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LOAN AGREEMENT
Dated as of February __, 2005
By and Among
BEHRINGER HARVARD ALAMO PLAZA H, LLC and
BEHRINGER HARVARD ALAMO PLAZA S, LLC
as Borrowers
And
CITIGROUP GLOBAL MARKETS REALTY CORP.
as Lender
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TABLE OF CONTENTS
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1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION...............................1
1.1 SPECIFIC DEFINITIONS.........................................1
1.2 INDEX OF OTHER DEFINITIONS..................................11
1.3 PRINCIPLES OF CONSTRUCTION..................................13
2. GENERAL LOAN TERMS...................................................13
2.1 THE LOAN....................................................13
2.2 INTEREST; MONTHLY PAYMENTS..................................13
2.2.1 GENERALLY..........................................13
2.2.2 DEFAULT RATE.......................................14
2.2.3 TAXES..............................................14
2.2.4 NEW PAYMENT DATE...................................15
2.3 LOAN REPAYMENT..............................................15
2.3.1 REPAYMENT..........................................15
2.3.2 MANDATORY PREPAYMENTS..............................15
2.3.3 DEFEASANCE.........................................16
2.3.4 OPTIONAL PREPAYMENTS...............................17
2.4 RELEASE OF PROPERTY.........................................18
2.4.1 RELEASE ON DEFEASANCE..............................18
2.4.2 RELEASE ON PAYMENT IN FULL.........................18
2.5 PAYMENTS AND COMPUTATIONS...................................18
2.5.1 MAKING OF PAYMENTS.................................18
2.5.2 COMPUTATIONS.......................................18
2.5.3 LATE PAYMENT CHARGE................................18
3. CASH MANAGEMENT AND RESERVES.........................................19
3.1 CASH MANAGEMENT ARRANGEMENTS................................19
3.2 REQUIRED REPAIRS;...........................................19
3.2.1 COMPLETION OF REQUIRED REPAIRS.....................19
3.2.2 REQUIRED REPAIRS RESERVES..........................19
3.3 TAXES AND INSURANCE.........................................20
3.4 CAPITAL EXPENSE RESERVES;...................................20
3.4.1 CAPITAL RESERVE SUBACCOUNT.........................20
3.5 ROLLOVER RESERVES...........................................21
3.5.1 GENERAL ROLLOVER RESERVE...........................21
3.5.2 22
3.6 OPERATING EXPENSE SUBACCOUNT................................22
3.7 CASUALTY/CONDEMNATION SUBACCOUNT............................22
3.8 SECURITY DEPOSITS...........................................22
3.9 CASH COLLATERAL SUBACCOUNT..................................23
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3.10 GRANT OF SECURITY INTEREST; APPLICATION OF FUNDS...............................................23
3.11 PROPERTY CASH FLOW ALLOCATION..................................................................23
3.12 INTENTIONALLY OMITTED................................................ERROR! BOOKMARK NOT DEFINED.
3.13 INITIAL DEPOSITS INTO RESERVES. ...............................................................25
4. REPRESENTATIONS AND WARRANTIES..........................................................................25
4.1 ORGANIZATION; SPECIAL PURPOSE..................................................................25
4.2 PROCEEDINGS; ENFORCEABILITY....................................................................25
4.3 NO CONFLICTS...................................................................................25
4.4 LITIGATION.....................................................................................26
4.5 AGREEMENTS.....................................................................................26
4.6 TITLE..........................................................................................26
4.7 NO BANKRUPTCY FILING...........................................................................27
4.8 FULL AND ACCURATE DISCLOSURE...................................................................27
4.9 TAX FILINGS....................................................................................27
4.10 NO PLAN ASSETS.................................................................................27
4.11 COMPLIANCE.....................................................................................28
4.12 CONTRACTS......................................................................................28
4.13 FEDERAL RESERVE REGULATIONS; INVESTMENT COMPANY ACT............................................28
4.14 EASEMENTS; UTILITIES AND PUBLIC ACCESS.........................................................28
4.15 PHYSICAL CONDITION.............................................................................29
4.16 LEASES.........................................................................................29
4.17 FRAUDULENT TRANSFER............................................................................29
4.18 OWNERSHIP OF BORROWER..........................................................................30
4.19 PURCHASE OPTIONS...............................................................................30
4.20 MANAGEMENT AGREEMENT...........................................................................30
4.21 HAZARDOUS SUBSTANCES...........................................................................31
4.22 NAME; PRINCIPAL PLACE OF BUSINESS..............................................................31
4.23 OTHER DEBT.....................................................................................31
4.24 TENANT IN COMMON AGREEMENT.....................................................................32
4.25 SECURITIES LAWS COMPLIANCE.....................................................................32
5. COVENANTS...............................................................................................33
5.1 EXISTENCE......................................................................................33
5.2 TAXES AND OTHER CHARGES........................................................................33
5.3 ACCESS TO PROPERTY.............................................................................34
5.4 REPAIRS; MAINTENANCE AND COMPLIANCE; ALTERATIONS...............................................34
5.4.1 REPAIRS; MAINTENANCE AND COMPLIANCE...................................................34
5.4.2 ALTERATIONS...........................................................................34
5.5 PERFORMANCE OF OTHER AGREEMENTS................................................................34
5.6 COOPERATE IN LEGAL PROCEEDINGS.................................................................34
5.7 FURTHER ASSURANCES.............................................................................35
5.8 ENVIRONMENTAL MATTERS..........................................................................35
5.8.1 HAZARDOUS SUBSTANCES..................................................................35
5.8.2 ENVIRONMENTAL MONITORING..............................................................35
5.9 TITLE TO THE PROPERTY..........................................................................37
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5.10 LEASES......................................................37
5.10.1 GENERALLY..........................................37
5.10.2 MATERIAL LEASES....................................37
5.10.3 MINOR LEASES.......................................38
5.10.4 ADDITIONAL COVENANTS WITH RESPECT TO LEASES........39
5.11 ESTOPPEL STATEMENT..........................................39
5.12 PROPERTY MANAGEMENT.........................................39
5.12.1 MANAGEMENT AGREEMENT...............................39
5.12.2 TERMINATION OF MANAGER.............................40
5.13 SPECIAL PURPOSE BANKRUPTCY REMOTE ENTITY....................40
5.14 ASSUMPTION IN NON-CONSOLIDATION OPINION.....................40
5.15 CHANGE IN BUSINESS OR OPERATION OF PROPERTY.................40
5.16 DEBT CANCELLATION...........................................41
5.17 AFFILIATE TRANSACTIONS......................................41
5.18 ZONING......................................................41
5.19 NO JOINT ASSESSMENT.........................................41
5.20 PRINCIPAL PLACE OF BUSINESS.................................41
5.21 CHANGE OF NAME, IDENTITY OR STRUCTURE.......................41
5.22 INDEBTEDNESS................................................41
5.23 LICENSES....................................................42
5.24 COMPLIANCE WITH RESTRICTIVE COVENANTS, ETC..................42
5.25 ERISA.......................................................42
5.26 TRANSFERS...................................................43
5.26.1 GENERALLY..........................................43
5.26.2 TIC TRANSFERS AND ASSUMPTIONS......................43
5.26.3 TRANSFER AND ASSUMPTION............................45
5.27 LIENS.......................................................47
5.28 DISSOLUTION.................................................47
5.29 EXPENSES....................................................47
5.30 INDEMNITY...................................................48
5.31 TENANT IN COMMON AGREEMENT..................................49
5.32 BEHRINGER MINIMUM TENANT-IN COMMON INTEREST.................50
5.33 PATRIOT ACT COMPLIANCE......................................50
6. NOTICES AND REPORTING................................................51
6.1 NOTICES.....................................................51
6.2 BORROWER NOTICES AND DELIVERIES.............................51
6.3 FINANCIAL REPORTING.........................................52
6.3.1 BOOKKEEPING........................................52
6.3.2 ANNUAL REPORTS.....................................52
6.3.3 MONTHLY/QUARTERLY REPORTS..........................53
6.3.4 OTHER REPORTS......................................53
6.3.5 ANNUAL BUDGET......................................53
7. INSURANCE; CASUALTY; AND CONDEMNATION................................54
7.1 INSURANCE...................................................54
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7.1.1 COVERAGE...........................................54
7.1.2 POLICIES...........................................56
7.2 CASUALTY....................................................57
7.2.1 NOTICE; RESTORATION................................57
7.2.2 SETTLEMENT OF PROCEEDS.............................57
7.3 CONDEMNATION................................................58
7.3.1 NOTICE; RESTORATION................................58
7.3.2 COLLECTION OF AWARD................................58
7.4 APPLICATION OF PROCEEDS OR AWARD............................59
7.4.1 APPLICATION TO RESTORATION.........................59
7.4.2 APPLICATION TO DEBT................................60
7.4.3 PROCEDURE FOR APPLICATION TO RESTORATION...........60
8. DEFAULTS.............................................................61
8.1 EVENTS OF DEFAULT...........................................61
8.2 REMEDIES....................................................62
8.2.1 ACCELERATION.......................................63
8.2.2 REMEDIES CUMULATIVE................................63
8.2.3 SEVERANCE..........................................63
8.2.4 DELAY..............................................64
8.2.5 LENDER'S RIGHT TO PERFORM..........................64
9. SPECIAL PROVISIONS...................................................64
9.1 SALE OF NOTE AND SECONDARY MARKET TRANSACTION...............64
9.1.1 GENERAL; BORROWER COOPERATION......................64
9.1.2 USE OF INFORMATION.................................65
9.1.3 BORROWER OBLIGATIONS REGARDING DISCLOSURE
DOCUMENTS..........................................66
9.1.4 BORROWER INDEMNITY REGARDING FILINGS...............66
9.1.5 INDEMNIFICATION PROCEDURE..........................67
9.1.6 CONTRIBUTION.......................................67
9.1.7 SEVERANCE OF LOAN..................................67
9.2 COSTS AND EXPENSES..........................................68
10. MISCELLANEOUS........................................................68
10.1 EXCULPATION.................................................68
10.2 BROKERS AND FINANCIAL ADVISORS..............................71
10.3 RETENTION OF SERVICER.......................................71
10.4 SURVIVAL....................................................71
10.5 LENDER'S DISCRETION.........................................71
10.6 GOVERNING LAW...............................................71
10.7 MODIFICATION, WAIVER IN WRITING.............................73
10.8 TRIAL BY JURY...............................................73
10.9 HEADINGS/EXHIBITS...........................................73
10.10 SEVERABILITY................................................73
10.11 PREFERENCES.................................................73
10.12 WAIVER OF NOTICE............................................74
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10.13 REMEDIES OF BORROWER........................................74
10.14 PRIOR AGREEMENTS............................................74
10.15 OFFSETS, COUNTERCLAIMS AND DEFENSES.........................74
10.16 PUBLICITY...................................................75
10.17 NO USURY....................................................75
10.18 CONFLICT; CONSTRUCTION OF DOCUMENTS.........................75
10.19 NO THIRD PARTY BENEFICIARIES................................75
10.20 YIELD MAINTENANCE PREMIUM...................................76
10.21 ASSIGNMENT..................................................76
10.22 BORROWERS' DESIGNEE.........................................76
10.23 INTENTIONALLY OMITTED.......................................76
10.24 JOINT AND SEVERAL...........................................76
10.25 SET-OFF.....................................................77
10.26 1031 EXCHANGE...............................................77
10.27 COUNTERPARTS................................................77
Schedule 1 - Initial TIC Borrowers/Guarantors/TIC % Interests
Schedule 2 - Required Repairs
Schedule 3 - Exceptions to Representations and Warranties
Schedule 4 - Organization of Borrower
Schedule 5 - Definition of Special Purpose Bankruptcy Remote Entity
Schedule 6 - Form of Guaranty of Recourse Obligations
Schedule 7 - Form of Assignment and Assumption Agreement
Schedule 8 - Rent Roll
Schedule 9 - Outstanding Equity of Behringer
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LOAN AGREEMENT
LOAN AGREEMENT dated as of February ___, 2005 (as the same may
be modified, supplemented, amended or otherwise changed, this "AGREEMENT") by
and among BEHRINGER HARVARD ALAMO PLAZA H, LLC ("BEHRINGER TIC I LLC"), a
Delaware limited liability company having an office at 00000 Xxxxxx Xxxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000, BEHRINGER HARVARD ALAMO PLAZA S, LLC
("BEHRINGER TIC II LLC"), a Delaware limited liability company having an office
at 00000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (each, a "BEHRINGER TIC
BORROWER", and collectively, the "BEHRINGER TIC BORROWERS") and CITIGROUP GLOBAL
MARKETS REALTY CORP., a New York corporation (together with its successors and
assigns, "LENDER").
1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
1.1 SPECIFIC DEFINITIONS. The following terms have the meanings set
forth below:
ADVANCE: any portion of the Principal advanced by Lender to
Borrowers.
AFFILIATE: as to any Person, any other Person that, directly or
indirectly, is in Control of, is Controlled by or is under common Control with
such Person or is a director or officer of such Person or of an Affiliate of
such Person.
AMORTIZATION COMMENCEMENT DATE: April 11, 2010, as such date may
be changed in accordance with Section 2.2.4.
APPROVED CAPITAL EXPENSES: Capital Expenses incurred by
Borrowers, provided that during a Cash Trap Period, such Capital Expenses shall
either be (i) included in the total Approved Capital Budget or (ii) approved by
Lender.
APPROVED LEASING EXPENSES: actual out-of-pocket expenses
incurred by Borrowers in leasing space at the Property pursuant to Leases
entered into in accordance with the Loan Documents, including brokerage
commissions (including those paid pursuant to the Management Agreement) and
tenant improvements, which expenses (i) are (A) specifically approved by Lender
in connection with approving the applicable Lease, (B) incurred in the ordinary
course of business and on market terms and conditions in connection with Leases
which do not require Lender's approval under the Loan Documents, or (C)
otherwise approved by Lender, which approval shall not be unreasonably withheld
or delayed, and (ii) are substantiated by executed Lease documents and brokerage
agreements.
APPROVED OPERATING EXPENSES: during a Cash Trap Period,
operating expenses incurred by Borrowers which (i) are within 105% of the total
amounts included in the Approved Operating Budget for the current calendar month
(or for unpaid operating expenses included in the Approved Operating Budget for
prior calendar months); provided that, for purposes hereof, operating expenses
in such Approved Operating Budget shall be deemed to be increased from the
amounts in the applicable Approved Operating Budget to the extent that such
increased amounts are at least equal to an increase in operating revenues from
the amounts in such Approved Operating Budget or directly relate to variances in
occupancy levels or emergencies or
unforeseen circumstances, (ii) are for real estate taxes, insurance premiums,
electric, gas, oil, water, sewer or other utility service to the Property, (iii)
are for property management fees payable to Manager under the Management
Agreement, such amounts not to exceed 4% of the monthly Rents (excluding however
any asset management fees payable by Borrowers to Manager pursuant to the
Management Agreement; provided, however, the foregoing 4% limitation shall not
be deemed to preclude Borrowers from paying any such asset management fees
pursuant to the terms of the Management Agreement from their own funds) or (iv)
have been approved by Lender, acting in a commercially reasonably manner.
Notwithstanding the foregoing, nothing herein shall be deemed to preclude
Borrowers from paying any asset management fee (over and above the amount set
forth above) pursuant to the terms of the Management Agreement from their own
funds.
APPROVED TIC BORROWER CONTROL PARTY: a transferee of a direct or
indirect interest in any TIC Borrower (which owns less than a 5% tenant in
common interests in the Property) that has acquired such interest by devise or
bequest or by operation of law upon the death of a natural person that was the
holder of such interest; provided, however, at the time in question (i) such
Approved TIC Borrower Control Party shall (1) be solvent, (2) have never been
convicted of a felony, (3) have never been the subject of a voluntary or
involuntary (to the extent the same has not been discharged) bankruptcy
proceeding, (4) have no outstanding judgments against him/her, and (ii) Lender
shall have received a credit check investigation against such Approved TIC
Borrower Control Party reasonably acceptable to Lender.
AVAILABLE CASH: as of each Payment Date during the continuance
of Cash Trap Period, the amount of Rents, if any, remaining in the Deposit
Account after the application of all of the payments required under clauses (i)
through (vi) of Section 3.11(a).
BEHRINGER: Behringer Harvard Holdings, LLC, a Delaware limited
liability company.
BEHRINGER ENTITIES: collectively, Behringer, Behringer TIC I
LLC, Harvard Fund I, Harvard REIT,
BEHRINGER MINIMUM TENANT-IN-COMMON INTEREST: a 20%
tenant-in-common ownership interest in the Property held by one or more of the
Behringer Entities.
BORROWERS: collectively, the Behringer TIC Borrowers, the
Initial TIC Borrowers and each TIC Borrower that may hereafter assume the Loan
as contemplated by Section 5.26.2, together with their respective permitted
successors and assigns. "BORROWER" means any one of the Borrowers.
BORROWERS' DESIGNEE: Behringer Harvard TIC Management Services,
L.P., a Texas limited partnership.
BUSINESS DAY: any day other than a Saturday, Sunday or any day
on which commercial banks in New York, New York are authorized or required to
close.
CALCULATION DATE: the last day of each calendar quarter during
the Term.
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CAPITAL EXPENSES: expenses that are capital in nature or
required under GAAP to be capitalized.
CASH TRAP PERIOD: shall commence, if, (i) an Event of Default
has occurred and is continuing, and shall end if such Event of Default has been
cured and no other Event of Default has occurred and is continuing, or (ii) as
of any Calculation Date, the Debt Service Coverage Ratio is less than 1.10:1,
and shall end upon Lender's determination that the Property has achieved a Debt
Service Coverage Ratio of at least 1.10:1 for two consecutive Calculation Dates
or (iii) at any time during the Term, any of the covenants set forth in Section
5.32 are breached, and shall end upon the full compliance with such covenants.
CODE: the Internal Revenue Code of 1986, as amended and as it
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
CONTROL: with respect to any Person, either (i) ownership
directly or indirectly of 49% or more of all equity interests in such Person or
(ii) the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, by contract or otherwise.
DEBT: the unpaid Principal, all interest accrued and unpaid
thereon, any Yield Maintenance Premium and all other sums due to Lender in
respect of the Loan or under any Loan Document.
DEBT SERVICE: with respect to any particular period, the
scheduled Principal and interest payments due under the Note in such period.
DEBT SERVICE COVERAGE RATIO: as of any date, the ratio
calculated by Lender of (i) the Net Operating Income for the 12-month period
ending with the most recently completed calendar month to (ii) the Debt Service
with respect to such period (but assuming, only for the purpose of calculating
the Debt Service Coverage Ratio, that the Amortization Commencement Date has
already occurred).
DEFAULT: the occurrence of any event under any Loan Document
which, with the giving of notice or passage of time, or both, would be an Event
of Default.
DEFAULT RATE: a rate per annum equal to the lesser of (i) the
maximum rate permitted by applicable law, or (ii) 5% above the Interest Rate,
compounded monthly.
DEFEASANCE COLLATERAL: U.S. Obligations, which provide payments
(i) on or prior to, but as close as possible to, all Payment Dates and other
scheduled payment dates, if any, under the Note after the Defeasance Date and up
to and including the Stated Maturity Date, and (ii) in amounts equal to or
greater than the Scheduled Defeasance Payments.
DEPOSIT BANK: LaSalle Bank, National Association, or such other
bank or depository selected by Lender in its discretion.
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ELIGIBLE ACCOUNT: a separate and identifiable account from all
other funds held by the holding institution that is either (i) an account or
accounts (A) maintained with a federal or state-chartered depository institution
or trust company which complies with the definition of Eligible Institution or
(B) as to which Lender has received a Rating Comfort Letter from each of the
applicable Rating Agencies with respect to holding funds in such account, or
(ii) a segregated trust account or accounts maintained with the corporate trust
department of a federal depository institution or state chartered depository
institution subject to regulations regarding fiduciary funds on deposit similar
to Title 12 of the Code of Federal Regulations ss.9.10(b), having in either case
corporate trust powers, acting in its fiduciary capacity, and a combined capital
and surplus of at least $50,000,000 and subject to supervision or examination by
federal and state authorities. An Eligible Account will not be evidenced by a
certificate of deposit, passbook or other instrument.
ELIGIBLE INSTITUTION: a depository institution insured by the
Federal Deposit Insurance Corporation the short term unsecured debt obligations
or commercial paper of which are rated at least A-1 by S&P, P-1 by Moody's and
F-1+ by Fitch, in the case of accounts in which funds are held for thirty (30)
days or less or, in the case of Letters of Credit or accounts in which funds are
held for more than thirty (30) days, the long term unsecured debt obligations of
which are rated at least "AA" by Fitch and S&P and "Aa2" by Moody's.
ERISA: the Employment Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder.
ERISA AFFILIATE: all members of a controlled group of
corporations and all trades and business (whether or not incorporated) under
common control and all other entities which, together with Borrowers (or any
Borrower), are treated as a single employer under any or all of Section 414(b),
(c), (m) or (o) of the Code.
GAAP: generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
GOVERNMENTAL AUTHORITY: any court, board, agency, commission,
office or authority of any nature whatsoever for any governmental xxxx (xxxxxxx,
xxxxx, xxxxxx, xxxxxxxx, xxxxxxxxx, xxxx or otherwise) now or hereafter in
existence.
GUARANTORS: collectively, Behringer Harvard Holdings, LLC, a
Delaware limited liability company, Xxxxxx X. Xxxxxxxxx, an individual, each of
the guarantors identified on SCHEDULE 1 attached hereto and each additional TIC
Owner that may hereafter execute and deliver a guaranty of recourse obligations
as contemplated by Section 5.26.2.
HARVARD FUND I: individually or collectively, Behringer Harvard
Short-Term Opportunity Funds I, L.P., a Texas limited partnership and/or
Behringer Harvard Mid-Term Value Enhancement Fund I, L.P. a Texas limited
partnership and/or Behringer Harvard Strategic Opportunity Fund I LP, a Texas
limited partnership.
HARVARD REIT: individually or collectively, the BH Operating
Partnership I LP, a Texas limited partnership (the "HARVARD REIT OPERATING
PARTNERSHIP") and/or Behringer Harvard REIT I, Inc., a Maryland corporation
("BEHRINGER HARVARD REIT") and/or Behringer
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Harvard Opportunity REIT I, Inc., a Maryland corporation ("BEHRINGER HARVARD
OPPORTUNITY REIT").
INTEREST PERIOD: (i) the period from the date hereof through the
first day thereafter that is the 10th day of a calendar month and (ii) each
period thereafter from the 11th day of each calendar month through the 10th day
of the following calendar month; except that the Interest Period, if any, that
would otherwise commence before and end after the Maturity Date shall end on the
Maturity Date. Notwithstanding the foregoing, if Lender exercises its right to
change the Payment Date to a New Payment Date in accordance with Section 2.2.4,
then from and after such election, each Interest Period shall be the period from
the New Payment Date in each calendar month through the day in the next
succeeding calendar month immediately preceding the New Payment Date in such
calendar month.
INTEREST RATE: a rate of interest equal to 5.395% per annum (or,
when applicable pursuant to this Note or any other Loan Document, the Default
Rate).
KEY PRINCIPAL: Xxxxxx X. Xxxxxxxxx, an individual.
LEASES: all leases and other agreements or arrangements
heretofore or hereafter entered into affecting the use, enjoyment or occupancy
of, or the conduct of any activity upon or in, the Property or the Improvements,
including any guarantees, extensions, renewals, modifications or amendments
thereof and all additional remainders, reversions and other rights and estates
appurtenant thereunder.
LEGAL REQUIREMENTS: statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting any Borrower, any Loan Document or all or part of the Property or the
construction, ownership, use, alteration or operation thereof, whether now or
hereafter enacted and in force, and all permits, licenses and authorizations and
regulations relating thereto, and all covenants, agreements, restrictions and
encumbrances contained in any instrument, either of record or known to any
Borrower, at any time in force affecting all or part of the Property.
LIEN: any mortgage, deed of trust, lien (statutory or
otherwise), pledge, hypothecation, easement, restrictive covenant, preference,
assignment, security interest or any other encumbrance, charge or transfer of,
or any agreement to enter into or create any of the foregoing, on or affecting
all or any part of the Property or any interest therein, or any direct or
indirect interest in any Borrower, including any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, the filing of any financing statement, and
mechanic's, materialmen's and other similar liens and encumbrances.
LOAN DOCUMENTS: this Agreement and all other documents,
agreements and instruments now or hereafter evidencing, securing or delivered to
Lender in connection with the Loan, including the following, each of which is
dated as of the date hereof: (i) the Note or Notes made by Borrowers to Lender
in the aggregate principal amount equal to the Loan (the "NOTE"), (ii) the Deed
of Trust, Assignment of Leases and Rents and Security Agreement made by
Borrowers to a trustee, in favor of Lender which covers the Property (the
"MORTGAGE"), (iii) the
5
Assignment of Leases and Rents from Borrowers to Lender, (iv) the Assignment of
Agreements, Licenses, Permits and Contracts from Borrowers to Lender, (v) the
Clearing Account Agreement (the "CLEARING ACCOUNT AGREEMENTS") among Borrowers,
Lender, Manager and the Clearing Bank, (vi) the Deposit Account Agreement (the
"DEPOSIT ACCOUNT AGREEMENT") among Borrowers, Lender, Manager and the Deposit
Bank, (vii) the Guaranty of Recourse Obligations made by Behringer and Xxxxxx
Xxxxxxxxx, (viii) each Guaranty of Recourse Obligations made by the guarantors
identified on SCHEDULE 1 attached hereto; as each of the foregoing may be (and
each of the foregoing defined terms shall refer to such documents as they may
be) amended, restated, replaced, supplemented or otherwise modified from time to
time (including pursuant to Section 9.1.7). Additionally, from and after any TIC
Transfer and Assumption, each TIC Transfer Document shall constitute a Loan
Document.
MANAGEMENT AGREEMENT: the Property and Asset Management
Agreement between Borrowers and Manager, pursuant to which Manager is to manage
the Property, as same may be amended, restated, replaced, supplemented or
otherwise modified from time to time in accordance with Section 5.12.
MANAGER: Behringer Harvard TIC Management Services, L.P., a
Texas limited partnership, or any successor, assignee or replacement manager
appointed by Borrower in accordance with Section 5.12.
MATERIAL ALTERATION: any alteration affecting structural
elements of the Property the cost of which exceeds $250,000; provided, however,
that in no event shall (i) any Required Repairs, (ii) any tenant improvement
work performed pursuant to any Lease existing on the date hereof or entered into
hereafter in accordance with the provisions of this Agreement, or (iii)
alterations performed as part of a Restoration, constitute a Material
Alteration.
MATERIAL LEASE: all Leases which individually or in the
aggregate with respect to the same tenant and its Affiliates (i) cover more than
10,000 square feet of the Improvements or (ii) have a gross annual rent of more
than 5% of the total annual Rents or (iii) demise at least one full floor of the
Improvements.
MATURITY DATE: the date on which the final payment of principal
of the Note becomes due and payable as therein provided, whether at the Stated
Maturity Date, by declaration of acceleration, or otherwise.
MINOR LEASE: any Lease that is not a Material Lease.
NET OPERATING INCOME: for any period, the underwritten net cash
flow of the Property determined by Lender in its sole discretion exercised in
good faith (uniformly and consistently applied in the same manner as Lender
exercises similar discretion in other loans of this type and nature for
comparable properties) in accordance with Lender's then current underwriting
standards for loans of this type and the then current underwriting standards of
the Rating Agencies (including adjustments for a management fee equal to the
greater of the combined management fees and asset management fees paid under the
Management Agreement during such period or 4% of gross revenues, market vacancy,
bankrupt tenants which are not in
6
full occupancy of their respective leased premises or which have rejected their
respective leases or which are not paying rent on a current basis, leasing costs
and capital items).
OFFICER'S CERTIFICATE: a certificate delivered to Lender by
Borrowers, which is signed by a senior executive officer of Borrowers' Designee.
OTHER CHARGES: all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including vault charges and
license fees for the use of vaults, chutes and similar areas adjoining the
Property, now or hereafter levied or assessed or imposed against the Property or
any part thereof.
PAYMENT DATE: the 11th day of each calendar month or, upon
Lender's exercise of its right to change the Payment Date in accordance with
Section 2.2.4, the New Payment Date (in either case, if such day is not a
Business Day, the Payment Date shall be the first Business Day thereafter). The
first Payment Date hereunder shall be April 11, 2005.
PERMITTED ENCUMBRANCES: (i) the Liens created by the Loan
Documents, (ii) all Liens and other matters disclosed in the Title Insurance
Policy, (iii) Liens, if any, for Taxes or Other Charges not yet due and payable
and not delinquent, (iv) any workers', mechanics' or other similar Liens on the
Property provided that any such Lien is bonded or discharged within 30 days
after a Borrower first receives notice of such Lien and (v) such other title and
survey exceptions as Lender approves in writing in Lender's discretion.
PERMITTED TRANSFERS:
(i) a Lease entered into in accordance with the Loan
Documents;
(ii) a Permitted Encumbrance;
(iii) a Transfer and Assumption pursuant to Section 5.26.3;
(iv) a TIC Transfer and Assumption pursuant to, and subject
to the satisfaction of the conditions set forth in, subsection (b) of Section
5.26.2, as applicable.
(v) Intentionally Deleted;
(vi) provided that no Event of Default shall then exist (or,
if an Event of Default exists, the Transfer of the subject tenant-in-common
interest will cure such Event of Default), a conveyance or assignment of a
tenant-in-common interest in the Property from one existing Borrower to any
other existing Borrower or to Behringer or its Affiliates in accordance with the
terms and provisions of the Tenant in Common Agreement and this Agreement
(provided that the Behringer Entities shall at all times retain at least the
Behringer Minimum Tenant-in-Common Interest in the Property);
(vii) provided that no Event of Default shall then exist, a
Transfer of a direct or indirect interest in any Borrower to any Person
(including the Transfer of publicly traded shares or of operating partnership
units in the Behringer Harvard REIT, Behringer Harvard Opportunity REIT, Harvard
Fund I or the Harvard REIT Operating Partnership, which shall be permitted
7
whether or not an Event of Default shall exist) provided that (A) such Transfer
shall not (x) cause the transferee (other than Key Principal), together with its
Affiliates, to acquire Control of any Borrower or to increase its direct or
indirect interest in any Borrower to an amount which equals or exceeds 49% or
(y) with respect to Behringer TIC I LLC, result in Behringer TIC I LLC no longer
being Controlled by Key Principal, (B) Borrowers shall give Lender notice of
such Transfer together with copies of all instruments effecting such Transfer
not less than 10 days prior to the date of such Transfer (other than with
respect to Transfers of "unit interests" in Harvard Fund I), and (C) the legal
and financial structure of Borrowers and their members and the single purpose
nature and bankruptcy remoteness of Borrowers and their members after such
Transfer, shall satisfy Lender's then current applicable underwriting criteria
and requirements;
(viii) provided that no Event of Default shall then exist, a
Transfer of a direct or indirect interest in a Borrower related to or in
connection with the estate planning of such transferor to (1) the spouse,
children or grandchildren of such transferor or (2) a trust established for the
benefit of such parties, provided that (A) such Transfer shall not cause a
change in the Control of any Borrower, (B) such Transfer shall not result in a
change of the day to day management and operations of the Property, (C)
Borrowers shall give Lender notice of such Transfer together with copies of all
instruments effecting such Transfer not less than 10 days after the date of such
Transfer and (D) the legal and financial structure of the applicable Borrower,
and the single purpose nature and bankruptcy remoteness of such Borrower after
such Transfer, shall satisfy Lender's then current applicable underwriting
criteria and requirements; or
(ix) provided that no Event of Default shall then exist, a
Transfer of a direct or indirect interest in any Borrower that occurs by devise
or bequest or by operation of law upon the death of a natural person that was
the holder of such interest to a member of the immediate family of such interest
holder or a trust established for the benefit of such immediate family member,
provided that (A) no such Transfer shall result in a change of the day to day
operations of the Property, (B) Borrower shall give Lender notice of such
Transfer together with copies of all instruments effecting such Transfer not
less than 30 days after the date of such Transfer, (C) such Borrower shall
continue to be a Special Purpose Bankruptcy Remote Entity, (D) if any such
Transfer would result in a change of Control of such Borrower and occurs prior
to the occurrence of a Secondary Market Transaction, such Transfer is approved
by Lender in writing within 30 days after any such Transfer, unless such
Transfer of Control has occurred with respect to a TIC Borrower that owns less
than a 5% tenant in common interest in the Property and is to an Approved TIC
Borrower Control Party (in which case Lender's approval shall not be required
under this clause (D)), and (E) if any such Transfer would result in a change of
Control of such Borrower and occurs after the occurrence of a Secondary Market
Transaction, Borrowers, at Borrowers' sole cost and expense, shall, within 30
days after any such Transfer, (a) deliver (or cause to be delivered) (x) a
Rating Comfort Letter to Lender, unless such Transfer of Control has occurred
with respect to a TIC Borrower that owns less than a 5% tenant in common
interest in the Property and is to an Approved TIC Borrower Control Party (in
which case a Rating Comfort Letter will not be required under this subclause
(x)), and (y) a substantive non-consolidation opinion to Lender and the Rating
Agencies with respect to the applicable Borrower and such transferee in form and
substance satisfactory to Lender and the Rating Agencies, (b) obtain the prior
written consent of Lender which shall not be unreasonably withheld, unless such
Transfer of Control has occurred with respect to a TIC Borrower that owns less
than a 5% tenant in common interest in the Property and is to an Approved TIC
Borrower Control Party (in which
8
case Lender's consent shall not be required under this subclause (b)) and (c)
reimburse Lender for all reasonable expenses incurred by Lender in connection
with such Transfer.
PERSON: any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, unincorporated association, any
other person or entity, and any federal, state, county or municipal government
or any bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.
PLAN: (i) an employee benefit or other plan established or
maintained by a Borrower or any ERISA Affiliate or to which a Borrower or any
ERISA Affiliate makes or is obligated to make contributions and (ii) which is
covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code.
PROPERTY: the parcel of real property and Improvements thereon
owned or leased by Borrower and encumbered by the Mortgage; together with all
rights pertaining to such real property and Improvements, and all other
collateral for the Loan as more particularly described in the Granting Clauses
of the Mortgage and referred to therein as the Trust Property. The Property is
located at 0000 00xx Xxxxxx, Xxxxxx, Xxxxxxxx.
RATING AGENCY: each of Standard & Poor's Ratings Services, a
division of The XxXxxx-Xxxx Companies, Inc. ("S&P"), Xxxxx'x Investors Service,
Inc. ("XXXXX'X"), and Fitch, Inc., a division of Fitch Ratings Ltd., or any
other nationally-recognized statistical rating organization to the extent any of
the foregoing have been engaged by Lender or its designee in connection with or
in anticipation of any Secondary Market Transaction.
RATING COMFORT LETTER: a letter issued by each of the applicable
Rating Agencies which confirms that the taking of the action referenced to
therein will not result in any qualification, withdrawal or downgrading of any
existing ratings of Securities created in a Secondary Market Transaction.
RELEASE DATE: the earlier to occur of (i) the forty second
(42nd) Payment Date of the Term and (ii) the date that is two (2) years from the
"startup day" (within the meaning of Section 860G(a)(9) of the Code) of the
REMIC Trust established in connection with a Securitization involving this Loan.
REMIC TRUST: a "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code that holds the Note.
RENTS: all rents, rent equivalents, moneys payable as damages
(including payments by reason of the rejection of a Lease in a Bankruptcy
Proceeding) or in lieu of rent or rent equivalents, royalties (including all oil
and gas or other mineral royalties and bonuses), income, fees, receivables,
receipts, revenues, deposits (including security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other
payment and consideration of whatever form or nature received by or paid to or
for the account of or benefit of each Borrower, Manager or any of their agents
or employees (other than fees paid under the Management Agreements and salaries
paid to employees) from any and all sources arising from or attributable to the
Property and the Improvements, including all receivables, customer obligations,
installment payment obligations and other obligations now existing or hereafter
9
arising or created out of the sale, lease, sublease, license, concession or
other grant of the right of the use and occupancy of the Property or rendering
of services by a Borrower, Manager or any of their agents or employees and
proceeds, if any, from business interruption or other loss of income insurance.
SCHEDULED DEFEASANCE PAYMENTS: the Monthly Debt Service Payment
Amount required under the Note for all Payment Dates occurring after the
Defeasance Date (including the outstanding Principal balance on the Note as of
the Stated Maturity Date).
SECURITY AGREEMENT: a security agreement in form and substance
that would be satisfactory to Lender (in Lender's sole but good faith
discretion) pursuant to which Borrowers grant Lender a perfected, first priority
security interest in the Defeasance Collateral Account and the Defeasance
Collateral.
SERVICER: a servicer selected by Lender to service the Loan,
including any "master servicer" or "special servicer" appointed under the terms
of any pooling and servicing agreement or similar agreement entered into as a
result of a Secondary Market Transaction (provided that NorthMarq Capital Inc.
shall be designated as the sub-servicer of the Loan).
STATE: the state in which the Property is located.
STATED MATURITY DATE: March 11, 2015, as such date may be
changed in accordance with Section 2.2.4.
TAXES: all real estate and personal property taxes, assessments,
water rates or sewer rents, maintenance charges, impositions, vault charges and
license fees, now or hereafter levied or assessed or imposed against all or part
of the Property.
TENANT IN COMMON AGREEMENT: that certain Tenant in Common
Agreement of even date herewith by and among the Behringer TIC Borrowers and the
Initial TIC Borrowers, as the same may hereafter be assumed by each TIC Borrower
in accordance with Section 5.26.2.
TERM: the entire term of this Agreement, which shall expire upon
repayment in full of the Debt and full performance of each and every obligation
to be performed by Borrowers pursuant to the Loan Documents.
TITLE INSURANCE POLICY: the ALTA mortgagee title insurance
policy in the form acceptable to Lender issued with respect to the Property and
insuring the Lien of the Mortgage.
TRANSFER: any sale, conveyance, transfer, lease or assignment,
or the entry into any agreement to sell, convey, transfer, lease or assign,
whether by law or otherwise, of, on, in or affecting (i) all or part of the
Property (including any legal or beneficial direct or indirect interest therein)
or (ii) any direct or indirect interest in any Borrower (including any profit
interest).
UCC: the Uniform Commercial Code as in effect in the State or
the state in which any of the Cash Management Accounts are located, as the case
may be.
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U.S. OBLIGATIONS: direct full faith and credit obligations of
the United States of America that are not subject to prepayment, call or early
redemption.
WELFARE PLAN: an employee welfare benefit plan, as defined in
Section 3(1) of ERISA.
YIELD MAINTENANCE PREMIUM: an amount which, when added to the
outstanding Principal, would be sufficient to purchase U.S. Obligations which
provide payments (a) on or prior to, but as close as possible to, all successive
scheduled payment dates under this Agreement through the Stated Maturity Date
and (b) in amounts equal to the Monthly Debt Service Payment Amount required
under this Agreement through the Stated Maturity Date together with the
outstanding principal balance of the Note as of the Stated Maturity Date
assuming all such Monthly Debt Service Payments are made (including any
servicing costs associated therewith). In no event shall the Yield Maintenance
Premium be less than zero.
1.2 INDEX OF OTHER DEFINITIONS. The following terms are defined in
the sections or Loan Documents indicated below:
"APPROVED ANNUAL BUDGET" - 6.3.5
"ANNUAL BUDGET" - 6.3.5
"APPROVED CAPITAL BUDGET" - 6.3.5
"APPROVED OPERATING BUDGET" - 6.3.5
"APPLICABLE TAXES" - 2.2.3
"AWARD" - 7.3.2
"BANKRUPTCY PROCEEDING" - 4.7
"BORROWER'S RECOURSE LIABILITIES" - 10.1
"CAPITAL RESERVE SUBACCOUNT" - 3.4
"CASH COLLATERAL SUBACCOUNT" - 3.9
"CASH MANAGEMENT ACCOUNTS" - 3.10
"CASUALTY" - 7.2.1
"CASUALTY/CONDEMNATION PREPAYMENT" - 2.3.2
"CASUALTY/CONDEMNATION SUBACCOUNT" - 3.7
"CITIGROUP GROUP" - 9.1.3
"CLEARING ACCOUNT" - 3.1
"CLEARING ACCOUNT AGREEMENT" - 1.1 (Definition of Loan Documents)
"CLEARING BANK" - 3.1
"CONDEMNATION" - 7.3.1
"DEFEASANCE COLLATERAL ACCOUNT" - 2.3.3
"DEFEASANCE " - 2.3.3
"DEFEASANCE EVENT" - 2.3.3
"DEFEASANCE DATE" - 2.3.3
"DEPOSIT ACCOUNT" - 3.1
"DEPOSIT ACCOUNT AGREEMENT" - 1.1 (Definition of Loan Documents)
"DISCLOSURE DOCUMENT" - 9.1.2
"EASEMENTS" - 4.14
"ENDORSEMENT" - 5.26.3
"ENVIRONMENTAL LAWS" - 4.21
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"EQUIPMENT" - Mortgage "EVENT OF DEFAULT" - 8.1
"EXCHANGE ACT" - 9.1.2
"HARVARD REIT OPERATING PARTNERSHIP" - 1.1 (Definition of Harvard REIT)
"HAZARDOUS SUBSTANCES" - 4.21
"IMPROVEMENTS" - Mortgage "INDEMNIFIED LIABILITIES" - 5.30
"INDEMNIFIED PARTY" - 5.30
"INDEPENDENT DIRECTOR" - Schedule 5
"INITIAL TIC BORROWERS" - 5.26.2
"INITIAL TIC TRANSFERS" - 5.26.2
"INSURANCE PREMIUMS" - 7.1.2
"INSURED CASUALTY" - 7.2.2
"ISSUER" - 9.1.3
"LATE PAYMENT CHARGE" - 2.5.3
"LENDER'S CONSULTANT" - 5.7.1
"LIABILITIES" - 9.1.3
"LICENSES" - 4.11
"LOAN" - 2.1
"MONTHLY DEBT SERVICE PAYMENT AMOUNT" - 2.2.1
"MONTHLY INTEREST PAYMENT AMOUNT" - 2.2.1
"MOODY'S" - 1.1 (Definition of Rating Agency)
"MORTGAGE" - 1.1 (Definition of Loan Documents)
"NEW PAYMENT DATE" - 2.2.4
"NOTE" - 1.1 (Definition of Loan Documents)
"NOTICE" - 6.1
"OPERATING EXPENSE SUBACCOUNT" - 3.6
"PERMITTED INDEBTEDNESS" - 5.22
"PERMITTED INVESTMENTS" - Deposit Account Agreement
"PERMITTED PREPAYMENT DATE" - 2.3.4
"POLICIES" - 7.1.2
"PREEO" - 3.12
"PREEO FUNDS" - 3.12
"PREEO LEASE" - 3.12
"PRINCIPAL" - 2.1
"PROCEEDS" - 7.2.2
"PROPOSED MATERIAL LEASE" - 5.10.2
"PROVIDED INFORMATION" - 9.1.1
"QUALIFIED CARRIER" - 7.1.1
"REGISTRATION STATEMENT" - 9.1.3
"REMEDIAL WORK" - 5.7.2
"RENT ROLL" - 4.16
"REQUIRED RECORDS" - 6.3.6
"REQUIRED REPAIRS" - 3.2.1
"REQUIRED REPAIRS SUBACCOUNT" - 3.2.2
"RESTORATION" - 7.4.1
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"ROLLOVER RESERVE SUBACCOUNT" - 3.5.1
"S&P" - 1.1 (Definition of Rating Agency)
"SECONDARY MARKET TRANSACTION" - 9.1.1
"SECURITIES" - 9.1.1
"SECURITIES ACT" - 9.1.2
"SECURITY DEPOSIT SUBACCOUNT" - 3.8
"SIGNIFICANT CASUALTY" - 7.2.2
"SPECIAL PURPOSE BANKRUPTCY REMOTE ENTITY" - 5.13
"SPRINGING RECOURSE EVENT" - 10.1
"SUBACCOUNTS" - 3.1
"SUBSTITUTE TIC BORROWER" - 5.26.2
"SUCCESSOR BORROWER" - 2.3.3
"TAX AND INSURANCE SUBACCOUNT" - 3.3
"TENANT IMPROVEMENT RESERVE SUBACCOUNT" - 3.12
"TIC BORROWERS" - 5.26.2
"TIC OWNER" - 5.26.2
"TIC TRANSFER AND ASSUMPTION" - 5.26.2
"TOXIC MOLD" - 4.21
"TRANSFER AND ASSUMPTION" - 5.26.3
"TRANSFEREE BORROWER" - 5.26.3
"UNDERWRITER GROUP" - 9.1.3
"UNDERWRITERS" - 9.1.3
1.3 PRINCIPLES OF CONSTRUCTION. Unless otherwise specified, (i) all
references to sections and schedules are to those in this Agreement, (ii) the
words "hereof," "herein" and "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular provision, (iii) all
definitions are equally applicable to the singular and plural forms of the terms
defined, (iv) the word "including" means "including but not limited to," and (v)
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.
2. GENERAL LOAN TERMS
2.1 THE LOAN. Subject to and upon the terms and conditions of this
Agreement, Lender agrees to make a loan to Borrowers (the "LOAN") in the maximum
principal amount of up to $31,500,000 (the "PRINCIPAL"). The Loan shall mature
on the Stated Maturity Date. Each Borrower acknowledges receipt of the
Principal, the proceeds of which are being and shall be used to (i) acquire the
Property, (ii) fund certain of the Subaccounts and (iii) pay transaction costs.
Any excess proceeds may be used for any lawful purpose. No amount repaid in
respect of the Loan may be reborrowed.
2.2 INTEREST; MONTHLY PAYMENTS.
2.2.1 GENERALLY. From and after the date hereof, interest on
the unpaid Principal shall accrue at the Interest Rate and be payable as
hereinafter provided. On the date hereof, Borrowers shall pay interest on the
unpaid Principal from the date hereof through and including March 10, 2005. On
April 11, 2005 and each Payment Date thereafter through and including the
Payment Date immediately preceding the Amortization Commencement Date,
13
Borrowers shall pay interest on the unpaid Principal accrued at the Interest
Rate during the Interest Period immediately preceding such Payment Date (the
"MONTHLY INTEREST PAYMENT AMOUNT"). On the Amortization Commencement Date and
each Payment Date thereafter through and including February 11, 2015 (as such
date may be changed in accordance with Section 2.2.4), the Principal and
interest thereon at the Interest Rate shall be payable in equal monthly
installments of $176,783.90 (the "MONTHLY DEBT SERVICE PAYMENT AMOUNT"); which
is based on the Interest Rate and a 360-month amortization schedule. The Monthly
Debt Service Payment Amount due on any Payment Date shall first be applied to
the payment of interest accrued during the preceding Interest Period and the
remainder of such Monthly Debt Service Payment Amount shall be applied to the
reduction of the unpaid Principal. All accrued and unpaid interest shall be due
and payable on the Maturity Date. If the Loan is repaid on any date other than
on a Payment Date (whether prior to or after the Stated Maturity Date),
Borrowers shall also pay interest that would have accrued on such repaid
Principal to but not including the next Payment Date.
2.2.2 DEFAULT RATE. After the occurrence and during the
continuance of an Event of Default, the entire unpaid Debt shall bear interest
at the Default Rate, and shall be payable upon demand from time to time, to the
extent permitted by applicable law.
2.2.3 TAXES. Any and all payments by Borrowers hereunder and
under the other Loan Documents shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
taxes imposed on Lender's income, and franchise taxes imposed on Lender by the
law or regulation of any Governmental Authority (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to in this Section 2.2.3 as "APPLICABLE TAXES"). If any
Borrower shall be required by law to deduct any Applicable Taxes from or in
respect of any sum payable hereunder to Lender, the following shall apply: (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.2.3), Lender receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Borrower shall make
such deductions and (iii) such Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law. Payments pursuant to this Section 2.2.3 shall be made within ten days after
the date Lender makes written demand therefor. If the amounts payable hereunder
relate to Applicable Taxes which are not of general application to lending
institutions making secured mortgage loans at such time, Borrowers shall have
the option to prepay the Loan in full without any Yield Maintenance Premium
unless Lender, at its option, elects not to require Borrower to pay such
Applicable Taxes pursuant to this Section 2.2.3. Notwithstanding the foregoing,
if the Loan is transferred to a transferee which is organized under the laws of
any jurisdiction other than the United States of America or any state thereof,
the transferor shall cause such transferee, concurrently with the effectiveness
of such transfer, to furnish to the transferor and Borrowers either a United
States Internal Revenue Service Form 4224 or United States Internal Revenue
Service Form 1001 (wherein such transferee claims entitlement to complete
exemption from United States federal withholding tax on all interest payments
hereunder); provided, however, that in the event that the transferor fails to
cause the transferee to furnish either such Form, Borrowers shall deduct any
Applicable Taxes to the extent required by
14
law and payments shall be made net of any Applicable Taxes without regard to the
provisions of clause (i) of the second sentence of this Section 2.2.3.
2.2.4 NEW PAYMENT DATE. Lender shall have the right, to be
exercised not more than once during the term of the Loan, to change the Payment
Date to a date other than the eleventh day of each month (a "NEW PAYMENT DATE"),
on 30 days' written notice to Borrowers; provided, however, that any such change
in the Payment Date: (i) shall not modify the amount of regularly scheduled
monthly principal and interest payments, except that the first payment of
principal and interest payable on the New Payment Date shall be accompanied by
interest at the interest rate herein provided for the period from the Payment
Date in the month in which the New Payment Date first occurs to the New Payment
Date, (ii) shall extend the Amortization Commencement Date to the New Payment
Date occurring in the month set forth in the definition of Amortization
Commencement Date, and (iii) shall extend the Stated Maturity Date to the New
Payment Date occurring in the month set forth in the definition of Stated
Maturity Date.
2.3 LOAN REPAYMENT.
2.3.1 REPAYMENT. Borrowers shall repay the entire outstanding
principal balance of the Note in full on the Maturity Date, together with
interest thereon to (but excluding) the date of repayment and any other amounts
due and owing under the Loan Documents. Borrowers shall have no right to prepay
or defease all or any portion of the Principal except in accordance with Section
2.3.2, Section 2.3.3 and Section 2.4 below. Except during the continuance of an
Event of Default, all proceeds of any repayment, including any prepayments of
the Loan, shall be applied by Lender as follows in the following order of
priority: FIRST, accrued and unpaid interest at the Interest Rate; SECOND, to
Principal; and THIRD, to any other amounts then due and owing under the Loan
Documents. If prior to the Stated Maturity Date the Debt is accelerated by
reason of an Event of Default, then Lender shall be entitled to receive, in
addition to the unpaid Principal and accrued interest and other sums due under
the Loan Documents, an amount equal to the Yield Maintenance Premium applicable
to such Principal so accelerated. During the continuance of an Event of Default,
all proceeds of repayment, including any payment or recovery on the Property
(whether through foreclosure, deed-in-lieu of foreclosure, or otherwise) shall,
unless otherwise provided in the Loan Documents, be applied in such order and in
such manner as Lender shall elect in Lender's discretion.
2.3.2 MANDATORY PREPAYMENTS. The Loan is subject to mandatory
prepayment in certain instances of Insured Casualty or Condemnation (each a
"CASUALTY/CONDEMNATION PREPAYMENT"), in the manner and to the extent set forth
in Section 7.4.2. Each Casualty/Condemnation Prepayment, after deducting
Lender's costs and expenses (including reasonable attorneys' fees and expenses)
in connection with the settlement or collection of the Proceeds or Award, shall
be applied in the same manner as repayments under Section 2.3.1, and if such
Casualty/Condemnation Payment is made on any date other than a Payment Date,
then such Casualty/Condemnation Payment shall include interest that would have
accrued on the Principal prepaid to but not including the next Payment Date.
Provided that no Event of Default is continuing, any such mandatory prepayment
under this Section 2.3.2 shall be without the payment of the Yield Maintenance
Premium. Notwithstanding anything to the contrary contained herein, each
Casualty/Condemnation Prepayment shall be applied in inverse order of
15
maturity and shall not extend or postpone the due dates of the monthly
installments due under the Note or this Agreement, or change the amounts of such
installments.
2.3.3 DEFEASANCE.
(A) CONDITIONS TO DEFEASANCE. Provided no Event of Default
shall be continuing, Borrowers shall have the right on any Payment Date after
the Release Date and prior to the Permitted Prepayment Date to voluntarily
defease the entire amount of the Principal and obtain a release of the Lien of
the Mortgage by providing Lender with the Defeasance Collateral (a "DEFEASANCE
EVENT"), subject to the satisfaction of the following conditions precedent:
(1) Borrowers shall give Lender not less than thirty (30)
days prior written notice specifying a Payment Date (the "DEFEASANCE
DATE") on which the Defeasance Event is to occur.
(2) Borrowers shall pay to Lender (A) all payments of
Principal and interest due on the Loan to and including the Defeasance
Date and (B) all other sums, then due under the Note, this Agreement and
the other Loan Documents;
(3) Borrowers shall deposit the Defeasance Collateral into
the Defeasance Collateral Account and otherwise comply with the
provisions of subsections (b) and (c) of this Section 2.3.3;
(4) Borrowers shall execute and deliver to Lender a Security
Agreement in respect of the Defeasance Collateral Account and the
Defeasance Collateral;
(5) Borrowers shall deliver to Lender an opinion of counsel
for Borrowers that is standard in commercial lending transactions and
subject only to customary qualifications, assumptions and exceptions
opining, among other things, that (i) Lender has a legal and valid
perfected first priority security interest in the Defeasance Collateral
Account and the Defeasance Collateral, (ii) if a securitization has
occurred, the REMIC Trust formed pursuant to such securitization will
not fail to maintain its status as a "real estate mortgage investment
conduit" within the meaning of Section 860D of the Code as a result of a
Defeasance Event pursuant to this Section 2.3.3, (iii) the Defeasance
Event will not result in a deemed exchange for purposes of the Code and
will not adversely affect the status of the Note as indebtedness for
federal income tax purposes, (iv) delivery of the Defeasance Collateral
and the grant of a security interest therein to Lender shall not
constitute an avoidable preference under Section 547 of the Bankruptcy
Code or applicable state law and (v) a non-consolidation opinion with
respect to the Successor Borrower;
(6) Borrowers shall deliver to Lender a Rating Comfort
Letter as to the Defeasance Event;
(7) Borrowers shall deliver an Officer's Certificate
certifying that the requirements set forth in this Section 2.3.3 have
been satisfied;
16
(8) Borrowers shall deliver a certificate of a "big four" or
other nationally recognized public accounting firm acceptable to Lender
certifying that the Defeasance Collateral will generate monthly amounts
equal to or greater than the Scheduled Defeasance Payments;
(9) Borrowers shall deliver such other certificates,
opinions, documents and instruments as Lender may reasonably request;
and
(10) Borrowers shall pay all costs and expenses of Lender
incurred in connection with the Defeasance Event, including Lender's
reasonable attorneys' fees and expenses and Rating Agency fees and
expenses.
(B) DEFEASANCE COLLATERAL ACCOUNT. On or before the date on
which Borrowers deliver the Defeasance Collateral, Borrowers shall open at any
Eligible Institution the defeasance collateral account (the "DEFEASANCE
COLLATERAL ACCOUNT") which shall at all times be an Eligible Account. The
Defeasance Collateral Account shall contain only (i) Defeasance Collateral, and
(ii) cash from interest and principal paid on the Defeasance Collateral. All
cash from interest and principal payments paid on the Defeasance Collateral
shall be paid over to Lender on each Payment Date and applied first to accrued
and unpaid interest and then to Principal. Any cash from interest and principal
paid on the Defeasance Collateral not needed to pay accrued and unpaid interest
or Principal shall be retained in the Defeasance Collateral Account as
additional collateral for the Loan. Borrowers shall cause the Eligible
Institution at which the Defeasance Collateral is deposited to enter an
agreement with Borrowers and Lender, satisfactory to Lender in its sole
discretion, pursuant to which such Eligible Institution shall agree to hold and
distribute the Defeasance Collateral in accordance with this Agreement. The
Successor Borrower shall be the owner of the Defeasance Collateral Account and
shall report all income accrued on Defeasance Collateral for federal, state and
local income tax purposes in its income tax return. Borrowers shall prepay all
cost and expenses associated with opening and maintaining the Defeasance
Collateral Account. Lender shall not in any way be liable by reason of any
insufficiency in the Defeasance Collateral Account.
(C) SUCCESSOR BORROWER. In connection with a Defeasance
Event under this Section 2.3.3, Borrowers shall, if required by the Rating
Agencies or if Borrowers elect to do so, establish or designate a successor
entity (the "SUCCESSOR BORROWER") which shall be a Single Purpose Bankruptcy
Remote Entity and which shall be approved by the Rating Agencies. Any such
Successor Borrower may, at Borrowers' option, be an Affiliate of Borrowers
unless the Rating Agencies shall require otherwise. Borrowers shall transfer and
assign all obligations, rights and duties under and to the Note, together with
the Defeasance Collateral to such Successor Borrower. Such Successor Borrower
shall assume the obligations under the Note and the Security Agreement and
Borrower shall be relieved of its obligations under such documents. Borrowers
shall pay a minimum of $1,000 to any such Successor Borrower as consideration
for assuming the obligations under the Note and the Security Agreement.
Borrowers shall pay all costs and expenses incurred by Lender, including
Lender's attorney's fees and expenses, incurred in connection therewith.
2.3.4 OPTIONAL PREPAYMENTS. From and after the third Payment
Date prior to the Stated Maturity Date (the "PERMITTED PREPAYMENT Date"),
Borrowers shall have the right to
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prepay the Loan in whole (but not in part), provided that Borrowers give Lender
at least 15 days' prior written notice thereof. If any such prepayment is not
made on a Payment Date, Borrowers shall also pay interest that would have
accrued on such prepaid Principal to, but not including, the next Payment Date.
Any such prepayment shall be made without payment of the Yield Maintenance
Premium.
2.4 RELEASE OF PROPERTY.
2.4.1 RELEASE ON DEFEASANCE. If Borrowers have elected to
defease the Note and the requirements of Section 2.3.3 and this Section 2.4 have
been satisfied, the Property shall be released from the Lien of the Mortgage and
the Defeasance Collateral pledged pursuant to the Security Agreement shall be
the sole source of collateral securing the Note. In connection with the release
of the Lien, Borrowers shall submit to Lender, not less than thirty (30) days
prior to the Defeasance Date (or such shorter time as is acceptable to Lender in
its sole discretion), a release of Lien (and related Loan Documents) for
execution by Lender. Such release shall be in a form appropriate in the
jurisdiction in which the Property is located and contain standard provisions
protecting the rights of the releasing lender. In addition, Borrowers shall
provide all other documentation Lender reasonably requires to be delivered by
Borrowers in connection with such release, together with an Officer's
Certificate certifying that such documentation (i) is in compliance with all
Legal Requirements, and (ii) will effect such release in accordance with the
terms of this Agreement. Borrower shall pay all costs, taxes and expenses
associated with the release of the Lien of the Mortgage, including Lender's
reasonable attorneys' fees.
2.4.2 RELEASE ON PAYMENT IN FULL. Lender shall, upon the
written request and at the expense of Borrowers, upon payment in full of the
Debt in accordance herewith, release or, if requested by Borrowers, assign to
Borrowers' designee (without any representation or warranty by and without any
recourse against Lender whatsoever), the Lien of the Loan Documents if not
theretofore released.
2.5 PAYMENTS AND COMPUTATIONS.
2.5.1 MAKING OF PAYMENTS. Each payment by a Borrower or
Borrowers shall be made in funds settled through the New York Clearing House
Interbank Payments System or other funds immediately available to Lender by
11:00 a.m., New York City time, on the date such payment is due, to Lender by
deposit to such account as Lender may designate by written notice to Borrowers.
Whenever any such payment shall be stated to be due on a day that is not a
Business Day, such payment shall be made on the first Business Day thereafter.
All such payments shall be made irrespective of, and without any deduction,
set-off or counterclaim whatsoever and are payable without relief from valuation
and appraisement laws and with all costs and charges incurred in the collection
or enforcement thereof, including attorneys' fees and court costs.
2.5.2 COMPUTATIONS. Interest payable under the Loan Documents
shall be computed on the basis of the actual number of days elapsed over a
360-day year.
2.5.3 LATE PAYMENT CHARGE. If any Principal, interest or other
sum due under any Loan Document is not paid by Borrowers on the date on which it
is due and, subject to the
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last sentence of this Section 2.5.3, such failure continues for five (5) days,
Borrowers shall pay to Lender upon demand an amount equal to the lesser of 5% of
such unpaid sum or the maximum amount permitted by applicable law (the "LATE
PAYMENT CHARGE"), in order to defray the expense incurred by Lender in handling
and processing such delinquent payment and to compensate Lender for the loss of
the use of such delinquent payment. Such amount shall be secured by the Loan
Documents. With respect to the foregoing 5 day grace period, the parties agree
that such 5 day grace period shall only be applicable no more than twice during
the Term, and in all other instances, the Late Payment Charge shall be payable
in accordance with this Section 2.5.3 with respect to any Principal, interest or
other sum due under any Loan Document which is not paid by Borrowers on the date
on which the same is due.
3. CASH MANAGEMENT AND RESERVES
3.1 CASH MANAGEMENT ARRANGEMENTS. Borrowers shall cause all Rents to
be transmitted directly by tenants of the Property into a trust account (the
"CLEARING ACCOUNT") maintained by Borrower at a local bank selected by such
Borrower, which shall at all times be an Eligible Institution (the "CLEARING
BANK") as more fully described in the Clearing Account Agreement. Without in any
way limiting the foregoing, all Rents received by Borrowers or Manager shall be
deposited into the Clearing Account within two Business Days of receipt. Funds
deposited into the Clearing Account shall be swept by the Clearing Bank on a
daily basis into an Eligible Account at the Deposit Bank controlled by Lender
(the "DEPOSIT ACCOUNT") and applied and disbursed in accordance with this
Agreement. Funds in the Deposit Account shall be invested at Lender's discretion
only in Permitted Investments. Lender will also establish subaccounts of the
Deposit Account which shall at all times be Eligible Accounts (and may be ledger
or book entry accounts and not actual accounts) (such subaccounts are referred
to herein as "SUBACCOUNTS"). The Deposit Account and any Subaccount will be
under the sole control and dominion of Lender, and no Borrower shall have any
right of withdrawal therefrom. Borrowers shall pay for all expenses of opening
and maintaining all of the above accounts.
3.2 REQUIRED REPAIRS; 3.2.1 COMPLETION OF REQUIRED REPAIRS.
Borrowers shall perform and complete each item of the repairs and environmental
remedial work at the Property described on Schedule 2 (the "REQUIRED REPAIRS")
within six (6) months of the date hereof or such shorter period of time for such
item set forth on Schedule 2.
3.2.2 REQUIRED REPAIRS RESERVES. On the date hereof, Borrowers
shall deposit with Lender $107,429.00 and Lender shall cause such amount to be
transferred to a Subaccount (the "REQUIRED REPAIRS SUBACCOUNT"). Provided no
Event of Default shall have occurred and is continuing, Lender shall disburse
funds held in the Required Repairs Subaccount to Borrowers (or at Borrower's
direction, disburse directly to the payee of the subject Required Repairs (or
portion thereof)), within 10 days after the delivery by Borrowers to Lender of a
request therefor (but not more often than once per month), in increments of at
least $5,000, accompanied by the following items (which items shall be in form
and substance satisfactory to Lender): (i) an Officer's Certificate (A)
certifying that the Required Repairs or any portion thereof which are the
subject of the requested disbursement have been completed in a good and
workmanlike manner and in accordance with all applicable Legal Requirements, (B)
identifying each Person that supplied materials or labor in connection with such
Required Repairs or any portion thereof and
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(C) stating that each such Person has been or, upon receipt of the requested
disbursement, will be paid in full with respect to the portion of the Required
Repairs which is the subject of the requested disbursement; (ii) copies of
appropriate Lien waivers or other evidence of payment satisfactory to Lender;
(iii) with respect to any disbursement that exceeds $50,000, at Lender's option,
a title search for the Property indicating that it is free from all Liens not
previously approved by Lender; (iv) a copy of each License required to be
obtained with respect to the portion of the Required Repairs which is the
subject of the requested disbursement; and (v) such other evidence as Lender
shall reasonably request that the Required Repairs which are the subject of the
requested disbursement have been completed and paid for. Provided no Default or
Event of Default shall have occurred and is continuing, upon Borrowers'
completion of all Required Repairs in accordance with this Section 3.2, Lender
shall release any funds remaining in the Required Repairs Subaccount, if any, to
Borrowers.
3.3 TAXES AND INSURANCE. Borrowers shall pay to Lender on each
Payment Date (i) one-twelfth of the Taxes that Lender estimates will be payable
during the next 12 months in order to accumulate with Lender sufficient funds to
pay all such Taxes at least 30 days prior to their respective due dates and (ii)
one-twelfth of the Insurance Premiums that Lender estimates will be payable for
the renewal of the coverage afforded by the Policies upon the expiration thereof
in order to accumulate with Lender sufficient funds to pay all such Insurance
Premiums at least 30 days prior to the expiration of the Policies. Such amounts
will be transferred by Lender to a Subaccount (the "TAX AND INSURANCE
SUBACCOUNT"). Provided that no monetary Event of Default or material
non-monetary Event of Default has occurred and is continuing, Lender will (a)
apply funds in the Tax and Insurance Subaccount to payments of Taxes and
Insurance Premiums required to be made by Borrowers pursuant to Sections 5.2 and
7.1, provided that Borrowers have promptly supplied Lender with notices of all
Taxes and Insurance Premiums due, or (b) reimburse Borrowers for such amounts
upon presentation of evidence of payment; subject, however, to Borrowers' right
to contest Taxes in accordance with Section 5.2. In making any payment relating
to Taxes and Insurance Premiums, Lender may do so according to any xxxx,
statement or estimate procured from the appropriate public office (with respect
to Taxes) or insurer or agent (with respect to Insurance Premiums), without
inquiry into the accuracy of such xxxx, statement or estimate or into the
validity of any tax, assessment, sale, forfeiture, tax lien or title or claim
thereof. If Lender determines in its reasonable judgment that the funds in the
Tax and Insurance Subaccount will be insufficient to pay (or in excess of) the
Taxes or Insurance Premiums next coming due, Lender may increase (or decrease)
the monthly contribution required to be made by Borrowers to the Tax and
Insurance Subaccount.
3.4 CAPITAL EXPENSE RESERVES; 3.4.1 CAPITAL RESERVE SUBACCOUNT. On
the date hereof, Borrowers shall deposit with Lender $0 and Lender shall
transfer such amounts into a Subaccount (the "CAPITAL RESERVE SUBACCOUNT"). On
the Payment Date occurring on April 11, 2005, and each Payment Date thereafter,
Borrowers shall pay to Lender $3,185.83 per month. Lender will transfer such
amounts into the Capital Reserve Subaccount. Additionally, upon thirty (30)
days' prior notice to Borrowers, Lender may reassess the amount of the monthly
payment required under this Section 3.4 from time to time in its reasonable
discretion (based upon its then current underwriting standards). Provided that
no Event of Default has occurred and is continuing, Lender shall disburse funds
held in the Capital Reserve Subaccount to Borrowers, within 15 days after the
delivery by Borrowers to Lender of a request therefor (but not more often than
once per month), in increments of at least $5,000 provided that (i) such
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disbursement is for an Approved Capital Expense; (ii) Lender shall have (if it
desires) verified (by an inspection conducted at Borrowers' expense (with
respect to any disbursement in excess of $50,000)) performance of the work
associated with such Approved Capital Expense; and (iii) the request for
disbursement is accompanied by (A) an Officer's Certificate certifying (1) that
such funds will be used to pay or reimburse Borrowers for Approved Capital
Expenses and a description thereof, (2) that all outstanding trade payables
(other than those not yet due and payable or those to be paid from the requested
disbursement or those constituting Permitted Indebtedness) have been paid in
full, (3) that the same has not been the subject of a previous disbursement, and
(4) that all previous disbursements have been used to pay the previously
identified Approved Capital Expenses, and (B) lien waivers or other evidence of
payment satisfactory to Lender, (C) with respect to any disbursement that
exceeds $50,000, at Lender's option, a title search for the Property indicating
that the Property is free from all Liens, claims and other encumbrances not
previously approved by Lender and (D) such other evidence as Lender shall
reasonably request that the Approved Capital Expenditures at the Property to be
funded by the requested disbursement have been completed and are paid for or
will be paid upon such disbursement to Borrowers. Any such disbursement of more
than $10,000 to pay (rather than reimburse) Approved Capital Expenses may, at
Lender's option, be made by joint check payable to Borrowers and the payee on
such Approved Capital Expenses.
3.5 ROLLOVER RESERVES..
3.5.1 GENERAL ROLLOVER RESERVE. On the date hereof, Borrowers
shall deposit with Lender $4,192,571.00 and Lender shall transfer such amount
into a Subaccount (the "ROLLOVER RESERVE SUBACCOUNT"). On the Payment Date
occurring on April 11, 2010, and each Payment Date thereafter, Borrowers shall
pay to Lender monthly deposits of $8,333.34. Lender will transfer such amounts
into the Rollover Reserve Subaccount. Borrowers shall pay to Lender for transfer
into the Rollover Reserve Subaccount all payments received from tenants in
connection with the early termination or cancellation of any Leases, including
fees, penalties and commissions. Provided that no Event of Default has occurred
and is continuing, Lender shall disburse funds held in the Rollover Reserve
Subaccount to Borrowers, within 15 days after the delivery by Borrowers to
Lender of a request therefor (but not more often than once per month), in
increments of at least $5,000, provided (i) such disbursement is for an Approved
Leasing Expense incurred hereafter (with respect to the initial deposit into the
Rollover Reserve Subaccount), or after April 11, 2010 (with respect to monthly
deposits into the Rollover Reserve Subaccount); (ii) Lender shall have (if it
desires) verified (by an inspection conducted at Borrowers' expense) performance
of any construction work associated with such Approved Leasing Expense; and
(iii) the request for disbursement is accompanied by (A) an Officer's
Certificate certifying (1) that such funds will be used only to pay (or
reimburse Borrowers for) Approved Leasing Expenses and a description thereof,
(2) that all outstanding trade payables (other than those not yet due and
payable or those to be paid from the requested disbursement or those
constituting Permitted Indebtedness) have been paid in full, (3) that the same
has not been the subject of a previous disbursement, and (4) that all previous
disbursements have been used only to pay (or reimburse Borrowers for) the
previously identified Approved Leasing Expenses, and (B) reasonably detailed
supporting documentation as to the amount, necessity and purpose therefor. Any
such disbursement of more than $10,000 to pay (rather than reimburse) Approved
Leasing Expenses may, at Lender's option, be made by joint check payable to
Borrowers and the payee of such Approved Leasing Expenses.
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3.6 OPERATING EXPENSE SUBACCOUNT On each Payment Date during the
continuance of a Cash Trap Period, a portion of Rents that have been deposited
into the Deposit Account during the immediately preceding Interest Period in an
amount equal to the monthly amount set forth in the Approved Operating Budget
for the following month (plus any other amounts requested by Borrowers for such
month for payment of items constituting Approved Operating Expenses, which are
not included in the Approved Operating Budget), shall be transferred into a
Subaccount for the purpose of payment of Approved Operating Expenses for the
month in which such Payment Date occurs (the "OPERATING EXPENSE SUBACCOUNT").
Provided no Event of Default has occurred and is continuing, Lender shall
disburse funds held in the Operating Expense Subaccount to Borrowers (or at
Borrowers' direction, to the Manager), within 5 Business Days after delivery by
Borrowers to Lender of a request therefor (but not more often than weekly), in
increments of at least $1,000, provided (i) such disbursement is for an Approved
Operating Expense; and (ii) such disbursement is accompanied by (A) an Officer's
Certificate certifying (1) that such funds will be used to pay Approved
Operating Expenses and a description thereof, (2) that all outstanding trade
payables (other than those not yet due and payable or those to be paid from the
requested disbursement or those constituting Permitted Indebtedness) have been
paid in full, (3) that the same has not been the subject of a previous
disbursement, and (4) that all previous disbursements have been or will be used
to pay the previously identified Approved Operating Expenses, and (B) reasonably
detailed documentation satisfactory to Lender as to the amount, necessity and
purpose therefor. Notwithstanding anything to the contrary contained herein, to
the extent that (i) Borrower has requested a disbursement of funds from the
Operating Expense Subaccount in accordance with the foregoing provisions and
(ii) at the time of such request, the funds that have been collected in the
Operating Expense Subaccount are insufficient to cover the same, then Lender
shall nonetheless disburse additional funds that are thereafter deposited into
the Operating Expense Subaccount to Borrower (without any requirement for
Borrower to submit an additional request therefor); provided that sufficient
funds have been collected in the Deposit Account to make the payments required
under clauses (i) - (v) of Section 3.11(a) on the next succeeding Payment Date.
3.7 CASUALTY/CONDEMNATION SUBACCOUNT. Borrowers shall pay, or cause
to be paid, to Lender all Proceeds or Awards due to any Casualty or Condemnation
to be transferred to a Subaccount (the "CASUALTY/CONDEMNATION SUBACCOUNT") in
accordance with the provisions of Section 7. All amounts in the
Casualty/Condemnation Subaccount shall disbursed in accordance with the
provisions of Section 7.
3.8 SECURITY DEPOSITS. Borrowers shall keep all security deposits
under Leases in accordance with applicable Legal Requirements. After the
occurrence of an Event of Default, Borrowers shall, upon Lender's request, if
permitted by applicable Legal Requirements, turn over to Lender the security
deposits (and any interest theretofore earned thereon) under Leases, to be held
by Lender in a Subaccount (the "SECURITY DEPOSIT SUBACCOUNT") subject to the
terms of the Leases. Security deposits held in the Security Deposit Subaccount
will be released by Lender upon notice from Borrowers together with such
evidence as Lender may reasonably request that such security deposit is required
to be returned to a tenant pursuant to the terms of a Lease or may be applied as
Rent pursuant to the rights of Borrower under the applicable Lease. Any letter
of credit or other instrument that any Borrower receives in lieu of a cash
security deposit under any Lease shall (i) be maintained in full force and
effect in the full amount unless replaced by a cash deposit as hereinabove
described and (ii) if permitted pursuant to any Legal
22
Requirements, name Lender as payee or mortgagee thereunder (or at Lender's
option, be fully assignable to Lender).
3.9 CASH COLLATERAL SUBACCOUNT. If a Cash Trap Period shall have
commenced, then on the immediately succeeding Payment Date and on each Payment
Date thereafter during the continuance of such Cash Trap Period, all Available
Cash shall be paid to Lender, which amounts shall be transferred by Lender into
a Subaccount (the "CASH COLLATERAL SUBACCOUNT") as cash collateral for the Debt.
Any funds in the Cash Collateral Account and not previously disbursed or applied
shall be disbursed to Borrowers upon the termination of such Cash Trap Period.
Lender shall have the right, but not the obligation, at any time during the
continuance of a monetary Event of Default or material non-monetary Event of
Default, in its sole and absolute discretion to apply all sums then on deposit
in the Cash Collateral Subaccount to the Debt, in such order and in such manner
as Lender shall elect in its sole and absolute discretion, including to make a
prepayment of Principal (together with the applicable Yield Maintenance Premium
applicable thereto). Notwithstanding anything to the contrary contained above,
Lender shall have the right, but not the obligation, in its sole and absolute
discretion, to allocate any funds that have been deposited into the Cash
Collateral Subaccount as a result of a Cash Trap Period described in clause (ii)
of the defined term "Cash Trap Period", into the Rollover Reserve Subaccount to
be applied in accordance with the terms and conditions of SECTION 3.5 hereof.
3.10 GRANT OF SECURITY INTEREST; APPLICATION OF FUNDS. As security
for payment of the Debt and the performance by Borrowers of all other terms,
conditions and provisions of the Loan Documents, each Borrower hereby pledges
and assigns to Lender, and grants to Lender a security interest in, all such
Borrower's right, title and interest in and to all Rents and in and to all
payments to or monies held in the Clearing Account, the Deposit Account, all
Subaccounts created pursuant to this Agreement (collectively, the "CASH
MANAGEMENT ACCOUNTS"). Each Borrower hereby grants to Lender a continuing
security interest in, and agrees to hold in trust for the benefit of Lender, all
Rents in its possession prior to the (i) payment of such Rents to Lender or (ii)
deposit of such Rents into the Deposit Account. No Borrower shall, without
obtaining the prior written consent of Lender, further pledge, assign or grant
any security interest in any Cash Management Account, or permit any Lien to
attach thereto, or any levy to be made thereon, or any UCC Financing Statements,
except those naming Lender as the secured party, to be filed with respect
thereto. This Agreement is, among other things, intended by the parties to be a
security agreement for purposes of the UCC. Upon the occurrence and during the
continuance of an Event of Default, Lender may apply any sums in any Cash
Management Account in any order and in any manner as Lender shall elect in
Lender's discretion without seeking the appointment of a receiver and without
adversely affecting the rights of Lender to foreclose the Lien of the Mortgage
or exercise its other rights under the Loan Documents. Cash Management Accounts
shall not constitute trust funds and may be commingled with other monies held by
Lender. All interest which accrues on the funds in any Cash Management Account
(other than the Tax and Insurance Subaccount) shall accrue for the benefit of
Borrowers and shall be taxable to Borrowers and shall be added to and disbursed
in the same manner and under the same conditions as the principal sum on which
said interest accrued. Upon repayment in full of the Debt, all remaining funds
in the Subaccounts, if any, shall be promptly disbursed to Borrowers.
3.11 PROPERTY CASH FLOW ALLOCATION. (a)All Rents deposited into the
Deposit Account during the immediately preceding Interest Period shall be
applied on each Payment Date as
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follows in the following order of priority: (i) First, to make payments into the
Tax and Insurance Subaccount as required under Section 3.3; (ii) Second, to pay
the monthly portion of the fees charged by the Deposit Bank in accordance with
the Deposit Account Agreement; (iii) Third, to Lender to pay the Monthly
Interest Payment Amount or the Monthly Debt Service Payment Amount, as the case
may be, due on such Payment Date (plus, if applicable, interest at the Default
Rate and all other amounts, other than those described under other clauses of
this Section 3.11(a), then due to Lender under the Loan Documents); (iv) Fourth,
to make payments into the Capital Reserve Subaccount as and when required under
Section 3.4; (v) Fifth, to make payments into the Rollover Reserve Subaccount as
and when required under Section 3.5; (vi) Sixth, during the continuance of a
Cash Trap Period, to make payments for Approved Operating Expenses as required
under Section 3.6; (vii) Seventh during the continuance of a Cash Trap Period,
to make payments in an amount equal to all remaining Available Cash on such
Payment Date into the Cash Collateral Subaccount in accordance with Section 3.9;
and (viii) Lastly, except during the continuance of a Cash Trap Period, payments
to Borrowers of any remaining amounts. Notwithstanding the foregoing, except
during the continuance of a Cash Trap Period provided that in any given Interest
Period, all amounts referred to in the foregoing clauses (i) - (v) have been
paid, then at Borrowers' request, the payments to Borrowers under the foregoing
clause (viii) shall be made on a weekly basis.
(b) The failure of Borrowers to make all of the payments
required under clauses (i) through (vii) of Section 3.11(a) in full on each
Payment Date shall constitute an Event of Default under this Agreement;
provided, however, if adequate funds are available in the Deposit Account for
such payments, the failure by the Deposit Bank to allocate such funds into the
appropriate Subaccounts shall not constitute an Event of Default.
(c) Notwithstanding anything to the contrary contained in
this Section 3.11, after the occurrence of an Event of Default, Lender may apply
all Rents deposited into the Deposit Account and other proceeds of repayment in
such order and in such manner as Lender shall elect.
3.12 TENANT IMPROVEMENTS. On the date hereof, Borrowers shall deposit
with Lender $33,319.00 which shall be referred to as the "PREEO FUNDS" and
Lender shall transfer such amount into a Subaccount (the "TENANT IMPROVEMENT
RESERVE SUBACCOUNT"). The Preeo Funds shall be used to reimburse Borrowers
and/or to pay, in accordance with the terms and conditions set forth in this
Agreement, for the reasonable costs and expenses incurred by Borrowers in
completing the tenant improvements under Paragraph 4 of that certain Second
Amendment to Lease Agreement dated January 22, 2003 between MG-Alamo, LLC, as
landlord, and Preeo Xxxxxxxxx Green & Egle. P.C. ("Preeo"), as tenant (the
"PREEO LEASE"). Provided that no Event of Default has occurred and is
continuing, Lender shall disburse funds held in the Tenant Improvement Reserve
Subaccount to Borrowers, within 15 days after the delivery by Borrowers to
Lender of a request therefor (but not more often than once per month), in
increments of at least $5,000, provided (i) such request includes an estoppel
from Preeo certifying that all construction to be performed and all improvements
to be installed under the Preeo Lease have been completed and fully accepted by
Preeo, and that there are no defaults under such lease (nor does there exist any
event or condition, which with the passage of time or the giving of notice, or
both, could result in such a default); (ii) Lender shall have (if it desires)
verified (by an inspection conducted at Borrowers' expense) performance of any
construction work associated with such work; and (iii) the request for
disbursement is accompanied by (A) an Officer's
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Certificate certifying (1) that such funds will be used only to pay (or
reimburse Borrowers for) tenant improvements under the Preeo Lease, (2) that all
outstanding trade payables (other than those not yet due and payable or those to
be paid from the requested disbursement or those constituting Permitted
Indebtedness) have been paid in full, and (3) that the same has not been the
subject of a previous disbursement, and (B) reasonably detailed supporting
documentation as to the amount, necessity and purpose therefor. Any such
disbursement of more than $10,000 to pay (rather than reimburse) tenant
improvements under this Section may, at Lender's option, be made by joint check
payable to Borrowers and the payee of such tenant improvements.
3.13 INITIAL DEPOSITS INTO RESERVES. The initial deposits required to
be made on the date hereof into the reserve accounts established under this
Article 3 are funded from the proceeds of the Loan disbursed at closing.
4. REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to Lender as of the date
hereof that, except to the extent (if any) disclosed on Schedule 3 with
reference to a specific Section of this Article 4:
4.1 ORGANIZATION; SPECIAL PURPOSE. Each Borrower has been duly
organized and is validly existing and in good standing under the laws of the
state of its formation, with requisite power and authority, and all rights,
licenses, permits and authorizations, governmental or otherwise, necessary to
own its properties and to transact the business in which it is now engaged. Each
Borrower is duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in connection with its
properties, business and operations. Each Borrower is a Special Purpose
Bankruptcy Remote Entity.
4.2 PROCEEDINGS; ENFORCEABILITY. Each Borrower has taken all
necessary action to authorize the execution, delivery and performance of the
Loan Documents. The Loan Documents have been duly executed and delivered by each
Borrower that is a party to such Loan Document and constitute legal, valid and
binding obligations of such Borrower enforceable against such Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and general
principles of equity. The Loan Documents are not subject to, and no Borrower has
asserted, any right of rescission, set-off, counterclaim or defense, including
the defense of usury. No exercise of any of the terms of the Loan Documents, or
any right thereunder, will render any Loan Document unenforceable.
4.3 NO CONFLICTS. The execution, delivery and performance of the
Loan Documents by Borrowers and the transactions contemplated hereby will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
(other than pursuant to the Loan Documents) upon any of the property of any
Borrower pursuant to the terms of, any agreement or instrument to which any
Borrower is a party or by which its property is subject, nor will such action
result in any violation of the provisions of any statute or any order, rule or
regulation of any Governmental Authority having jurisdiction over any Borrower
or any of its properties. No Borrower's rights under the Licenses and the
Management Agreement will be adversely affected by the execution and delivery of
the
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Loan Documents, any Borrower's performance thereunder, the recordation of the
Mortgage, or the exercise of any remedies by Lender. Any consent, approval,
authorization, order, registration or qualification of or with any Governmental
Authority required for the execution, delivery and performance by any Borrower
of the Loan Documents has been obtained and is in full force and effect.
4.4 LITIGATION. There are no actions, suits or other proceedings at
law or in equity by or before any Governmental Authority now pending or
threatened against or affecting any Borrower, the Manager or the Property,
which, if adversely determined, might materially adversely affect the condition
(financial or otherwise) or business of any Borrower, Manager or the condition
or ownership of the Property.
4.5 AGREEMENTS. No Borrower is a party to any agreement or
instrument or subject to any restriction which might adversely affect any
Borrower or the Property, or any Borrower's business, properties, operations or
condition, financial or otherwise. No Borrower is in default in any material
respect in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Permitted Encumbrance or any other
agreement or instrument to which any Borrower is a party or by which any
Borrower or the Property is bound.
4.6 TITLE. Borrowers have good, marketable and indefeasible title in
fee to the real property and good title to the balance of the Property, free and
clear of all Liens except the Permitted Encumbrances. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements in
connection with the transfer of the Property to Borrowers have been paid. The
Mortgage when properly recorded in the appropriate records, together with any
UCC Financing Statements required to be filed in connection therewith, will
create (i) a valid, perfected first priority lien on Borrowers' interest in the
Property and (ii) valid and perfected first priority security interests in and
to, and perfected collateral assignments of, all personalty (including the
Leases), all in accordance with the terms thereof, in each case subject only to
any applicable Permitted Encumbrances. All mortgage, recording, stamp,
intangible or other similar taxes required to be paid by any Person under
applicable Legal Requirements in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the Loan
Documents have been paid. The Permitted Encumbrances do not materially adversely
affect the value, operation or use of the Property, or Borrowers' ability to
repay the Loan. No Condemnation or other proceeding has been commenced or, to
Borrowers' best knowledge, is contemplated with respect to all or part of the
Property or for the relocation of roadways providing access to the Property.
There are no claims for payment for work, labor or materials affecting the
Property which are or may become a Lien prior to, or of equal priority with, the
Liens created by the Loan Documents. There are no outstanding options to
purchase or rights of first refusal affecting all or any portion of the
Property. The survey for the Property delivered to Lender does not fail to
reflect any material matter affecting the Property or the title thereto. Except
as shown on the survey, all of the Improvements included in determining the
appraised value of the Property lie wholly within the boundaries and building
restriction lines of the Property, and no improvement on an adjoining property
encroaches upon the Property, and no easement or other encumbrance upon the
Property encroaches upon any of the Improvements, except those insured against
by the Title Insurance Policy. Each parcel comprising the Property is a separate
tax lot and is not a portion of any other tax lot that is not a part of the
Property.
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There are no pending or proposed special or other assessments for public
improvements or otherwise affecting the Property, or any contemplated
improvements to the Property that may result in such special or other
assessments.
4.7 NO BANKRUPTCY FILING. No Borrower is contemplating either the
filing of a petition by it under any state or federal bankruptcy or insolvency
law or the liquidation of all or a major portion of its property (a "BANKRUPTCY
PROCEEDING"), and Borrowers have no knowledge of any Person contemplating the
filing of any such petition against any Borrower. In addition, no Borrower nor
any principal nor Affiliate of any Borrower has been a party to, or the subject
of a Bankruptcy Proceeding for the past ten years.
4.8 FULL AND ACCURATE DISCLOSURE. No statement of fact made by any
Borrower in any Loan Documents contains any untrue statement of a material fact
or omits to state any material fact necessary to make statements contained
therein not misleading. There is no material fact presently known to any
Borrower that has not been disclosed to Lender which adversely affects, or, as
far as any Borrower can foresee, might adversely affect, the Property or the
business, operations or condition (financial or otherwise) of any Borrower. All
financial data, including the statements of cash flow and income and operating
expense, that have been delivered to Lender in respect of Borrowers and, to
Borrowers' knowledge, the Property (i) are true, complete and correct in all
material respects, (ii) accurately represent the financial condition of each
Borrower and the Property as of the date of such reports, and (iii) to the
extent prepared by an independent certified public accounting firm, have been
prepared in accordance with GAAP consistently applied throughout the periods
covered, except as disclosed therein. No Borrower has any contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments,
unrealized or anticipated losses from any unfavorable commitments or any
liabilities or obligations not expressly permitted by this Agreement. Since the
date of such financial statements, there has been no materially adverse change
in the financial condition, operations or business of any Borrower or the
Property from that set forth in said financial statements.
4.9 TAX FILINGS. To the extent required, each Borrower has filed (or
has obtained effective extensions for filing) all federal, state and local tax
returns required to be filed and have paid or made adequate provision for the
payment of all federal, state and local taxes, charges and assessments payable
by such Borrower. Each Borrower believes that its tax returns (if any) properly
reflect the income and taxes of such Borrower for the periods covered thereby,
subject only to reasonable adjustments required by the Internal Revenue Service
or other applicable tax authority upon audit.
4.10 NO PLAN ASSETS. As of the date hereof and throughout the Term
(i) no Borrower is or will be an "employee benefit plan," as defined in Section
3(3) of ERISA, subject to Title I of ERISA, (ii) none of the assets of any
Borrower constitutes or will constitute "plan assets" of one or more such plans
within the meaning of 29 C.F.R. Section 2510.3-101, (iii) no Borrower is or will
be a "governmental plan" within the meaning of Section 3(32) of ERISA, and (iv)
transactions by or with any Borrower are not and will not be subject to state
statutes regulating investment of, and fiduciary obligations with respect to,
governmental plans. As of the date hereof, no Borrower, nor any member of a
"controlled group of corporations" (within the meaning of Section 414 of the
Code) maintains, sponsors or contributes to a "defined benefit
27
plan" (within the meaning of Section 3(35) of ERISA) or a "multiemployer pension
plan" (within the meaning of Section 3(37)(A) of ERISA).
4.11 COMPLIANCE. Each Borrower and, to Borrowers' best knowledge, the
Property and the use thereof comply in all material respects with all applicable
Legal Requirements (including with respect to parking and applicable zoning and
land use laws, regulations and ordinances). No Borrower is in default or
violation of any order, writ, injunction, decree or demand of any Governmental
Authority, the violation of which might materially adversely affect the
condition (financial or otherwise) or business of any Borrower. The Property is
used exclusively as an office building property and other appurtenant and
related uses. In the event that all or any part of the Improvements are
destroyed or damaged, said Improvements can be legally reconstructed to their
condition prior to such damage or destruction, and thereafter exist for the same
use without violating any zoning or other ordinances applicable thereto and
without the necessity of obtaining any variances or special permits. No legal
proceedings are pending or, to the knowledge of Borrowers, threatened with
respect to the zoning of the Property. Neither the zoning nor any other right to
construct, use or operate the Property is in any way dependent upon or related
to any property other than the Property. All certifications, permits, licenses
and approvals, including certificates of completion and occupancy permits
required for the legal use, occupancy and operation of the Property
(collectively, the "LICENSES"), have been obtained and are in full force and
effect. The use being made of the Property is in conformity with the certificate
of occupancy issued for the Property and all other restrictions, covenants and
conditions affecting the Property.
4.12 CONTRACTS. There are no service, maintenance or repair contracts
affecting the Property that are not terminable on one month's notice or less
without cause and without penalty or premium. All service, maintenance or repair
contracts affecting the Property have been entered into at arms-length in the
ordinary course of the business of the Borrower which owns the Property and
provide for the payment of fees in amounts and upon terms comparable to existing
market rates.
4.13 FEDERAL RESERVE REGULATIONS; INVESTMENT COMPANY ACT. No part of
the proceeds of the Loan will be used for the purpose of purchasing or acquiring
any "margin stock" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System or for any other purpose that would be
inconsistent with such Regulation U or any other regulation of such Board of
Governors, or for any purpose prohibited by Legal Requirements or any Loan
Document. No Borrower is (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.
4.14 EASEMENTS; UTILITIES AND PUBLIC ACCESS. All easements, cross
easements, licenses, air rights and rights-of-way or other similar property
interests (collectively, "EASEMENTS"), if any, necessary for the full
utilization of the Improvements for their intended purposes have been obtained,
are described in the Title Insurance Policy and are in full force and effect
without default thereunder. The Property has rights of access to public ways and
is served
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by water, sewer, sanitary sewer and storm drain facilities adequate to service
it for its intended uses. All public utilities necessary or convenient to the
full use and enjoyment of the Property are located in the public right-of-way
abutting the Property, and all such utilities are connected so as to serve the
Property without passing over other property absent a valid easement. All roads
necessary for the use of the Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities.
4.15 PHYSICAL CONDITION. The Property, including all Improvements,
parking facilities, systems, Equipment and landscaping, are in good condition,
order and repair in all material respects; there exists no structural or other
material defect or damages to the Property, whether latent or otherwise. No
Borrower has received notice from any insurance company or bonding company of
any defect or inadequacy in the Property, or any part thereof, which would
adversely affect its insurability or cause the imposition of extraordinary
premiums or charges thereon or any termination of any policy of insurance or
bond. No portion of the Property is located in an area as identified by the
Federal Emergency Management Agency as an area having special flood hazards. The
Improvements have suffered no material casualty or damage which has not been
fully repaired and the cost thereof fully paid.
4.16 LEASES. The rent roll attached hereto as Schedule 8 (the "RENT
ROLL") is true, complete and correct and the Property is not subject to any
Leases other than the Leases described in the Rent Roll. Except as set forth on
the Rent Roll: (i) each Lease is in full force and effect; (ii) the tenants
under the Leases have accepted possession of and are in occupancy of all of
their respective demised premises, have commenced the payment of rent under the
Leases, and there are no offsets, claims or defenses to the enforcement thereof;
(iii) all rents due and payable under the Leases have been paid and no portion
thereof has been paid for any period more than 30 days in advance; (iv) the rent
payable under each Lease is the amount of fixed rent set forth in the Rent Roll,
and there is no claim or basis for a claim by the tenant thereunder for an
adjustment to the rent; (v) to Borrowers' best knowledge, no tenant has made any
claim against the landlord under any Lease which remains outstanding, there are
no defaults on the part of the landlord under any Lease, and no event has
occurred which, with the giving of notice or passage of time, or both, would
constitute such a default; (vi) to Borrowers' best knowledge, there is no
present material default by the tenant under any Lease; (vii) all security
deposits under Leases are as set forth on the Rent Roll and are held consistent
with Section 3.8; (viii) Borrowers are the sole owner of the entire lessor's
interest in each Lease; (ix) each Lease is the valid, binding and enforceable
obligation of such Borrower and the applicable tenant thereunder; (x) to
Borrowers' best knowledge, no Person has any possessory interest in, or right to
occupy, the Property except under the terms of the Lease; and (xi) each Lease is
subordinate to the Loan Documents, either pursuant to its terms or pursuant to a
subordination and attornment agreement. None of the Leases contains any option
to purchase or right of first refusal to purchase the Property or any part
thereof. Neither the Leases nor the Rents have been assigned or pledged except
to Lender, and no other Person has any interest therein except the tenants
thereunder.
4.17 FRAUDULENT TRANSFER. No Borrower has entered into the Loan or
any Loan Document with the actual intent to hinder, delay, or defraud any
creditor, and Borrowers have received reasonably equivalent value in exchange
for their obligations under the Loan Documents. Giving effect to the
transactions contemplated by the Loan Documents, the fair
29
saleable value of Borrowers' assets exceeds and will, immediately following the
execution and delivery of the Loan Documents, exceed Borrowers' total
liabilities, including subordinated, unliquidated, disputed or contingent
liabilities, including the maximum amount of its contingent liabilities or its
debts as such debts become absolute and matured. Borrowers' assets do not and,
immediately following the execution and delivery of the Loan Documents will not,
constitute unreasonably small capital to carry out their business as conducted
or as proposed to be conducted. No Borrower intends to, and does not believe
that it will, incur debts and liabilities (including 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 such Borrower).
4.18 OWNERSHIP OF BORROWER.
(a) BEHRINGER TIC I LLC. The sole member of Behringer TIC I
LLC is the Harvard REIT Operating Partnership. The only partners of the Harvard
REIT Operating Partnership are the Behringer Harvard REIT (0.1% general partner)
and BHR Partners, LLC, a Delaware limited liability company (99.9% limited
partner), which is 100% owned by the Behringer Harvard REIT. The membership
interests in Behringer TIC I LLC and Behringer are owned free and clear of all
Liens, warrants, options and rights to purchase. Behringer TIC I LLC has no
obligation to any Person to purchase, repurchase or issue any ownership interest
in it. The organizational chart attached hereto as Schedule 3 is complete and
accurate and illustrates all Persons who have a direct or indirect ownership
interest in Behringer TIC I LLC.
(b) BEHRINGER TIC II LLC. The sole member of Behringer TIC
II LLC is Behringer. Xxxxxx X. Xxxxxxxxx is the 55.731% owner and managing
member of Behringer, and holds 100% of the voting interests in Behringer. No
other member of Behringer currently owns more than a 20% interest. The
membership interests in Behringer TIC II LLC and Behringer are owned free and
clear of all Liens, warrants, options and rights to purchase. Behringer TIC II
LLC has no obligation to any Person to purchase, repurchase or issue any
ownership interest in it. The organizational chart attached hereto as Schedule 3
is complete and accurate and illustrates all Persons who have a direct or
indirect ownership interest in Behringer TIC II LLC.
(c) TENANT IN COMMON INTERESTS. As of the date hereof,
Behringer TIC I LLC owns an undivided 30.583629% tenant-in-common interest in
the Property. Behringer TIC II LLC shall have conveyed its entire 69.416371%
tenant-in-common interest in the Property to the Initial TIC Borrowers and shall
own 0% as of the date hereof. SCHEDULE 1 attached hereto sets forth the
undivided percentage tenant in common interest in the Property that is owned (as
of the date hereof) by each Initial TIC Borrower.
4.19 PURCHASE OPTIONS. Neither the Property nor any part thereof is
subject to any purchase options or other similar rights in favor of third
parties.
4.20 MANAGEMENT AGREEMENT. The Management Agreement is in full force
and effect. There is no default, breach or violation existing thereunder, and no
event has occurred (other than payments due but not yet delinquent) that, with
the passage of time or the giving of notice, or both, would constitute a
default, breach or violation thereunder, by either party thereto. Pursuant to
the Management Agreement, Borrowers have appointed the Manager as their agent
30
for (i) hiring, terminating (subject to the provisions thereof), overseeing and
otherwise dealing with any sub-property manager for the Property, (ii) otherwise
overseeing the operation and management of the Property, and (iii) making
decisions and otherwise interacting and dealing with Lender with respect to the
Loan, this Agreement, the other Loan Documents and the Property. Additionally,
subject to the provisions of Section 3.1 and the Clearing Account Agreement and
the Deposit Account Agreement, the Manager has control of all operating and
other bank accounts with respect to the Property.
4.21 HAZARDOUS SUBSTANCES. Except as disclosed in the environmental
assessment report delivered to Lender in connection with the Loan, (i) the
Property is not in violation of any Legal Requirement pertaining to or imposing
liability or standards of conduct concerning environmental regulation,
contamination or clean-up, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking Water
Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes, any local law requiring related permits and
licenses and all amendments to and regulations in respect of the foregoing laws
(collectively, "ENVIRONMENTAL LAWS"); (ii) the Property is not subject to any
private or governmental Lien or judicial or administrative notice or action or
inquiry, investigation or claim relating to hazardous, toxic and/or dangerous
substances, toxic mold or fungus of a type that may pose a risk to human health
or the environment or would negatively impact the value of the Property ("TOXIC
MOLD") or any other substances or materials which are included under or
regulated by Environmental Laws (collectively, "HAZARDOUS SUBSTANCES"); (iii) to
the best of each Borrower's knowledge, after due inquiry, no Hazardous
Substances are or have been (including the period prior to such Borrower's
acquisition of the Property), discharged, generated, treated, disposed of or
stored on, incorporated in, or removed or transported from the Property other
than in compliance with all Environmental Laws; (iv) to the best of each
Borrower's knowledge, after due inquiry, no Hazardous Substances are present in,
on or under any nearby real property which could migrate to or otherwise affect
the Property; (v) to the best of Borrowers' knowledge, no Toxic Mold is on or
about the Property which requires remediation; and (vi) no underground storage
tanks exist on the Property and the Property has never been used as a landfill.
There have been no environmental investigations, studies, audits, reviews or
other analyses conducted by or on behalf of any Borrower which have not been
provided to Lender.
4.22 NAME; PRINCIPAL PLACE OF BUSINESS. No Borrower uses or will use
any trade name or has done or will not do business under any name other than its
actual name set forth herein and the trade name of the Property. The principal
place of business of each Borrower is its primary address for notices as set
forth in Section 6.1, and no Borrower has any other place of business.
4.23 OTHER DEBT. There is no indebtedness with respect to the
Property or any excess cash flow or any residual interest therein, whether
secured or unsecured, other than Permitted Encumbrances and Permitted
Indebtedness.
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4.24 TENANT IN COMMON AGREEMENT. (a) The Tenant in Common Agreement
is in full force and effect and has not been modified or amended.
(b) There are no defaults under the Tenant in Common
Agreement on the part of any Borrower, and no event has occurred, which with the
passage of time, the giving of notice, or both, would constitute a default under
the Tenant in Common Agreement on the part of any Borrower.
(c) The Tenant in Common Agreement provides that so long as
the Loan or any portion thereof is outstanding, each tenant-in-common agrees
that it will not seek or be entitled to seek and obtain a partition of all or
any part of the Property without first obtaining the prior written consent of
Lender, and each tenant-in-common expressly waives any right it may have to
partition the Property or any part thereof, unless Lender has consented in
writing to such party's exercise of such rights.
(d) The Tenant in Common Agreement provides that each
tenant-in-common agrees that the Tenant in Common Agreement, and all rights and
privileges and remedies of each tenant-in-common thereunder, including without
limitation, any rights of first refusal, purchase options or other similar
rights under the Tenant in Common Agreement, are subject and subordinate to the
Mortgage and the other Loan Documents and the Liens created thereby, and to all
rights of the Lender thereunder.
(e) The Tenant in Common Agreement provides that no party
thereunder may exercise any remedy provided for therein (including any rights of
indemnification) against any other party for as long as the Loan (or any portion
thereof) is outstanding.
(f) The Tenant in Common Agreement provides that each
tenant-in-common waives, for so long as the Loan (or any portion thereof) is
outstanding, any lien rights, whether statutory or otherwise, that it may have
against the co-tenancy interest of any other tenant-in-common.
(g) The Tenant in Common Agreement provides that for so long
as the Loan (or any portion thereof) is outstanding, Lender shall be a third
party beneficiary of the Tenant in Common Agreement.
4.25 SECURITIES LAWS COMPLIANCE. No Securities Laws have been
violated in connections with the issuing, selling, transferring or marketing of
tenancy in common interests. Without limiting the foregoing, no Borrower nor any
of their Affiliates has made any material untrue statement in any offering
memorandum or other offering materials provided to prospective investors in
connection with any potential investment in any such tenancy in common interest
or has omitted any material fact or information from any such materials.
Borrowers shall and shall cause all of their Affiliates to comply with any and
all securities laws in connections with the issuing, selling, transferring or
marketing of tenancy in common interests. Without limiting the foregoing, no
Borrower nor any of their Affiliates shall include any material untrue statement
in any offering memorandum or other offering materials provided to prospective
investors in connection with any potential investment in any such tenancy in
common interest or shall omit any material fact or information from any such
materials.
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All of the representations and warranties in this Article 4 and
elsewhere in the Loan Documents (i) shall survive for so long as any portion of
the Debt remains owing to Lender and (ii) shall be deemed to have been relied
upon by Lender notwithstanding any investigation heretofore or hereafter made by
Lender or on its behalf, provided, however, that the representations, warranties
and covenants set forth in Section 4.21 shall survive in perpetuity.
Notwithstanding anything to the contrary contained herein, it is understood and
agreed that any representation made by a Borrowers relating to a Borrower shall
be deemed made only by such Borrower with respect to itself and not by any other
Borrower.
5. COVENANTS
Until the end of the Term, Borrowers hereby covenant and agree with
Lender that:
5.1 EXISTENCE. Each Borrower shall (i) do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
existence, rights, and franchises, (ii) continue to engage in the business
presently conducted by it, (iii) obtain and maintain all Licenses, and (iv)
qualify to do business and remain in good standing under the laws of each
jurisdiction, in each case as and to the extent required for the ownership,
maintenance, management and operation of the Property.
5.2 TAXES AND OTHER CHARGES. Borrowers shall pay all Taxes and Other
Charges prior to delinquency, and deliver to Lender receipts for payment or
other evidence satisfactory to Lender that the Taxes and Other Charges have been
so paid prior to delinquency (provided, however, that Borrowers need not pay
such Taxes nor furnish such receipts for payment of Taxes paid by Lender
pursuant to Section 3.3). Borrowers shall not suffer and shall promptly cause to
be paid and discharged any Lien against the Property, and shall promptly pay for
all utility services provided to the Property. After prior notice to Lender,
Borrowers, at their own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due diligence, the
amount or validity or application of any Taxes or Other Charges, provided that
(i) no Event of Default has occurred and is continuing, (ii) such proceeding
shall suspend the collection of the Taxes or such Other Charges, (iii) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which any Borrower is subject and shall
not constitute a default thereunder, (iv) no part of or interest in the Property
will be in danger of being sold, forfeited, terminated, canceled or lost, (v)
Borrowers shall have furnished such security as may be required in the
proceeding, or as may be requested by Lender, to insure the payment of any such
Taxes or Other Charges, together with all interest and penalties thereon, which
shall not be less than 125% of the Taxes and Other Charges being contested (less
amounts then being retained in the Taxes and Insurance Subaccount to pay such
Taxes so contested), and (vi) Borrowers shall promptly upon final determination
thereof pay the amount of such Taxes or Other Charges, together with all costs,
interest and penalties. Lender may, with the prior approval of Borrowers (not to
be unreasonably withheld), pay over any such security or part thereof held by
Lender to the claimant entitled thereto at any time when, in the judgment of
Lender, the entitlement of such claimant is established.
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5.3 ACCESS TO PROPERTY. Borrowers shall permit agents,
representatives, consultants and employees of Lender to inspect the Property or
any part thereof at reasonable hours upon reasonable advance notice.
5.4 REPAIRS; MAINTENANCE AND COMPLIANCE; ALTERATIONS.
5.4.1 REPAIRS; MAINTENANCE AND COMPLIANCE. Borrowers shall at
all times maintain, preserve and protect all franchises and trade names, and
Borrowers shall cause the Property to be maintained in a good and safe condition
and repair and shall not remove, demolish or alter the Improvements or Equipment
(except for alterations performed in accordance with Section 5.4.2 and normal
replacement of Equipment with Equipment of equivalent value and functionality).
Borrowers shall promptly comply with all Legal Requirements and immediately cure
properly any violation of a Legal Requirement. Borrowers shall notify Lender in
writing within three Business Days after any Borrower first receives notice of
any such non-compliance. Borrowers shall promptly repair, replace or rebuild any
part of the Property that becomes damaged, worn or dilapidated and shall
complete and pay for any Improvements at any time in the process of construction
or repair.
5.4.2 ALTERATIONS. Borrowers may, without Lender's consent,
perform alterations to the Improvements and Equipment which (i) do not
constitute a Material Alteration, (ii) do not adversely affect any Borrower's
financial condition or the value or Net Operating Income of the Property and
(iii) are in the ordinary course of Borrowers' business. No Borrower shall
perform any Material Alteration without Lender's prior written consent, which
consent shall not be unreasonably withheld or delayed. Lender may, as a
condition to giving its consent to a Material Alteration, require that Borrowers
deliver to Lender security for payment of the cost of such Material Alteration
in an amount equal to 125% of the cost of the Material Alteration as estimated
by Lender. Upon substantial completion of the Material Alteration, Borrowers
shall provide evidence satisfactory to Lender that (i) the Material Alteration
was constructed in accordance with applicable Legal Requirements and
substantially in accordance with plans and specifications approved by Lender
(which approval shall not be unreasonably withheld or delayed), (ii) all
contractors, subcontractors, materialmen and professionals who provided work,
materials or services in connection with the Material Alteration have been paid
in full and have delivered unconditional releases of lien and (iii) all material
Licenses necessary for the use, operation and occupancy of the Material
Alteration (other than those which depend on the performance of tenant
improvement work) have been issued. Borrowers shall reimburse Lender upon demand
for all out-of-pocket costs and expenses (including the reasonable fees of any
architect, engineer or other professional engaged by Lender) incurred by Lender
in reviewing plans and specifications or in making any determinations necessary
to implement the provisions of this Section 5.4.2.
5.5 PERFORMANCE OF OTHER AGREEMENTS. Borrowers shall observe and
perform each and every term to be observed or performed by one or more Borrowers
pursuant to the terms of any agreement or instrument affecting or pertaining to
the Property, including the Loan Documents and the Tenant in Common Agreement.
5.6 COOPERATE IN LEGAL PROCEEDINGS. Borrowers shall cooperate fully
with Lender with respect to, and permit Lender, at its option, to participate
in, any proceedings before any
34
Governmental Authority which may in any way affect the rights of Lender under
any Loan Document.
5.7 FURTHER ASSURANCES. Borrowers shall, at Borrowers' sole cost and
expense, (i) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary
or desirable, to evidence, preserve and/or protect the collateral at any time
securing or intended to secure the Debt and/or for the better and more effective
carrying out of the intents and purposes of the Loan Documents, as Lender may
reasonably require from time to time; and (ii) upon Lender's request therefor
given from time to time after the occurrence of any Default or Event of Default
pay for (a) reports of UCC, federal tax lien, state tax lien, judgment and
pending litigation searches with respect to any Borrower and (b) searches of
title to the Property, each such search to be conducted by search firms
reasonably designated by Lender in each of the locations reasonably designated
by Lender.
5.8 ENVIRONMENTAL MATTERS.
5.8.1 HAZARDOUS SUBSTANCES. So long as one or more Borrowers
own or are in possession of the Property, each such Borrower shall (i) keep the
Property free from Hazardous Substances and in compliance with all Environmental
Laws, (ii) promptly notify Lender if such Borrower shall become aware that (A)
any Hazardous Substance is on or near the Property, (B) the Property is in
violation of any Environmental Laws or (C) any condition on or near the Property
shall pose a threat to the health, safety or welfare of humans and (iii) remove
such Hazardous Substances and/or cure such violations and/or remove such
threats, as applicable, as required by law (or as shall be required by Lender in
the case of removal which is not required by law, but in response to the opinion
of a licensed hydrogeologist, licensed environmental engineer or other qualified
environmental consulting firm engaged by Lender ("LENDER'S CONSULTANT")),
promptly after such Borrower becomes aware of same, at Borrowers' sole expense.
Nothing herein shall prevent such Borrower from recovering such expenses from
any other party that may be liable for such removal or cure.
5.8.2 ENVIRONMENTAL MONITORING.
(a) Borrowers shall give prompt written notice to Lender of
(i) any proceeding or inquiry by any party (including any Governmental
Authority) with respect to the presence of any Hazardous Substance on, under,
from or about the Property, (ii) all claims made or threatened by any third
party (including any Governmental Authority) against any Borrower or the
Property or any party occupying the Property relating to any loss or injury
resulting from any Hazardous Substance, and (iii) any Borrower's discovery of
any occurrence or condition on any real property adjoining or in the vicinity of
the Property that could cause the Property to be subject to any investigation or
cleanup pursuant to any Environmental Law. Upon becoming aware of the presence
of mold or fungus at the Property, Borrowers shall (i) undertake an
investigation to identify the source(s) of such mold or fungus and shall develop
and implement an appropriate remediation plan to eliminate the presence of any
Toxic Mold, (ii) perform or cause to be performed all acts reasonably necessary
for the remediation of any Toxic Mold (including taking any action necessary to
clean and disinfect any portions of the Property affected by Toxic Mold,
including providing any necessary moisture control systems at the Property), and
(iii) provide evidence reasonably satisfactory to Lender of the foregoing.
Borrowers shall permit Lender to
35
join and participate in, as a party if it so elects, any legal or administrative
proceedings or other actions initiated with respect to the Property in
connection with any Environmental Law or Hazardous Substance, and Borrowers
shall pay all reasonable attorneys' fees and disbursements incurred by Lender in
connection therewith.
(b) Upon Lender's request, at any time and from time to
time, Borrowers shall provide an inspection or audit of the Property prepared by
a licensed hydrogeologist, licensed environmental engineer or qualified
environmental consulting firm approved by Lender assessing the presence or
absence of Hazardous Substances on, in or near the Property, and if Lender in
its good faith judgment determines that reasonable cause exists for the
performance of such environmental inspection or audit, then the cost and expense
of such audit or inspection shall be paid by Borrowers. Such inspections and
audit may include soil bearings and ground water monitoring. If Borrowers fail
to provide any such inspection or audit within 30 days after such request,
Lender may order same, and Borrowers hereby grant to Lender and its employees
and agents access to the Property and a license to undertake such inspection or
audit.
(c) If any environmental site assessment report prepared in
connection with such inspection or audit recommends that an operations and
maintenance plan be implemented for any Hazardous Substance, whether such
Hazardous Substance existed prior to the ownership of the Property by any
Borrower, or presently exists or is reasonably suspected of existing, Borrowers
shall cause such operations and maintenance plan to be prepared and implemented
at their expense upon request of Lender, and with respect to any Toxic Mold,
Borrowers shall take all action necessary to clean and disinfect any portions of
the Improvements affected by Toxic Mold in or about the Improvements, including
providing any necessary moisture control systems at the Property. If any
investigation, site monitoring, containment, cleanup, removal, restoration or
other work of any kind is reasonably necessary under an applicable Environmental
Law ("REMEDIAL WORK"), Borrowers shall commence all such Remedial Work within 30
days after written demand by Lender and thereafter diligently prosecute to
completion all such Remedial Work within such period of time as may be required
under applicable law). All Remedial Work shall be performed by licensed
contractors approved in advance by Lender and under the supervision of a
consulting engineer approved by Lender. All costs of such Remedial Work shall be
paid by Borrowers, including Lender's reasonable attorneys' fees and
disbursements incurred in connection with the monitoring or review of such
Remedial Work. If Borrowers do not timely commence and diligently prosecute to
completion the Remedial Work, Lender may (but shall not be obligated to) cause
such Remedial Work to be performed at Borrowers' expense. Notwithstanding the
foregoing, Borrowers shall not be required to commence such Remedial Work within
the above specified time period: (x) if prevented from doing so by any
Governmental Authority, (y) if commencing such Remedial Work within such time
period would result in any Borrower or such Remedial Work violating any
Environmental Law, or (z) if Borrowers, at their expense and after prior written
notice to Lender, are contesting by appropriate legal, administrative or other
proceedings, conducted in good faith and with due diligence, the need to perform
Remedial Work. Borrowers shall have the right to contest the need to perform
such Remedial Work, provided that, (1) Borrowers are permitted by the applicable
Environmental Laws to delay performance of the Remedial Work pending such
proceedings, (2) neither the Property nor any part thereof or interest therein
will be sold, forfeited or lost if a Borrower fails to promptly perform the
Remedial Work being contested, and if such Borrower fails to prevail in contest
such Borrower would thereafter have the opportunity
36
to perform such Remedial Work, (3) Lender would not, by virtue of such permitted
contest, be exposed to any risk of any civil liability for which Borrowers have
not furnished additional security as provided in clause (4) below, or to any
risk of criminal liability, and neither the Property nor any interest therein
would be subject to the imposition of any Lien for which Borrowers have not
furnished additional security as provided in clause (4) below, as a result of
the failure to perform such Remedial Work and (4) Borrowers shall have furnished
to Lender additional security in respect of the Remedial Work being contested
and the loss or damage that may result from Borrowers' failure to prevail in
such contest in such amount as may be reasonably requested by Lender but in no
event less than one hundred twenty-five percent (125%) of the cost of such
Remedial Work as estimated by Lender or Lender's Consultant and any loss or
damage that may result from Borrowers' failure to prevail in such contest.
(d) No Borrower shall install or permit to be installed on
the Property any underground storage tank, except that the parties acknowledge
that the Property currently contains one 1,000 gallon diesel fuel underground
storage tank which is equipped with overfill protection, release detection and a
vapor monitoring system (the "EXISTING TANK"). Borrowers shall not use or permit
the Existing Tank to be used other than for its current use as a diesel fuel
tank, and shall cause sufficient on-site personnel to be properly trained in,
and responsible for, the monitoring and maintaining of such Existing Tank and
related monitoring and release prevention equipment, and maintain in place an
appropriate emergency response plan in the event of an alarm or release, all in
accordance with prudent monitoring, maintenance and protection standards and all
applicable environmental laws.
(e) Borrowers shall maintain and comply and cause the
Property to be operated in compliance with, and comply in all respects with the
terms and conditions of, an operation and maintenance program for the Property
with respect to the presence of asbestos and asbestos-containing materials at
the Property (the "O&M Program"), a copy of which O&M Program is attached hereto
as Schedule 10.
5.9 TITLE TO THE PROPERTY. Borrowers will warrant and defend the
title to the Property, and the validity and priority of all Liens granted or
otherwise given to Lender under the Loan Documents, subject only to Permitted
Encumbrances, against the claims of all Persons.
5.10 LEASES.
5.10.1 GENERALLY. Upon request, Borrowers shall furnish Lender
with executed copies of all Leases then in effect (other than Leases that have
previously been furnished to Lender). All renewals of Leases and all proposed
leases shall provide for rental rates and terms comparable to existing local
market rates and shall be arm's length transactions with bona fide, independent
third-party tenants.
5.10.2 MATERIAL LEASES. No Borrower shall enter into a proposed
Material Lease or a proposed renewal, extension (other than a renewal or
extension that is being unilaterally exercised by a tenant pursuant to the terms
of an existing Lease, with respect to which Lender shall not have any consent
rights) or modification of an existing Material Lease without the prior written
consent of Lender, which consent shall not, so long as no Event of Default is
continuing, be unreasonably withheld or delayed. Prior to seeking Lender's
consent to any Material Lease,
37
Borrowers shall deliver to Lender a copy of such proposed lease (a "PROPOSED
MATERIAL LEASE") blacklined to show changes from the standard form of Lease
approved by Lender and then being used by Borrowers. Lender shall approve or
disapprove each Proposed Material Lease or proposed renewal, extension or
modification of an existing Material Lease for which Lender's approval is
required under this Agreement within 10 Business Days of the submission by
Borrowers to Lender of a written request for such approval, accompanied by a
final copy of the Proposed Material Lease or proposed renewal, extension or
modification of an existing Material Lease. If requested by Borrowers, Lender
will grant conditional approvals of Proposed Material Leases or proposed
renewals, extensions or modifications of existing Material Leases at any stage
of the leasing process, from initial "term sheet" through negotiated lease
drafts, provided that Lender shall retain the right to disapprove any such
Proposed Material Lease or proposed renewal, extension or modification of an
existing Material Lease, if subsequent to any preliminary approval material
changes are made to the terms previously approved by Lender, or additional
material terms are added that had not previously been considered and approved by
Lender in connection with such Proposed Material Lease or proposed renewal,
extension or modification of an existing Material Lease. Provided that no Event
of Default is continuing, if Borrowers provide Lender with a written request for
approval (which written request shall specifically refer to this Section 5.10.2
and shall explicitly state that failure by Lender to approve or disapprove
within 10 Business Days will constitute a deemed approval) and Lender fails to
reject the request in writing delivered to Borrowers within 10 Business Days
after receipt by Lender of the request, the Proposed Material Lease or proposed
renewal, extension or modification of an existing Material Lease shall be deemed
approved by Lender, and Borrowers shall be entitled to enter into such Proposed
Material Lease or proposed renewal, extension or modification of an existing
Material Lease. Notwithstanding anything to the contrary in this Section 5.10,
unless expressly agreed to in writing by Lender, any approval or deemed approval
by Lender of a proposed Lease or proposed renewal, extension or modification of
an existing Lease pursuant to this Section 5.10 shall not be deemed to
constitute (in and of itself) an approval or deemed approval by Lender of any
Approved Leasing Expenses in connection therewith.
5.10.3 MINOR LEASES. Notwithstanding the provisions of Section
5.10.2 above, provided that no Event of Default is continuing, renewals,
amendments and modifications of existing Leases and proposed leases shall not be
subject to the prior approval of Lender provided (i) the proposed lease would be
a Minor Lease or the existing Lease as amended or modified or the renewal Lease
is a Minor Lease, (ii) the proposed lease shall be written substantially in
accordance with the standard form of Lease which shall have been approved by
Lender, (iii) the Lease as amended or modified or the renewal Lease or series of
leases or proposed lease or series of leases: (a) shall provide for net
effective rental rates comparable to existing local market rates, (b) with
respect to any new Lease with a new tenant (other than kiosks and vending
machines), shall have an initial term (together with all renewal options) of not
less than three years or greater than ten years, (c) shall provide for automatic
self-operative subordination to the Mortgage and, at Lender's option, (x)
attornment to Lender and (y) the unilateral right by Lender, at the option of
Lender, to subordinate the Lien of the Mortgage to the Lease, and (d) shall not
contain any option to purchase, any right of first refusal to purchase, any
right to terminate (except in the event of the destruction or condemnation of
substantially all of the Property), any requirement for a non-disturbance or
recognition agreement, or any other provision which might adversely affect the
rights of Lender under the Loan Documents in any
38
material respect. Borrowers shall deliver to Lender copies of all Leases which
are entered into pursuant to the preceding sentence together with Borrowers'
certification that it has satisfied all of the conditions of the preceding
sentence within ten days after the execution of the Lease. Notwithstanding
anything in this Section 5.10 to the contrary, at Borrowers' request and at
Borrowers' sole cost and expense, Lender shall enter into a subordination,
non-disturbance and attornment agreement on Lender's then current form with any
tenant under a Lease of at least 2,500 rentable square feet.
5.10.4 ADDITIONAL COVENANTS WITH RESPECT TO LEASES. Each
Borrower (i) shall observe and perform the material obligations imposed upon the
lessor under the Leases and shall not do or permit anything to impair the value
of the Leases as security for the Debt; (ii) shall promptly send copies to
Lender of all notices of default that such Borrower shall send or receive under
any Lease; (iii) shall enforce, in accordance with commercially reasonable
practices for properties similar to the Property, the terms, covenants and
conditions in the Leases to be observed or performed by the lessees, short of
termination thereof; (iv) shall not collect any of the Rents more than one month
in advance (other than security deposits); (v) shall not execute any other
assignment of lessor's interest in the Leases or the Rents (except as
contemplated by the Loan Documents); (vi) shall not modify any Lease in a manner
inconsistent with the Loan Documents; (vii) shall not convey or transfer or
suffer or permit a conveyance or transfer of the Property so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees under Leases; (viii) shall not consent to any assignment
of or subletting under any Material Lease unless required in accordance with its
terms without the prior consent of Lender, which, with respect to a subletting,
may not, so long as no Event of Default is continuing, be unreasonably withheld
or delayed; and (ix) shall not cancel or terminate any Lease or accept a
surrender thereof (except in the exercise of Borrowers' commercially reasonable
judgment in connection with a tenant default under a Minor Lease) without the
prior consent of Lender, which consent shall not, so long as no Event of Default
is continuing, be unreasonably withheld or delayed.
5.11 ESTOPPEL STATEMENT. After request by Lender, Borrowers' Designee
shall within ten days furnish Lender with a statement addressed to Lender, its
successors and assigns, duly acknowledged and certified, setting forth (i) the
unpaid Principal, (ii) the Interest Rate, (iii) the date installments of
interest and/or Principal were last paid, (iv) any offsets or defenses to the
payment of the Debt, and (v) that the Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification.
5.12 PROPERTY MANAGEMENT.
5.12.1 MANAGEMENT AGREEMENT. Borrowers shall (i) cause the
Property to be managed pursuant to the Management Agreement; (ii) promptly
perform and observe all of the covenants required to be performed and observed
by them under the Management Agreement and do all things necessary to preserve
and to keep unimpaired their rights thereunder; (iii) promptly notify Lender of
any default under the Management Agreement of which they are aware; (iv)
promptly deliver to Lender a copy of each financial statement, business plan,
capital expenditure plan, and property improvement plan and any other notice,
report and estimate received by any Borrower under the Management Agreement; and
(v) promptly enforce the performance and observance of all of the covenants
required to be performed and observed by
39
Manager under the Management Agreement. Without Lender's prior written consent,
no Borrower shall (a) surrender, terminate, cancel, extend or renew the
Management Agreement or otherwise replace the Manager or enter into any other
management agreement (except pursuant to Section 5.12.2); (b) reduce or consent
to the reduction of the term of the Management Agreement; (c) increase or
consent to the increase of the amount of any charges under the Management
Agreement; (d) otherwise modify, change, supplement, alter or amend in any
material respect, or waive or release any of its rights and remedies under, the
Management Agreement; (e) suffer or permit the occurrence and continuance of a
default beyond any applicable cure period under the Management Agreement (or any
successor management agreement) if such default permits the Manager to terminate
the Management Agreement (or such successor management agreement); or (f) suffer
or permit the ownership, management or control of the Manager to be transferred
to a Person other than an Affiliate of Behringer.
5.12.2 TERMINATION OF MANAGER. If (i) as of any Calculation
Date, Borrowers fail to maintain a Debt Service Coverage Ratio of at least
1.05:1 or (ii) an Event of Default shall be continuing, or (iii) Manager is in
default under the Management Agreement, or (iv) upon the gross negligence,
malfeasance or willful misconduct of the Manager, Borrowers shall, at the
request of Lender, terminate the Management Agreement and replace Manager with a
replacement manager acceptable to Lender in Lender's discretion and the
applicable Rating Agencies on terms and conditions satisfactory to Lender and
the applicable Rating Agencies. All calculations of the Debt Service Coverage
Ratio for purposes of this Section 5.12.2 shall be subject to verification by
Lender. Borrowers' failure to appoint an acceptable manager within thirty (30)
days after Lender's request of Borrowers to terminate the Management Agreement
shall constitute an immediate Event of Default. Borrowers may from time to time
appoint a successor manager to manage the Property, which successor manager and
Management Agreement shall be approved in writing by Lender in Lender's
discretion and the applicable Rating Agencies.
5.13 SPECIAL PURPOSE BANKRUPTCY REMOTE ENTITY. Each Borrower shall at
all times be a Special Purpose Bankruptcy Remote Entity. No Borrower shall
directly or indirectly make any change, amendment or modification to its
organizational documents, or otherwise take any action which could result in
such Borrower not being a Special Purpose Bankruptcy Remote Entity. A "SPECIAL
PURPOSE BANKRUPTCY REMOTE ENTITY" shall have the meaning set forth on Schedule 5
hereto.
5.14 ASSUMPTION IN NON-CONSOLIDATION OPINION. Each Borrower shall
conduct their business so that the assumptions (with respect to each Person)
made in that certain substantive non-consolidation opinion letter dated the date
hereof delivered by Borrowers' counsel in connection with the Loan, shall be
true and correct in all respects.
5.15 CHANGE IN BUSINESS OR OPERATION OF PROPERTY. Borrowers shall not
purchase or own any real property other than the Property and shall not enter
into any line of business other than the ownership and operation of the
Property, or make any material change in the scope or nature of their business
objectives, purposes or operations, or undertake or participate in activities
other than the continuance of its present business or otherwise cease to operate
the Property as an office building, or terminate such business for any reason
whatsoever (other than temporary cessation in connection with renovations to the
Property).
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5.16 DEBT CANCELLATION. No Borrower shall cancel or otherwise forgive
or release any claim or debt (other than termination of Leases in accordance
herewith) owed to such Borrower by any Person, except for adequate consideration
and in the ordinary course of such Borrower's business.
5.17 AFFILIATE TRANSACTIONS. No Borrower shall enter into, or be a
party to, any transaction with an Affiliate of any Borrower or any of the
members of any Borrower except in the ordinary course of business and on terms
which are fully disclosed to Lender in advance and are no less favorable to such
Borrower or such Affiliate than would be obtained in a comparable arm's-length
transaction with an unrelated third party.
5.18 ZONING. No Borrower shall initiate or consent to any zoning
reclassification of any portion of the Property or seek any variance under any
existing zoning ordinance or use or permit the use of any portion of the
Property in any manner that could result in such use becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, without the prior consent of Lender.
5.19 NO JOINT ASSESSMENT. No Borrower shall suffer, permit or
initiate the joint assessment of the Property (i) with any other real property
constituting a tax lot separate from the Property, and (ii) with any portion of
the Property which may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to the Property.
5.20 PRINCIPAL PLACE OF BUSINESS. No Borrower shall change its
principal place of business or chief executive office without first giving
Lender 30 days' prior notice.
5.21 CHANGE OF NAME, IDENTITY OR STRUCTURE. No Borrower shall change
its name, identity (including its trade name or names) or such Borrower's
corporate, partnership or other structure without notifying Lender of such
change in writing at least thirty (30) days prior to the effective date of such
change and, in the case of a change in such Borrower's structure, without first
obtaining the prior written consent of Lender. Each Borrower shall execute and
deliver to Lender, prior to or contemporaneously with the effective date of any
such change, any financing statement or financing statement change required by
Lender to establish or maintain the validity, perfection and priority of the
security interest granted herein. At the request of Lender, each Borrower shall
execute a certificate in form satisfactory to Lender listing the trade names
under which such Borrower intends to operate the Property, and representing and
warranting that such Borrower does business under no other trade name with
respect to the Property.
5.22 INDEBTEDNESS. Borrowers shall not directly or indirectly create,
incur or assume any indebtedness other than the Debt and unsecured trade
payables incurred in the ordinary course of business relating to the ownership
and operation of the Property which do not exceed, at any time, a maximum amount
of 2% of the original amount of the Principal and are paid within sixty (60)
days of the date incurred or invoiced (collectively, "PERMITTED INDEBTEDNESS");
provided, however, such 2% limitation shall not apply to (i) any asset
management or property management fee payable pursuant to the terms of the
Management Agreement or (ii) any amounts that are payable out of the Capital
Reserve Subaccount, the Rollover Reserve Subaccount or any other reserves
established under this Agreement. Notwithstanding the
41
foregoing, with respect to the 60-day period set forth above, Borrowers may,
after prior notice to Lender, at their own expense, contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity of any such Permitted Indebtedness (during
which time such 60-day period shall be tolled), provided that if Borrowers
desire to withhold payment of such Permitted Indebtedness during the pendency of
the contest, (i) no Event of Default has occurred and is continuing, (ii) no
part of or interest in the Property will be in danger of being sold, forfeited,
terminated, canceled or lost, (iii) Borrowers shall have furnished such security
as may be required in the proceeding, or as may be reasonably requested by
Lender, to insure the payment of any such Permitted Indebtedness, together with
all interest and penalties thereon, which shall not be less than 125% of the
Permitted Indebtedness being contested, and (iv) Borrowers shall promptly upon
final determination thereof pay the amount of such Permitted Indebtedness,
together with all costs, interest and penalties and Borrower shall be permitted
to use such security to make such payment.
5.23 LICENSES. No Borrower shall Transfer any License required for
the operation of the Property.
5.24 COMPLIANCE WITH RESTRICTIVE COVENANTS, ETC. No Borrower will
modify, waive in any material respect or release any Easements, restrictive
covenants or other Permitted Encumbrances, or suffer, consent to or permit the
foregoing, without Lender's prior written consent, which consent may be granted
or denied in Lender's sole discretion.
5.25 ERISA.
5.25.1.1 No Borrower shall engage in any transaction which would
cause any obligation, or action taken or to be taken, hereunder (or the exercise
by Lender of any of its rights under the Note, this Agreement or the other Loan
Documents) to be a non-exempt (under a statutory or administrative class
exemption) prohibited transaction under ERISA.
5.25.1.2 No Borrower shall maintain, sponsor, contribute to or
become obligated to contribute to, or suffer or permit any ERISA Affiliate of
such Borrower to, maintain, sponsor, contribute to or become obligated to
contribute to, any Plan or any Welfare Plan or permit the assets of such
Borrower to become "plan assets," whether by operation of law or under
regulations promulgated under ERISA.
5.25.1.3 Each Borrower shall deliver to Lender such
certifications or other evidence from time to time throughout the Term, as
requested by Lender in its sole discretion, that (A) such Borrower is not and
does not maintain an "employee benefit plan" as defined in Section 3(3) of
ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(3) of ERISA; (B) such Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (C) one or more of the following circumstances is true:
(1) Equity interests in such Borrower are publicly offered
securities, within the meaning of 29 C.F.R. ss.2510.3-101(b)(2);
42
(2) Less than twenty-five percent (25%) of each outstanding
class of equity interests in such Borrower are held by "benefit plan
investors" within the meaning of 29 C.F.R. ss.2510.3-101(f)(2); or
(3) such Borrower qualifies as an "operating company" or a
"real estate operating company" within the meaning of 29 C.F.R.
ss.2510.3-101(c) or (e).
5.26 TRANSFERS.
5.26.1 GENERALLY. No Borrower shall directly or indirectly
make, suffer or permit the occurrence of any Transfer other than a Permitted
Transfer.
5.26.2 TIC TRANSFERS AND ASSUMPTIONS.
(a) INITIAL TIC TRANSFERS. Immediately after the execution
and delivery of this Agreement, TIC II LLC shall transfer an aggregate of
74.088084% of the tenant-in-common percentage interests in the Property to the
entities identified on Schedule 1 (the "INITIAL TIC BORROWERS"), which Initial
TIC Borrowers will assume, on a joint and several basis, Borrowers' obligations
under the Loan Documents (the "INITIAL TIC TRANSFERS"); provided that in
connection with the Initial TIC Transfers, each of the conditions set forth in
clauses (3) through (13) of subsection (b) below shall have been satisfied.
(b) SUBSTITUTION OF TIC BORROWERS. Subject to obtaining
Lender's prior written consent, and subject to the satisfaction of all of the
conditions precedent set forth below, after the Initial TIC Transfers any TIC
Borrower that owns less than a 49% tenant-in-common interest in the Property
shall have a one-time right to transfer its tenant-in-common interest in the
Property to another entity (the "SUBSTITUTE TIC BORROWER", and together with the
Initial TIC Borrowers, collectively, the "TIC BORROWERS")) that will assume, on
a joint and several basis, Borrowers' obligations under the Loan Documents (a
"TIC TRANSFER AND ASSUMPTION"). Borrowers may make a written application to
Lender for Lender's consent to a TIC Transfer and Assumption, subject to the
conditions set forth below. Together with each such written application,
Borrowers will pay to Lender a non-refundable $2,000 processing fee. Borrowers
also shall pay on demand all of the reasonable out-of-pocket costs and expenses
incurred by Lender, including reasonable attorneys' fees and expenses, in
connection with any proposed TIC Transfer and Assumption, whether or not the
same occurs. Lender's consent to a TIC Transfer and Assumption, which shall be
granted or denied within ten (10) Business Days following receipt of the items
described in clause (2) of subsection (b) above, shall be subject to the
satisfaction of the following conditions:
(1) No Event of Default has occurred and is continuing.
(2) The identity and financial condition of each Substitute
TIC Borrower and the owner(s) of the beneficial interests in such
Substitute TIC Borrower (each, a "TIC OWNER") shall be satisfactory to
Lender. In connection with the foregoing, with respect to any proposed
Substitute TIC Borrower and TIC Owner, (i) Lender shall have received
true and correct copies of credit reports, Lexis/Nexis background
searches, financial statements and federal income tax returns for the
two years preceding the TIC Transfer and Assumption in question, and any
other information reasonably requested by Lender
43
concerning the proposed Substitute TIC Borrower and/or its TIC Owner(s)
and (ii) the subject TIC Owner shall (1) be solvent, (2) have never been
convicted of a felony, (3) have never been the subject of a voluntary or
involuntary (to the extent the same has not been discharged) bankruptcy
proceeding, (4) have no outstanding judgments against him/her and (5)
shall be an "Accredited Investor" as defined in Regulation D, as
promulgated under the Securities Act of 1933. Lender's consent to a
proposed TIC Transfer and Assumption shall be granted or denied within
ten (10) Business Days following receipt of the items described above.
(3) Each Substitute TIC Borrower shall be a Single Member
Bankruptcy Remote LLC in compliance with the requirements of Section
5.13 and Schedule 5 hereof, whose operating agreement shall be in
substantially the same form as the operating agreements of the Initial
TIC Borrowers.
(4) The TIC Owner(s) of each Substitute TIC Borrower shall
execute and deliver to Lender a Guaranty of Recourse Obligations in the
form attached hereto as Schedule 6.
(5) INTENTIONALLY DELETED.
(6) INTENTIONALLY DELETED.
(7) The Behringer Entities shall collectively at all times
retain at least the Behringer Minimum Tenant-in-Common Interest in the
Property.
(8) The applicable Substitute TIC Borrower shall execute and
deliver to Lender an assignment and assumption agreement in the form
attached hereto as Schedule 7, pursuant to which, among other things,
such Substitute TIC Borrower shall assume all of Borrowers', liabilities
and obligations under the Loan Documents so that each existing Borrower
and each Substitute TIC Borrower shall be jointly and severally liable
for all of the liabilities and obligations under the Loan Documents as
set forth herein, and upon the execution and delivery of such assignment
and assumption agreement such Substitute TIC Borrower shall be a
"Borrower" for all purposes under the Loan Documents.
(9) The applicable Substitute TIC Borrower shall execute and
deliver an assumption of the Tenant-in-Common Agreement and the
Management Agreement.
(10) The applicable Substitute TIC Borrower and each existing
Borrower shall execute and deliver to Lender any other documents or
deliverable required by Lender related to the TIC Transfer and
Assumption, including title insurance endorsements, in form and
substance acceptable to Lender in Lender's sole discretion (together
with the documents required pursuant to paragraphs (4), (8) and (9)
above, the "TIC TRANSFER DOCUMENTS").
(11) Each Substitute TIC Borrower shall deliver to Lender an
opinion of counsel in form and substance satisfactory to Lender, to the
effect that each Substitute TIC Borrower is duly formed, validly
existing, and in good standing, that the TIC Transfer Documents have
been duly authorized, executed and delivered, that the TIC
44
Transfer Documents and the Loan Documents are enforceable in accordance
with their terms, and such other matters as Lender may request.
(12) With respect to each Substitute TIC Borrower and TIC
Owner, each such Substitute TIC Borrower shall deliver to Lender a
substantive non-consolidation opinion in form and substance reasonably
satisfactory to Lender.
(13) With respect to any TIC Transfer and Assumption, (i)
after giving effect to such TIC Transfer and Assumption, Key Principal
shall continue to Control (as defined in clause (ii) of the defined term
"Control" in Section 1.1) the Manager and the day to day management and
operations of the Property, and (ii) no such TIC Transfer and Assumption
shall result in a change of the day to day management and operations of
the Property.
(14) If the Loan, by itself or together with other loans, has
been the subject of a Secondary Market Transaction, then, if required by
the applicable Rating Agencies, Lender shall have received a Rating
Comfort Letter from the applicable Rating Agencies.
(15) Borrowers shall deliver to Lender an assumption fee in
the amount of 1.00% of the Substitute TIC Borrower's pro-rata share of
the then unpaid Principal (i.e., an amount equal to 1.00% of the product
of (1) the then unpaid Principal and (2) the applicable Substitute TIC
Borrower's undivided tenant in common interest (after giving effect to
the subject TIC Transfer and Assumption) in the Property (expressed as a
percentage)); provided that such assumption fee shall not be payable in
connection with the first five TIC Transfer and Assumptions;
(16) If the Loan, by itself or together with other loans, has
been the subject of a Secondary Market Transaction, then, if required by
the applicable Rating Agencies, Lender shall have received a Rating
Comfort Letter from the applicable Rating Agencies.
5.26.3 TRANSFER AND ASSUMPTION.
(a) Subject to obtaining Lender's prior written consent,
which may be withheld in Lender's reasonable and absolute discretion, and
subject to the terms and satisfaction of all of the conditions precedent set
forth in this Section 5.26.3, Borrowers shall have a one-time right to Transfer
the Property to one or more parties (the "TRANSFEREE BORROWER") and have the
Transferee Borrower assume all of Borrowers' obligations under the Loan
Documents, and have replacement guarantors and indemnitors assume all of the
obligations of the indemnitors and guarantors of the Loan Documents
(collectively, a "TRANSFER AND ASSUMPTION"). Borrowers may make a written
application to Lender for Lender's consent to the Transfer and Assumption,
subject to the conditions set forth in paragraphs (b) and (c) of this Section
5.26.3. Together with such written application, Borrowers will pay to Lender the
reasonable review fee then required by Lender. Borrowers also shall pay on
demand all of the reasonable costs and expenses incurred by Lender, including
reasonable attorneys' fees and expenses, and including the fees and expenses of
Rating Agencies and other outside entities, in connection with considering any
proposed Transfer and Assumption, whether or not the same is permitted or
occurs.
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(b) Lender's consent, which may be withheld in Lender's
reasonable discretion, to a Transfer and Assumption shall be subject to the
following conditions:
(1) No Event of Default has occurred and is continuing;
(2) Borrowers have submitted to Lender true, correct and
complete copies of any and all information and documents of any kind
requested by Lender concerning the Property, Transferee Borrower,
replacement guarantors and indemnitors and Borrowers;
(3) Evidence satisfactory to Lender has been provided
showing that the Transferee Borrower and such of its Affiliates as shall
be designated by Lender comply and will comply with Section 5.13 hereof,
as those provisions may be modified by Lender taking into account the
ownership structure of Transferee Borrower and its Affiliates;
(4) If the Loan, by itself or together with other loans, has
been the subject of a Secondary Market Transaction, then Lender shall
have received a Rating Comfort Letter from the applicable Rating
Agencies;
(5) If the Loan has not been the subject of a Secondary
Market Transaction, then Lender shall have determined that no rating for
any securities that would be issued in connection with such
securitization will be diminished, qualified, or withheld by reason of
the Transfer and Assumption;
(6) Borrowers shall have paid all of Lender's reasonable
costs and expenses in connection with considering the Transfer and
Assumption, and shall have paid the amount requested by Lender as a
deposit against Lender's costs and expenses in connection with the
effecting the Transfer and Assumption;
(7) Borrowers, the Transferee Borrower, and the replacement
guarantors and indemnitors shall have indicated in writing in form and
substance reasonably satisfactory to Lender their readiness and ability
to satisfy the conditions set forth in subsection (c) below;
(8) The identity, experience, and financial condition of the
Transferee Borrower and the replacement guarantors and indemnitors shall
be satisfactory to Lender; and
(9) The proposed property manager and proposed Management
Agreement shall be satisfactory to Lender and the applicable Rating
Agencies.
(c) If Lender consents to the Transfer and Assumption, the
Transferee Borrower and/or Borrower as the case may be, shall immediately
deliver the following to Lender:
(1) Borrowers shall deliver to Lender an assumption fee in
the amount of 1.00% of the then unpaid Principal;
46
(2) Borrowers, Transferee Borrower and the original and
replacement guarantors and indemnitors shall execute and deliver to
Lender any and all documents required by Lender, in form and substance
required by Lender, in Lender's sole discretion;
(3) Counsel to the Transferee Borrower and replacement
guarantors and indemnitors shall deliver to Lender opinions in form and
substance satisfactory to Lender as to such matters as Lender shall
require, which may include opinions as to substantially the same matters
and were required in connection with the origination of the Loan
(including a new substantive non-consolidation opinion with respect to
the Transferee Borrower);
(4) Borrowers shall cause to be delivered to Lender, an
endorsement (relating to the change in the identity of the vestee and
execution and delivery of the Transfer and Assumption documents) to the
Title Insurance Policies in form and substance acceptable to Lender, in
Lender's reasonable discretion (the "ENDORSEMENT"); and
(5) Borrowers shall deliver to Lender a payment in the
amount of all remaining unpaid costs incurred by Lender in connection
with the Transfer and Assumption, including but not limited to, Lender's
reasonable attorneys fees and expenses, all recording fees, and all fees
payable to the title company for the delivery to Lender of the
Endorsement.
(d) Upon the closing of a Transfer and Assumption, Lender
shall release Borrowers and Guarantors from all obligations under the Loan
Documents arising prior to and after the date of the Transfer and Assumption
(but only to the extent that such obligations of Borrowers and Guarantors are
expressly assumed by the Transferee Borrower or replacement guarantor, as the
case may be, in connection with the Transfer and Assumption).
(e) The rights of Borrowers under this Section 5.26.3 are in
addition to and in no way shall limit or be limited by the occurrence of one or
more TIC Transfer and Assumptions permitted pursuant to Section 5.26.2 above.
5.27 LIENS. Without Lender's prior written consent, no Borrower shall
create, incur, assume, permit or suffer to exist any Lien on all or any portion
of the Property or any direct or indirect legal or beneficial ownership interest
in any Borrower, except Liens in favor of Lender and Permitted Encumbrances,
unless such Lien is bonded or discharged within 30 days after any Borrower first
receives notice of such Lien.
5.28 DISSOLUTION. No Borrower shall (i) engage in any dissolution,
liquidation or consolidation or merger with or into any other business entity,
(ii) engage in any business activity not related to the ownership and operation
of the Property or (iii) transfer, lease or sell, in one transaction or any
combination of transactions, all or substantially all of the property or assets
of such Borrower except to the extent expressly permitted by the Loan Documents.
5.29 EXPENSES. Borrowers shall reimburse Lender upon receipt of
notice for all reasonable out-of-pocket costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by Lender in connection with the
Loan, including (i) the preparation, negotiation, execution and delivery of the
Loan Documents and the consummation of the
47
transactions contemplated thereby and all the costs of furnishing all opinions
by counsel for Borrowers; (ii) Borrowers' and Lender's ongoing performance under
and compliance with the Loan Documents, including confirming compliance with
environmental and insurance requirements; (iii) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications of or under any Loan Document and any other documents or
matters requested by Lender; (iv) filing and recording of any Loan Documents;
(v) title insurance, surveys, inspections and appraisals; (vi) the creation,
perfection or protection of Lender's Liens in the Property and the Cash
Management Accounts (including fees and expenses for title and lien searches,
intangibles taxes, personal property taxes, mortgage recording taxes, due
diligence expenses, travel expenses, accounting firm fees, costs of appraisals,
environmental reports and Lender's Consultant, surveys and engineering reports);
(vii) enforcing or preserving any rights in response to third party claims or
the prosecuting or defending of any action or proceeding or other litigation, in
each case against, under or affecting one or more Borrowers, the Loan Documents,
the Property, or any other security given for the Loan; (viii) fees charged by
Rating Agencies in connection with any modification of the Loan requested by
Borrowers and (ix) enforcing any obligations of or collecting any payments due
from Borrowers under any Loan Document or with respect to the Property or in
connection with any refinancing or restructuring of the Loan in the nature of a
"work-out", or any insolvency or bankruptcy proceedings. Any costs and expenses
due and payable to Lender hereunder which are not paid by Borrowers within ten
days after demand may be paid from any amounts in the Deposit Account, with
notice thereof to any Borrower. The obligations and liabilities of Borrowers
under this Section 5.29 shall survive the Term and the exercise by Lender of any
of its rights or remedies under the Loan Documents, including the acquisition of
the Property by foreclosure or a conveyance in lieu of foreclosure.
5.30 INDEMNITY. Borrowers shall defend, indemnify and hold harmless
Lender and each of its Affiliates and their respective successors and assigns,
including the directors, officers, partners, members, shareholders,
participants, employees, professionals and agents of any of the foregoing
(including any Servicer) and each other Person, if any, who Controls Lender, its
Affiliates or any of the foregoing (each, an "INDEMNIFIED PARTY"), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including the reasonable fees and disbursements of counsel
for an Indemnified Party in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not Lender shall be
designated a party thereto, court costs and costs of appeal at all appellate
levels, investigation and laboratory fees, consultant fees and litigation
expenses), that may be imposed on, incurred by, or asserted against any
Indemnified Party (collectively, the "INDEMNIFIED LIABILITIES") in any manner,
relating to or arising out of or by reason of the Loan, including: (i) any
breach by any Borrower of its obligations under, or any misrepresentation by any
Borrower contained in, any Loan Document; (ii) the use or intended use of the
proceeds of the Loan; (iii) any information provided by any Borrower; (iv)
ownership of the Mortgage, the Property or any interest therein, or receipt of
any Rents; (v) any accident, injury to or death of persons or loss of or damage
to property occurring in, on or about the Property or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(vi) any use, nonuse or condition in, on or about the Property or on adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(vii) performance of any labor or services or the furnishing of any materials or
other property in respect of the Property; (viii) the presence, disposal,
escape, seepage, leakage,
48
spillage, discharge, emission, release, or threatened release of any Hazardous
Substance on, from or affecting the Property; (ix) any personal injury
(including wrongful death) or property damage (real or personal) arising out of
or related to such Hazardous Substance; (x) any lawsuit brought or threatened,
settlement reached, or government order relating to such Hazardous Substance;
(xi) any violation of the Environmental Laws which is based upon or in any way
related to such Hazardous Substance, including the costs and expenses of any
Remedial Work; (xii) any failure of the Property to comply with any Legal
Requirement; (xiii) any claim by brokers, finders or similar persons claiming to
be entitled to a commission in connection with any Lease or other transaction
involving the Property or any part thereof, or any liability asserted against
Lender with respect thereto; and (xiv) the claims of any lessee of any portion
of the Property or any Person acting through or under any lessee or otherwise
arising under or as a consequence of any Lease; provided, however, that
Borrowers shall not have any obligation to any Indemnified Party hereunder to
the extent that it is finally judicially determined that such Indemnified
Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of such Indemnified Party. Any amounts payable to any Indemnified
Party by reason of the application of this paragraph shall be payable within 10
days after demand and shall bear interest at the Default Rate from the date due
until paid. The obligations and liabilities of Borrowers under this Section 5.30
shall survive the Term and the exercise by Lender of any of its rights or
remedies under the Loan Documents, including the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.
5.31 TENANT IN COMMON AGREEMENT. (a) Each Borrower shall (i)
diligently perform and observe all of the terms, covenants and conditions set
forth in the Tenant in Common Agreement on the part of each such Borrower to be
performed thereunder, and (ii) promptly deliver to Lender any notice given or
received by any Borrower under the Tenant in Common Agreement.
(b) No Borrower shall without the prior consent of Lender,
terminate or cancel the Tenant in Common Agreement or modify, change,
supplement, alter or amend the Tenant in Common Agreement in any manner
whatsoever (other than to reflect an assumption of the Tenant in Common
Agreement by a TIC Borrower in accordance with Section 5.26.2(b)(10)), and any
such termination, cancellation, modification, change, supplement, alteration or
amendment of the Tenant in Common Agreement without the prior consent of Lender
shall be void and of no force and effect.
(c) Each Borrower hereby assigns to Lender, as further
security for the payment of the Debt and for the performance and observance of
the terms, covenants and conditions of the Loan Documents all of the rights,
privileges and prerogatives of the applicable Borrower under the Tenant in
Common Agreement and the Management Agreement, including any rights of first
refusal (including any such rights arising under Section 363(i) of Chapter 11 of
the United States Bankruptcy Code), purchase options or other similar rights
under the Tenant in Common Agreement. Each Borrower hereby agrees that any
rights of first refusal, purchase options or other similar rights under the
Tenant in Common Agreement afforded to any Borrower are hereby made expressly
subordinate to the Mortgage and the other Loan Documents.
49
(d) Each Borrower hereby agrees that all rights and remedies
of each such Borrower, including rights of indemnification, under the Tenant in
Common Agreement are hereby expressly made subject and subordinate to the terms
and conditions of the Loan Documents and, so long as the Loan is outstanding, no
Borrower shall exercise any such rights and remedies, including any rights of
indemnification, against any other tenant-in-common under the Tenant in Common
Agreement.
(e) Each Borrower hereby waives any rights it may have
(whether by operation of law or pursuant to the terms of the Tenant in Common
Agreement), so long as any portion of the Debt is outstanding, to create or
suffer to exist any Lien on all or any portion of any other tenant-in-common
interest held by any other Borrower pursuant to the terms of the Tenant in
Common Agreement and, so long as the Loan is outstanding, no Borrower shall
place a Lien on all or any portion of any other tenant-in-common interest held
by any other Borrower pursuant to the terms of the Tenant in Common Agreement.
(f) Each Borrower hereby waives any right that it may have
(whether by operation of law or pursuant to the terms of the Tenant in Common
Agreement), so long as any portion of the Debt is outstanding, to make any
application to or petition any court for a partition of the Property, and, so
long any portion of the Debt is outstanding, no Borrower shall make any
application to or petition any court for a partition of the Property.
5.32 BEHRINGER MINIMUM TENANT-IN COMMON INTEREST. At all times during
the Term, (i) the Behringer Entities shall collectively retain at least the
Behringer Minimum Tenant-in-Common Interest in the Property, and (ii) Key
Principal shall continue to maintain Control (directly or indirectly) (as
defined in clause (ii) of the defined term "Control" in Section 1.1) of
Behringer TIC I LLC, with respect to voting rights on all matters relating to
the Loan, the Loan Documents and/or restructurings or amendments or
modifications thereof (including in connection with a work-out relating
thereto). The failure of the foregoing shall, at Lender's option, constitute an
Event of Default.
5.33 PATRIOT ACT COMPLIANCE(a) . (a) Borrowers will use their good
faith and commercially reasonable efforts to comply with the Patriot Act (as
defined below) and all applicable requirements of governmental authorities
having jurisdiction over Borrowers and the Property, including those relating to
money laundering and terrorism. Lender shall have the right to audit Borrowers'
compliance with the Patriot Act and all applicable requirements of governmental
authorities having jurisdiction over Borrowers and the Property, including those
relating to money laundering and terrorism. In the event that any Borrower fails
to comply with the Patriot Act or any such requirements of governmental
authorities, then Lender may, at its option, cause such Borrower to comply
therewith and any and all reasonable costs and expenses incurred by Lender in
connection therewith shall be secured by the Mortgages and the other Loan
Documents and shall be immediately due and payable. For purposes hereof, the
term "PATRIOT ACT" means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT)
Act of 2001, as the same may be amended from time to time, and corresponding
provisions of future laws.
(b) Neither any Borrower nor any partner in any Borrower or
member of such partner nor any owner of a direct or indirect interest in any
Borrower (a) is listed on any
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Government Lists (as defined below), (b) is a person who has been determined by
competent authority to be subject to the prohibitions contained in Presidential
Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions
contained in the rules and regulations of OFAC (as defined below) or in any
enabling legislation or other Presidential Executive Orders in respect thereof,
(c) has been previously indicted for or convicted of any felony involving a
crime or crimes of moral turpitude or for any Patriot Act Offense (as defined
below), or (d) is currently under investigation by any governmental authority
for alleged criminal activity. For purposes hereof, the term "PATRIOT ACT
OFFENSE" means any violation of the criminal laws of the United States of
America or of any of the several states, or that would be a criminal violation
if committed within the jurisdiction of the United States of America or any of
the several states, relating to terrorism or the laundering of monetary
instruments, including any offense under (a) the criminal laws against
terrorism; (b) the criminal laws against money laundering, (c) the Bank Secrecy
Act, as amended, (d) the Money Laundering Control Act of 1986, as amended, or
the (e) Patriot Act. "Patriot Act Offense" also includes the crimes of
conspiracy to commit, or aiding and abetting another to commit, a Patriot Act
Offense. For purposes hereof, the term "GOVERNMENT LISTS" means (i) the
Specially Designated Nationals and Blocked Persons Lists maintained by Office of
Foreign Assets Control ("OFAC"), (ii) any other list of terrorists, terrorist
organizations or narcotics traffickers maintained pursuant to any of the Rules
and Regulations of OFAC that Lender notified Borrowers in writing is now
included in "Governmental Lists", or (iii) any similar lists maintained by the
United States Department of State, the United States Department of Commerce or
any other government authority or pursuant to any Executive Order of the
President of the United States of America that Lender notified Borrower in
writing is now included in "Governmental Lists".
6. NOTICES AND REPORTING
6.1 NOTICES. All notices, consents, approvals and requests required
or permitted hereunder or under any other Loan Document (a "NOTICE") shall be
given in writing and shall be effective for all purposes if either hand
delivered with receipt acknowledged, or by a nationally recognized overnight
delivery service (such as Federal Express), or by certified or registered United
States mail, return receipt requested, postage prepaid, or by facsimile and
confirmed by facsimile answer back, in each case addressed as follows (or to
such other address or Person as a party shall designate from time to time by
notice to the other party): If to Lender: Citigroup Global Markets Realty Corp.,
000 Xxxxxxxxx Xx., Xxxxx 00, Xxx Xxxx, XX 00000, Attention: Xxxx Xxxxxxx,
Telecopier (000) 000-0000, with a copy to: Sidley Xxxxxx Xxxxx & Xxxx LLP, 00
Xxxxx Xxxxxxxx Xx., Xxxxxxx, XX 00000, Attention: Xxxxxxx Xxxxxxx, Telecopier:
(000) 000-0000; if to any Borrower: c/o Behringer Harvard TIC Management
Services, L.P., 00000 Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000,
Attention: name of individual Borrower, Telecopier: (000) 000-0000. A notice
shall be deemed to have been given: in the case of hand delivery, at the time of
delivery; in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; or in the case of overnight
delivery, upon the first attempted delivery on a Business Day; or in the case of
facsimile, upon the confirmation of such facsimile transmission.
6.2 BORROWER NOTICES AND DELIVERIES. Each Borrower shall (a) give
prompt written notice to Lender of: (i) any litigation, governmental proceedings
or claims or investigations pending or threatened against any such Borrower
which might materially adversely affect such
51
Borrower's condition (financial or otherwise) or business or the Property; (ii)
any material adverse change in such Borrower's condition, financial or
otherwise, or of the occurrence of any Default or Event of Default of which such
Borrower has knowledge; and (b) furnish and provide to Lender all instruments,
documents, boundary surveys, footing or foundation surveys, certificates, plans
and specifications, appraisals, title and other insurance reports and
agreements, reasonably requested, from time to time, by Lender. In addition,
after request by Lender (but no more frequently than twice in any year), (x)
Borrowers (other than the TIC Borrowers) shall furnish to Lender within ten
days, a certificate addressed to Lender, its successors and assigns reaffirming
(to the best of their knowledge) all representations and warranties of Borrowers
(other than with respect to the TIC Borrowers) set forth in the Loan Documents
as of the date requested by Lender or, to the extent of any changes to any such
representations and warranties, so stating such changes, and (y) Borrowers shall
use commercially reasonable efforts to furnish to Lender within 30 days, tenant
estoppel certificates addressed to Lender, its successors and assigns from each
tenant at each Property in form and substance reasonably satisfactory to Lender.
6.3 FINANCIAL REPORTING.
6.3.1 BOOKKEEPING. Each Borrower shall keep on a calendar year
basis, in accordance with GAAP (or federal income tax basis of accounting,
consistently applied), proper and accurate books, records and accounts
reflecting all of the financial affairs of such Borrower and all items of income
and expense and any services, Equipment or furnishings provided in connection
with the operation of the Property, whether such income or expense is realized
by such Borrower, Manager or any Affiliate of such Borrower. Lender shall have
the right from time to time during normal business hours upon reasonable notice
to examine such books, records and accounts relating to the Property at the
office of Manager or other Person maintaining them, and to make such copies or
extracts thereof as Lender shall desire. After an Event of Default, Borrowers
shall pay any costs incurred by Lender to examine such books, records and
accounts, as Lender shall determine to be necessary or appropriate in the
protection of Lender's interest.
6.3.2 ANNUAL REPORTS. Borrowers' Designee (on behalf of
Borrowers) shall furnish to Lender annually, within 120 days after each calendar
year, a complete copy of each Borrower's annual financial statements audited by
a "big four" accounting firm or another independent certified public accountant
(accompanied by an unqualified opinion from such accounting firm or other
independent certified public accountant) reasonably acceptable to Lender, each
in accordance with GAAP (or federal income tax basis of accounting, consistently
applied) and containing balance sheets and statements of profit and loss for
such Borrower and the Property in such detail as Lender may request; PROVIDED,
however, no individual TIC Borrower shall be required to furnish such financial
statements unless such TIC Borrower owns at least a 20% tenant-in-common
interest in the Property. Each such statement (x) shall be in form and substance
satisfactory to Lender, (y) shall set forth the financial condition and the
income and expenses for the Property for the immediately preceding calendar
year, including statements of annual Net Operating Income as well as (1) a list
of tenants, if any, occupying more than twenty percent of the rentable space of
the Property, (2) a breakdown showing (a) the year in which each Lease then in
effect expires, (b) the percentage of rentable space covered by such Lease, (c)
the percentage of base rent with respect to which Leases shall expire in each
such
52
year, expressed both on a per year and a cumulative basis and (z) shall be
accompanied by an Officer's Certificate certifying (1) that such statement is
true, correct, complete and accurate and presents fairly the financial condition
of the Property and has been prepared in accordance with GAAP(or federal income
tax basis of accounting, consistently applied) and (2) whether there exists a
Default or Event of Default, and if so, the nature thereof, the period of time
it has existed and the action then being taken to remedy it.
6.3.3 MONTHLY/QUARTERLY REPORTS. Borrowers' Designee (on
behalf of Borrowers) shall furnish to Lender within 30 days after the end of
each calendar month or calendar quarter (as indicated below) the following
items: (i) monthly and year-to-date operating statements, noting Net Operating
Income and other information necessary and sufficient under GAAP (or federal
income tax basis of accounting, consistently applied) to fairly represent the
financial position and results of operation of the Property during such calendar
month, all in form satisfactory to Lender; (ii) a balance sheet for such
calendar month; (iii) a comparison of the budgeted income and expenses and the
actual income and expenses for each month and year-to-date for the Property,
together with a detailed explanation of any variances of 10% or more between
budgeted and actual amounts for such period and year-to-date; (iv) a statement
of the actual Capital Expenses made by Borrowers during each calendar quarter as
of the last day of such calendar quarter; (v) a statement that Borrowers have
not incurred any indebtedness other than indebtedness permitted hereunder; (vi)
an aged receivables report and (vii) rent rolls identifying the leased premises,
names of all tenants, units leased, monthly rental and all other charges payable
under each Lease, date to which paid, term of Lease, date of occupancy, date of
expiration, material special provisions, concessions or inducements granted to
tenants, and a year-by-year schedule showing by percentage the rentable area of
the Improvements and the total base rent attributable to Leases expiring each
year) and a delinquency report for the Property. Each such statement shall be
accompanied by an Officer's Certificate certifying that to the best of such
officer's knowledge, (1) that such items are true, correct, accurate, and
complete and fairly present the financial condition and results of the
operations of Borrowers and the Property in accordance with GAAP (or federal
income tax basis of accounting, consistently applied) (subject to normal
year-end adjustments) and (2) whether there exists a Default or Event of
Default, and if so, the nature thereof, the period of time it has existed and
the action then being taken to remedy it.
6.3.4 OTHER REPORTS. Subject to the provisions of Section
6.3.2, Borrowers' Designee (on behalf of Borrowers) shall furnish to Lender,
within ten Business Days after request, such further detailed information with
respect to the operation of the Property and the financial affairs of Borrowers
or Manager as may be reasonably requested by Lender or any applicable Rating
Agency.
6.3.5 ANNUAL BUDGET. Borrowers' Designee (on behalf of
Borrowers) shall prepare and submit (or shall cause Manager to prepare and
submit) to Lender within 30 days after a Cash Trap Period and by December 15th
of each year thereafter during the Term until such Cash Trap Period has ended,
for approval by Lender, which approval shall not be unreasonably withheld or
delayed, a proposed pro forma budget for the Property for the succeeding
calendar year (the "ANNUAL BUDGET", and each Annual Budget approved by Lender is
referred to herein as the "APPROVED ANNUAL BUDGET")), and, promptly after
preparation thereof, any revisions to such Annual Budget. The Annual Budget
shall consist of (i) an operating expense budget showing, on a month-by-month
basis, in reasonable detail, each line item of Borrowers' anticipated operating
income and operating expenses (on a cash and accrual basis), including amounts
required to establish, maintain and/or increase any monthly payments required
hereunder (and once such Annual Budget has been approved by Lender, such
operating expense budget shall be referred to herein as the "APPROVED OPERATING
BUDGET"), and (ii) a Capital Expense budget showing, on
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a month-by-month basis, in reasonable detail, each line item of anticipated
Capital Expenses (and once such Annual Budget has been approved by Lender, such
Capital Expense budget shall be referred to herein as the "APPROVED CAPITAL
BUDGET"). Until such time that any Annual Budget has been approved by Lender,
the prior Approved Annual Budget shall apply for all purposes hereunder (with
such adjustments as reasonably determined by Lender (including increases for any
non-discretionary expenses)).
7. INSURANCE; CASUALTY; AND CONDEMNATION
7.1 INSURANCE.
7.1.1 COVERAGE. Borrowers, at their sole cost, for the mutual
benefit of each Borrower and Lender, shall obtain and maintain during the Term
the following policies of insurance:
(a) Property insurance insuring against loss or damage
customarily included under so called "all risk" or "special form" policies
including fire, lightning, flood, vandalism, and malicious mischief, boiler and
machinery and, if available and subject to subsection (j) below, coverage for
damage or destruction caused by the acts of "Terrorists" (or such policies shall
have no exclusion from coverage with respect thereto) and such other insurable
hazards as, under good insurance practices, from time to time are insured
against for other property and buildings similar to the premises in nature, use,
location, height, and type of construction. Such insurance policy shall also
insure costs of demolition and increased cost of construction (which insurance
for demolition and increased cost of construction may contain a sub-limit
satisfactory to Lender). Each such insurance policy shall (i) be in an amount
equal to the greatest of (A) the then replacement cost of the Improvements
without deduction for physical depreciation, (B) the unpaid Principal, and (C)
such amount as is necessary so that the insurer would not deem Borrower a
co-insurer under such policies, (ii) have deductibles no greater than the lesser
of $10,000 or 5% of the Net Operating Income per occurrence, (iii) be paid
annually in advance and (iv) contain an agreed amount replacement cost
endorsement with a waiver of depreciation, and shall cover, without limitation,
all tenant improvements and betterments that Borrower is required to insure on a
replacement cost basis. If the insurance required under this subparagraph is not
obtained by blanket insurance policies, the insurance policy shall be endorsed
to also provide guaranteed building replacement cost to the Improvements and
such tenant improvements in an amount to be subject to the consent of Lender,
which consent shall not be unreasonably withheld. Lender shall be named Loss
Payee on a Standard Mortgagee Endorsement.
(b) Flood insurance if any part of the Property is located
in an area now or hereafter designated by the Federal Emergency Management
Agency as a Zone "A" & "V" Special Hazard Area, or such other Special Hazard
Area if Lender so requires in its sole discretion. Such policy shall (i) be in
an amount equal to the greater of (A) 100% of the full
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replacement cost of the Improvements on the Property (without any deduction for
depreciation) (B) the maximum limit of coverage available and (ii) have a
maximum permissible deductible of $3,000.
(c) Public liability insurance, including (i) "Commercial
General Liability Insurance", (ii) "Owned", "Hired" and "Non Owned Auto
Liability"; and (iii) umbrella liability coverage for personal injury, bodily
injury, death, accident and property damage, such insurance providing in
combination no less than containing minimum limits per occurrence of $1,000,000
and $2,000,000 in the aggregate for any policy year; together with at least
$10,000,000 excess and/or umbrella liability insurance for any and all claims
with no deductible. The policies described in this subsection shall also include
coverage for elevators, escalators, independent contractors, "Contractual
Liability" (covering, to the maximum extent permitted by law, Borrower's
obligation to indemnify Lender as required under this Agreement and the other
Loan Documents), "Products" and "Completed Operations Liability" coverage.
(d) Rental loss and/or business interruption insurance (i)
with Lender being named as "Lender Loss Payee", (ii) in an amount equal to one
hundred percent (100%) of the projected Rents from the Property during the
period of restoration; and (iii) containing an extended period of indemnity
endorsement which provides that after the physical loss to the Property has been
repaired, the continued loss of income will be insured until such income either
returns to the same level it was at prior to the loss, or the expiration of
eighteen (18) months from the date that the Property is repaired or replaced and
operations are resumed, whichever first occurs, and notwithstanding that the
policy may expire prior to the end of such period. The amount of such insurance
shall be increased from time to time during the Term as and when the estimated
or actual Rents increase.
(e) Comprehensive boiler and machinery insurance covering
all mechanical and electrical equipment against physical damage, rent loss and
improvements loss and covering, without limitation, all tenant improvements and
betterments that Borrower is required to insure pursuant to the lease on a
replacement cost basis and in an amount equal to the greater of (i) $2,000,000
and (ii) 100% of the full replacement cost of the Improvements on the Property
(without any deduction for depreciation).
(f) Worker's compensation and disability insurance with
respect to any employees of Borrower, as required by any Legal Requirement.
(g) During any period of repair or restoration, builder's
"all-risk" insurance in an amount equal to not less than the full insurable
value of the Property, against such risks (including fire and extended coverage
and collapse of the Improvements to agreed limits) as Lender may request, in
form and substance acceptable to Lender.
(h) Coverage to compensate for the cost of demolition and
the increased cost of construction in an amount satisfactory to Lender.
(i) Such other insurance (including environmental liability
insurance, earthquake (but only if a future seismic study indicates a PML in
excess of 20%) insurance, mine subsidence
55
insurance and windstorm insurance) as may from time to time be reasonably
required by Lender in order to protect its interests.
(j) Notwithstanding anything in subsection (a) above to the
contrary, Borrowers shall be required to obtain and maintain coverage in their
property insurance Policy (or by a separate Policy) against loss or damage by
terrorist acts in an amount equal to 100% of the "Full Replacement Cost" of the
Property; provided that such coverage is available. In the event that such
coverage with respect to terrorist acts is not included as part of the "all
risk" property policy required by subsection (a) above, Borrowers shall,
nevertheless be required to obtain coverage for terrorism (as stand alone
coverage) in an amount equal to 100% of the "Full Replacement Cost" of the
Property; provided that such coverage is available. Notwithstanding the
foregoing, with respect to any such stand-alone policy covering terrorist acts,
Borrowers shall not be required to pay any Insurance Premiums solely with
respect to such terrorism coverage in excess of the Terrorism Premium Cap
(hereinafter defined); provided that if the Insurance Premiums payable with
respect to such terrorism coverage exceeds the Terrorism Premium Cap, Lender
may, at its option (1) purchase such stand-alone terrorism Policy, with Borrower
paying such portion of the Insurance Premiums with respect thereto equal to the
Terrorism Premium Cap and the Lender paying such portion of the Insurance
Premiums in excess of the Terrorism Premium Cap or (2) modify the deductible
amounts, policy limits and other required policy terms to reduce the Insurance
Premiums payable with respect to such stand-alone terrorism Policy to the
Terrorism Premium Cap. As used herein, (i) "TERRORISM PREMIUM CAP" means an
amount equal to 100% of the aggregate Insurance Premiums payable with respect to
all the insurance coverage under Section 7.1.1(a) for the last policy year in
which coverage for terrorism was included as part of the "all risk" property
policy required by subsection (a) above, adjusted annually by a percentage equal
to the increase in the Consumer Price Index (hereinafter defined) and (ii)
"CONSUMER PRICE INDEX" means the Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics of the United States Department of
Labor, New York Metropolitan Statistical Area, All Items (1982-84 = 100), or any
successor index thereto, approximately adjusted, and in the event that the
Consumer Price Index is converted to a different standard reference base or
otherwise revised, the determination of adjustments provided for herein shall be
made with the use of such conversion factor, formula or table for converting the
Consumer Price Index as may be published by the Bureau of Labor Statistics or,
if said Bureau shall not publish the same, then with the use of such conversion
factor, formula or table as may be published by Xxxxxxxx-Xxxx, Inc., or any
other nationally recognized publisher of similar statistical information; and if
the Consumer Price Index ceases to be published, and there is no successor
thereto (i) such other index as Lender and Borrower shall agree upon in writing
or (ii) if Lender and Borrower cannot agree on a substitute index, such other
index, as reasonably selected by Lender. Borrower shall obtain the coverage
required under this subsection (j) from a carrier which otherwise satisfies the
rating criteria specified in Section 7.1.2 (a "QUALIFIED CARRIER") or in the
event that such coverage is not available from a Qualified Carrier, Borrower
shall obtain such coverage from the highest rated insurance company providing
such coverage.
7.1.2 POLICIES. All policies of insurance (the "POLICIES")
required pursuant to Section 7.1.1 shall (i) be issued by companies approved by
Lender and licensed to do business in the State, with a claims paying ability
rating of "AA" or better by S&P (and the equivalent by any other Rating Agency)
and a rating of A:X or better in the current Best's Insurance Reports; (ii) name
Lender and its successors and/or assigns as their interest may appear as the
mortgagee
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(in the case of property insurance) or an additional insured (in the case of
liability insurance); (iii) contain (in the case of property insurance) a
Non-Contributory Standard Mortgagee Clause and a Lender's Loss Payable
Endorsement, or their equivalents, naming Lender as the person to which all
payments made by such insurance company shall be paid; (iv) contain a waiver of
subrogation against Lender; (v) be assigned and the originals thereof delivered
to Lender; (vi) contain such provisions as Lender deems reasonably necessary or
desirable to protect its interest, including (A) endorsements providing that
neither any Borrower, Lender nor any other party shall be a co-insurer under the
Policies, (B) that Lender shall receive at least 30 days' prior written notice
of any modification, reduction or cancellation of any of the Policies, (C) an
agreement whereby the insurer waives any right to claim any premiums and
commissions against Lender, provided that the policy need not waive the
requirement that the premium be paid in order for a claim to be paid to the
insured and (D) providing that Lender is permitted to make payments to effect
the continuation of such policy upon notice of cancellation due to non-payment
of premiums; (vii) in the event any insurance policy (except for general public
and other liability and workers compensation insurance) shall contain breach of
warranty provisions, such policy shall provide that with respect to the interest
of Lender, such insurance policy shall not be invalidated by and shall insure
Lender regardless of (A) any act, failure to act or negligence of or violation
of warranties, declarations or conditions contained in such policy by any named
insured, (B) the occupancy or use of the premises for purposes more hazardous
than permitted by the terms thereof, or (C) any foreclosure or other action or
proceeding taken by Lender pursuant to any provision of the Loan Documents; and
(viii) be satisfactory in form and substance to Lender and approved by Lender as
to amounts, form, risk coverage, deductibles, loss payees and insureds.
Borrowers shall pay the premiums for such Policies (the "INSURANCE PREMIUMS") as
the same become due and payable and furnish to Lender evidence of the renewal of
each of the Policies together with (unless such Insurance Premiums have been
paid by Lender pursuant to Section 3.3) receipts for or other evidence of the
payment of the Insurance Premiums reasonably satisfactory to Lender. If
Borrowers do not furnish such evidence and receipts at least 30 days prior to
the expiration of any expiring Policy, then Lender may, but shall not be
obligated to, procure such insurance and pay the Insurance Premiums therefor,
and Borrowers shall reimburse Lender for the cost of such Insurance Premiums
promptly on demand, with interest accruing at the Default Rate. Borrowers shall
deliver to Lender a certified copy of each Policy within 30 days after its
effective date. Within 30 days after request by Lender, Borrowers shall obtain
such increases in the amounts of coverage required hereunder as may be
reasonably requested by Lender, taking into consideration changes in the value
of money over time, changes in liability laws, changes in prudent customs and
practices, and the like.
7.2 CASUALTY.
7.2.1 NOTICE; RESTORATION. If the Property is damaged or
destroyed, in whole or in part, by fire or other casualty (a "CASUALTY"),
Borrowers shall give prompt notice thereof to Lender. Following the occurrence
of a Casualty, Borrowers, regardless of whether insurance proceeds are
available, shall promptly proceed to restore, repair, replace or rebuild the
Property in accordance with Legal Requirements to be of at least equal value and
of substantially the same character as prior to such damage or destruction.
7.2.2 SETTLEMENT OF PROCEEDS. If a Casualty covered by any of
the Policies (an "INSURED CASUALTY") occurs where the loss does not exceed
$250,000, provided no Event of
57
Default has occurred and is continuing, Borrowers may settle and adjust any
claim without the prior consent of Lender; provided such adjustment is carried
out in a competent and timely manner, and Borrowers are hereby authorized to
collect and receipt for the insurance proceeds (the "PROCEEDS"). In the event of
an Insured Casualty where the loss equals or exceeds $250,000 (a "SIGNIFICANT
CASUALTY"), Borrowers may settle and adjust any claim with the prior consent of
Lender (which consent shall not be unreasonably withheld or delayed) unless
either (i) an Event of Default has occurred and is continuing or (ii) the loss
equals or exceeds $1,000,000, in which either such case Lender may, in its sole
discretion, settle and adjust any claim without the consent of any Borrower and
agree with the insurer(s) on the amount to be paid on the loss, and the Proceeds
shall be due and payable solely to Lender and held by Lender in the
Casualty/Condemnation Subaccount and disbursed in accordance herewith. If any
Borrower or any party other than Lender is a payee on any check representing
Proceeds with respect to a Significant Casualty, such Borrower shall immediately
endorse, and cause all such third parties to endorse, such check payable to the
order of Lender. Each Borrower hereby irrevocably appoints Lender as its
attorney-in-fact, coupled with an interest, to endorse such check payable to the
order of Lender. The expenses incurred by Lender in the settlement, adjustment
and collection of the Proceeds shall become part of the Debt and shall be
reimbursed by Borrowers to Lender upon demand. Notwithstanding anything to the
contrary contained herein, if in connection with a Casualty any insurance
carrier makes a payment under the Property insurance Policy that Borrowers
propose be treated as business or rental interruption insurance, then,
notwithstanding any designation (or lack of designation) by the insurance
carrier as to the purpose of such payment, as between Lender and Borrowers, such
payment shall not be treated as business or rental interruption insurance
proceeds unless Borrowers have demonstrated to Lender's satisfaction that the
remaining net Proceeds that will be received from the property insurance
carriers are sufficient to pay 100% of the cost of fully restoring the
Improvements or, if such net Proceeds are to be applied to repay the Debt in
accordance with the terms hereof, that such remaining net Proceeds will be
sufficient to pay the Debt in full.
7.3 CONDEMNATION.
7.3.1 NOTICE; RESTORATION. Borrowers shall promptly give
Lender notice of the actual or threatened commencement of any condemnation or
eminent domain proceeding affecting the Property (a "CONDEMNATION") and shall
deliver to Lender copies of any and all papers served in connection with such
Condemnation. Following the occurrence of a Condemnation, Borrowers, regardless
of whether an Award is available, shall promptly proceed to restore, repair,
replace or rebuild the Property in accordance with Legal Requirements to the
extent practicable to be of at least equal value and of substantially the same
character (and to have the same utility) as prior to such Condemnation.
7.3.2 COLLECTION OF AWARD. If a Condemnation occurs where the
award or payment in respect thereof (an "AWARD") does not exceed $250,000 or
which results in the taking of 5% or less of the Property, provided no Event of
Default has occurred and is continuing, Borrowers may make any compromise,
adjustment or settlement in connection with such Condemnation with the prior
consent of Lender, not to be unreasonably withheld, provided such adjustment is
carried out in a competent and timely manner, and Borrowers are hereby
authorized to collect and receipt for the Award. In the event of a Condemnation
where the Award is in excess of $250,000 or which results in the taking of more
than 5% of the Property,
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Lender is hereby irrevocably appointed as Borrowers' attorney-in-fact, coupled
with an interest, with exclusive power to collect, receive and retain such Award
and to make any compromise, adjustment or settlement in connection with such
Condemnation with the prior consent of Borrowers (unless an Event of Default is
continuing, in which case, Borrowers' prior consent shall not be required), not
to be unreasonably withheld (which shall be deemed consented to if Borrowers
fail to respond to any request for consent therefor within 10 days' of request).
Notwithstanding any Condemnation (or any transfer made in lieu of or in
anticipation of such Condemnation), Borrowers shall continue to pay the Debt at
the time and in the manner provided for in the Loan Documents, and the Debt
shall not be reduced unless and until any Award shall have been actually
received and applied by Lender to expenses of collecting the Award and to
discharge of the Debt. Lender shall not be limited to the interest paid on the
Award by the condemning authority but shall be entitled to receive out of the
Award interest at the rate or rates provided in the Note. If the Property is
sold, through foreclosure or otherwise, prior to the receipt by Lender of such
Award, Lender shall have the right, whether or not a deficiency judgment on the
Note shall be recoverable or shall have been sought, recovered or denied, to
receive all or a portion of the Award sufficient to pay the Debt. Borrowers
shall cause any Award that is payable to Borrower to be paid directly to Lender.
Lender shall hold such Award in the Casualty/Condemnation Subaccount and
disburse such Award in accordance with the terms hereof.
7.4 APPLICATION OF PROCEEDS OR AWARD.
7.4.1 APPLICATION TO RESTORATION. If an Insured Casualty or
Condemnation occurs where (i) the loss is in an aggregate amount less than the
25% of the unpaid Principal, (ii) in the reasonable judgment of Lender, the
Property can be restored within nine months after all applicable restoration
permits have been obtained, and prior to six months before the Stated Maturity
Date and prior to the expiration of the rental or business interruption
insurance with respect thereto, to the Property's pre-existing condition and
utility as existed immediately prior to such Insured Casualty or Condemnation
and to an economic unit not less valuable and not less useful than the same was
immediately prior to the Insured Casualty or Condemnation, and after such
restoration will adequately secure the Debt, (iii) less than (x) 30%, in the
case of an Insured Casualty or (y) 15%, in the case of a Condemnation, of the
rentable area of the Improvements has been damaged, destroyed or rendered
unusable as a result of such Insured Casualty or Condemnation; (iv) Leases
demising in the aggregate at least 65% of the total rentable space in the
Property and in effect as of the date of the occurrence of such Insured Casualty
or Condemnation remain in full force and effect during and after the completion
of the Restoration (hereinafter defined); and (v) no Event of Default shall have
occurred and be then continuing, then the Proceeds or the Award, as the case may
be (after reimbursement of any expenses incurred by Lender), shall be applied to
pay for or reimburse Borrowers for the cost of restoring, repairing, replacing
or rebuilding the Property (the "RESTORATION"), in the manner set forth herein.
Borrowers shall commence and diligently prosecute such Restoration.
Notwithstanding the foregoing, in no event shall Lender be obligated to apply
the Proceeds or Award to reimburse any Borrower for the cost of Restoration
unless, in addition to satisfaction of the foregoing conditions, both (x)
Borrowers shall pay (and if required by Lender, Borrowers shall deposit with
Lender in advance) all costs of such Restoration in excess of the net amount of
the Proceeds or the Award made available pursuant to the terms hereof; and (y)
Lender shall have received evidence reasonably satisfactory to it that during
the period of the Restoration, the Rents will be
59
at least equal to the sum of the operating expenses and Debt Service, as
reasonably determined by Lender.
7.4.2 APPLICATION TO DEBT. Except as provided in Section
7.4.1, any Proceeds and/or Award may, at the option of Lender in its discretion,
be applied to the payment of (i) accrued but unpaid interest on the Note, (ii)
the unpaid Principal and (iii) other charges due under the Note and/or any of
the other Loan Documents, or applied to reimburse Borrowers for the cost of any
Restoration, in the manner set forth in Section 7.4.3. Any such prepayment of
the Loan shall be without any Yield Maintenance Premium, unless an Event of
Default has occurred and is continuing at the time the Proceeds are received
from the insurance company or the Award is received from the condemning
authority, as the case may be, in which event Borrowers shall pay to Lender an
additional amount equal to the Yield Maintenance Premium, if any, that may be
required with respect to the amount of the Proceeds or Award applied to the
unpaid Principal. Notwithstanding anything to the contrary contained herein, if
any Proceeds or Award are not required to be made available for a Restoration
and are retained and applied by Lender toward the payment of the Debt, Borrowers
may prepay the entire outstanding Principal without payment of any Yield
Maintenance Premium provided that (x) such prepayment is made within 90 days
after Lender applies such Proceeds or Award to the Debt and (y) together with
such prepayment, Borrowers pay to Lender all accrued and unpaid interest and all
other sums payable under the Loan Documents.
7.4.3 PROCEDURE FOR APPLICATION TO RESTORATION. If any
Borrower is entitled to reimbursement out of the Proceeds or an Award held by
Lender, such Proceeds or Award shall be disbursed from time to time from the
Casualty/Condemnation Subaccount upon Lender being furnished with (i) evidence
satisfactory to Lender of the estimated cost of completion of the Restoration,
(ii) a fixed price or guaranteed maximum cost construction contract for
Restoration satisfactory to Lender, (iii) prior to the commencement of
Restoration, all immediately available funds in addition to the Proceeds or
Award that in Lender's judgment are required to complete the proposed
Restoration, (iv) such architect's certificates, waivers of lien, contractor's
sworn statements, title insurance endorsements, bonds, plats of survey, permits,
approvals, licenses and such other documents and items as Lender may reasonably
require and approve in Lender's discretion, and (v) all plans and specifications
for such Restoration, such plans and specifications to be approved by Lender
prior to commencement of any work. Lender may, at Borrowers' expense, retain a
consultant to review and approve all requests for disbursements, which approval
shall also be a condition precedent to any disbursement. No payment made prior
to the final completion of the Restoration shall exceed 90% of the value of the
work performed from time to time; funds other than the Proceeds or Award shall
be disbursed prior to disbursement of such Proceeds or Award; and at all times,
the undisbursed balance of such Proceeds or Award remaining in the hands of
Lender, together with funds deposited for that purpose or irrevocably committed
to the satisfaction of Lender by or on behalf of Borrowers for that purpose,
shall be at least sufficient in the reasonable judgment of Lender to pay for the
cost of completion of the Restoration, free and clear of all Liens or claims for
Lien. Provided no Default or Event of Default then exists, any surplus that
remains out of the Proceeds held by Lender after payment of such costs of
Restoration shall be paid to Borrowers. Any surplus that remains out of the
Award received by Lender after payment of such costs of Restoration shall, in
the discretion of Lender, be retained by Lender and applied to payment of the
Debt or returned to Borrowers.
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8. DEFAULTS
8.1 EVENTS OF DEFAULT. An "Event of Default" shall exist with
respect to the Loan if any of the following shall occur:
(a) any portion of the Debt is not paid when due or any
other amount under Section 3.11(a)(i) through (vii) is not paid in full on each
Payment Date (provided, however, if adequate funds are available in the Deposit
Account for such payments, the failure by the Deposit Bank to allocate such
funds into the appropriate Subaccounts shall not constitute an Event of
Default);
(b) any of the Taxes are not paid when due (unless Lender is
paying such Taxes pursuant to Section 3.3), subject to Borrowers' right to
contest Taxes in accordance with Section 5.2;
(c) the Policies are not kept in full force and effect, or
are not delivered to Lender pursuant to Section 7.1.2(v) within 10 days after
request;
(d) a Transfer other than a Permitted Transfer occurs;
(e) any representation or warranty made by any Borrower or
Guarantor or in any Loan Document, or in any report, certificate, financial
statement or other instrument, agreement or document furnished by any Borrower
or Guarantor in connection with any Loan Document, shall be false or misleading
in any material respect as of the date the representation or warranty was made;
(f) any Borrower or Guarantor shall make an assignment for
the benefit of creditors, or shall generally not be paying its debts as they
become due; provided that so long as no other Event of Default shall have
occurred and be continuing, an assignment for the benefit of creditors by any
one Guarantor (other than Behringer Harvard Holdings, LLC or Xxxxxx X.
Xxxxxxxxx) shall not be an Event of Default hereunder if the tenant-in-common
ownership interest indirectly owned by such Guarantor is purchased by any
Borrower (subject to the terms, conditions and limitations contained in this
Agreement) within 30 days of such assignment in accordance with Section 9.1 of
the Tenant in Common Agreement, and the owner/guarantor of such purchasing
Borrower reaffirms its obligations under its Guaranty of Recourse Obligations in
connection therewith;
(g) a receiver, liquidator or trustee shall be appointed for
any Borrower or Guarantor; or any Borrower or Guarantor shall be adjudicated a
bankrupt or insolvent; or any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in by, any
Borrower or Guarantor, as the case may be; or any proceeding for the dissolution
or liquidation of any Borrower or Guarantor shall be instituted; provided,
however, (i) if such appointment, adjudication, petition or proceeding was
involuntary and not consented to by such Borrower or Guarantor, as the case may
be, only upon the same not being discharged, stayed or dismissed within 60 days
and (ii) so long as no other Event of Default shall have occurred and be
continuing, the occurrence of any event described in this subsection (g) with
respect to any one
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Guarantor (other than Behringer Harvard Holdings, LLC or Xxxxxx X. Xxxxxxxxx)
shall not be an Event of Default hereunder if the tenant-in-common ownership
interest indirectly owned by such Guarantor is purchased by any Borrower
(subject to the terms, conditions and limitations contained in this Agreement)
within 30 days of the occurrence of such event in accordance with Section 9.1 of
the Tenant in Common Agreement, and the owner/guarantor of such purchasing
Borrower reaffirms its obligations under its Guaranty of Recourse Obligations in
connection therewith;
(h) any Borrower breaches any covenant contained in Sections
5.12.1 (a) - (f), 5.13, 5.15, 5.22, 5.25, 5.28 or 5.31;
(i) except as expressly permitted hereunder, the alteration,
improvement, demolition or removal of all or any of portion of the Improvements
without the prior written consent of Lender (if such consent is required
pursuant to the terms of this Agreement);
(j) an Event of Default as defined or described elsewhere in
this Agreement or in any other Loan Document occurs; or any other event shall
occur or condition shall exist, if the effect of such event or condition is to
accelerate or to permit Lender to accelerate the maturity of any portion of the
Debt;
(k) a default occurs under any term, covenant or provision
set forth herein or in any other Loan Document which specifically contains a
notice requirement or grace period and such notice has been given and such grace
period has expired;
(l) any of the assumptions contained in any substantive
non-consolidation opinion, delivered to Lender by Borrowers' counsel in
connection with the Loan or otherwise hereunder, were not true and correct as of
the date of such opinion or thereafter became untrue or incorrect;
(m) if Key Principal fails to Control (as defined in clause
(ii) of the defined term "Control" in Section 1.1) the Manager and the day to
day management and operations of the Property (unless the Manager is replaced
with a successor manager in accordance with and subject to satisfaction of the
terms and conditions set forth in Section 5.12.2); or
(n) a default shall be continuing under any of the other
terms, covenants or conditions of this Agreement or any other Loan Document not
otherwise specified in this Section 8.1, for ten days after notice to Borrowers
(and Guarantor, if applicable) from Lender, in the case of any default which can
be cured by the payment of a sum of money, or for 30 days after notice from
Lender in the case of any other default; provided, however, that if such
non-monetary default is susceptible of cure but cannot reasonably be cured
within such 30-day period, and Borrowers (or Guarantor, if applicable) shall
have commenced to cure such default within such 30-day period and thereafter
diligently and expeditiously proceeds to cure the same, such 30-day period shall
be extended for an additional period of time as is reasonably necessary for
Borrowers (or Guarantor, if applicable) in the exercise of due diligence to cure
such default, such additional period not to exceed 60 days.
8.2 REMEDIES.
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8.2.1 ACCELERATION. Upon the occurrence and during the
continuance of an Event of Default (other than an Event of Default described in
paragraph (f) or (g) of Section 8.1) and at any time and from time to time
thereafter during the continuance of such Event of Default, in addition to any
other rights or remedies available to it pursuant to the Loan Documents or at
law or in equity, Lender may take such action, without notice or demand, that
Lender deems advisable to protect and enforce its rights against any or all
Borrowers and in and to the Property; including declaring the Debt to be
immediately due and payable (including unpaid interest), Default Rate interest,
Late Payment Charges, Yield Maintenance Premium and any other amounts owing by
Borrowers), without notice or demand; and upon any Event of Default described in
paragraph (f) or (g) of Section 8.1, the Debt (including unpaid interest,
Default Rate interest, Late Payment Charges, Yield Maintenance Premium and any
other amounts owing by Borrowers) shall immediately and automatically become due
and payable, without notice or demand, and each Borrower hereby expressly waives
any such notice or demand, anything contained in any Loan Document to the
contrary notwithstanding.
8.2.2 REMEDIES CUMULATIVE. Upon the occurrence and during the
continuance of an Event of Default, all or any one or more of the rights,
powers, privileges and other remedies available to Lender against Borrowers
under the Loan Documents or at law or in equity may be exercised by Lender at
any time and from time to time, whether or not all or any of the Debt shall be
declared, or be automatically, due and payable, and whether or not Lender shall
have commenced any foreclosure proceeding or other action for the enforcement of
its rights and remedies under any of the Loan Documents. Any such actions taken
by Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth in the Loan Documents.
Without limiting the generality of the foregoing, each Borrower agrees that if
an Event of Default is continuing, (i) to the extent permitted by applicable
law, Lender is not subject to any "one action" or "election of remedies" law or
rule, and (ii) all Liens and other rights, remedies or privileges provided to
Lender shall remain in full force and effect until Lender has exhausted all of
its remedies against the Property, the Mortgage has been foreclosed, the
Property has been sold and/or otherwise realized upon in satisfaction of the
Debt or the Debt has been paid in full. To the extent permitted by applicable
law, nothing contained in any Loan Document shall be construed as requiring
Lender to resort to any particular Property or any portion of the Property for
the satisfaction of any of the Debt in preference or priority to any other
portion, and Lender may seek satisfaction out of the entire Property or any part
thereof, in its discretion.
8.2.3 SEVERANCE. Lender shall have the right from time to time
to sever the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents in such denominations and priorities of
payment and liens as Lender shall determine in its discretion for purposes of
evidencing and enforcing its rights and remedies. Each Borrower shall execute
and deliver to Lender from time to time, promptly after the request of Lender, a
severance agreement and such other documents as Lender shall request in order to
effect the severance described in the preceding sentence, all in form and
substance reasonably satisfactory to Lender. Each Borrower hereby absolutely and
irrevocably appoints Lender as its true and lawful attorney, coupled with an
interest, in its name and stead to make and execute all
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documents necessary or desirable to effect such severance, each Borrower
ratifying all that such attorney shall do by virtue thereof.
8.2.4 DELAY. No delay or omission to exercise any remedy,
right or power accruing upon an Event of Default, or the granting of any
indulgence or compromise by Lender shall impair any such remedy, right or power
hereunder or be construed as a waiver thereof, but any such remedy, right or
power may be exercised from time to time and as often as may be deemed
expedient. A waiver of one Default or Event of Default shall not be construed to
be a waiver of any subsequent Default or Event of Default or to impair any
remedy, right or power consequent thereon. Notwithstanding any other provision
of this Agreement, Lender reserves the right to seek a deficiency judgment or
preserve a deficiency claim in connection with the foreclosure of the Mortgage
to the extent necessary to foreclose on all or any portion of the Property, the
Rents, the Cash Management Accounts or any other collateral.
8.2.5 LENDER'S RIGHT TO PERFORM. If any Borrower fails to
perform any covenant or obligation contained herein and such failure shall
continue for a period of five Business Days after Borrowers' receipt of written
notice thereof from Lender, without in any way limiting Lender's right to
exercise any of its rights, powers or remedies as provided hereunder, or under
any of the other Loan Documents, Lender may, but shall have no obligation to,
perform, or cause performance of, such covenant or obligation, and all costs,
expenses, liabilities, penalties and fines of Lender incurred or paid in
connection therewith shall be payable by Borrowers to Lender upon demand and if
not paid shall be added to the Debt (and to the extent permitted under
applicable laws, secured by the Mortgage and other Loan Documents) and shall
bear interest thereafter at the Default Rate. Notwithstanding the foregoing,
Lender shall have no obligation to send notice to any Borrower of any such
failure. Additionally, during the continuance of an Event of Default, Lender
shall have the right, but not the obligation, to make any Protective Advance
(hereinafter defined) (provided, however, that Lender will only make such
Protective Advance from its own funds if there are insufficient funds in the
Cash Management Accounts), and the same shall be added to the Debt (and to the
extent permitted under applicable laws, secured by the Mortgage and other Loan
Documents) and shall bear interest thereafter at the Default Rate. As used
herein, "PROTECTIVE ADVANCE" means all sums advanced for the purpose of payment
of real estate taxes (including special payments in lieu of real estate taxes),
maintenance costs, insurance premiums, operating expenses, trade payables or
other items with respect to the Property (including capital items) reasonably
necessary to protect the Property or any other security given for the Loan or to
preserve any of Lender's rights or remedies under the Loan Documents.
9. SPECIAL PROVISIONS
9.1 SALE OF NOTE AND SECONDARY MARKET TRANSACTION.
9.1.1 GENERAL; BORROWER COOPERATION. Lender shall have the
right at any time and from time to time (i) to sell or otherwise transfer the
Loan or any portion thereof or the Loan Documents or any interest therein to one
or more investors, (ii) to sell participation interests in the Loan to one or
more investors or (iii) to securitize the Loan or any portion thereof in a
single asset securitization or a pooled loan securitization of rated single or
multi-class securities (the "SECURITIES") secured by or evidencing ownership
interests in the Note and the Mortgage (each
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such sale, assignment, participation and/or securitization is referred to herein
as a "SECONDARY MARKET TRANSACTION"). In connection with any Secondary Market
Transaction, Borrowers shall use all reasonable efforts and cooperate fully and
in good faith with Lender and otherwise assist Lender in satisfying the market
standards to which Lender customarily adheres or which may be reasonably
required in the marketplace or by the Rating Agencies in connection with any
such Secondary Market Transactions, including: (a) to (i) provide such financial
and other information with respect to the Property, Borrowers and their
Affiliates, Manager and any tenants of the Property, (ii) provide business plans
and budgets relating to the Property and (iii) perform or permit or cause to be
performed or permitted such site inspection, appraisals, surveys, market
studies, environmental reviews and reports, engineering reports and other due
diligence investigations of the Property, as may be reasonably requested from
time to time by Lender or the Rating Agencies or as may be necessary or
appropriate in connection with a Secondary Market Transaction or Exchange Act
requirements (the items provided to Lender pursuant to clauses (i) and (ii) of
this paragraph (a) being called the "PROVIDED INFORMATION"), together, if
customary, with appropriate verification of and/or consents to the Provided
Information through letters of auditors or opinions of counsel of independent
attorneys acceptable to Lender and the Rating Agencies; (b) at Borrowers'
expense, cause counsel to render opinions as to non-consolidation (which may be
an update of an existing non-consolidation opinion) and any other opinion
customary in securitization transactions with respect to the Property, Borrowers
and their Affiliates, which counsel and opinions shall be reasonably
satisfactory to Lender and the Rating Agencies; (c) make such representations
and warranties as of the closing date of any Secondary Market Transaction with
respect to the Property, Borrowers and the Loan Documents as are customarily
provided in such transactions and as may be reasonably requested by Lender or
the Rating Agencies and consistent with the facts covered by such
representations and warranties as they exist on the date thereof, including the
representations and warranties made in the Loan Documents; (d) provide current
certificates of good standing and qualification with respect to Borrowers from
appropriate Governmental Authorities; and (e) execute such amendments to the
Loan Documents and Borrowers' organizational documents, as may be requested by
Lender or the Rating Agencies or otherwise to effect a Secondary Market
Transaction, provided that nothing contained in this subsection (e) shall result
in changes to Loan terms adverse to Borrowers or require Borrowers to incur any
additional liabilities. Borrowers' cooperation obligations set forth herein
shall continue until the Loan has been paid in full.
9.1.2 USE OF INFORMATION. Borrowers understand that all or any
portion of the Provided Information and the Required Records may be included in
disclosure documents in connection with a Secondary Market Transaction,
including a prospectus or private placement memorandum (each, a "DISCLOSURE
DOCUMENT") and may also be included in filings with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), or the Securities and Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), or provided or made available to investors or prospective investors in
the Securities, the Rating Agencies, and service providers or other parties
relating to the Secondary Market Transaction. If the Disclosure Document is
required to be revised, Borrowers shall cooperate with Lender in updating the
Provided Information or Required Records for inclusion or summary in the
Disclosure Document or for other use reasonably required in connection with a
Secondary Market Transaction by providing all current information pertaining to
Borrowers, Manager and the Property necessary to keep the Disclosure Document
accurate and complete in all material respects with respect to such matters.
65
9.1.3 BORROWER OBLIGATIONS REGARDING DISCLOSURE DOCUMENTS. In
connection with a Disclosure Document, Borrowers' Designee (on behalf of
Borrowers) shall: (a) if requested by Lender, certify in writing that Borrowers
have carefully examined those portions of such Disclosure Document, pertaining
to Borrowers, the Property Manager and the Loan, and that such portions do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and (b) indemnify (in
a separate instrument of indemnity, if so requested by Lender) (i) any
underwriter, syndicate member or placement agent (collectively, the
"UNDERWRITERS") retained by Lender or its issuing company affiliate (the
"ISSUER") in connection with a Secondary Market Transaction, (ii) Lender and
(iii) the Issuer that is named in the Disclosure Document or registration
statement relating to a Secondary Market Transaction (the "REGISTRATION
STATEMENT"), and each of the Issuer's directors, each of its officers who have
signed the Registration Statement and each person or entity who controls the
Issuer or the Lender within the meaning of Section 15 of the Securities Act or
Section 30 of the Exchange Act (collectively within (iii), the "CITIGROUP
GROUP"), and each of its directors and each person who controls each of the
Underwriters, within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act (collectively, the "UNDERWRITER GROUP") for any losses,
claims, damages or liabilities (the "LIABILITIES") to which Lender, the
Citigroup Group or the Underwriter Group may become subject (including
reimbursing all of them for any legal or other expenses actually incurred in
connection with investigating or defending the Liabilities) insofar as the
Liabilities arise out of or are based upon any untrue statement of any material
fact contained in any of the Provided Information or in any of the applicable
portions of such sections of the Disclosure Document applicable to Borrowers,
Manager, the Property or the Loan, or arise out of or are based upon the
omission to state therein a material fact required to be stated in the
applicable portions of such sections or necessary in order to make the
statements in the applicable portions of such sections in light of the
circumstances under which they were made, not misleading; provided, however,
that Borrowers shall not be required to indemnify Lender for any Liabilities
relating to (i) untrue statements or omissions which Borrowers identified to
Lender in writing at the time of Borrowers' examination of such Disclosure
Document or (ii) any information or document not provided to or certified by
Borrowers. Notwithstanding anything to the contrary contained in this Section
9.1.3, nothing contained herein shall impose liability upon Borrowers for any
losses, claims, damages or liability arising out of or based upon an untrue
statement of any material fact contained in any statement, report or document
provided to Lender on behalf of Borrowers by a party who is not an Affiliate of
a Borrower (a "THIRD PARTY REPORT"), unless Borrowers had actual knowledge at
the time Borrowers provided such statement, report or document to Lender that
such Third Party Report contains such untrue statement.
9.1.4 BORROWER INDEMNITY REGARDING FILINGS. In connection with
filings under the Exchange Act, Borrowers shall (i) indemnify Lender, the
Citigroup Group and the Underwriter Group for any Liabilities to which Lender,
the Citigroup Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon the omission to state in the Provided
Information a material fact required to be stated in the Provided Information in
order to make the statements in the Provided Information, in light of the
circumstances under which they were made not misleading and (ii) reimburse
Lender, the Citigroup Group or the Underwriter Group for any legal or other
expenses actually incurred by Lender, Citigroup Group or the Underwriter Group
in connection with defending or investigating
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the Liabilities. Notwithstanding anything to the contrary contained in this
Section 9.1.4, nothing contained herein shall impose liability upon Borrowers
for any Liabilities arising out of or based upon an untrue statement of any
material fact contained in any Third Party Report, unless Borrowers had actual
knowledge at the time Borrowers provided such statement, report or document to
Lender that such Third Party Report contains such untrue statement.
9.1.5 INDEMNIFICATION PROCEDURE. Promptly after receipt by an
indemnified party under Section 9.1.3 or 9.1.4 of notice of the commencement of
any action for which a claim for indemnification is to be made against
Borrowers, such indemnified party shall notify Borrowers in writing of such
commencement, but the omission to so notify Borrowers will not relieve Borrowers
from any liability that they may have to any indemnified party hereunder except
to the extent that failure to notify causes prejudice to Borrowers. If any
action is brought against any indemnified party, and it notifies Borrowers of
the commencement thereof, Borrowers will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent that it (or they)
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice of commencement, to assume the defense thereof
with counsel satisfactory to such indemnified party in its discretion. After
notice from Borrowers to such indemnified party under this Section 9.1.5,
Borrowers shall not be responsible for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, if the defendants in
any such action include both Borrowers and an indemnified party, and any
indemnified party shall have reasonably concluded that there are any legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to Borrowers, then the indemnified party
or parties shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Borrowers shall not be liable for the
expenses of more than one separate counsel unless there are legal defenses
available to it that are different from or additional to those available to
another indemnified party.
9.1.6 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 9.1.3 or 9.1.4 is for any reason held to be unenforceable by an
indemnified party in respect of any Liabilities (or action in respect thereof)
referred to therein which would otherwise be indemnifiable under Section 9.1.3
or 9.1.4, Borrowers shall contribute to the amount paid or payable by the
indemnified party as a result of such Liabilities (or action in respect
thereof); provided, however, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person not guilty of such fraudulent
misrepresentation. In determining the amount of contribution to which the
respective parties are entitled, the following factors shall be considered: (i)
the Citigroup Group's and Borrowers' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted;
(ii) the opportunity to correct and prevent any statement or omission; and (iii)
any other equitable considerations appropriate in the circumstances. Lender and
Borrowers hereby agree that it may not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation.
9.1.7 SEVERANCE OF LOAN. Lender shall have the right, at any
time (whether prior to, in connection with, or after any Secondary Market
Transaction), with respect to all or
67
any portion of the Loan, to modify, split and/or sever all or any portion of the
Loan as hereinafter provided. Without limiting the foregoing, Lender may (i)
cause the Note and the Mortgage to be split into a first and second mortgage
loan, (ii) create one more senior and subordinate notes (I.E., an A/B or A/B/C
structure), (iii) create multiple components of the Note or Notes (and allocate
or reallocate the principal balance of the Loan among such components) or (iv)
otherwise sever the Loan into two or more loans secured by mortgages and by a
pledge of partnership or membership interests (directly or indirectly) in
Borrowers (I.E., a senior loan/mezzanine loan structure), in each such case, in
whatever proportion and whatever priority Lender determines; provided, however,
in each such instance the outstanding principal balance of all the Notes
evidencing the Loan (or components of such Notes) immediately after the
effective date of such modification equals the outstanding principal balance of
the Loan immediately prior to such modification and the weighted average of the
interest rates for all such Notes (or components of such Notes) immediately
after the effective date of such modification equals the interest rate of the
original Note immediately prior to such modification. If requested by Lender,
Borrowers (and Borrowers' constituent members, if applicable, and Guarantor)
shall execute within seven (7) Business Days after such request, such
documentation as Lender may reasonably request to evidence and/or effectuate any
such modification or severance.
9.2 COSTS AND EXPENSES. Notwithstanding anything to the contrary
contained in this Article 9, Borrowers shall not be required to incur
out-of-pocket expenses in the performance of their obligations under Sections
9.1.1 (other than with respect to the delivery or update of non-consolidation
opinions), 9.1.2 and clause (a) of Section 9.1.3 and 9.1.7.
10. MISCELLANEOUS
10.1 EXCULPATION. (a) Subject to the qualifications below, Lender
shall not enforce the liability and obligation of any Borrower to perform and
observe the obligations contained in the Loan Documents by any action or
proceeding wherein a money judgment shall be sought against such Borrower,
except that Lender may bring a foreclosure action, an action for specific
performance or any other appropriate action or proceeding to enable Lender to
enforce and realize upon its interest and rights under the Loan Documents, or in
the Property, the Rents or any other collateral given to Lender pursuant to the
Loan Documents; provided, however, that, except as specifically provided herein,
any judgment in any such action or proceeding shall be enforceable against a
Borrower only to the extent of such Borrower's interest in the Property, in the
Rents and in any other collateral given to Lender, and Lender shall not xxx for,
seek or demand any deficiency judgment against a Borrower in any such action or
proceeding under or by reason of or under or in connection with any Loan
Document. The provisions of this Section shall not, however, (i) constitute a
waiver, release or impairment of any obligation evidenced or secured by any Loan
Document; (ii) impair the right of Lender to name one or more Borrowers as a
party defendant in any action or suit for foreclosure and sale under the
Mortgage; (iii) affect the validity or enforceability of any of the Loan
Documents or any guaranty made in connection with the Loan or any of the rights
and remedies of Lender thereunder; (iv) impair the right of Lender to obtain the
appointment of a receiver; (v) impair the enforcement of the Assignment of
Leases; (vi) constitute a prohibition against Lender to commence any other
appropriate action or proceeding in order for Lender to fully realize the
security granted by the Mortgage or to exercise its remedies against the
Property; or (vii) constitute a waiver of the right of Lender to enforce the
liability and obligation of Borrowers, by money judgment or otherwise, to the
extent
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of any loss, damage, cost, expense, liability, claim or other obligation
incurred by Lender (including attorneys' fees and costs reasonably incurred)
(collectively, "LENDER'S LOSSES") arising out of or in connection with the
following (all such liability and obligation of Borrower for any or all of the
following being referred to herein as "BORROWERS' RECOURSE LIABILITIES"): (a)
fraud or intentional misrepresentation by any Borrower, or Guarantor in
connection with obtaining the Loan; (b) physical waste of the Property or any
portion thereof (other than acts committed by a third party non-affiliated
property manager), or after an Event of Default the removal or disposal of any
portion of the Property (other than acts committed by a third party
non-affiliated property manager); (c) any Proceeds paid by reason of any Insured
Casualty or any Award received in connection with a Condemnation or other sums
or payments attributable to the Property not applied in accordance with the
provisions of the Loan Documents (other than acts committed by a third party
non-affiliated property manager) (except to the extent that a Borrower did not
have the legal right, because of a bankruptcy, receivership or similar judicial
proceeding, to direct disbursement of such sums or payments); (d) all Rents of
the Property received or collected by or on behalf of any Borrower after an
Event of Default and not applied to payment of Principal and interest due under
the Note, and to the payment of actual and reasonable operating expenses of the
Property, as they become due or payable (other than acts committed by a third
party non-affiliated property manager) (except to the extent that such
application of such funds is prevented by bankruptcy, receivership, or similar
judicial proceeding in which such Borrower is legally prevented from directing
the disbursement of such sums); (e) misappropriation (including failure to turn
over to Lender on demand following an Event of Default) of tenant security
deposits and rents collected in advance, or of funds held by any Borrower for
the benefit of another party (other than acts committed by a third party
non-affiliated property manager); (f) the failure to pay Taxes, provided
Borrowers shall not be liable (A) to the extent funds to pay such amounts are
available in the Tax and Insurance Subaccount and Lender failed to pay same or
has elected not to pay the same pursuant to Section 3.3 or (B) Rents are
insufficient to yield sufficient funds to pay such amounts; (g) the breach of
any representation, warranty, covenant or indemnification in any Loan Document
concerning Environmental Laws or Hazardous Substances, including Sections 4.21
and 5.8, and clauses (viii) through (xi) of Section 5.30; (h) the breach of the
covenants set forth in Section 5.13 (other than a breach of any of the covenants
described in clauses (x) and (xxi) (with respect to unsecured trade payables)
set forth in the definition of "Special Purpose Bankruptcy Remote Entity" on
Schedule 5, if the same occurs as a result of the economic performance of the
Property); (i) any Borrower or any Guarantor of such Borrower or any of their
direct or indirect Affiliates taking any action or making any omission intended
or reasonably likely to hinder, delay, impair or prevent Lender in or from
enforcing any and all of its rights and remedies under or pursuant to the Loan
Documents or at law or in equity (unless the same is brought in good faith and
is determined in favor of such Borrower or Guarantor pursuant to a final,
non-appealable judgment of a court of competent jurisdiction); (j) the
termination of the Management Agreement or the removal of Behringer Harvard TIC
Management Services, L.P. as property manager thereunder without Lender's
consent (provided that only the Borrower(s) that voted in favor of such
termination or removal shall be liable for such losses); or (k) subject to the
next succeeding sentence, the failure by any Borrower to consent to a
modification of the terms of the Loan after a minimum of other Borrowers
representing a collective 66% tenancy in common interest in the Property (as
such percentage shall be automatically increased by each percentage point by
which the Behringer Minimum Tenant-in-Common Interest exceeds 5%) have approved
69
the same. For purposes of the foregoing clause (k), Lender's Losses with respect
to the occurrence of any event giving rise to such matter (A) shall be deemed to
be equal to any unpaid portion of the Debt that remains outstanding after Lender
completes its realization with respect to the Property (and all of its other
collateral for the Loan pursuant to any of the Loan Documents) and applies the
proceeds of such realization to the Debt and (B) Lender's Losses with respect to
any applicable Borrower shall be limited to an amount equal to the product of
(1) the original principal amount of the Loan and (2) the applicable Borrower's
respective undivided tenant in common interest in the Property (expressed as a
percentage).
(b) Notwithstanding anything to the contrary in this
Agreement or any of the Loan Documents, (A) Lender shall not be deemed to have
waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or
any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the Debt or to require that all collateral shall continue to secure
all of the Debt in accordance with the Loan Documents, and (B) Lender's
agreement not to pursue personal liability of Borrowers as set forth above SHALL
BECOME NULL AND VOID and shall be of no further force and effect, and the Debt
shall be fully recourse to the applicable Borrower or Borrowers in an amount
equal to the greater of (x) Lender's Losses arising out of or in connection with
the following matters or (y) an amount equal to the product of (1) the unpaid
balance of the Debt and (2) the applicable Borrower's respective undivided
tenant in common interest in the Property (expressed as a percentage), in the
event that one or more of the following occurs (each, a "SPRINGING RECOURSE
EVENT"): (i) an Event of Default described in Section 8.1(d) shall have
occurred, (ii) the occurrence of any condition or event described in either
Section 8.1(f) (with respect to Borrowers only) or Section 8.1(g) (with respect
to Borrowers only) (each, an "INSOLVENCY ACTION") and, with respect to such
Insolvency Action described in Section 8.1(g), either any Borrower, Guarantor or
any Person owning an interest (directly or indirectly) in any Borrower, or
Guarantor consents to, aids, solicits, supports, or otherwise cooperates or
colludes to cause such Insolvency Action or fails to contest such Insolvency
Action, except in the event that any such party has a fiduciary or legal duty to
take such action, (iii) any involuntary bankruptcy proceeding is brought by any
Borrower or its Guarantor or any of such Borrower's or its Guarantor's
Affiliates against any other Borrower; (iv) if subsequent to the commencement of
any voluntary bankruptcy proceeding with respect to any Borrower, any
involuntary bankruptcy proceeding is brought by Lender against one or more
Borrowers and any Borrower or such Borrower's Guarantor files any motion
contesting the same; or (v) any Borrower, such Borrower's Guarantor or any
Affiliate of such Borrower brings or joins in any action or proceeding for the
partition of the Property or any portion thereof or interest therein.
(c) Notwithstanding anything to the contrary in this Section
10.1 or in any Loan Document, Lender hereby agrees that (1) with respect to the
matters described in clauses (a) through (f), (h), (i), (j) and (k) of
Borrowers' Recourse Liabilities, each TIC Borrower shall be liable for its own
acts, and no TIC Borrower (or any other Borrower) shall be liable for such
Borrowers' Recourse Liabilities occasioned as a result of the acts of any other
Borrower (or property manager) and (2) with respect to the matters described
clauses (i) through (v) of the Springing Recourse Events, if any such Springing
Recourse Event is caused by one or more TIC Borrowers, then only such TIC
Borrower or TIC Borrowers (and such TIC Borrower's or TIC Borrowers' Guarantor
or Guarantors (as applicable)) shall have the liability set forth in clause (b)
70
above, and no other TIC Borrower (or any other Borrower) shall be liable as a
result of such matter.
10.2 BROKERS AND FINANCIAL ADVISORS. Each Borrower hereby represents
that it has dealt with no financial advisors, brokers, underwriters, placement
agents, agents or finders in connection with the Loan, other than NorthMarq
Capital, Inc., whose fee shall be paid by Borrowers. Borrowers shall indemnify
and hold Lender harmless from and against any and all claims, liabilities, costs
and expenses (including attorneys' fees, whether incurred in connection with
enforcing this indemnity or defending claims of third parties) of any kind in
any way relating to or arising from a claim by any Person that such Person acted
on behalf of Borrowers in connection with the transactions contemplated herein.
The provisions of this Section 10.2 shall survive the expiration and termination
of this Agreement and the repayment of the Debt.
10.3 RETENTION OF SERVICER. Lender reserves the right to retain the
Servicer to act as its agent hereunder with such powers as are specifically
delegated to the Servicer by Lender, whether pursuant to the terms of this
Agreement, any pooling and servicing agreement or similar agreement entered into
as a result of a Secondary Market Transaction, the Deposit Account Agreement or
otherwise, together with such other powers as are reasonably incidental thereto.
Borrowers shall pay any reasonable fees and expenses of the Servicer in
connection with a release of the Property, assumption or modification of the
Loan, enforcement of the Loan Documents or any other action taken by Servicer
hereunder on behalf of Lender, to the extent such actions are permitted to be
taken pursuant to the terms of the Loan Documents, but only to the extent that
Borrowers are expressly required to pay such expenses pursuant to the terms of
this Agreement. Notwithstanding anything to the contrary contained herein, to
the extent any matter described in this Agreement requires the consent or
approval of the special servicer under the pooling and servicing agreement (or
other similar agreement) entered into in connection with a Securitization, such
special servicer shall be afforded a consent period for such matter equal to the
greater of (i) the period of time given to Lender hereunder within which to
consent or approve such matter, (ii) 15 Business Days (to the extent such 15
Business Day period is required under the terms of such pooling and servicing
agreement).
10.4 SURVIVAL. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as any of the Debt is unpaid or such longer period if expressly set
forth in this Agreement. All Borrowers' covenants and agreements in this
Agreement shall inure to the benefit of the respective legal representatives,
successors and assigns of Lender.
10.5 LENDER'S DISCRETION. Whenever pursuant to this Agreement or any
other Loan Document, Lender exercises any right given to it to approve or
disapprove, or consent or withhold consent, or any arrangement or term is to be
satisfactory to Lender or is to be in Lender's discretion, the decision of
Lender to approve or disapprove, to consent or withhold consent, or to decide
whether arrangements or terms are satisfactory or not satisfactory, or
acceptable or unacceptable or in Lender's discretion shall (except as is
otherwise specifically herein provided) be in the sole discretion of Lender and
shall be final and conclusive.
10.6 GOVERNING LAW.
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(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK
AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE
STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP
TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED
STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH
THE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT
PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE DEBT.
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION
GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
PURSUANT TO ss. 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
ANY BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN
ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY, NEW YORK AND EACH BORROWER WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH
BORROWER DOES HEREBY DESIGNATE AND APPOINT FULBRIGHT & XXXXXXXX L.L.P., 000
XXXXX XXXXXX, XXX XXXX, XXX XXXX 00000, ATTENTION: XXXXXXX X. XXXXXX, ESQ. AS
ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND
ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS
UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF SUCH
BORROWER MAILED OR DELIVERED TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER
(UNLESS LOCAL LAW REQUIRES ANOTHER METHOD OF SERVICE), IN ANY SUCH SUIT, ACTION
OR PROCEEDING IN THE STATE OF NEW YORK. EACH BORROWER (i) SHALL GIVE PROMPT
NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (ii)
MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT
WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE
ADDRESS FOR
72
SERVICE OF PROCESS), AND (iii) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS
AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.
10.7 MODIFICATION, WAIVER IN WRITING. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement
or of any other Loan Document, nor consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in a writing
signed by the party against whom enforcement is sought, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. Except as otherwise expressly provided herein, no notice to or
demand on any Borrower shall entitle any Borrower to any other or future notice
or demand in the same, similar or other circumstances. Neither any failure nor
any delay on the part of Lender in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under any other Loan Document, shall operate as or
constitute a waiver thereof, nor shall a single or partial exercise thereof
preclude any other future exercise, or the exercise of any other right, power,
remedy or privilege. In particular, and not by way of limitation, by accepting
payment after the due date of any amount payable under any Loan Document, Lender
shall not be deemed to have waived any right either to require prompt payment
when due of all other amounts due under the Loan Documents, or to declare an
Event of Default for failure to effect prompt payment of any such other amount.
10.8 TRIAL BY JURY. EACH BORROWER AND LENDER HEREBY AGREE NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY EACH BORROWER AND LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. EITHER PARTY IS HEREBY AUTHORIZED TO FILE
A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER
BY THE OTHER.
10.9 HEADINGS/EXHIBITS. The Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose. The Exhibits attached hereto, are
hereby incorporated by reference as a part of the Agreement with the same force
and effect as if set forth in the body hereof.
10.10 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.11 PREFERENCES. Upon the occurrence and continuance of an Event of
Default, Lender shall have the continuing and exclusive right to apply any and
all payments by Borrowers to any portion of the Debt. To the extent Borrowers
make a payment to Lender, or Lender
73
receives proceeds of any collateral, which is in whole or part subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the Debt or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender. This provision shall survive the
expiration or termination of this Agreement and the repayment of the Debt.
10.12 WAIVER OF NOTICE. No Borrower shall be entitled to any notices
of any nature whatsoever from Lender except with respect to matters for which
this Agreement or any other Loan Document specifically and expressly requires
the giving of notice by Lender to such Borrower and except with respect to
matters for which such Borrower is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice. Each Borrower hereby
expressly waives the right to receive any notice from Lender with respect to any
matter for which no Loan Document specifically and expressly requires the giving
of notice by Lender to such Borrower.
10.13 REMEDIES OF BORROWER. If a claim or adjudication is made that
Lender or any of its agents, including Servicer, has acted unreasonably or
unreasonably delayed acting in any case where by law or under any Loan Document,
Lender or any such agent, as the case may be, has an obligation to act
reasonably or promptly, Borrowers agree that neither Lender nor its agents,
including Servicer, shall be liable for any monetary damages, and Borrowers'
sole remedy shall be to commence an action seeking injunctive relief or
declaratory judgment. Any action or proceeding to determine whether Lender has
acted reasonably shall be determined by an action seeking declaratory judgment.
Each Borrower specifically waives any claim against Lender and its agents,
including Servicer, with respect to actions taken by Lender or its agents on
Borrowers' behalf.
10.14 PRIOR AGREEMENTS. This Agreement and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements,
understandings and negotiations among or between such parties, whether oral or
written, are superseded by the terms of this Agreement and the other Loan
Documents.
10.15 OFFSETS, COUNTERCLAIMS AND DEFENSES. Each Borrower hereby waives
the right to assert a counterclaim, other than a compulsory counterclaim, in any
action or proceeding brought against one or more Borrowers by Lender or its
agents, including Servicer, or otherwise offset any obligations to make payments
required under the Loan Documents. Any assignee of Lender's interest in and to
the Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which one or more Borrowers may otherwise have
(including with respect to any Future Funding Obligation or any default or
dispute relating thereto) against any assignor of such documents, and no such
offset, counterclaim or defense shall be interposed or asserted by one or more
Borrowers in any action or proceeding brought by any such assignee upon such
documents, and any such right to interpose or assert any such offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Borrowers.
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10.16 PUBLICITY. All news releases, publicity or advertising by any
Borrower or its Affiliates through any media intended to reach the general
public, which refers to the Loan Documents, the Loan, Lender or any member of
the Citigroup Group, a Loan purchaser, the Servicer or the trustee in a
Secondary Market Transaction, shall be subject to the prior written approval of
Lender; provided however, that Lender's consent shall not be required by any
Borrower, Borrower's Affiliates, or any broker dealer or investor representative
related to the marketing or sale of any investment fund or investment trust
managed by Borrower's Affiliates which disclosure is required under the
Securities Act of 1933 or 1934 or to any potential purchaser of an interest in
the Property. Lender shall have the right to issue any of the foregoing without
any Borrower's approval.
10.17 NO USURY. Borrowers and Lender intend at all times to comply
with applicable state law or applicable United States federal law (to the extent
that it permits Lender to contract for, charge, take, reserve or receive a
greater amount of interest than under state law) and that this Section 10.17
shall control every other agreement in the Loan Documents. If the applicable law
(state or federal) is ever judicially interpreted so as to render usurious any
amount called for under the Note or any other Loan Document, or contracted for,
charged, taken, reserved or received with respect to the Debt, or if Lender's
exercise of the option to accelerate the maturity of the Loan or any prepayment
by Borrowers results in Borrowers having paid any interest in excess of that
permitted by applicable law, then it is Borrowers' and Lender's express intent
that all excess amounts theretofore collected by Lender shall be credited
against the unpaid Principal and all other Debt (or, if the Debt has been or
would thereby be paid in full, refunded to Borrowers), and the provisions of the
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with applicable law, but so as to permit the
recovery of the fullest amount otherwise called for thereunder. All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of the Loan
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Loan until payment
in full so that the rate or amount of interest on account of the Debt does not
exceed the maximum lawful rate from time to time in effect and applicable to the
Debt for so long as the Debt is outstanding. Notwithstanding anything to the
contrary contained in any Loan Document, it is not the intention of Lender to
accelerate the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration.
10.18 CONFLICT; CONSTRUCTION OF DOCUMENTS. In the event of any
conflict between the provisions of this Agreement and any of the other Loan
Documents, the provisions of this Agreement shall control. The parties hereto
acknowledge that each is represented by separate counsel in connection with the
negotiation and drafting of the Loan Documents and that the Loan Documents shall
not be subject to the principle of construing their meaning against the party
that drafted them.
10.19 NO THIRD PARTY BENEFICIARIES. The Loan Documents are solely for
the benefit of Lender and Borrowers and nothing contained in any Loan Document
shall be deemed to confer upon anyone other than the Lender and Borrowers any
right to insist upon or to enforce the performance or observance of any of the
obligations contained therein.
75
10.20 YIELD MAINTENANCE PREMIUM. Borrowers acknowledge that (a) Lender
is making the Loan in consideration of the receipt by Lender of all interest and
other benefits intended to be conferred by the Loan Documents and (b) if
payments of Principal are made to Lender prior to the Stated Maturity Date, for
any reason whatsoever, whether voluntary, as a result of Lender's acceleration
of the Loan after an Event of Default, by operation of law or otherwise, Lender
will not receive all such interest and other benefits and may, in addition,
incur costs. For these reasons, and to induce Lender to make the Loan, Borrowers
agree that, except as expressly provided in Section 7, all prepayments, if any,
whether voluntary or involuntary, will be accompanied by the Yield Maintenance
Premium. Such Yield Maintenance Premium shall be required whether payment is
made by one or more Borrowers, by a Person on behalf of one or more Borrowers,
or by the purchaser at any foreclosure sale, and may be included in any bid by
Lender at such sale. Borrowers further acknowledge that (A) they are
knowledgeable real estate developers and/or investors; (B) they fully understand
the effect of the provisions of this Section 10.20, as well as the other
provisions of the Loan Documents; (C) the making of the Loan by Lender at the
Interest Rate and other terms set forth in the Loan Documents are sufficient
consideration for Borrowers' obligation to pay a Yield Maintenance Premium (if
required); and (D) Lender would not make the Loan on the terms set forth herein
without the inclusion of such provisions. Borrowers also acknowledge that the
provisions of this Agreement limiting the right of prepayment and providing for
the payment of the Yield Maintenance Premium and other charges specified herein
were independently negotiated and bargained for, and constitute a specific
material part of the consideration given by Borrowers to Lender for the making
of the Loan except as expressly permitted hereunder.
10.21 ASSIGNMENT. The Loan, the Note, the Loan Documents and/or
Lender's rights, title, obligations and interests therein may be assigned by
Lender and any of its successors and assigns to any Person at any time in its
discretion, in whole or in part, whether by operation of law (pursuant to a
merger or other successor in interest) or otherwise. Upon such assignment, all
references to Lender in this Loan Agreement and in any Loan Document shall be
deemed to refer to such assignee or successor in interest and such assignee or
successor in interest shall thereafter stand in the place of Lender. No Borrower
may assign its rights, title, interests or obligations under this Loan Agreement
or under any of the Loan Documents.
10.22 BORROWERS' DESIGNEE. Each of the Borrowers hereby authorizes,
designates and directs Borrowers' Designee to give Lender directions of any
kind, to take the actions or make such deliveries specified herein to be taken
or delivered by Borrowers' Designee (including under Sections 5.11, 6.3 and 9.1,
and including with respect to any requisitions from any reserve accounts under
Article 3) and to give and receive notices of any kind on behalf of such
Borrower under this Agreement or any of the other Loan Documents. Any notice
given by Lender to Borrowers' Designee shall be deemed to have been given to
each and every Borrower.
10.23 INTENTIONALLY OMITTED.
10.24 JOINT AND SEVERAL. Except to the extent expressly provided
otherwise in the Loan Documents, each of the Borrowers shall be jointly and
severally liable for payment of the Debt and performance of all other
obligations of Borrowers (or any of them) under this Agreement or any other Loan
Document.
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10.25 SET-OFF. IN ADDITION TO ANY RIGHTS AND REMEDIES OF LENDER
PROVIDED BY THIS LOAN AGREEMENT AND BY LAW, LENDER SHALL HAVE THE RIGHT, WITHOUT
PRIOR NOTICE TO ANY BORROWER, ANY SUCH NOTICE BEING EXPRESSLY WAIVED BY EACH
BORROWER TO THE EXTENT PERMITTED BY APPLICABLE LAW, UPON ANY AMOUNT BECOMING DUE
AND PAYABLE BY ANY BORROWER HEREUNDER (WHETHER AT THE STATED MATURITY, BY
ACCELERATION OR OTHERWISE) TO SET-OFF AND APPROPRIATE AND APPLY AGAINST SUCH
AMOUNT ANY AND ALL DEPOSITS (GENERAL OR SPECIAL, TIME OR DEMAND, PROVISIONAL OR
FINAL), IN ANY CURRENCY, AND ANY OTHER CREDITS, INDEBTEDNESS OR CLAIMS, IN ANY
CURRENCY, IN EACH CASE WHETHER DIRECT OR INDIRECT, ABSOLUTE OR CONTINGENT,
MATURED OR UNMATURED, AT ANY TIME HELD OR OWING BY LENDER OR ANY AFFILIATE
THEREOF TO OR FOR THE CREDIT OR THE ACCOUNT OF BORROWERS. LENDER AGREES PROMPTLY
TO NOTIFY BORROWERS AFTER ANY SUCH SET-OFF AND APPLICATION MADE BY LENDER;
PROVIDED THAT THE FAILURE TO GIVE SUCH NOTICE SHALL NOT AFFECT THE VALIDITY OF
SUCH SET-OFF AND APPLICATION.
10.26 1031 EXCHANGE. Borrowers acknowledge that they have established
a tenancy in common ownership structure for the Property in order to, among
other things, obtain certain tax benefits afforded under the provisions of
Section 1031 of the Code. Each Borrower expressly acknowledges that, together
with its own professional advisors and legal counsel, it has performed its own
due diligence and legal analysis relating to a tenancy in common ownership
structure and to the financial, tax, legal and other issues as it had deemed
necessary or appropriate to make an informed investment decision to purchase a
tenancy in common interest in the Property. Each Borrower expressly acknowledges
that Lender has not acted in any way whatsoever as an advisor to any Borrower
with respect to the foregoing and agrees that Lender shall have no
responsibility or express or implied liability whatsoever with respect to any of
the foregoing.
10.27 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed by their duly authorized representatives, all as of the day
and year first above written.
CITIGROUP GLOBAL MARKETS REALTY CORP.,
a New York corporation
By:_____________________________________
Name:________________________________
Title:_______________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
Behringer Harvard Alamo Plaza H, LLC,
a Delaware limited liability company
By:_____________________________________
Xxxxxx X. Xxxxxxx, III, Secretary
[Signature Pages Follow]
Behringer Harvard Alamo Plaza S, LLC,
a Delaware limited liability company
By:_____________________________________
Xxxxxx X. Xxxxxxx, III, Secretary
SCHEDULE 1
INITIAL TIC BORROWERS/GUARANTORS/TIC % INTERESTS
SEE ATTACHED.
1 - 1
SCHEDULE 2
REQUIRED REPAIRS
------------------------------- ---------------------------- ---------------------------- ----------------------------
ITEM # REQUIRED REPAIR DESCRIPTION ENGINEER'S ESTIMATE ESCROW AMOUNT
------------------------------- ---------------------------- ---------------------------- ----------------------------
1 Concrete Restoration $85,943.00 $107,429.00
------------------------------- ---------------------------- ---------------------------- ----------------------------
2 Patch the concrete on the $0 $0
ceiling of the basement
parking garage where the
post-tensioning cables
have broken through
------------------------------- ---------------------------- ---------------------------- ----------------------------
3 Repair the water-damaged $0 $0
gypsum board on the
soffits and apply a
water-resistant coating;
secure the loose window
gasket on the southwest
side of the building
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTAL $85,943.00 $107,429.00
-----
------------------------------- ---------------------------- ---------------------------- ----------------------------
All required repairs must be completed within six (6) months from the date of
this Loan Agreement.
1 - 2
SCHEDULE 3
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
2 - 1
SCHEDULE 4
ORGANIZATION OF BORROWER
(See attached)
3 - 1
SCHEDULE 5
DEFINITION OF SPECIAL PURPOSE BANKRUPTCY REMOTE ENTITY
A "SPECIAL PURPOSE BANKRUPTCY REMOTE ENTITY" means (x) a limited liability
company that is a Single Member Bankruptcy Remote LLC or (y) a corporation,
limited partnership or limited liability company which at all times since its
formation and at all times thereafter (i) was and will be organized solely for
the purpose of (A) owning the Property or (B) acting as a general partner of the
limited partnership that owns the Property or member of the limited liability
company that owns the Property; (ii) has not engaged and will not engage in any
business unrelated to (A) the ownership of the Property, (B) acting as general
partner of the limited partnership that owns the Property or (C) acting as a
member of the limited liability company that owns the Property, as applicable;
(iii) has not had and will not have any assets other than those related to the
Property or its partnership or member interest in the limited partnership or
limited liability company that owns the Property, as applicable; (iv) has not
engaged, sought or consented to and will not engage in, seek or consent to any
dissolution, winding up, liquidation, consolidation, merger, asset sale (except
as expressly permitted by this Agreement), transfer of partnership or membership
interests or the like, or amendment of its limited partnership agreement,
articles of incorporation, articles of organization, certificate of formation or
operating agreement (as applicable); (v) if such entity is a limited
partnership, has and will have, as its only general partners, Special Purpose
Bankruptcy Remote Entities that are corporations; (vi) if such entity is a
corporation, has and will have at least one Independent Director, and has not
caused or allowed and will not cause or allow the board of directors of such
entity to take any action requiring the unanimous affirmative vote of 100% of
the members of its board of directors unless all of the directors and all
Independent Directors shall have participated in such vote; (vii) if such entity
is a limited liability company, has and will have at least one member that has
been and will be a Special Purpose Bankruptcy Remote Entity that has been and
will be a corporation and such corporation is the managing member of such
limited liability company; (viii) if such entity is a limited liability company,
has and will have articles of organization, a certificate of formation and/or an
operating agreement, as applicable, providing that (A) such entity will dissolve
only upon the bankruptcy of the managing member, (B) the vote of a
majority-in-interest of the remaining members is sufficient to continue the life
of the limited liability company in the event of such bankruptcy of the managing
member and (C) if the vote of a majority-in-interest of the remaining members to
continue the life of the limited liability company following the bankruptcy of
the managing member is not obtained, the limited liability company may not
liquidate the Property without the consent of the applicable Rating Agencies for
as long as the Loan is outstanding; (ix) has not, and without the unanimous
consent of all of its partners, directors or members (including all Independent
Directors), as applicable, will not, with respect to itself or to any other
entity in which it has a direct or indirect legal or beneficial ownership
interest (A) file a bankruptcy, insolvency or reorganization petition or
otherwise institute insolvency proceedings or otherwise seek any relief under
any laws relating to the relief from debts or the protection of debtors
generally, (B) seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for such
entity or for all or any portion of such entity's properties, (C) make any
assignment for the benefit of such entity's creditors or (D) take any action
that might cause such entity to become insolvent; (x) has remained and will
remain solvent and has maintained and will maintain adequate capital in light
4 - 1
of its contemplated business operations; (xi) has not failed and will not fail
to correct any known misunderstanding regarding the separate identity of such
entity; (xii) has maintained and will maintain its accounts, books and records
separate from any other Person and will file its own tax returns; (xiii) has
maintained and will maintain its books, records, resolutions and agreements as
official records; (xiv) has not commingled and will not commingle its funds or
assets with those of any other Person; (xv) has held and will hold its assets in
its own name; (xvi) has conducted and will conduct its business in its name or
under the trade name of the Property, (xvii) has maintained and will maintain
its financial statements, accounting records and other entity documents separate
from any other Person; (xviii) has paid and will pay its own liabilities,
including the salaries of its own employees, out of its own funds and assets;
(xix) has observed and will observe all partnership, corporate or limited
liability company formalities, as applicable; (xx) has maintained and will
maintain an arm's-length relationship with its Affiliates; (xxi) (a) if such
entity owns the Property, has and will have no indebtedness other than the Loan
and unsecured trade payables in the ordinary course of business relating to the
ownership and operation of Property which (1) do not exceed, at any time, a
maximum amount of 2% of the original amount of the Principal and (2) are paid
within sixty (60) days of the date incurred, or (b) if such entity acts as the
general partner of a limited partnership which owns the Property, has and will
have no indebtedness other than unsecured trade payables in the ordinary course
of business relating to acting as general partner of the limited partnership
which owns the Property which (1) do not exceed, at any time, $10,000 and (2)
are paid within thirty (30) days of the date incurred, or (c) if such entity
acts as a managing member of a limited liability company which owns the
Property, has and will have no indebtedness other than unsecured trade payables
in the ordinary course of business relating to acting as a member of the limited
liability company which owns the Property which (1) do not exceed, at any time,
$10,000 and (2) are paid within thirty (30) days of the date incurred; (xxii)
has not and will not assume or guarantee or become obligated for the debts of
any other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the Loan; (xxiii) has not and will
not acquire obligations or securities of its partners, members or shareholders;
(xxiv) has allocated and will allocate fairly and reasonably shared expenses,
including shared office space, and uses separate stationery, invoices and
checks; (xxv) except in connection with the Loan, has not pledged and will not
pledge its assets for the benefit of any other Person; (xxvi) has held itself
out and identified itself and will hold itself out and identify itself as a
separate and distinct entity under its own name and not as a division or part of
any other Person; (xxvii) has maintained and will maintain its assets in such a
manner that it will not be costly or difficult to segregate, ascertain or
identify its individual assets from those of any other Person; (xxviii) has not
made and will not make loans to any Person; (xxix) has not identified and will
not identify its partners, members or shareholders, or any Affiliate of any of
them, as a division or part of it; (xxx) except for the Management Agreement,
has not entered into or been a party to, and will not enter into or be a party
to, any transaction with its partners, members, shareholders or Affiliates
except in the ordinary course of its business and on terms which are
intrinsically fair and are no less favorable to it than would be obtained in a
comparable arm's-length transaction with an unrelated third party; (xxxi) has
and will have no obligation to indemnify its partners, officers, directors,
members or Special Members, as the case may be, or has such an obligation that
is fully subordinated to the Debt and will not constitute a claim against it if
cash flow in excess of the amount required to pay the Debt is insufficient to
pay such obligation; and (xxxii) will consider
4 - 2
the interests of its creditors in connection with all corporate, partnership or
limited liability actions, as applicable.
"INDEPENDENT DIRECTOR" means (x) in the case of a Single Member Bankruptcy
Remote LLC: a natural person selected by Borrower and reasonably satisfactory to
Lender who shall not have been at the time of such individual's appointment as
an Independent Director of the Single Member Bankruptcy Remote LLC, does not
thereafter become while serving as an Independent Director (except pursuant to
an express provision in the Single Member Bankruptcy Remote LLC's limited
liability company agreement providing for the Independent Director to become a
Special Member (defined below) upon the sole member of such Single Member
Bankruptcy Remote LLC ceasing to be a member in such Single Member Bankruptcy
Remote LLC) and shall not have been at any time during the preceding five years
(i) a shareholder/partner/member of, or an officer or employee of, Borrower or
any of its shareholders, subsidiaries or Affiliates, (ii) a director (other than
as an Independent Director) of any shareholder, subsidiary or Affiliate of
Borrower, (iii) a customer of, or supplier to, Borrower or any of its
shareholders, subsidiaries or Affiliates, (iv) a Person who Controls any such
shareholder, supplier or customer, or (v) a member of the immediate family of
any such shareholder/ director/partner/member, officer, employee, supplier or
customer or of any director of Borrower (other than as an Independent Director);
and (y) in the case of a corporation, an individual selected by Borrower and
reasonably satisfactory to Lender who shall not have been at the time of such
individual's appointment as a director, does not thereafter become while serving
as an Independent Director and shall not have been at any time during the
preceding five years (i) a shareholder/partner/member of, or an officer,
employee, consultant, agent or advisor of, Borrower or any of its shareholders,
subsidiaries, members or Affiliates, (ii) a director of any shareholder,
subsidiary, member, or Affiliate of Borrower other than Borrower's general
partner or managing member, (iii) a customer of, or supplier to, Borrower or any
of its shareholders, subsidiaries or Affiliates that derives more than 10% of
its purchases or income from its activities with Borrower or any Affiliate of
Borrower, (iv) a Person who Controls any such shareholder, supplier or customer,
or (v) a member of the immediate family (including a grandchild or sibling) of
any such shareholder/director/partner/member, officer, employee, supplier or
customer or of any other director of Borrower's general partner or managing
member.
"SINGLE MEMBER BANKRUPTCY REMOTE LLC" means a limited liability company
organized under the laws of the State of Delaware which at all times since its
formation and at all times thereafter (i) complies with the following clauses of
the definition of Special Purpose Bankruptcy Remote Entity above: (i)(A),
(ii)(A), (iii), (iv), (ix), (x), (xi) and (xiii) through (xxxii); (ii) has
maintained and will maintain its accounts, books and records separate from any
other person; (iii) has and will have an operating agreement which provides that
the business and affairs of Borrower shall be managed by its sole member (the
"SOLE MEMBER"), and at all times there shall be at least one duly appointed
Independent Director, and the Sole Member will not, without the written consent
of its Independent Director (1) take any action affecting its status as a
"Special Purpose Bankruptcy Remote Entity" (as set forth in this Schedule 5) or
(2) take any other "Material Action" (which for purposes hereof means any action
to consolidate or merge the Borrower with or into any Person, or sell all or
substantially all of the assets of the Borrower, or to institute proceedings to
have the Borrower be adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Borrower or file
a petition seeking, or consent to, reorganization or relief with respect to the
Borrower under any applicable
4 - 3
federal or state law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Borrower or a substantial part of its property, or make any
assignment for the benefit of creditors of the Borrower, or admit in writing the
Borrower's inability to pay its debts generally as they become due, or take
action in furtherance of any such action, or, to the fullest extent permitted by
law, dissolve or liquidate the Borrower); (iv) has and will have an operating
agreement which provides that, as long as any portion of the Debt remains
outstanding, (A) upon the occurrence of any event that causes Sole Member to
cease to be a member of Borrower (other than (x) upon an assignment by Sole
Member of all of its limited liability company interest in Borrower and the
admission of the transferee, if permitted pursuant to the organizational
documents of Borrower and the Loan Documents, or (y) the resignation of Sole
Member and the admission of an additional member of Borrower, if permitted
pursuant to the organizational documents of Borrower and the Loan Documents),
the person acting as an Independent Director of Borrower shall, without any
action of any Person and simultaneously with Sole Member ceasing to be a member
of Borrower, automatically be admitted as the sole member of Borrower (the
"SPECIAL MEMBER") and shall preserve and continue the existence of Borrower
without dissolution, (B) no Special Member may resign or transfer its rights as
Special Member unless (x) a successor Special Member has been admitted to
Borrower as a Special Member, and (y) such successor Special Member has also
accepted its appointment as an Independent Director and (C) except as expressly
permitted pursuant to the terms of this Agreement, Sole Member may not resign
and no additional member shall be admitted to Borrower; (v) has and will have an
operating agreement which provides that, as long as any portion of the Debt
remains outstanding, (A) Borrower shall be dissolved, and its affairs shall be
would up only upon the first to occur of the following: (x) the termination of
the legal existence of the last remaining member of Borrower or the occurrence
of any other event which terminates the continued membership of the last
remaining member of Borrower in Borrower unless the business of Borrower is
continued in a manner permitted by its operating agreement or the Delaware
Limited Liability Company Act (the "ACT") or (y) the entry of a decree of
judicial dissolution under Section 18-802 of the Act; (B) upon the occurrence of
any event that causes the last remaining member of Borrower to cease to be a
member of Borrower or that causes Sole Member to cease to be a member of
Borrower (other than (x) upon an assignment by Sole Member of all of its limited
liability company interest in Borrower and the admission of the transferee, if
permitted pursuant to the organizational documents of Borrower and the Loan
Documents, or (y) the resignation of Sole Member and the admission of an
additional member of Borrower, if permitted pursuant to the organizational
documents of Borrower and the Loan Documents), to the fullest extent permitted
by law, the personal representative of such member shall be authorized to, and
shall, within 90 days after the occurrence of the event that terminated the
continued membership of such member in Borrower, agree in writing to continue
the existence of Borrower and to the admission of the personal representative or
its nominee or designee, as the case may be, as a substitute member of Borrower,
effective as of the occurrence of the event that terminated the continued
membership of such member in Borrower; (C) the bankruptcy of Sole Member or a
Special Member shall not cause such member or Special Member, respectively, to
cease to be a member of Borrower and upon the occurrence of such an event, the
business of Borrower shall continue without dissolution; (D) in the event of
dissolution of Borrower, Borrower shall conduct only such activities as are
necessary to wind up its affairs (including the sale of the assets of Borrower
in an orderly manner), and the assets of Borrower shall be applied in the
manner, and in the order of
4 - 4
priority, set forth in Section 18-804 of the Act; and (E) to the fullest extent
permitted by law, each of Sole Member and the Special Members shall irrevocably
waive any right or power that they might have to cause Borrower or any of its
assets to be partitioned, to cause the appointment of a receiver for all or any
portion of the assets of Borrower, to compel any sale of all or any portion of
the assets of Borrower pursuant to any applicable law or to file a complaint or
to institute any proceeding at law or in equity to cause the dissolution,
liquidation, winding up or termination of Borrower.
4 - 5
SCHEDULE 6
FORM OF GUARANTY OF RECOURSE OBLIGATIONS
(See attached)
6 - 1
SCHEDULE 7
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
(See attached)
7 - 1
SCHEDULE 8
RENT ROLL
(SEE ATTACHED)
5 - 1
SCHEDULE 9
OUTSTANDING EQUITY OF BEHRINGER
As of the date hereof, the outstanding equity of Behringer
Harvard Holdings, LLC is as follows:
----------------------------------------- ----------- ----------------------------------------------------------------
MEMBER NAME SERIES PERCENTAGE INTEREST AS OF THE DATE HEREOF
----------------------------------------- ----------- ----------------------------------------------------------------
Xxxxxx X. Xxxxxxxxx A 55.731%
----------------------------------------- ----------- ----------------------------------------------------------------
Xxxxx X. Xxxxx B 11.0%
----------------------------------------- ----------- ----------------------------------------------------------------
Xxxxxx X. Xxxxxxx, III B 4.5%
----------------------------------------- ----------- ----------------------------------------------------------------
Xxxxxx X. Xxxxxx B 4.0%
----------------------------------------- ----------- ----------------------------------------------------------------
Xxxx X. Xxxxxx B 3.0%
----------------------------------------- ----------- ----------------------------------------------------------------
M. Xxxxx Xxxxxx B 1.5%
----------------------------------------- ----------- ----------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx B 1.0%
----------------------------------------- ----------- ----------------------------------------------------------------
Holland Realty Partners, L.P. C 9.3662%
----------------------------------------- ----------- ----------------------------------------------------------------
Xxxxx X. Xxxxx C 6.1141%
----------------------------------------- ----------- ----------------------------------------------------------------
North Bosque Properties, L.P. C 3.7887%
----------------------------------------- ----------- ----------------------------------------------------------------
The only voting equity securities are the Series A Membership Interests. All or
a portion of the equity interests of each Messrs. Reihsen, Aisner, Bresky,
Xxxxxx and Schwaber vest over time or upon the occurrence of certain events
contingent upon continued employment with us or our subsidiaries. The holders of
the Series A Membership Interests have the option to purchase the unvested
portion of these interests at the book value thereof unless the holder is
terminated from employment without cause or he terminates his employment for
good reason, in which case the purchase price is the amount paid he originally
paid for the interest. If the holders of the Series A Membership Interests do
not exercise their option to purchase the unvested interests then all of the
members have a pro rata option to purchase such interests. The forgoing does not
include outstanding convertible notes which could be converted into Series B
Membership Interests representing up to 3.1858% on the company, all of which
dilution would be borne by the Series A Membership Interests.
8 - 1
