event, cause to be provided to
Lender and the Rating Agencies estoppel certificates acceptable to Lender and
the Rating Agencies in respect of the leased premises set forth on Schedule 2
attached hereto and made a part hereof (collectively, the "Major Tenants") and
from tenants other than the Major Tenants which represent at least seventy
percent (70%) of the rentable improved square footage (exclusive of the square
footage attributable to the Major Tenants). Notwithstanding the foregoing, in
connection with that certain Property located in Chicago, Illinois (identified
as Property #67 on Exhibit A), Borrower shall deliver estoppels from Tenants
representing not less than 50% of the net rentable space of such Property. With
respect to all remaining tenants, Borrower shall furnish an estoppel for such
tenants' occupancy. In addition, Borrower and Guarantor shall have exercised
their best commercially reasonable efforts to cause to be provided to Lender
Subordination, Non-Disturbance and Attornment Agreements in the form set forth
as Exhibit F attached hereto and made a part hereof, from certain tenants as
designated in writing by Lender. All present Leases and all amendments,
modifications or terminations of any Leases, shall be subject to Lender's
approval.
(s) Management Agreements. Borrower shall have provided Lender
with copies of all management agreements in effect at the Properties (the
"Management Agreements"), which shall be in form and substance reasonably
acceptable to Lender and with managers (collectively, the "Manager") acceptable
to Lender. Borrower shall cause the Manager to consent to the assignment by
Borrower of the Management Agreements to Lender, and to subordinate the
Management Agreements (and all payments thereunder) to the Loan Documents,
pursuant to an agreement in form and substance acceptable to Lender.
(t) Cash Management Agreement. Borrower shall have executed
and delivered the Cash Management Agreement to Lender and Borrower shall have
complied with all of the requirements set forth in the Cash Management
Agreement.
(u) Reserve Accounts. Borrower shall have established all of
the impound and reserve accounts with Lender as required in Article IX.
(v) Enforceability Opinions of Borrower's Counsel. Borrower
shall furnish Lender (or cause to be furnished at Borrower's expense) an opinion
of legal counsel from attorneys admitted to practice in each and all of the
respective states in which any of the Properties are located and shall also
furnish an opinion from an attorney admitted to practice in the State of New
York (which shall be the State governing the contractual obligations hereunder
and under the Loan Documents, except as otherwise specifically provided in the
Loan Documents), each of whom shall be retained by Borrower and acceptable to
Lender, which opinions shall be in form and substance acceptable to Lender. Said
opinions shall be dated as of the Closing Date, and shall cover, without
limitation, the following matters:
(i) the due organization, valid legal existence and good
standing of Borrower and Guarantor;
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(ii) the due authorization, execution, delivery,
validity, binding effect and enforceability of the Loan Documents, guaranties,
and indemnification agreements (including, without limitation, choice of law)
in accordance with their terms; (iii) that the Loan complies with applicable
usury laws;
(iv) the existence of, or the nonexistence of, any
requirement for any consent of any governmental authority in connection
with the execution, delivery or performance of the Loan Documents, guaranties,
and indemnification agreements;
(v) the fact that the Loan Documents, guaranties, and
indemnification agreements and the execution thereof and the performance of the
obligations thereunder do not conflict with or violate any applicable laws,
agreements or restrictions;
(vi) that the Mortgages are in form sufficient to
create a lien on the Properties in favor of the trustee thereunder for the
benefit of Lender as beneficiary and the security agreement contained in each
Mortgage is in form sufficient to create a lien to the Collateral in favor of
Lender; and
(vii) such other matters incident to the Loan as
Lender may request.
(w) Bankruptcy Nonconsolidation Opinion. Borrower shall
furnish an opinion of counsel acceptable to Lender, dated as of the Closing
Date, that the assets of Borrower (and its partners or members and, if
applicable, any affiliated Manager) will not be substantially consolidated with
the assets of any other affiliated person or entity, including, without
limitation, Guarantor or any partner or member of Borrower, if any, in the event
of a bankruptcy or insolvency proceeding of any such person or entity.
(x) No Material Adverse Change. Borrower shall have delivered
to Lender written certification, dated as of the Closing Date, and Lender shall
be independently satisfied, as to the following matters: (i) from and after the
date of any inspection of the Properties acceptable to Lender, no portion
thereof shall (1) have been damaged and not repaired to Lender's satisfaction,
(2) have been taken in condemnation or other like proceedings, or (3) have
become the subject of any pending condemnation proceeding or litigation; (ii)
the Properties have not been impaired and the values of the Properties have not
been reduced and are free from settling and other structural defects; (iii) from
and after the date of the Loan application, neither Borrower nor any general
partner, member, shareholder or principal of Borrower, nor any Guarantor nor any
Property, has been involved in any action or proceeding (criminal or civil)
which materially and adversely affects the Properties or Borrower's (or
Guarantor's, as applicable) ability to repay the Loan (in each case as
determined by Lender), or any bankruptcy, reorganization, insolvency or similar
proceeding; and (iv) from and after the date of the most recent financial
statements for such person or entity delivered to Lender, no material adverse
change has occurred with respect to Borrower, Guarantor or any other person
(provided, however, if the Guarantor incurs debt unrelated to the Properties, no
adverse change shall be deemed to have occurred).
(y) [Intentionally Deleted].
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(z) Funding of Deposits. All amounts required to be deposited
by Borrower under the Loan Documents have been deposited and are held by or on
behalf of Lender, and there are no deficiencies with respect thereto.
ARTICLE IV
INSURANCE
4.1 Insurance. Borrower shall, at Borrower's expense, maintain in force
and effect on each Property in the Property Pool at all times the following
insurance:
(a) Insurance against loss or damage to each Property by fire,
windstorm, tornado and hail and against loss and damage by such other, further
and additional risks as may be now or hereafter embraced by an "all-risk" or
"special form" form of insurance policy. The amount of such insurance shall be
not less than one hundred percent (100%) of the full replacement cost (insurable
value) of the Improvements (as established by an MAI appraisal) situated on such
Property, without reduction for depreciation, provided, however, that such
insurance may be carried under blanket insurance policies approved by Lender
covering the Properties and other properties with liability limits of less than
the aggregate replacement cost of all Improvements as long as Lender has
reasonably determined that the amount of such insurance is adequate under the
circumstances. Full replacement cost, as used herein, means, with respect to
each of the Improvements, the cost of replacing such Improvements without regard
to deduction for depreciation, exclusive of the cost of excavations, foundations
and footings below the lowest basement floor. Borrower shall also maintain
insurance against loss or damage to such furniture, furnishings, fixtures,
equipment and other items (whether personalty or fixtures) included in such
Property and owned by Borrower from time to time, to the extent applicable, in
the amount of the cost of replacing the same. The maximum deductible for any
Property covered by such policy shall be $100,000.00, or as consented to by
Lender, such consent not to be unreasonably withheld.
(b) Commercial General Liability Insurance against claims for
personal injury, bodily injury, death and property damage occurring on, in or
about each of the Properties in amounts not less than $1,000,000.00 per
occurrence and $2,000,000.00 in the aggregate plus umbrella coverage in an
amount not less than $100,000,000.00. During any construction on the respective
Property, Borrower's general contractor for such construction shall also provide
the insurance, on a primary basis only, as required in this Subsection (b).
Lender hereby retains the right to periodically review the amount of said
liability insurance being maintained by Borrower and to require an increase in
the amount of said liability insurance should Lender deem an increase to be
reasonably prudent under then existing circumstances.
(c) Boiler and machinery insurance is required if steam
boilers or other pressure-fired vessels are in operation at the Property.
Minimum liability coverage per accident must equal the replacement cost
(insurable value) of the Improvements housing such boiler or pressure-fired
machinery.
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(d) If the Improvements or any part thereof are situated in an
area now or subsequently designated by the Federal Emergency Management Agency
("FEMA") as a special flood hazard area (Zone A or Zone V), flood insurance in
an amount equal to the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid balance
of the Allocated Loan Amount for such Property if replacement cost coverage is
not available for the type of building insured). The flood insurance requirement
will be waived if: (A) although a portion of the land may be in the Special
Flood Hazard Area, no portion of the Improvements situated on such land are in
the Special Flood Hazard Area; or (B) Lender receives a letter from FEMA stating
that its maps have been amended so that the Property is no longer in a Special
Flood Hazard Area. In the event there occurs, from time to time, any loss on any
property which is not part of the Property Pool and which loss reduces the
annual aggregate coverage available for claim payments under Borrower's blanket
insurance policies, Borrower agrees that it shall repurchase, from time to time,
the amount of insurance necessary to provide the required coverages under this
Article IV within thirty (30) days after the occurrence of such loss.
(e) During the period of any construction, renovation or
alteration of the Improvements which exceeds the lesser of 10% of the principal
amount of the Allocated Loan Amount for such Property or $500,000.00, at
Lender's request, a completed value, "All Risk" Builder's Risk form, or "Course
of Construction" insurance policy in non-reporting form, in an amount approved
by Lender, may be required. During the period of any construction of any
addition to the existing Improvements, a completed value, "All Risk" Builder's
Risk form or "Course of Construction" insurance policy in non-reporting form, in
an amount approved by Lender, shall be required. These requirements may be met
by an endorsement to the policy described in Section 4.1(a). In the event there
occurs, from time to time, any loss on any property which is not part of the
Property Pool and which loss reduces the annual aggregate coverage available for
claim payments under Borrower's blanket insurance policies, Borrower agrees that
it shall repurchase, from time to time, the amount of insurance necessary to
provide the required coverages under this Article IV within thirty (30) days
after the occurrence of such loss.
(f) When required by any applicable Governmental Authority or
Governmental Rule, Worker's Compensation and Employer's Liability Insurance
covering all persons subject to the workers' compensation laws of the state in
which the applicable Property is located.
(g) Rent loss insurance in amounts sufficient to compensate
Borrower for all income losses incurred from insured perils during a period of
not less than eighteen (18) months. The amount of coverage shall be adjusted
annually to reflect any increase in the current rent levels payable during the
succeeding twelve-(12) month period. In addition, Borrower shall maintain rent
loss insurance of not less than $10,000,000, with no annual aggregate, to
compensate Borrower for all income loss incurred from earthquake loss (whether
or not Borrower maintains earthquake insurance) during a period of not less than
eighteen (18) months.
(h) Sinkhole, Mine Subsidence and/or Earthquake insurance
shall be required in the amount of $50,000,000 for those Properties (including
all other real property owned by Borrower and encumbered by other deeds of trust
or mortgages securing the Loan) located within
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California, to the extent that such coverage is available at commercially
reasonable rates. The earthquake insurance policy shall have a deductible of not
more than five percent (5%) or such greater amount as may be commercially
reasonable under the then-existing circumstances. Lender agrees that Borrower
shall not be required to carry earthquake insurance with respect to the Ground
Leased Properties.
(i) Environmental insurance, which shall not be required as of
the Closing Date but if subsequently required for any of the Properties, must be
from a carrier and in form and substance satisfactory to Lender and the Rating
Agencies and must provide protection for preexisting, but undetected,
environmental contamination, as well as for liabilities resulting from
contamination that occurs during the policy term.
(j) Such other insurance on the Property or on any replacements
or substitutions thereof or additions thereto as may from time to time be
required by Lender against other insurable hazards or casualties which at the
time are commonly insured against in the case of property similarly situated,
due regard being given to the height and type of buildings, their
construction, location, use and occupancy.
(1) All such insurance shall (i) be with insurers
fully licensed and authorized to do business in the state within which such
Property is located (other than insurers providing coverage for loss as a result
of earthquake in California) and who have and maintain a rating of (A) at least
"A" if rated by DCR, and if not rated by DCR, then similarly rated by two
nationally recognized statistical rating agencies, and (B) at least "A2" if
rated by Moody's; (ii) contain the complete address of the Property (or a
complete legal description); (iii) be for terms of at least one year; (iv) be
subject to the reasonable approval of Lender as to insurance companies, amounts,
content, forms of policies, method by which premiums are paid and expiration
dates; and (v) include EXACTLY the following standard, non-contributory,
mortgagee clause naming:
Prudential Mortgage Capital Company, Inc.,
its successors and assigns ATIMA
c/o Prudential Mortgage Loan Servicing
P.O. Box 10387
Van Nuys, California 91401,
(A) as an additional insured under all liability (primary and excess liability)
insurance policies, (B) as the first mortgagee on all property insurance
policies, and (C) as the lender's loss payee on all loss of rents or loss of
business income insurance policies.
Borrower shall deliver to Lender evidence that said insurance
policies have been obtained as required above and certified copies of such
insurance policies and original certificates of insurance signed by an
authorized agent of the applicable insurance companies evidencing such insurance
satisfactory to Lender. Borrower shall renew all such insurance and
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deliver to Lender certificates evidencing such renewals at least twenty
(20) days before any such insurance shall expire and deliver originals or
certified copies of the insurance policies within sixty (60) days of the
effective date of such policies. Borrower further agrees that each such
insurance policy: (i) shall provide for at least thirty (30) days' prior written
notice to Lender prior to any policy reduction or cancellation for any reason;
(ii) shall contain an endorsement or agreement by the insurer that any loss
shall be payable to Lender in accordance with the terms of such policy
notwithstanding any act or negligence of Borrower which might otherwise result
in forfeiture of such insurance; (iii) shall waive all rights of subrogation
against Lender; and (iv) may be in the form of a blanket policy. The blanket
policy must properly identify and fully protect the applicable Properties as if
a separate policy were issued for 100% of replacement cost at the time of loss
and otherwise meet all of Lender's applicable insurance requirements set forth
in this Article IV. Borrower represents that it has, and covenants that it shall
maintain throughout the term of the Loan, an ordinance or law coverage
endorsement for any Property or Improvements which constitute a legal
non-conforming use under applicable building, zoning or land use laws or
ordinances, which endorsement will contain Coverage A: "Loss Due to Operation of
Law" (with a minimum liability limit equal to Replacement Cost With Agreed Value
Endorsement established at no less than 150% of the Allocated Loan Amount for
such Property), Coverage B: "Demolition Cost" and Coverage C: "Increased Cost of
Construction" coverages. The delivery to Lender of the insurance policies (if
required by Lender) or the certificates of insurance as provided above shall
constitute an assignment of all proceeds payable under such insurance policies
relating to such Properties by Borrower to Lender as further security for the
Loan and to be applied or disbursed as provided in the Mortgages. In the event
of foreclosure of the applicable Mortgage, or other transfer of title to the
subject Property in extinguishment in whole or in part of the Loan, all right,
title and interest of Borrower in and to all proceeds payable under such
policies then in force concerning the subject Property shall thereupon vest in
the purchaser at such foreclosure, or in Lender or other transferee in the event
of such other transfer of title. Approval of any insurance by Lender shall not
be a representation of the solvency of any insurer or the sufficiency of any
amount of insurance. In the event Borrower fails to provide, maintain, keep in
force or deliver and furnish to Lender the policies of insurance required by
this Article IV or evidence of their renewal as required herein, Lender may, but
shall not be obligated to, procure such insurance and Borrower shall pay all
amounts advanced by Lender therefor, together with interest thereon at the
Default Interest Rate from and after the date advanced by Lender until actually
repaid by Borrower, promptly upon demand by Lender. Any amounts so advanced by
Lender, together with interest thereon, shall be secured by the Mortgages and by
all of the other Loan Documents securing all or any part of the Loan. Lender
shall not be responsible for nor incur any liability for the insolvency of the
insurer or other failure of the insurer to perform, even though Lender has
caused the insurance to be placed with the insurer after failure of Borrower to
furnish such insurance. If Borrower shall obtain insurance for the Properties in
addition to that required by Lender, Borrower agrees that it shall name Lender
as an additional insured on such additional insurance and shall provide Lender
with complete copies of all policies evidencing such insurance.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Warranties of Borrower. Borrower, for itself and its successors and
assigns, does hereby represent, warrant and covenant to and with Lender, its
successors and assigns, that:
(a) Organization and Existence. Borrower is duly organized and
validly existing as a limited liability company in good standing under the laws
of the State of Delaware and in all other jurisdictions in which any Property is
located or in which Borrower is transacting business. Borrower has the power and
authority to execute, deliver and perform the obligations imposed on it under
the Loan Documents and to consummate the transactions contemplated by the Loan
Documents.
(b) Authorization. Borrower has taken all necessary actions
for the authorization of the borrowing on account of the Loan, and for the
execution and delivery of the Loan Documents, including, without limitation,
that those members of Borrower whose approval is required by the terms of
Borrower's organizational documents have duly approved the transactions
contemplated by the Loan Documents and have authorized execution and delivery
thereof by the respective signatories. To the best of Borrower's knowledge, no
other consent by any local, state or federal agency is required in connection
with the execution and delivery of the Loan Documents.
(c) Valid Execution and Delivery. All of the Loan Documents
requiring execution by Borrower have been duly and validly executed and
delivered by Borrower.
(d) Enforceability. All of the Loan Documents constitute
valid, legal and binding obligations of Borrower and are fully enforceable
against Borrower in accordance with their terms by Lender and its successors,
transferees and assigns, subject only to bankruptcy laws, creditors' rights, and
general principles of equity.
(e) No Defenses. The Note, the Mortgages and the other Loan
Documents are not subject to any right of rescission, set-off, counterclaim or
defense, nor would the operation of any of the terms of the Note, the Mortgages
or any of the other Loan Documents, or the exercise of any right thereunder,
render such documents unenforceable, in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury.
(f) Defense of Usury. Borrower knows of no facts that would
support a claim of usury to defeat or avoid its obligation to repay the
principal of, interest on, and other sums or amounts due and payable under, the
Loan Documents.
(g) No Conflict/Violation of Law. The execution, delivery and
performance of the Loan Documents by Borrower will not cause or constitute a
default under or conflict with the organizational documents of Borrower, any
Guarantor or any general partner or managing member of Borrower or any
Guarantor. The execution, delivery and performance of the obligations imposed on
Borrower under the Loan Documents will not cause Borrower to be in default,
including after due notice or lapse of time or both, under the provisions of any
agreement, judgment or order to which Borrower is a party or by which Borrower
is bound.
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(h) Compliance with Applicable Laws and Regulations. All of
the Improvements and the use of the Properties by Borrower comply with, and
shall remain in compliance with, all applicable statutes, rules, regulations and
private covenants now or hereafter relating to the ownership, construction, use
or operation of the Properties, including all applicable statutes, rules and
regulations pertaining to requirements for equal opportunity,
anti-discrimination, fair housing, environmental protection, zoning (including,
without limitation, parking requirements) and land use, and no notices of
violation or non-compliance have been issued by any Governmental Authority
relating to any of the foregoing that remain outstanding. All of the
Improvements comply with, and shall remain in compliance with, applicable
health, fire and building codes. There is no evidence of any illegal activities
relating to controlled substances on any of the Properties. All certifications,
permits, licenses and approvals, including, without limitation, certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of the Properties as currently conducted have been obtained and are in
full force and effect. All of the Improvements comply with all material
requirements of any applicable zoning and subdivision laws and ordinances, and
no Improvements (other than the Improvements located at 210 Fallon Street,
Oakland, California (identified as Property #73 on Exhibit A attached hereto),
the Improvements located at 324 West Blueridge, Orange, California (identified
as Property #42 on Exhibit A attached hereto), the Improvements located at 12865
Ann Street, Santa Fe Springs, California (identified as Property #77 on Exhibit
A attached hereto), the Improvements located at 1200 Edinger Avenue, Tustin,
California (identified as Property #44 on Exhibit A attached hereto), the
Improvements located at 14352 Franklin Avenue, Tustin, California (identified as
Property #45 on Exhibit A attached hereto), the Improvements located at 1311
East Valencia, Tustin, California (identified as Property #64 on Exhibit A
attached hereto), the Improvements located at 1361 Valencia, Tustin, California
(identified as Property #65 on Exhibit A attached hereto), the Improvements
located at 15222 Del Amo, Tustin, California (identified as Property #66 on
Exhibit A attached hereto), the Improvements located at 1100 Edinger St.,
Tustin, California (identified as Property #72 on Exhibit A attached hereto) and
for which Properties Borrower has law and ordinance insurance coverage),
constitute a legal nonconforming use under any of such laws and ordinances.
(i) Consents Obtained. All consents, approvals,
authorizations, orders or filings with any court or governmental agency or body,
if any, required for the execution, delivery and performance of the Loan
Documents by Borrower have been obtained or made.
(j) No Litigation. There are no pending actions, suits or
proceedings, arbitrations or governmental investigations against any of the
Properties, Borrower, or Guarantor, an adverse outcome of which would materially
affect Borrower's performance under the Note, the Mortgages, or the other Loan
Documents.
(k) Title. Borrower has good, marketable and indefeasible fee
simple title to all of the Land and all Improvements thereon (but subject to the
terms of the leases for the Ground Leased Properties which may limit Borrower's
interest to certain Improvements to a conditional future interest), subject only
to the Permitted Exceptions. Except for the Permitted Exceptions, the possession
of each of the Properties is peaceful and undisturbed and title thereto is not
disputed or questioned to the best of Borrower's knowledge. Further, Borrower
has full power and lawful authority to grant, bargain, sell, convey, assign,
transfer, encumber and mortgage its interest in the Properties under the Loan
Documents. Borrower will preserve its
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interest in and title to the Properties and will warrant and defend the
same to Lender against any and all claims whatsoever and will warrant and defend
the validity and priority of the lien and security interest created under the
Loan Documents against the claims of all persons and parties whomsoever, subject
to the Permitted Exceptions. The foregoing warranty of title shall survive the
foreclosure of the applicable Mortgage and shall inure to the benefit of and be
enforceable by Lender in the event Lender acquires title to such Property
pursuant to any foreclosure.
(l) Permitted Exceptions. The Permitted Exceptions do not and
will not materially and adversely affect (1) the ability of Borrower to pay in
full the principal and interest on the Note in a timely manner or (2) the use of
the applicable Property for the use currently being made thereof, the operation
of the applicable Property as currently being operated or the value of the
applicable Property other than as reflected in the appraisals of the Properties.
(m) First Lien. Except with respect to the Gillette Property
and to the GATX-Stockton Property, upon the execution by Borrower and the
recording of the Mortgages, and upon the execution and filing of UCC-1 financing
statements or amendments thereto, Lender will have a valid first lien on each of
the Properties and a valid first security interest in all Collateral, subject to
no liens, charges or encumbrances other than the Permitted Exceptions. No
Property secures any indebtedness or obligation other than as created under or
pursuant to the Loan Documents and for taxes and assessments not yet delinquent.
(n) ERISA. Borrower has made and shall continue to make all
required contributions to all employee benefit plans, if any, and Borrower has
no knowledge of any material liability which has been incurred by Borrower which
remains unsatisfied for any taxes or penalties with respect to any employee
benefit plan or any multi-employer plan, and each such plan has been
administered in compliance with its terms and the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and any
other federal or state law.
(o) Contingent Liabilities. Borrower has no known material
contingent liabilities.
(p) No Other Obligations. Borrower has no material financial
obligation under any indenture, mortgage, loan agreement or other agreement or
instrument to which Borrower is a party or by which Borrower or any of the
Properties is otherwise bound, other than obligations incurred in the ordinary
course of the operation of such Property and other than obligations under the
Mortgages and the other Loan Documents.
(q) Fraudulent Conveyance. Borrower (i) has not entered into
the Loan or any Loan Document with the actual intent to hinder, delay, or
defraud any creditor and (ii) received fair value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan contemplated by
the Loan Documents, the fair saleable value of the Borrower's assets exceed and
will, immediately following the execution and delivery of the Loan Documents,
exceed Borrower's total liabilities, including, without limitation,
subordinated, unliquidated, disputed or contingent liabilities. The fair
saleable value of Borrower's assets is and will, immediately following the
execution and delivery of the Loan Documents, be greater than Borrower's
probable liabilities, including the maximum amount of its contingent liabilities
or its debts as
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such debts become absolute and matured. Borrower's assets do not and,
immediately following the execution and delivery of the Loan Documents will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted. Borrower does not intend to, and does not believe
that it will, incur debts and liabilities (including, without limitation,
contingent liabilities and other commitments) beyond its ability to pay such
debts as they mature (taking into account the timing and amounts to be payable
on or in respect of obligations of Borrower).
(r) Investment Company Act. Borrower is not: (i) an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended; (ii) a
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or (iii)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
(s) Access/Utilities. Each of the Properties has adequate
rights of access to public ways and is served by adequate water, sewer, sanitary
sewer and storm drain facilities. All public utilities necessary to the
continued use and enjoyment of each of the Properties as presently used and
enjoyed are located in the public right-of-way abutting such Property, and all
such utilities are connected so as to serve such Property without passing over
other property or, if such utilities must cross other property, Borrower holds
easements for such utilities that are insured by the Title Policy insuring the
lien of the Mortgage on the Property. Except for the Gillette Property and the
GATX-Stockton Property, all streets, roads, highways, bridges and waterways
necessary for access to and full use, occupancy, operation and disposition of
the Land and the Improvements have been completed, have been dedicated and
accepted by the appropriate municipal authority and are open and available to
the land and the Improvements without further condition or cost to Borrower.
(t) Taxes Paid. Borrower has filed or has caused to be filed
all federal, state, county and municipal tax returns required to have been filed
by Borrower, and has paid, or has caused to be paid, all taxes which have become
due pursuant to such returns or to any notice of assessment received by Borrower
, and Borrower has no knowledge of any basis for additional assessment with
respect to such taxes. Further, each of the Properties is free from delinquent
water charges, sewer rents, taxes and assessments.
(u) Single Tax Lot. Except as disclosed in the Title Policies,
each Property consists of a single lot or m