Exhibit 10.1
CREDIT AGREEMENT
DATED AS OF AUGUST 25, 2008
by and among
PACIFIC OFFICE PROPERTIES, L.P.,
AS BORROWER,
KEYBANK NATIONAL ASSOCIATION,
AND
OTHER LENDERS THAT MAY BECOME
PARTIES TO THIS AGREEMENT,
KEYBANK NATIONAL ASSOCIATION,
AS AGENT,
AND
KEYBANC CAPITAL MARKETS,
AS SOLE LEAD ARRANGER AND SOLE BOOK MANAGER

 

--------------------------------------------------------------------------------

 

CREDIT AGREEMENT
     THIS CREDIT AGREEMENT (this “Agreement”) is made as of the 25th day of
August, 2008, by and among PACIFIC OFFICE PROPERTIES, L.P., a Delaware limited
partnership (the “Borrower”), KEYBANK NATIONAL ASSOCIATION (“KeyBank”) and the
other lending institutions that may become parties hereto pursuant to §18
(together with KeyBank, the “Lenders”), and KEYBANK NATIONAL ASSOCIATION, as
Agent for the Lenders (the “Agent”), and KEYBANC CAPITAL MARKETS, as Sole Lead
Arranger and Sole Book Manager.
R E C I T A L S
     WHEREAS, the Borrower has requested that the Lenders provide a revolving
credit facility to the Borrower; and
     WHEREAS, the Agent and the Lenders are willing to provide such revolving
credit facility to the Borrower on and subject to the terms and conditions set
forth herein;
     NOW, THEREFORE, in consideration of the recitals herein and mutual
covenants and agreements contained herein, the parties hereto hereby covenant
and agree as follows:
§1. DEFINITIONS AND RULES OF INTERPRETATION.
     §1.1 Definitions. The following terms shall have the meanings set forth in
this §l or elsewhere in the provisions of this Agreement referred to below:
          Acknowledgments. The Acknowledgments executed by each Company in favor
of the Agent, acknowledging the pledge of Equity Interests in such Company to
Agent, such Acknowledgement to be in form and substance satisfactory to Agent.
          Additional Commitment Request Notice. See §2.10(a).
          Additional Guarantor. Each additional Subsidiary of Borrower which
becomes a Subsidiary Guarantor pursuant to §5.2.
          Additional Pledgor. Each additional Pledgor which becomes a Pledgor
pursuant to §5.3.
          Additional Security Documents. See § 5.3.
          Adjusted Consolidated Fixed Charges. On any date of determination, the
sum of (a) Consolidated Interest Expense, plus (b) the amount of any Preferred
Distributions attributable to Borrower and REIT during such period, plus (c) all
regularly scheduled principal payments made with respect to Indebtedness of the
Borrower and its Subsidiaries, other than any balloon, bullet or similar
principal payment which repays such Indebtedness in full, plus (d) federal and
state income taxes paid, in each of (a), (b), (c) and (d) as measured for the
period of four (4) fiscal quarters most recently ended (provided however that if
financial information has not existed for four (4) fiscal quarters as of the
date of determination, then such calculation shall be

 

--------------------------------------------------------------------------------

 

based upon the period of those calendar quarters that are available commencing
April 1, 2008 and ended prior to the date of determination annualized in a
manner reasonably acceptable to Agent). Adjusted Consolidated Fixed Charges
shall include such Person’s Equity Percentage in the Adjusted Consolidated Fixed
Charges of its Unconsolidated Affiliates.
          Adjusted Consolidated EBITDA. On any date of determination, the sum of
(a) the Consolidated EBITDA for the prior four (4) fiscal quarters most recently
ended (provided however that if financial information has not existed for four
(4) fiscal quarters as of the date of determination, then such calculation shall
be based upon the period of those calendar quarters that are available
commencing April 1, 2008 and ended prior to the date of determination annualized
in a manner reasonably acceptable to Agent), less (b) the Capital Reserve.
          Adjusted Real Estate Collateral Value. An amount equal to the Real
Estate Collateral Value divided by 1.25.
          Advisor. Pacific Office Management, Inc., a Delaware corporation.
          Advisory Agreement. That certain Advisory Agreement dated as of
March 19, 2008 by and between Borrower, the REIT and Advisor.
          Affiliate. An Affiliate, as applied to any Person, shall mean any
other Person directly or indirectly controlling, controlled by, or under common
control with, that Person. For purposes of this definition, “control”
(including, with correlative meanings, the terms “controlling”, “controlled by”
and “under common control with”), as applied to any Person, means (a) the
possession, directly or indirectly, of the power to vote ten percent (10%) or
more of the stock, shares, voting trust certificates, beneficial interest,
partnership interests, member interests or other interests having voting power
for the election of directors of such Person or otherwise to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise, or (b) the ownership
of (i) a general partnership interest, (ii) a managing member’s or manager’s
interest in a limited liability company or (iii) a limited partnership interest
or preferred stock (or other ownership interest) representing ten percent (10%)
or more of the outstanding limited partnership interests, preferred stock or
other ownership interests of such Person.
          Agent. KeyBank National Association, acting as administrative agent
for the Lenders, and its successors and assigns.
          Agent’s Head Office. The Agent’s head office located at 127 Public
Square, Cleveland, Ohio 44114-1306, or at such other location as the Agent may
designate from time to time by notice to the Borrower and the Lenders.
          Agent’s Special Counsel. McKenna Long & Aldridge LLP or such other
counsel as selected by Agent.
          Agreement. This Credit Agreement, including the Schedules and Exhibits
hereto.
          Agreement Regarding Fees. See §4.2.

2

--------------------------------------------------------------------------------

 

          Arranger. KeyBanc Capital Markets or any successor.
          Assignment and Acceptance Agreement. See §18.1.
          Assignment of Interests. The Assignment of Interests dated of even
date herewith made by Pledgors in favor of Agent for the benefit of the Lenders.
          Authorized Officer. Any of the following Persons: Jim Kasim and such
other Persons as Borrower shall designate in a written notice to Agent.
          Balance Sheet Date. June 30, 2008.
          Bankruptcy Code. Title 11, U.S.C.A., as amended from time to time or
any successor statute thereto.
          Base Rate. The greater of (a) the fluctuating annual rate of interest
announced from time to time by the Agent at the Agent’s Head Office as its
“prime rate” or (b) one half of one percent (0.5%) above the Federal Funds
Effective Rate. The Base Rate is a reference rate and does not necessarily
represent the lowest or best rate being charged to any customer. Any change in
the rate of interest payable hereunder resulting from a change in the Base Rate
shall become effective as of the opening of business on the day on which such
change in the Base Rate becomes effective, without notice or demand of any kind.
          Base Rate Loans. Loans bearing interest calculated by reference to the
Base Rate.
          Borrower. Pacific Office Properties, L.P., a Delaware limited
partnership.
          Borrowing Base. The Borrowing Base shall be the amount which is the
sum of the aggregate Borrowing Base Asset Values of the Borrowing Base Assets.
          Borrowing Base Asset. Borrowing Base Asset shall mean any Eligible
Asset which satisfies the conditions set forth in §7.17(a). The initial
Borrowing Base Assets are described on Schedule 7.17 hereto.
          Borrowing Base Asset Value. The Borrowing Base Asset Value of any
Borrowing Base Asset shall be the Interest Value; provided that the Borrowing
Base Asset Value of any Borrowing Base Asset shall be deemed to be zero in the
event of any event of default or other event which would permit the acceleration
of any senior mortgage or mezzanine Indebtedness with respect to such Borrowing
Base Asset has occurred and is continuing.
          Borrowing Base Certificate. See §7.4(c).
          Borrowing Base Covenant. The covenant set forth in § 9.5.
          Breakage Costs. The cost to any Lender of re-employing funds bearing
interest at LIBOR incurred (or reasonably expected to be incurred) in connection
with (i) any payment of any portion of the Loans bearing interest at LIBOR prior
to the termination of any applicable Interest Period, (ii) the conversion of a
LIBOR Rate Loan to any other applicable interest rate on

3

--------------------------------------------------------------------------------

 

a date other than the last day of the relevant Interest Period, or (iii) the
failure of the Borrower to draw down, on the first day of the applicable
Interest Period, any amount as to which the Borrower has elected a LIBOR Rate
Loan.
          Building. With respect to each parcel of Real Estate, all of the
buildings, structures and improvements now or hereafter located thereon.
          Business Day. Any day on which banking institutions located in the
same city and State as the Agent’s Head Office is located and in Los Angeles,
California are open for the transaction of banking business and, in the case of
LIBOR Rate Loans, which also is a LIBOR Business Day.
          Capital Reserve. For any period and with respect to any improved Real
Estate, an amount per annum equal to $0.50 multiplied by the total square
footage of the Buildings in such Real Estate, less the amount of related cash
balances maintained in lender reserve accounts pursuant to Senior Loan Documents
which are attributable to the Buildings in such Real Estate. If the term Capital
Reserve is used without reference to any specific Real Estate, then the amount
shall be determined on an aggregate basis with respect to all Real Estate of the
Borrower and its Subsidiaries and a proportionate share of all Real Estate of
all Unconsolidated Affiliates. The Capital Reserve shall be calculated based on
the total square footage of the Buildings owned (or ground leased) at the end of
each fiscal quarter.
          Capitalization Rate. 6.50%.
          Capitalized Lease. A lease under which the discounted future rental
payment obligations of the lessee or the obligor are required to be capitalized
on the balance sheet of such Person in accordance with GAAP.
          Capitalized Value. For any Real Estate, an amount equal to (a) the sum
of the Net Operating Income for such Real Estate for the period of four
(4) fiscal quarters most recently ended (provided however that if financial
information has not existed for four (4) fiscal quarters as of the date of
determination, then such calculation shall be based upon the period of those
calendar quarters that are available commencing April 1, 2008 and ended prior to
the date of determination annualized in a manner reasonably acceptable to
Agent), minus the Capital Reserve for such Real Estate for such period, divided
by (b) the Capitalization Rate.
          Cash Collateral Agreement. The Cash Collateral Account and Control
Agreement among Borrower, Guarantors, Agent and KeyBank as depository, as the
same may be modified or amended, such agreement to be in form and substance
satisfactory to Agent.
          Carve-Out Guarantors. Collectively, Shidler West Investment Partners,
L.P. and Shidler Hawaii Investment Partners, LLC.
          Carve-Out Guaranty. That certain Indemnity and Guaranty Agreement
dated as of the date hereof executed by the Carve-Out Guarantors.
          Cash Collateralize. To pledge and deposit with or deliver to Agent,
for the benefit of the Issuing Lender of a Letter of Credit, as collateral for
the Letter of Credit Liabilities and

4

--------------------------------------------------------------------------------

 

other Obligations, cash or deposit account balances pursuant to documentation in
form and substance satisfactory to Agent and the Issuing Lender. Agent, for the
benefit of the Issuing Lender, shall have a security interest in all such cash,
deposit accounts and all balances therein and all proceeds of the foregoing.
Such cash collateral shall be maintained in blocked, interest bearing deposit
accounts at KeyBank which bear interest at the rate available for KeyBank’s
standard institutional money market accounts.
          CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C § 9601, et seq.).
          Change of Control. A Change of Control shall exist upon the occurrence
after the Closing Date of any of the following:
          (a) any Person (including a Person’s Affiliates and associates) or
group (as that term is understood under Section 13(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) and the rules and regulations
thereunder), shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act) of a percentage (based on voting power, in
the event different classes of stock or voting interests shall have different
voting powers) of the voting stock or voting interests of REIT, POP Venture or
the Borrower equal to at least thirty-five percent (35.0%);
          (b) as of any date a majority of the Board of Directors or Trustees or
similar body (the “Board”) of REIT or the Borrower consists of individuals who
were not either (i) directors or trustees of REIT or the Borrower as of the date
hereof, or (ii) selected or nominated to become directors or trustees by the
Board of REIT or the Borrower of which a majority consisted of individuals
described in clause (b)(i) above, or (iii) selected or nominated to become
directors or trustees by the Board of REIT or the Borrower, which majority
consisted of individuals described in clause (b)(i) above and individuals
described in clause (b)(ii), above (excluding, in the case of both clause
(ii) and (iii) above, any individual whose initial nomination for, or assumption
of office as, a member of the Board occurs as a result of an actual or
threatened solicitation of proxies or consents for the election or removal of
one or more directors or trustees by any Person or group other than a
solicitation for the election of one or more directors or trustees by or on
behalf of the Board); or
          (c) REIT, the Borrower or any of their respective Subsidiaries
consolidates with, is acquired by, or merges into or with any Person (other than
a merger permitted by §8.4); or
          (d) REIT and POP Venture shall fail to own directly or indirectly at
least fifty-five percent (55%) of Borrower; or
          (e) the Borrower shall no longer be controlled by REIT; or
          (f) the Borrower fails to own, directly or indirectly, free of any
lien, encumbrance or other adverse claim, at least one hundred percent (100%) of
the economic, voting and beneficial interest of each Subsidiary Guarantor; or

5

--------------------------------------------------------------------------------

 

          (g) (i) the Borrower shall no longer be managed and advised by
Advisor, or (ii) the Advisor shall no longer be directly or indirectly majority
owned and controlled by one or more of Jay H. Shidler, James C. Reynolds,
Lawrence J. Taff, James R. Ingebritsen and Matthew J. Root.
          Clifford Center Real Estate. That certain Real Estate owned by City
Center, LLC that is commonly referred to as “Clifford Center”.
          Closing Date. The first date on which all of the conditions set forth
in §10 and §11 have been satisfied.
          Code. The Internal Revenue Code of 1986, as amended.
          Collateral. All of the property, rights and interests of the Borrower
and its Subsidiaries which are subject to the security interests and liens
created by the Security Documents.
          Commitment. With respect to each Lender, the amount set forth on
Schedule 1.1 hereto as the amount of such Lender’s Commitment to make or
maintain Loans to the Borrower and to participate in Letters of Credit for the
account of the Borrower, as the same may be changed from time to time in
accordance with the terms of this Agreement.
          Commitment Increase. An increase in the Total Commitment to not more
than $40,000,000.00 pursuant to §2.10.
          Commitment Increase Date. See §2.10(a).
          Commitment Percentage. With respect to each Lender, the percentage set
forth on Schedule 1.1 hereto as such Lender’s percentage of the Total
Commitment, as the same may be changed from time to time in accordance with the
terms of this Agreement; provided that if the Commitments of the Lenders have
been terminated as provided in this Agreement, then the Commitment of each
Lender shall be determined based on the Commitment Percentage of such Lender
immediately prior to such termination and after giving effect to any subsequent
assignments made pursuant to the terms hereof.
          Company. Each “Company” as defined in the Assignment of Interests.
          Compliance Certificate. See §7.4(c).
          Consolidated. With reference to any term defined herein, that term as
applied to the accounts of a Person and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
          Consolidated EBITDA. With respect to any period, an amount equal to
the EBITDA of the Borrower and its Subsidiaries for such period determined on a
Consolidated basis.

6

--------------------------------------------------------------------------------

 

          Consolidated Fixed Charges. On any date of determination, the sum of
(a) Consolidated Interest Expense, plus (b) all regularly scheduled principal
payments made with respect to Indebtedness of the Borrower and its Subsidiaries,
other than any balloon, bullet or similar principal payment which repays such
Indebtedness in full, plus (c) federal and state income taxes paid, in each of
(a), (b) and (c) as measured for the period of four (4) fiscal quarters most
recently ended (provided however that if financial information has not existed
for four (4) fiscal quarters as of the date of determination, then such
calculation shall be based upon the period of those calendar quarters that are
available commencing April 1, 2008 and ended prior to the date of determination
annualized in a manner reasonably acceptable to Agent). Consolidated Fixed
Charges shall include such Person’s Equity Percentage in the Consolidated Fixed
Charges of its Unconsolidated Affiliates but shall exclude Preferred
Distributions.
          Consolidated Interest Expense. On any date of determination, without
duplication, (a) total Interest Expense determined on a consolidated basis in
accordance with GAAP, plus (b) the applicable Person’s Equity Percentage of
Interest Expense (subject to §8.15, other than Interest Expense from Excluded
Affiliate Debt) of its Unconsolidated Affiliates for the applicable period.
          Consolidated Tangible Net Worth. The amount by which Gross Asset Value
exceeds Consolidated Total Indebtedness.
          Consolidated Total Indebtedness. All Indebtedness of the Borrower and
its Subsidiaries determined on a consolidated basis including (without
duplication), such Person’s Equity Percentage of the Indebtedness of its
Unconsolidated Affiliates but excluding Excluded Affiliate Debt.
          Contribution Agreement. That certain Contribution Agreement dated of
even date herewith among the Borrower, the Guarantors and each Additional
Guarantor which may hereafter become a party thereto, as the same may be
modified, amended or ratified from time to time.
          Conversion/Continuation Request. A notice given by the Borrower to the
Agent of its election to convert or continue a Loan in accordance with §4.1.
          Debt Expense Rate. 6.00%.
          Default. See §12.1.
          Default Rate. See §4.11.
          Delinquent Lender. See §14.5(c).
          Derivatives Contract. Any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap

7

--------------------------------------------------------------------------------

 

transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement. Not in limitation of the
foregoing, the term “Derivatives Contract” includes any and all transactions of
any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement, including any such
obligations or liabilities under any such master agreement.
          Derivatives Termination Value. In respect of any one or more
Derivatives Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Derivatives Contracts, (a) for
any date on or after the date such Derivatives Contracts have been closed out
and termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in clause (a) the
amount(s) determined as the mark-to-market value(s) for such Derivatives
Contracts, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Derivatives
Contracts (which may include the Agent or any Lender).
          Development Property. Real Estate currently under development that has
not become a Stabilized Property or on which the improvements related to the
development have not been completed, provided that such a Development Property
on which all improvements related to the development of such Real Estate have
been substantially completed (excluding tenants improvements) for at least
twelve (12) months shall cease to constitute a Development Property
notwithstanding the fact that such Real Estate has not become a Stabilized
Property, and shall be considered a Stabilized Property for the purposes of the
calculation of Gross Asset Value.
          Distribution. Any (a) dividend or other distribution, direct or
indirect, on account of any Equity Interest of REIT, the Borrower or any of
their respective Subsidiaries now or hereafter outstanding, except a dividend
payable solely in Equity Interests of identical class to the holders of that
class; (b) redemption, conversion, exchange, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
Equity Interest of REIT, the Borrower or any of their respective Subsidiaries
now or hereafter outstanding; and (c) payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire any
Equity Interests of REIT, the Borrower or any of their respective Subsidiaries
now or hereafter outstanding.
          Dollars or $. Dollars in lawful currency of the United States of
America.
          Domestic Lending Office. Initially, the office of each Lender
designated as such on Schedule 1.1 hereto; thereafter, such other office of such
Lender, if any, located within the United States that will be making or
maintaining Base Rate Loans.
          Drawdown Date. The date on which any Loan is made or is to be made,
and the date on which any Loan is converted in accordance with §4.1.

8

--------------------------------------------------------------------------------

 

          EBITDA. With respect to a Person for any period (without duplication):
(a) net income (or loss) of such Person and its Subsidiaries (but excluding with
respect to any Unconsolidated Affiliate) for such period determined on a
consolidated basis in accordance with GAAP, exclusive of the following (but only
to the extent included in the determination of such net income (loss)):
(i) depreciation and amortization expense; (ii) Interest Expense; (iii) income
tax expense; (iv) extraordinary or non-recurring gains and losses;
(v) share-based compensation; and (vi) other reasonable and customary non-cash
expenses; plus (b) such Person’s pro rata share of EBITDA determined in
accordance with clause (a) above of its Unconsolidated Affiliates.
          Eligible Asset. Eligible Real Estate or a limited liability company,
partnership, common stock or other form of ownership approved by the Agent in a
special purpose, bankruptcy remote Person which owns, directly or through one or
more special purpose, bankruptcy remote Persons, Eligible Real Estate. Such
Eligible Real Estate and any equity interests in the Person owning such Eligible
Real Estate (other than the Eligible Asset) may be subject to a mortgage loan or
a mezzanine loan, provided that each such loan is performing in accordance with
its payment terms, no event of default or other event which would permit the
acceleration of such loan shall have occurred under the applicable documents
and, except with respect to loans pursuant to the agreements listed on
Schedule 8.1(f), the holder of such loan has entered into an intercreditor
agreement reasonably acceptable to Agent which consents to the pledge of 100% of
the Eligible Assets to Agent to secure the Obligations and the foreclosure and
sale by Agent of such Eligible Assets and which provides, among other things,
for notice to Agent of any default under such loan and the right to cure such
default.
          Eligible Real Estate. Real Estate shall constitute Eligible Real
Estate if:
          (a) such Real Estate is wholly-owned in fee (or a ground lease
acceptable to the Agent in its reasonable discretion provided that such ground
lease has not been terminated and is performing in accordance with its payment
terms and no event of default or other event which would permit the termination
of such ground lease shall have occurred under the applicable ground lease
documents and provided further that upon a First Insurance Ground Lease
Subordination Event, Borrower has delivered to Agent a commercially reasonable
subordination, attornment and non-disturbance agreement from the fee mortgagee
in favor of the holder of the leasehold interest which is reasonably acceptable
to Agent) by Borrower or a Wholly-Owned Subsidiary of Borrower;
          (b) such Real Estate is located within California, Arizona or Hawaii
and is consistent with Borrower’s business strategy as of the date of this
Agreement;
          (c) such Real Estate is improved with a completed income-producing
office building;
          (d) such Real Estate is managed by the Borrower or an Affiliate
thereof;
          (e) no interest of the Borrower or any Guarantor therein is subject to
any Lien (other than the Liens securing mortgage and mezzanine loans permitted
in the definition of Eligible Asset); and

9

--------------------------------------------------------------------------------

 

          (f) such Real Estate is free of all structural defects or major
architectural deficiencies, title defects, environmental conditions or other
adverse matters except for defects, deficiencies, conditions or other matters
individually or collectively which are not material to the profitable operation
of such Real Estate and would not materially adversely affect the value, use or
ability to sell or refinance such Real Estate.
          Employee Benefit Plan. Any employee benefit plan within the meaning of
§3(3) of ERISA maintained or contributed to by REIT or any ERISA Affiliate,
other than a Multiemployer Plan.
          Environmental Engineer. Any firm of independent professional engineers
or other scientists generally recognized as expert in the detection, analysis
and remediation of Hazardous Substances and related environmental matters and
acceptable to the Agent in its reasonable discretion.
          Environmental Laws. As defined in the Indemnity Agreement.
          Equity Interests. With respect to any Person, any share of capital
stock of (or other ownership or profit interests in) such Person, any warrant,
option or other right for the purchase or other acquisition from such Person of
any share of capital stock of (or other ownership or profit interests in) such
Person, any security convertible into or exchangeable for any share of capital
stock of (or other ownership or profit interests in) such Person or warrant,
right or option for the purchase or other acquisition from such Person of such
shares (or such other interests), and any other ownership or profit interest in
such Person (including, without limitation, partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not such share,
warrant, option, right or other interest is authorized or otherwise existing on
any date of determination.
          Equity Offering. The issuance and sale after the Closing Date by the
Borrower or any of its Subsidiaries, POP Venture or REIT of any equity
securities of such Person.
          Equity Percentage. The aggregate ownership percentage of REIT, the
Borrower or their respective Subsidiaries in each Unconsolidated Affiliate.
          ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
          ERISA Affiliate. Any Person which is treated as a single employer with
REIT or its Subsidiaries under §414 of the Code.
          ERISA Reportable Event. A reportable event with respect to a
Guaranteed Pension Plan within the meaning of §4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
          Event of Default. See §12.1.
          Excluded Affiliate Debt. Seller -financed indebtedness incurred in
connection with the acquisition and formation of an Unconsolidated Affiliate and
contributor-financed

10

--------------------------------------------------------------------------------

 

indebtedness incurred in connection with the formation transactions of the
Borrower and certain Affiliates thereof on March 19, 2008, or in connection with
additional acquisitions as permitted in §8.11, in each case that are expressly
and satisfactorily subordinated to the Obligations pursuant to a Subordination
and Standstill Agreement.
          Extension Request. See §2.9.
          Federal Funds Effective Rate. For any day, the rate per annum (rounded
upward to the nearest one-hundredth of one percent (1/100 of 1%)) announced by
the Federal Reserve Bank of Cleveland on such day as being the weighted average
of the rates on overnight federal funds transactions arranged by federal funds
brokers on the previous trading day, as computed and announced by such Federal
Reserve Bank in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate.”
          First Insurance Ground Lease. That certain Ground Lease dated
December 20, 2005, between 101 Park Avenue (1100 Ward) LLC, as Landlord, and POP
Ward Avenue, as Tenant.
          First Insurance Ground Lease Subordination Event. The subordination of
the leasehold interest of POP Ward Avenue under the First Insurance Ground Lease
to the interest of the mortgagee of the fee interest in the First Insurance Real
Estate.
          First Insurance Real Estate. That Real Estate described in and subject
to the First Insurance Ground Lease.
          Funds from Operations. With respect to any Person for any period, an
amount equal to the Net Income (or Loss) of such Person for such period,
computed in accordance with GAAP, excluding gains (or losses) from sales of
property, plus real estate depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be recalculated to reflect
funds from operations on the same basis.
          GAAP. Principles that are (a) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, as in effect from time to time and (b) consistently applied with
past financial statements of the Person adopting the same principles; provided
that a certified public accountant would, insofar as the use of such accounting
principles is pertinent, be in a position to deliver an unqualified opinion
(other than a qualification regarding changes in generally accepted accounting
principles) as to financial statements in which such principles have been
properly applied.
          Gross Asset Value. On a consolidated basis for the Borrower and its
Subsidiaries, Gross Asset Value shall mean the sum of (without duplication with
respect to any Real Estate):
               (i) with respect to each Stabilized Property, the Capitalized
Value of all such Real Estate; plus

11

--------------------------------------------------------------------------------

 

               (ii) with respect to Development Properties until the earlier of
(A) the one (1) year anniversary of the acquisition of such Real Estate by such
Person or (B) the first day of the first fiscal quarter following the date such
Real Estate becomes a Stabilized Property, the lesser of (x) the cost
(determined in accordance with GAAP) of such Development Property and (y) the
as-is appraised value of such Development Property as determined by a current
appraisal satisfactory to Agent.
Gross Asset Value will be adjusted, as appropriate, for acquisitions,
dispositions and other changes to the portfolio during the calendar quarter most
recently ended prior to a date of determination. All income, expense and value
associated with assets included in Gross Asset Value disposed of during the
calendar quarter most recently ended prior to the date of determination will be
eliminated from calculations. Gross Asset Value will be adjusted to only include
an amount equal to Borrower’s or any of its Subsidiaries’ pro rata share (based
upon such Person’s Equity Percentage in such Unconsolidated Affiliate) of the
Gross Asset Value attributable to any of the items listed above in this
definition owned by such Unconsolidated Affiliate.
          Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of §3(2) of ERISA maintained or contributed to by REIT or any ERISA
Affiliate the benefits of which are guaranteed on termination in full or in part
by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.
          Guarantor. Collectively, REIT, the Subsidiary Guarantors and each
Additional Guarantor, and individually any one of them.
          Guaranty. The Unconditional Guaranty of Payment and Performance dated
of even date herewith made by the Guarantors in favor of the Agent and the
Lenders, as the same may be modified or amended, such Guaranty to be in form and
substance reasonably satisfactory to the Agent.
          Hazardous Substances. As defined in the Indemnity Agreement.
          Inactive Amount. An amount equal to $10,000,000.00, which as of the
date hereof is not available to be borrowed by the Borrower, and which does not
constitute a part of the Commitments or Total Commitments.
          Increase Notice. See §2.10(a).
          Indebtedness. With respect to a Person, at the time of computation
thereof, all of the following (without duplication): (a) all obligations of such
Person in respect of money borrowed (other than trade debt incurred in the
ordinary course of business which is not more than ninety (90) days past due);
(b) all obligations of such Person, whether or not for money borrowed
(i) represented by notes payable, or drafts accepted, in each case representing
extensions of credit, (ii) evidenced by bonds, debentures, notes or similar
instruments, or (iii) constituting purchase money indebtedness, conditional
sales contracts, title retention debt instruments or other similar instruments,
upon which interest charges are customarily paid or that are issued or assumed
as full or partial payment for property or services rendered; (c) all
obligations of such Person as a lessee or obligor under a Capitalized Lease;
(d) all

12

--------------------------------------------------------------------------------

 

reimbursement obligations of such Person under any letters of credit or
acceptances (whether or not the same have been presented for payment); (e) all
Off-Balance Sheet Obligations of such Person; (f) all obligations of such Person
in respect of any purchase obligation, repurchase obligation, takeout commitment
or forward equity commitment, in each case evidenced by a binding agreement
(excluding any such obligation to the extent the obligation can be satisfied
solely by the issuance of Equity Interests), (g) net obligations under any
Derivatives Contract not entered into as a hedge against existing Indebtedness,
in an amount equal to the Derivatives Termination Value thereof; (h) all
obligations of such Person to redeem, retire, defease or otherwise make any
payment in respect of any Mandatorily Redeemable Stock issued by such Person or
any other Person, valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends; (i) all Indebtedness
of other Persons which such Person has guaranteed or is otherwise recourse to
such Person (except for guaranties of customary exceptions for fraud,
misapplication of funds, environmental indemnities, violation of “special
purpose entity” covenants, and other similar exceptions to recourse liability
(but not exceptions relating to bankruptcy, insolvency, receivership and other
similar events) until a claim is made with respect thereto, and then shall be
included only to the extent of the amount of such claim ), including liability
of a general partner in respect of liabilities of a partnership in which it is a
general partner which would constitute “Indebtedness” hereunder, any obligation
to supply funds to or in any manner to invest directly or indirectly in a
Person, to maintain working capital or equity capital of a Person or otherwise
to maintain net worth, solvency or other financial condition of a Person, to
purchase indebtedness, or to assure the owner of indebtedness against loss,
including, without limitation, through an agreement to purchase property,
securities, goods, supplies or services for the purpose of enabling the debtor
to make payment of the indebtedness held by such owner or otherwise; (j) all
Indebtedness of another Person secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property or assets owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness or other
payment obligation; and (k) such Person’s pro rata share of the Indebtedness
(based upon its Equity Percentage in such Unconsolidated Affiliates) of any
Unconsolidated Affiliate of such Person.
          Indemnity Agreement. The Indemnity Agreement Regarding Hazardous
Materials made by the Borrower, Carve-Out Guarantors and Guarantors in favor of
the Agent and the Lenders, as the same may be modified, amended or ratified,
pursuant to which the Borrower, each Carve-Out Guarantor and each Guarantor
agrees to indemnify the Agent and the Lenders with respect to Hazardous
Substances and Environmental Laws.
          Interest Expense. On any date of determination, with respect to the
Borrower and its Subsidiaries (but excluding with respect to any Unconsolidated
Affiliate except as set forth in (b) below), without duplication, (a) interest
incurred (in accordance with GAAP) for the period of four (4) fiscal quarters
most recently ended (provided however that if financial information has not
existed for four (4) fiscal quarters as of the date of determination, then such
calculation shall be based upon the period of those calendar quarters that are
available commencing April 1, 2008 and ended prior to the date of determination
annualized in a manner reasonably acceptable to Agent), including capitalized
interest not funded under a construction loan, plus (b) the Borrower’s and its
Subsidiaries’ Equity Percentage of Interest Expense of their Unconsolidated
Affiliates for such same period. Notwithstanding the foregoing, Interest Expense
shall not

13

--------------------------------------------------------------------------------

 

include (i) interest expense attributable to Excluded Affiliate Debt unless
otherwise specified herein or (ii) amortization expense.
          Interest Payment Date. As to each Loan, the first (1st) day of each
calendar month during the term of such Loan.
          Interest Period. With respect to each LIBOR Rate Loan (a) initially,
the period commencing on the Drawdown Date of such LIBOR Rate Loan and ending
one, two, three or six months thereafter, and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Loan and ending on the last day of one of the periods set forth above, as
selected by the Borrower in a Loan Request or Conversion/Continuation Request;
provided that all of the foregoing provisions relating to Interest Periods are
subject to the following:
               (i) if any Interest Period with respect to a LIBOR Rate Loan
would otherwise end on a day that is not a LIBOR Business Day, such Interest
Period shall end on the next succeeding LIBOR Business Day, unless such next
succeeding LIBOR Business Day occurs in the next calendar month, in which case
such Interest Period shall end on the next preceding LIBOR Business Day, as
determined conclusively by the Agent in accordance with the then current bank
practice in London;
               (ii) if the Borrower shall fail to give notice as provided in
§4.1, the Borrower shall be deemed to have requested a continuation of the
affected LIBOR Rate Loan, on the last day of the then current Interest Period
with respect thereto, as a LIBOR Rate Loan with an Interest Period of one month;
               (iii) any Interest Period pertaining to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the applicable calendar
month; and
               (iv) no Interest Period relating to any LIBOR Rate Loan shall
extend beyond the Maturity Date.
          Interest Value. With respect to any Eligible Asset, an amount equal to
the product of (a) the sum of (i) the Adjusted Real Estate Collateral Value for
the applicable Eligible Real Estate minus (ii) any Indebtedness encumbering such
Eligible Real Estate or any Senior Equity Interest therein, multiplied by
(b) the Borrower’s or Subsidiary Guarantor’s, as applicable, ownership interest
(expressed as a percentage) in such Eligible Real Property which has been
pledged to Lender as Collateral.
          Investments. With respect to any Person, all shares of capital stock,
evidences of Indebtedness and other securities issued by any other Person and
owned by such Person, all loans, advances, or extensions of credit to, or
contributions to the capital of, any other Person, all purchases of the
securities or business or integral part of the business of any other Person and
commitments and options to make such purchases, all interests in real property,
and all other investments; provided, however, that the term “Investment” shall
not include (i) equipment, inventory and other tangible personal property
acquired in the ordinary course of business, or

14

--------------------------------------------------------------------------------

 

(ii) current trade and customer accounts receivable for services rendered in the
ordinary course of business and payable in accordance with customary trade
terms. In determining the aggregate amount of Investments outstanding at any
particular time: (a) there shall be included as an Investment all interest
accrued with respect to Indebtedness constituting an Investment unless and until
such interest is paid; (b) there shall be deducted in respect of each Investment
any amount received as a return of capital; (c) there shall not be deducted in
respect of any Investment any amounts received as earnings on such Investment,
whether as dividends, interest or otherwise, except that accrued interest
included as provided in the foregoing clause (a) may be deducted when paid; and
(d) there shall not be deducted in respect of any Investment any decrease in the
value thereof.
          Issuing Lender. KeyBank, in its capacity as the Lender issuing the
Letters of Credit and any successor thereto.
          Joinder Agreement. The Joinder Agreement with respect to the Guaranty,
the Contribution Agreement and the Indemnity Agreement to be executed and
delivered pursuant to §5.2 by any Additional Guarantor, such Joinder Agreement
to be substantially in the form of Exhibit B hereto.
          KeyBank. As defined in the preamble hereto.
          Leases. Leases, licenses and agreements, whether written or oral,
relating to the use or occupation of space in any Building or of any Real
Estate.
          Lenders. KeyBank, the other lending institutions which are party
hereto and any other Person which becomes an assignee of any rights of a Lender
pursuant to §18 (but not including any participant as described in §18). The
Issuing Lender shall be a Lender, as applicable.
          Letter of Credit. Any standby letter of credit issued at the request
of the Borrower and for the account of the Borrower in accordance with §2.8.
          Letter of Credit Liabilities. At any time and in respect of any Letter
of Credit, the sum of (a) the maximum undrawn face amount of such Letter of
Credit plus (b) the aggregate unpaid principal amount of all drawings made under
such Letter of Credit which have not been repaid (including repayment by a
Loan). For purposes of this Agreement, a Lender (other than the Lender acting as
the Issuing Lender) shall be deemed to hold a Letter of Credit Liability in an
amount equal to its participation interest in the related Letter of Credit under
§2.8, and the Lender acting as the Issuing Lender shall be deemed to hold a
Letter of Credit Liability in an amount equal to its retained interest in the
related Letter of Credit after giving effect to the acquisition by the Lenders
other than the Lender acting as the Issuing Lender of their participation
interests under such Section.
          Letter of Credit Request. See §2.8(a).
          LIBOR. For any LIBOR Rate Loan for any Interest Period, the average
rate as shown in Reuters Screen LIBOR01 Page at which deposits in U.S. dollars
are offered by first class banks in the London Interbank Market at approximately
11:00 a.m. (London time) on the

15

--------------------------------------------------------------------------------

 

day that is two (2) LIBOR Business Days prior to the first day of such Interest
Period with a maturity approximately equal to such Interest Period and in an
amount approximately equal to the amount to which such Interest Period relates,
adjusted for reserves and taxes if required by future regulations. If such
service no longer reports such rate or Agent determines in good faith that the
rate so reported no longer accurately reflects the rate available to Agent in
the London Interbank Market, Loans shall accrue interest at the Base Rate plus
the Applicable Margin for such Loan. For any period during which a Reserve
Percentage shall apply, LIBOR with respect to LIBOR Rate Loans shall be equal to
the amount determined above divided by an amount equal to 1 minus the Reserve
Percentage.
          LIBOR Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London,
England.
          LIBOR Lending Office. Initially, the office of each Lender designated
as such on Schedule 1.1 hereto; thereafter, such other office of such Lender, if
any, that shall be making or maintaining LIBOR Rate Loans.
          LIBOR Rate Loans. Loans bearing interest calculated by reference to
LIBOR.
          Lien. See §8.2.
          Loan Documents. This Agreement, the Guaranty, the Carve-Out Guaranty,
the Notes, the Letter of Credit Request, the Security Documents, the
Subordination of Management Agreements, the Subordination of Advisory Fees, the
Subordination and Standstill Agreement and all other documents, instruments or
agreements now or hereafter executed or delivered by or on behalf of the
Borrower or any Guarantor in connection with the Loans.
          Loan Request. See §2.5.
          Loan and Loans. An individual loan or the aggregate loans, as the case
may be, in the maximum principal amount of $30,000,000.00 (subject to increase
as provided in §2.10) to be made by the Lenders hereunder as more particularly
described in §2. Without limiting the foregoing, Loans shall also include Loans
made pursuant to §2.8(f). All Loans shall be made in Dollars.
          Management Agreements. Agreements, whether written or oral, providing
for the management of any Real Estate, as the same may be amended, restated,
supplemented or otherwise modified in accordance with the terms hereof.
          Mandatorily Redeemable Stock. With respect to any Person, any Equity
Interest of such Person which by the terms of such Equity Interest (or by the
terms of any security into which it is convertible or for which it is
exchangeable or exercisable), upon the happening of any event or otherwise
(a) matures or is mandatorily redeemable, pursuant to a sinking fund obligation
or otherwise (other than an Equity Interest to the extent redeemable in exchange
for common stock or other equivalent common Equity Interests), (b) is
convertible into or exchangeable or exercisable for Indebtedness or Mandatorily
Redeemable Stock, or (c) is redeemable at the option of the holder thereof, in
whole or in part (other than an Equity Interest

16

--------------------------------------------------------------------------------

 

which is redeemable solely in exchange for common stock or other equivalent
common Equity Interests).
          Material Adverse Effect. A material adverse effect on (a) the
business, properties, assets, condition (financial or otherwise) or results of
operations of REIT, the Borrower and their respective Subsidiaries considered as
a whole; (b) the ability of REIT, the Borrower or any Subsidiary Guarantor to
perform any of its obligations under the Loan Documents; (c) the validity or
enforceability of any of the Loan Documents or the creation, perfection and
priority of any Liens of Agent in the Collateral; or (d) the rights or remedies
of Agent or the Lenders under the Loan Documents.
          Material Subsidiary. Any existing or future Subsidiary of the Borrower
which at any time has assets that constitute five percent (5%) or more of the
Gross Asset Value.
          Maturity Date. August 25, 2010, as such date may be extended as
provided in §2.9, or such earlier date on which the Loans shall become due and
payable pursuant to the terms hereof.
          Moody’s. Moody’s Investors Service, Inc.
          Mortgaged Property or Mortgaged Properties. The Eligible Real Estate
owned by Borrower or a Subsidiary Guarantor which is security for the
Obligations pursuant to the Mortgages.
          Mortgages. The mortgages, deeds to secure debt and/or deeds of trust
from Borrower or a Subsidiary Guarantor to the Agent for the benefit of the
Lenders (or to trustees named therein acting on behalf of the Agent for the
benefit of the Lenders), as the same may be modified or amended, pursuant to
which such Borrower or Subsidiary Guarantor has conveyed or granted a mortgage
lien upon or a conveyance in fee simple of a Mortgaged Property as security for
the Obligations, each such Mortgage entered into after the date hereof to be in
form and substance reasonably satisfactory to Agent.
          Multiemployer Plan. Any multiemployer plan within the meaning of
§3(37) of ERISA maintained or contributed to by REIT or any ERISA Affiliate.
          Net Income (or Loss). With respect to any Person (or any asset of any
Person) for any period, the net income (or loss) of such Person (or attributable
to such asset), determined in accordance with GAAP.
          Net Offering Proceeds. The gross cash proceeds received by the
Borrower or any of its Subsidiaries, POP Venture or REIT as a result of an
Equity Offering less the customary and reasonable costs, expenses and discounts
paid by the Borrower or such Subsidiary, POP Venture or REIT in connection
therewith.
          Net Operating Income. For any Real Estate and for a given period, an
amount equal to the sum of (a) the rents, common area reimbursements and other
revenue (including interest income) for such Real Estate for such period
received in the ordinary course of business from tenants in occupancy (excluding
pre-paid rents and revenues and security deposits except to

17

--------------------------------------------------------------------------------

 

the extent applied in satisfaction of tenants’ obligations for rent) minus
(b) all expenses paid or accrued and related to the ownership, operation or
maintenance of such Real Estate for such period, including, but not limited to,
taxes, assessments and the like, insurance, utilities, payroll costs,
maintenance, repair and landscaping expenses, marketing expenses, and general
and administrative expenses (including an appropriate allocation for legal,
accounting, advertising, marketing and other expenses incurred in connection
with such Real Estate, but specifically excluding general overhead expenses of
REIT, the Borrower and their respective Subsidiaries and any property management
fees), minus (c)  the greater of (i) actual property management expenses of such
Real Estate or (ii) an amount equal to three percent (3.0%) of the gross
revenues from such Real Estate, minus (d) all rents, common area reimbursements
and other income for such Real Estate received from tenants in default of
obligations under their lease or with respect to leases as to which the tenant
or any guarantor thereunder is subject to any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, liquidation or
similar debtor relief proceeding, plus (e) in connection with the calculation of
Gross Asset Value (and without duplication), one-third of the base return
allocation paid to Borrower from an Unconsolidated Affiliate included in the
applicable operating agreement or other organizational agreement of such
Unconsolidated Affiliate.
          Net Rentable Area. With respect to any Real Estate, the floor area of
any buildings, structures or other improvements available for leasing to tenants
determined in accordance with the Rent Roll for such Real Estate, the manner of
such determination to be reasonably consistent for all Real Estate of the same
type unless otherwise approved by the Agent.
          Non-Recourse Exclusions. With respect to any Non-Recourse Indebtedness
of any Person, any usual and customary exclusions from the non-recourse
limitations governing such Indebtedness, including, without limitation,
exclusions for claims that (i) are based on fraud, intentional misrepresentation
or misapplication of funds, (ii) result from intentional mismanagement of or
waste at the Real Property securing such Non-Recourse Indebtedness, (iii) arise
from the presence of Hazardous Substances on the Real Property securing such
Non-Recourse Indebtedness; (iv) are the result of any unpaid real estate taxes
and assessments (whether contained in a loan agreement, promissory note,
indemnity agreement or other document); or (v) result from the borrowing
Subsidiary and/or its assets becoming the subject of a voluntary bankruptcy,
insolvency or similar proceeding.
          Non-Recourse Indebtedness. With respect to a Person, Indebtedness in
respect of which recourse for payment (except for Non-Recourse Exclusions until
a claim is made with respect thereto, and then such Indebtedness shall not
constitute Non-Recourse Indebtedness only to the extent of the amount of such
claim) is contractually limited to specific assets of such Person encumbered by
a Lien securing such Indebtedness.
          Notes. See §2.1(b).
          Notice. See §19.
          Obligations. All indebtedness, obligations and liabilities of the
Borrower or any Guarantor to any of the Lenders or the Agent, individually or
collectively, under this Agreement

18

--------------------------------------------------------------------------------

 

or any of the other Loan Documents or in respect of any of the Loans, the Notes
or the Letters of Credit, or other instruments at any time evidencing any of the
foregoing, whether existing on the date of this Agreement or arising or incurred
hereafter, direct or indirect, joint or several, absolute or contingent, matured
or unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise.
          OFAC. Office of Foreign Asset Control of the Department of the
Treasury of the United States of America.
          Off-Balance Sheet Obligations. Liabilities and obligations of REIT,
the Borrower or any of their respective Subsidiaries or any other Person in
respect of “off-balance sheet arrangements” (as defined in the SEC Off-Balance
Sheet Rules) which REIT or Borrower, as applicable, would be required to
disclose in the “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” section of REIT’s or Borrower’s, as applicable, report on
Form 10-Q or Form 10-K (or their equivalents) which REIT or Borrower, as
applicable, is required to file with the SEC or would be required to file if it
were subject to the jurisdiction of the SEC (or any Governmental Authority
substituted therefore). As used in this definition, the term “SEC Off-Balance
Sheet Rules” means the Disclosure in Management’s Discussion and Analysis About
Off-Balance Sheet Arrangements, Securities Act Release No. 33-8182, 68 Fed. Reg.
5982 (Feb. 5, 2003) (codified at 17 CFR pts. 228, 229 and 249).
          Outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination. With respect to Letters of Credit, the
aggregate undrawn face amount of issued Letters of Credit.
          POP Ward Avenue. Pacific Office Properties Trust (Ward Avenue) LLC.
          Patriot Act. The Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as
the same may be amended from time to time, and corresponding provisions of
future laws.
          PBGC. The Pension Benefit Guaranty Corporation created by §4002 of
ERISA and any successor entity or entities having similar responsibilities.
          Permitted Liens. See §8.2.
          Person. Any individual, corporation, limited liability company,
partnership, trust, unincorporated association, business, or other legal entity,
and any government or any governmental agency or political subdivision thereof.
          Plan Assets. Assets of any employee benefit plan subject to Part 4,
Subtitle B, Title I of ERISA.
          Pledgors. Collectively, the Borrower and each Additional Pledgor, and
individually any one of them.
          POP Venture. POP Venture, LLC, a Delaware limited liability company.

19

--------------------------------------------------------------------------------

 

          Preferred Distributions. For any period and without duplication, all
Distributions paid, declared but not yet paid or otherwise due and payable
during such period on Preferred Securities issued by the Borrower or any of its
Subsidiaries or REIT. Preferred Distributions shall not include dividends or
distributions: (a) paid or payable solely in Equity Interests of identical class
payable to holders of such class of Equity Interests; (b) paid or payable to the
Borrower or any of its Subsidiaries; or (c) constituting or resulting in the
redemption of Preferred Securities, other than scheduled redemptions not
constituting balloon, bullet or similar redemptions in full.
          Preferred Securities. With respect to any Person, Equity Interests in
such Person, which are entitled to preference or priority over any other Equity
Interest in such Person in respect of the payment of dividends or distribution
of assets upon liquidation, or both.
          Proceeds. The proceeds received by Borrower, REIT, POP Venture or any
of the respective Subsidiaries or an Unconsolidated Affiliate of Borrower in
connection with the sale or refinancing of Real Estate or in connection with an
Equity Offering and any other net proceeds received by Borrower, REIT, POP
Venture or any of the respective Subsidiaries or an Unconsolidated Affiliate of
Borrower from any other capital raising activities or sale of any kind.
          Real Estate. All real property at any time owned or leased (as lessee
or sublessee) in whole or in part or operated by REIT, the Borrower or any of
their respective Subsidiaries, or an Unconsolidated Affiliate of the Borrower,
and which is located in the United States of America.
          Real Estate Collateral Value. An amount equal to (A) (x) the Net
Operating Income attributable to such Real Estate for the period of the calendar
quarter most recently ended prior to the date of determination, minus (y) the
Capital Reserve for such Real Estate for such period, times (B) four (4) (which
is the annualization factor) divided by (C) the Debt Expense Rate.
          Record. The grid attached to any Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by the
Agent with respect to any Loan referred to in such Note.
          Register. See §18.2.
          REIT. Pacific Office Properties Trust, Inc., a Maryland corporation.
          REIT Status. With respect to a Person, its status as a real estate
investment trust as defined in §856(a) of the Code.
          Release. Any releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, disposing or dumping (other than the
storing of materials in reasonable quantities to the extent necessary for the
operation of property in the ordinary course of business, and in any event in
compliance with all Environmental Laws) of Hazardous Substances.

20

--------------------------------------------------------------------------------

 

          Removed Borrowing Base Asset. Any property previously included within
the definition of “Borrowing Base Asset” as to which all of the following
conditions have been met: (a) the Borrower has notified the Agent in writing
that it wishes to exclude such property from the definition of “Borrowing Base
Asset” as a result of the sale or other permanent disposition of such Borrowing
Base Asset, (b) no Default or Event of Default has occurred and is continuing or
is reasonably expected to occur at the time such property is excluded from the
definition of “Borrowing Base Asset” or would result from such exclusion, and
(c) prior to the exclusion of such property from the definition of “Borrowing
Base Asset”, the Borrower has delivered to the Agent a Borrowing Base
Certificate demonstrating, after giving effect to such exclusion, compliance
with the Borrowing Base Covenant.
          Rent Roll. A report prepared by the Borrower showing for all Real
Estate owned or leased by the Borrower or its Subsidiaries, its occupancy, lease
expiration dates, lease rent and other information in substantially the form
presented to Agent prior to the date hereof or in such other form as may be
reasonably acceptable to the Agent.
          Required Lenders. As of any date, the Lender or Lenders whose
aggregate Commitment Percentage is equal to or greater than sixty-six and
7/10 percent (66.7%) of the Total Commitment; provided that in determining said
percentage at any given time, all then existing Delinquent Lenders will be
disregarded and excluded and the Commitment Percentages of the Lenders shall be
redetermined for voting purposes only to exclude the Commitment Percentages of
such Delinquent Lenders.
          Reserve Percentage. For any Interest Period, that percentage which is
specified two (2) Business Days before the first day of such Interest Period by
the Board of Governors of the Federal Reserve System (or any successor) or any
other governmental or quasi-governmental authority with jurisdiction over Agent
or any Lender for determining the maximum reserve requirement (including, but
not limited to, any marginal reserve requirement) for Agent or any Lender with
respect to liabilities constituting of or including (among other liabilities)
Eurocurrency liabilities in an amount equal to the Loans to which such Interest
Period applies and with a maturity equal to such Interest Period.
          SEC. The federal Securities and Exchange Commission.
          Security Documents. Collectively, the Acknowledgements, the Mortgages,
the Joinder Agreements, the Assignment of Interests, the Cash Collateral
Agreement, the Indemnity Agreement, and any further collateral assignments to
the Agent for the benefit of the Lenders, including without limitation the
Additional Security Documents.
          Senior Equity Interest. As to any Eligible Asset, any other Equity
Interest which is entitled in whole or in part to payment of distributions or
return of capital prior to such Eligible Asset.
          Senior Loan Documents. Any and all loan documents evidencing or issued
in connection with senior mortgage or mezzanine Indebtedness in connection with
a Borrowing Base Asset which is permitted in the definition of Eligible Asset.

21

--------------------------------------------------------------------------------

 

          Single Asset Entity. A bankruptcy remote, single purpose entity which
is a Subsidiary of the Borrower and which is not a Subsidiary Guarantor which
owns real property and related assets which are security for Indebtedness of
such entity, and which Indebtedness does not constitute Indebtedness of any
other Person.
          S&P. Standard & Poor’s Ratings Group.
          Stabilized Property. A completed project that has been substantially
completed (excluding tenants improvements) for at least six (6) months shall
constitute a Stabilized Property. Once a project becomes a Stabilized Property
under this Agreement, it shall remain a Stabilized Property.
          Subordination and Standstill Agreement. Any and all subordination and
standstill agreements in form and substance satisfactory to Agent executed to
specifically subordinate any Excluded Affiliate Debt to the Obligations.
          State. A state of the United States of America and the District of
Columbia.
          Subordination of Advisory Fees. The Subordination of Advisory Fees
dated as of the date hereof and entered into between the Borrower, REIT and the
Advisor evidencing the subordination of the advisor fees payable by the Borrower
pursuant to the relevant Advisory Agreement to the Obligations, as the same may
be amended, restated, supplemented or otherwise modified in accordance with the
terms hereof.
          Subordination of Management Agreement. Collectively, (i) the
Subordination of Management Agreement dated as of the date hereof and entered
into between Shidler Hawaii Investment Partners, LLC and City Center, LLC,
Davies Pacific, LLC, Pan Am I, LLC, Pan Am II, LLC, Pan Am III, LLC, And Pan Am
IV, LLC, PBN Office, LLC, Pacific Office Properties Trust (Ward Avenue) LLC,
Waterfront A, LLC, Waterfront B, LLC, Waterfront C, LLC, Waterfront D, LLC and
Waterfront E, LLC and (ii) the Subordination of Management Agreement dated as of
the date hereof and entered into between SHIDLER WEST INVESTMENT PARTNERS, L.P.
and Pacific Office Properties Trust/3800 N. Central, LLC, Pacific Office
Properties Trust/3838 N. Central, LLC, Pacific Office Properties Trust/4000 N.
Central, LLC and Pacific Office Properties/Sorrento Tech, LLC, each evidencing
the subordination of the management fees payable by the parties thereto pursuant
to the relevant Management Agreement(s) to the Obligations, as the same may be
amended, restated, supplemented or otherwise modified in accordance with the
terms hereof.
          Subsidiary. For any Person, any corporation, partnership, limited
liability company or other entity of which at least a majority of the securities
or other ownership interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions of such corporation, partnership, limited liability company or
other entity (without regard to the occurrence of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person, and shall include all Persons the accounts of which are
consolidated with those of such Person pursuant to GAAP.
          Subsidiary Guarantors. City Center, LLC and each Additional Guarantor.

22

--------------------------------------------------------------------------------

 

          Titled Agents. The Arranger, and any co-syndication agents or
documentation agent designated by Agent or Arranger.
          Total Commitment. The sum of the Commitments of the Lenders, as in
effect from time to time. As of the date of this Agreement, the Total Commitment
is Thirty Million and No/100 Dollars ($30,000,000.00).
          Type. As to any Loan, its nature as a Base Rate Loan or a LIBOR Rate
Loan.
          Unconsolidated Affiliate. In respect of any Person, any other Person
in whom such Person holds an Investment, (a) which Investment is accounted for
in the financial statements of such Person on an equity basis of accounting and
whose financial results would not be consolidated under GAAP with the financial
results of such first Person on the consolidated financial statements of such
first Person, or (b) which is not a Subsidiary of such first Person.
          Wholly Owned Subsidiary. As to the Borrower, any Subsidiary of
Borrower that is directly or indirectly owned 100% by the Borrower.
     §1.2 Rules of Interpretation.
          (a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Agreement.
          (b) The singular includes the plural and the plural includes the
singular.
          (c) A reference to any law includes any amendment or modification of
such law.
          (d) A reference to any Person includes its permitted successors and
permitted assigns.
          (e) Accounting terms not otherwise defined herein have the meanings
assigned to them by GAAP applied on a consistent basis by the accounting entity
to which they refer.
          (f) The words “include”, “includes” and “including” are not limiting.
          (g) The words “approval” and “approved”, as the context requires,
means an approval in writing given to the party seeking approval after full and
fair disclosure to the party giving approval of all material facts necessary in
order to determine whether approval should be granted.
          (h) All terms not specifically defined herein or by GAAP, which terms
are defined in the Uniform Commercial Code as in effect in the State of New
York, have the meanings assigned to them therein.

23

--------------------------------------------------------------------------------

 

          (i) Reference to a particular “§”, refers to that section of this
Agreement unless otherwise indicated.
          (j) The words “herein”, “hereof”, “hereunder” and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.
          (k) In the event of any change in generally accepted accounting
principles after the date hereof or any other change in accounting procedures
pursuant to §7.3 which would affect the computation of any financial covenant,
ratio or other requirement set forth in any Loan Document, then upon the request
of the Borrower or Agent, the Borrower, the Guarantors, the Agent and the
Lenders shall negotiate promptly, diligently and in good faith in order to amend
the provisions of the Loan Documents such that such financial covenant, ratio or
other requirement shall continue to provide substantially the same financial
tests or restrictions of the Borrower and the Guarantors as in effect prior to
such accounting change, as determined by the Required Lenders in their good
faith judgment. Until such time as such amendment shall have been executed and
delivered by the Borrower, the Guarantors, the Agent and the Required Lenders,
such financial covenants, ratio and other requirements, and all financial
statements and other documents required to be delivered under the Loan
Documents, shall be calculated and reported as if such change had not occurred.
§2. THE CREDIT FACILITY.
     §2.1 Loans.
          (a) Subject to the terms and conditions set forth in this Agreement,
each of the Lenders severally agrees to lend to the Borrower, and the Borrower
may borrow (and repay and reborrow) from time to time between the Closing Date
and the Maturity Date upon notice by the Borrower to the Agent given in
accordance with §2.5, such sums as are requested by the Borrower for the
purposes set forth in §2.7 up to a maximum aggregate principal amount
outstanding (after giving effect to all amounts requested) at any one time equal
to the lesser of (i) such Lender’s Commitment and (ii) such Lender’s Commitment
Percentage of the sum of (1) the amount of all outstanding Loans, and (2) the
aggregate amount of Letter of Credit Liabilities; provided, that, in all events
no Default or Event of Default shall have occurred and be continuing; and
provided, further, that the outstanding principal amount of the Loans (after
giving effect to all amounts requested) and Letter of Credit Liabilities shall
not at any time exceed the Total Commitment or the Borrowing Base (except to the
extent otherwise expressly permitted in Section 3.2(b)). The Loans shall be made
pro rata in accordance with each Lender’s Commitment Percentage. Each request
for a Loan hereunder shall constitute a representation and warranty by the
Borrower that all of the conditions required of the Borrower set forth in §10
and §11 have been satisfied on the date of such request. The Agent may assume
that the conditions in §10 and §11 have been satisfied unless it receives prior
written notice from a Lender that such conditions have not been satisfied. No
Lender shall have any obligation to make Loans to the Borrower in the aggregate
principal outstanding balance of more than the principal face amount of its
Note. The face amount of KeyBank’s Note includes the Inactive Amount, which as
of the date hereof is not available to be borrowed by the Borrower.

24

--------------------------------------------------------------------------------

 

          (b) The Loans shall be evidenced by separate promissory notes of the
Borrower in substantially the form of Exhibit A hereto (collectively, the
“Notes”), dated of even date with this Agreement (except as otherwise provided
in §18.3) and completed with appropriate insertions. One Note shall be payable
to the order of each Lender in the principal amount equal to such Lender’s
Commitment or, if less, the outstanding amount of all Loans made by such Lender,
plus interest accrued thereon, as set forth below (provided that without
increasing the Commitment of KeyBank, the initial Note delivered to KeyBank
shall be in the principal face amount equal to the sum of KeyBank’s Commitment
and the Inactive Amount). The Borrower irrevocably authorizes Agent to make or
cause to be made, at or about the time of the Drawdown Date of any Loan or the
time of receipt of any payment of principal thereof, an appropriate notation on
Agent’s Record reflecting the making of such Loan or (as the case may be) the
receipt of such payment. The outstanding amount of the Loans set forth on
Agent’s Record shall be prima facie evidence of the principal amount thereof
owing and unpaid to each Lender, but the failure to record, or any error in so
recording, any such amount on Agent’s Record shall not limit or otherwise affect
the obligations of the Borrower hereunder or under any Note to make payments of
principal of or interest on any Note when due.
     §2.2 Facility Unused Fee. The Borrower agrees to pay to the Agent for the
account of the Lenders in accordance with their respective Commitment
Percentages a facility unused fee calculated at the rate of 0.35% per annum on
the average daily amount by which the Total Commitment exceeds the sum of the
outstanding principal amount of Loans and the outstanding Letter of Credit
Liabilities during each calendar quarter or portion thereof, commencing on the
date hereof and ending on the Maturity Date. The facility unused fee shall be
payable quarterly in arrears on the first (1st) day of each calendar quarter for
the immediately preceding calendar quarter or portion thereof, and on any
earlier date on which the Commitments shall be reduced or shall terminate as
provided in §2.3, with a final payment on the Maturity Date.
     §2.3 Reduction and Termination of the Commitments. The Borrower shall have
the right at any time and from time to time upon five (5) Business Days’ prior
written notice to the Agent to reduce by $5,000,000.00 or an integral multiple
of $1,000,000.00 in excess thereof (provided that in no event shall the Total
Commitment be reduced in such manner to an amount less than $20,000,000.00) or
to terminate entirely the Commitments, whereupon the Commitments of the Lenders
shall be reduced pro rata in accordance with their respective Commitment
Percentages of the amount specified in such notice or, as the case may be,
terminated, any such termination or reduction to be without penalty except as
otherwise set forth in §4.8; provided, however, that each time that Proceeds are
received on and after January 1, 2010, the Total Commitment shall be reduced by
the amount of such Proceeds; provided, further however, that no such termination
or reduction shall be permitted if, after giving effect thereto, the sum of
Outstanding Loans and the Letter of Credit Liabilities would exceed the
Commitments of the Lenders as so terminated or reduced. Promptly after receiving
any notice from the Borrower delivered pursuant to this §2.3, the Agent will
notify the Lenders of the substance thereof. Any reduction of the Commitments
pursuant to this §2.3 or §3.5 shall also result in a proportionate reduction
(rounded to the next lowest integral multiple of $100,000.00) in the maximum
amount of Letters of Credit. Upon the effective date of any such reduction or
termination, the Borrower shall pay to the Agent for the respective accounts of
the Lenders the full amount of any facility fee under §2.2 then accrued on the
amount of the reduction. No reduction or termination of the Commitments may be
reinstated.

25

--------------------------------------------------------------------------------

 

     §2.4 Interest on Loans.
          (a) Each Base Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the date on which such Base Rate
Loan is repaid or converted to a LIBOR Rate Loan at the rate per annum equal to
the sum of the Base Rate plus 2.25%.
          (b) Each LIBOR Rate Loan shall bear interest for the period commencing
with the Drawdown Date thereof and ending on the last day of each Interest
Period with respect thereto at the rate per annum equal to the sum of LIBOR
determined for such Interest Period plus 3.50%.
          (c) The Borrower promises to pay interest on each Loan in arrears on
each Interest Payment Date with respect thereto.
          (d) Base Rate Loans and LIBOR Rate Loans may be converted to Loans of
the other Type as provided in §4.1.
     §2.5 Requests for Loans. Except with respect to the initial Loan on the
Closing Date, the Borrower shall give to the Agent written notice executed by an
Authorized Officer in the form of Exhibit C hereto (or telephonic notice
confirmed in writing in the form of Exhibit C hereto) of each Loan requested
hereunder (a “Loan Request”) by 1:00 p.m. (Cleveland time) one (1) Business Day
prior to the proposed Drawdown Date with respect to Base Rate Loans and
three (3) Business Days prior to the proposed Drawdown Date with respect to
LIBOR Rate Loans. Each such notice shall specify with respect to the requested
Loan the proposed principal amount of such Loan, the Type of Loan, the initial
Interest Period (if applicable) for such Loan and the Drawdown Date. Each such
notice shall also contain (i) a general statement as to the purpose for which
such advance shall be used (which purpose shall be in accordance with the terms
of §2.7) and (ii) a certification by the chief financial officer or chief
accounting officer of the Borrower that the Borrower and Guarantors are and will
be in compliance with all covenants under the Loan Documents after giving effect
to the making of such Loan. Promptly upon receipt of any such notice, the Agent
shall notify each of the Lenders thereof. Each such Loan Request shall be
irrevocable and binding on the Borrower and shall obligate the Borrower to
accept the Loan requested from the Lenders on the proposed Drawdown Date. Each
Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount of
$1,000,000.00 or an integral multiple of $100,000.00 in excess thereof; or
(b) for a LIBOR Rate Loan in a minimum aggregate amount of $1,000,000.00 or an
integral multiple of $100,000.00 in excess thereof; provided, however, that
there shall be no more than four (4) LIBOR Rate Loans outstanding at any one
time.
     §2.6 Funds for Loans.
          (a) Not later than 1:00 p.m. (Cleveland time) on the proposed Drawdown
Date of any Loans, each of the Lenders will make available to the Agent, at the
Agent’s Head Office, in immediately available funds, the amount of such Lender’s
Commitment Percentage of the amount of the requested Loans which may be
disbursed pursuant to §2.1. Upon receipt from each such Lender of such amount,
and upon receipt of the documents required by §10 and §11

26

--------------------------------------------------------------------------------

 

and the satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrower the aggregate amount
of such Loans made available to the Agent by the Lenders by crediting such
amount to the account of the Borrower maintained at the Agent’s Head Office. The
failure or refusal of any Lender to make available to the Agent at the aforesaid
time and place on any Drawdown Date the amount of its Commitment Percentage of
the requested Loans shall not relieve any other Lender from its several
obligation hereunder to make available to the Agent the amount of such other
Lender’s Commitment Percentage of any requested Loans, including any additional
Loans that may be requested subject to the terms and conditions hereof to
provide funds to replace those not advanced by the Lender so failing or
refusing. In the event of any such failure or refusal, the Lenders not so
failing or refusing shall be entitled to a priority secured position as against
the Lender or Lenders so failing or refusing to make available to the Borrower
the amount of its or their Commitment Percentage for such Loans as provided in
§12.5.
          (b) Unless the Agent shall have been notified by any Lender prior to
the applicable Drawdown Date that such Lender will not make available to Agent
such Lender’s Commitment Percentage of a proposed Loan, Agent may in its
discretion assume that such Lender has made such Loan available to Agent in
accordance with the provisions of this Agreement and the Agent may, if it
chooses, in reliance upon such assumption make such Loan available to the
Borrower, and such Lender shall be liable to the Agent for the amount of such
advance. If such Lender does not pay such corresponding amount upon the Agent’s
demand therefor, the Agent will promptly notify the Borrower, and the Borrower
shall promptly pay such corresponding amount to the Agent. The Agent shall also
be entitled to recover from the Lender or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to the date
such corresponding amount is recovered by the Agent at a per annum rate equal to
(i) from the Borrower at the applicable rate for such Loan or (ii) from a Lender
at the Federal Funds Effective Rate.
     §2.7 Use of Proceeds. The Borrower will use the proceeds of the Loans and
the Letters of Credit solely to fund the acquisition of new real estate related
assets, capital expenditures and short term operating expenses related to real
estate assets and other related purposes and expenditures reasonably approved by
Agent.
     §2.8 Letters of Credit.
          (a) Subject to the terms and conditions set forth in this Agreement,
at any time and from time to time from the Closing Date through the day that is
ninety (90) days prior to the Maturity Date, the Issuing Lender shall issue such
Letters of Credit as the Borrower may request upon the delivery of a written
request in the form of Exhibit D hereto (a “Letter of Credit Request”) to the
Issuing Lender, provided that (i) no Default or Event of Default shall have
occurred and be continuing, (ii) upon issuance of such Letter of Credit, the
Letter of Credit Liabilities shall not exceed Fifteen Million Dollars
($15,000,000.00) (as such amount may be reduced pursuant to §2.3), (iii) in no
event shall the outstanding principal amount of the Loans and the Letters of
Credit (after giving effect to any requested Letters of Credit) exceed the Total
Commitment or the Borrowing Base, (iv) the conditions set forth in §§10 and 11
shall have been satisfied, (v) no Lender is a Delinquent Lender (provided
Issuing Lender may, in its sole

27

--------------------------------------------------------------------------------

 

discretion, be entitled to waive this condition), and (vi) in no event shall any
amount drawn under a Letter of Credit be available for reinstatement or a
subsequent drawing under such Letter of Credit. The Issuing Lender may assume
that the conditions in §10 and §11 have been satisfied unless it receives
written notice from a Lender that such conditions have not been satisfied. Each
Letter of Credit Request shall be executed by an Authorized Officer of the
Borrower. The Issuing Lender shall be entitled to conclusively rely on an
Authorized Officer’s authority to request a Letter of Credit on behalf of the
Borrower. The Issuing Lender shall have no duty to verify the authenticity of
any signature appearing on a Letter of Credit Request. The Borrower assumes all
risks with respect to the use of the Letters of Credit. Unless the Issuing
Lender and the Required Lenders otherwise consent, the term of any Letter of
Credit shall not exceed a period of time commencing on the issuance of the
Letter of Credit and ending one year after the date of issuance thereof, subject
to extension pursuant to an “evergreen” clause acceptable to Agent and Issuing
Lender (but in any event the term shall not extend beyond the Maturity Date).
The amount available to be drawn under any Letter of Credit shall reduce on a
dollar-for-dollar basis the amount available to be drawn under the Total
Commitment as a Loan.
          (b) Each Letter of Credit Request shall be submitted to the Issuing
Lender at least five (5) Business Days (or such shorter period as the Issuing
Lender may approve) prior to the date upon which the requested Letter of Credit
is to be issued. Each such Letter of Credit Request shall contain (i) a
statement as to the purpose for which such Letter of Credit shall be used (which
purpose shall be in accordance with the terms of this Agreement), and (ii) a
certification by the chief financial or chief accounting officer of the Borrower
that the Borrower and Guarantors are and will be in compliance with all
covenants under the Loan Documents after giving effect to the issuance of such
Letter of Credit. The Borrower shall further deliver to the Issuing Lender such
additional applications (which application as of the date hereof is in the form
of Exhibit E attached hereto) and documents as the Issuing Lender may require,
in conformity with the then standard practices of its letter of credit
department, in connection with the issuance of such Letter of Credit; provided
that in the event of any conflict, the terms of this Agreement shall control.
          (c) The Issuing Lender shall, subject to the conditions set forth in
this Agreement, issue the Letter of Credit on or before five (5) Business Days
following receipt of the documents last due pursuant to §2.8(b). Each Letter of
Credit shall be in form and substance reasonably satisfactory to the Issuing
Lender in its reasonable discretion.
          (d) Upon the issuance of a Letter of Credit, each Lender shall be
deemed to have purchased a participation therein from Issuing Lender in an
amount equal to its respective Commitment Percentage of the amount of such
Letter of Credit. No Lender’s obligation to participate in a Letter of Credit
shall be affected by any other Lender’s failure to perform as required herein
with respect to such Letter of Credit or any other Letter of Credit.
          (e) Upon the issuance of each Letter of Credit, the Borrower shall pay
to the Issuing Lender (i) for its own account, a Letter of Credit fronting fee
calculated at the rate set forth in the Agreement Regarding Fees, and (ii) for
the accounts of the Lenders (including the Issuing Lender) in accordance with
their respective percentage shares of participation in such Letter of Credit, a
Letter of Credit fee calculated at the rate of 3.50% per annum on the amount
available to be drawn under such Letter of Credit. Such fees shall be payable in
quarterly

28

--------------------------------------------------------------------------------

 

installments in arrears with respect to each Letter of Credit on the first day
of each calendar quarter following the date of issuance and continuing on each
quarter or portion thereof thereafter, as applicable, or on any earlier date on
which the Commitments shall terminate and on the expiration or return of any
Letter of Credit. In addition, the Borrower shall pay to Issuing Lender for its
own account within five (5) days of demand of Issuing Lender the standard
issuance, documentation and service charges for Letters of Credit issued from
time to time by Issuing Lender.
          (f) In the event that any amount is drawn under a Letter of Credit by
the beneficiary thereof, the Borrower shall reimburse the Issuing Lender by
having such amount drawn treated as an outstanding Base Rate Loan under this
Agreement (the Borrower being deemed to have requested a Base Rate Loan on such
date in an amount equal to the amount of such drawing and such amount drawn
shall be treated as an outstanding Base Rate Loan under this Agreement) and the
Agent shall promptly notify each Lender by telecopy, telephone (confirmed in
writing) or other similar means of transmission, and each Lender shall promptly
and unconditionally pay to the Agent, for the Issuing Lender’s own account, an
amount equal to such Lender’s Commitment Percentage of such Letter of Credit (to
the extent of the amount drawn). If and to the extent any Lender shall not make
such amount available on the Business Day on which such draw is funded, such
Lender agrees to pay such amount to the Agent forthwith on demand, together with
interest thereon, for each day from the date on which such draw was funded until
the date on which such amount is paid to the Agent, at the Federal Funds
Effective Rate until three (3) days after the date on which the Agent gives
notice of such draw and at the Federal Funds Effective Rate plus one percent
(1.0%) for each day thereafter. Further, such Lender shall be deemed to have
assigned any and all payments made of principal and interest on its Loans,
amounts due with respect to its participations in Letters of Credit and any
other amounts due to it hereunder to the Agent to fund the amount of any drawn
Letter of Credit which such Lender was required to fund pursuant to this §2.8(f)
until such amount has been funded (as a result of such assignment or otherwise).
In the event of any such failure or refusal, the Lenders not so failing or
refusing shall be entitled to a priority secured position for such amounts as
provided in §12.5. The failure of any Lender to make funds available to the
Agent in such amount shall not relieve any other Lender of its obligation
hereunder to make funds available to the Agent pursuant to this §2.8(f).
          (g) If after the issuance of a Letter of Credit pursuant to §2.8(c) by
the Issuing Lender, but prior to the funding of any portion thereof by a Lender,
for any reason a drawing under a Letter of Credit cannot be refinanced as a
Loan, each Lender will, on the date such Loan pursuant to §2.8(f) was to have
been made, purchase an undivided participation interest in the Letter of Credit
in an amount equal to its Commitment Percentage of the amount of such Letter of
Credit. Each Lender will immediately transfer to the Issuing Lender in
immediately available funds the amount of its participation and upon receipt
thereof the Issuing Lender will deliver to such Lender a Letter of Credit
participation certificate dated the date of receipt of such funds and in such
amount.
          (h) Whenever at any time after the Issuing Lender has received from
any Lender any such Lender’s payment of funds pursuant to its participation in a
Letter of Credit and thereafter the Issuing Lender receives any payment on
account thereof, then the Issuing Lender will distribute to such Lender its
participation interest in such amount (appropriately adjusted in

29

--------------------------------------------------------------------------------

 

the case of interest payments to reflect the period of time during which such
Lender’s participation interest was outstanding and funded); provided, however,
that in the event that such payment received by the Issuing Lender is required
to be returned, such Lender will return to the Issuing Lender any portion
thereof previously distributed by the Issuing Lender to it.
          (i) The issuance of any supplement, modification, amendment, renewal
or extension to or of any Letter of Credit shall be treated in all respects the
same as the issuance of a new Letter of Credit.
          (j) The Borrower assumes all risks of the acts, omissions, or misuse
of any Letter of Credit by the beneficiary thereof. Neither Agent, Issuing
Lender nor any Lender will be responsible for (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or
any document submitted by any party in connection with the issuance of any
Letter of Credit, even if such document should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) failure
of any beneficiary of any Letter of Credit to comply fully with the conditions
required in order to demand payment under a Letter of Credit; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, telecopy or otherwise; (v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any document or draft
required by or from a beneficiary in order to make a disbursement under a Letter
of Credit or the proceeds thereof; (vii) the misapplication by the beneficiary
of any Letter of Credit of the proceeds of any drawing under such Letter of
Credit; and (viii) any consequences arising from causes beyond the control of
Agent or any Lender. None of the foregoing will affect, impair or prevent the
vesting of any of the rights or powers granted to Agent, Issuing Lender or the
Lenders hereunder. In furtherance and extension and not in limitation or
derogation of any of the foregoing, any act taken or omitted to be taken by
Agent, Issuing Lender or the other Lenders in good faith will be binding on the
Borrower and will not put Agent, Issuing Lender or the other Lenders under any
resulting liability to the Borrower; provided nothing contained herein shall
relieve Issuing Lender for liability to the Borrower arising as a result of the
gross negligence or willful misconduct of Issuing Lender as determined by a
court of competent jurisdiction after the exhaustion of all applicable appeal
periods.
     §2.9 Extension of Maturity Date. The Borrower shall have the one-time right
and option to extend the Maturity Date by six (6) months to February 25, 2011,
upon satisfaction of the following conditions precedent, which must be satisfied
prior to the effectiveness of any extension of the Maturity Date:
          (a) Extension Request. The Borrower shall deliver written notice of
such request (the “Extension Request”) to the Agent not earlier than the date
which is one hundred twenty (120) days and not later than the date which is
sixty (60) days prior to the Maturity Date (as determined without regard to such
extension). Any such Extension Request shall be irrevocable and binding on the
Borrower.

30

--------------------------------------------------------------------------------

 

          (b) Payment of Extension Fee. The Borrower shall pay to the Agent for
the pro rata accounts of the Lenders in accordance with their respective
Commitments an extension fee in an amount equal to twenty-five (25) basis points
on the Total Commitment in effect on the Maturity Date (as determined without
regard to such extension), which fee shall, when paid, be fully earned and
non-refundable under any circumstances.
          (c) No Default. On the date the Extension Request is given and on the
Maturity Date (as determined without regard to such extension) there shall exist
no Default or Event of Default.
          (d) Representations and Warranties. The representations and warranties
made by the Borrower and the Guarantors in the Loan Documents or otherwise made
by or on behalf of the Borrower and the Guarantors in connection therewith or
after the date thereof shall have been true and correct in all material respects
when made and shall also be true and correct in all material respects on the
date the Extension Request is given and on the Maturity Date (as determined
without regard to such extension) (except to the extent such representations
relate expressly to an earlier date, which representations shall be required to
be true and correct in all material respects only as of such specified date).
     §2.10 Increase in Total Commitment.
          (a) Provided that no Default or Event of Default has occurred and is
continuing, subject to the terms and conditions set forth in this §2.10, the
Borrower shall have the option at any time and from time to time before the date
that is six (6) months after the Closing Date to request an increase in the
Total Commitment to not more than $40,000,000.00 by giving written notice to the
Agent (an “Increase Notice”; and the amount of such requested increase is the
“Commitment Increase”), provided that any such individual increase must be in a
minimum amount of $1,000,000.00 and there shall be no more than two
(2) individual increases. Each Commitment Increase shall be applied to activate
the Inactive Amount, which subject to the terms hereof shall be activated and
become a part of the KeyBank Commitment.
          (b) On the effective date of the Commitment Increase (the “Commitment
Increase Date”) the outstanding principal balance of the Loans shall be
reallocated among the Lenders such that after the applicable Commitment Increase
Date the outstanding principal amount of Loans owed to each Lender shall be
equal to such Lender’s Commitment Percentage (as in effect after the applicable
Commitment Increase Date) of the outstanding principal amount of all Loans. The
participation interests of the Lenders in Letters of Credit shall be similarly
adjusted.
          (c) Notwithstanding anything to the contrary contained herein, the
obligation of the Agent and the Lenders to increase the Total Commitment
pursuant to this §2.10 shall be conditioned upon satisfaction of the following
conditions precedent which must be satisfied prior to the effectiveness of any
increase of the Total Commitment:
               (i) No Default. On the date any Increase Notice is given and on
the date such increase becomes effective, both immediately before and after the
Total Commitment is increased, there shall exist no Default or Event of Default;
and

31

--------------------------------------------------------------------------------

 

               (ii) Representations True. The representations and warranties
made by the Borrower and the Pledgors in the Loan Documents or otherwise made by
or on behalf of the Borrower and the Pledgors in connection therewith or after
the date thereof shall have been true and correct in all material respects when
made and shall also be true and correct in all material respects on the date of
such Increase Notice and on the date the Total Commitment is increased (except
to the extent such representations relate expressly to an earlier date, which
representations shall be required to be true and correct in all material
respects only as of such specified date), both immediately before and after the
Total Commitment is increased; and
               (iii) Additional Documents and Expenses. The Borrower and the
Pledgors shall execute and deliver to Agent and the Lenders such additional
documents, instruments, certifications and opinions as the Agent may reasonably
require in its sole and absolute discretion, including, without limitation, a
Compliance Certificate and a Borrowing Base Certificate, demonstrating
compliance with all covenants, representations and warranties set forth in the
Loan Documents after giving effect to the increase, and the Borrower shall pay
all recording costs and fees, and any and all intangible taxes or other
documentary taxes, assessments or charges or any similar fees, taxes or expenses
which are payable in connection with such increase.
§3. REPAYMENT OF THE LOANS.
     §3.1 Stated Maturity. The Borrower promises to pay on the Maturity Date and
there shall become absolutely due and payable on the Maturity Date all of the
Loans and other Letter of Credit Liabilities outstanding on such date, together
with any and all accrued and unpaid interest thereon.
     §3.2 Mandatory Prepayments.
          (a) If at any time the sum of the aggregate outstanding principal
amount of the Loans and the Letter of Credit Liabilities exceeds the Total
Commitment, then the Borrower shall immediately pay the amount of such excess to
the Agent for the respective accounts of the Lenders, as applicable, for
application to the Loans as provided in §3.4, together with any additional
amounts payable pursuant to §4.8.
          (b) If at any time the sum of the aggregate outstanding principal
amount of the Loans and the Letter of Credit Liabilities exceeds the Borrowing
Base, then the Borrower shall immediately pay the amount of such excess to the
Agent for the respective accounts of the Lenders for application to the Loans
together with any additional interest or amounts payable pursuant to §4.8.
Notwithstanding the foregoing sentence or the restrictions of Section 2.1(a)
hereof, if the aggregate outstanding principal amount of the Loans and the
Letter of Credit Liabilities exceeds the Borrowing Base, Borrower shall not be
required to pay the amount of such excess to the Agent for application to the
Loans as required by the preceding sentence until May 25, 2009 (it being
acknowledged that although the Borrowing Base as of the date of this Agreement
is $21,758,692, the Lenders have, subject to the terms hereof, agreed to make
available the sum of up to $30,000,000 until May 25, 2009); provided that if at
such time an event occurs that would otherwise reduce the Borrowing Base,
Borrower shall be required to reduce the outstanding Loans and Letter of Credit
Liabilities as provided in this Agreement.

32

--------------------------------------------------------------------------------

 

          (c) The Borrower shall pay the amount of all Proceeds to the Agent for
the respective accounts of the Lenders for application to the Loan immediately
upon receipt of any such Proceeds; provided however that notwithstanding the
foregoing, on and after January 1, 2010, such Proceeds shall be applied, first,
to Cash Collateralize any Letter of Credit Liabilities (in an amount equal to
the then Outstanding amount thereof) and, second, for application to the Loans.
     §3.3 Optional Prepayments.
          (a) The Borrower shall have the right, at its election, to prepay the
outstanding amount of the Loans, as a whole or in part, at any time without
penalty or premium; provided, that if any prepayment of the outstanding amount
of any LIBOR Rate Loans pursuant to this §3.3 is made on a date that is not the
last day of the Interest Period relating thereto, such prepayment shall be
accompanied by the payment of any amounts due pursuant to §4.8.
          (b) The Borrower shall give the Agent, no later than 1:00 p.m.
(Cleveland time) at least three (3) days prior written notice of any prepayment
pursuant to this §3.3, in each case specifying the proposed date of prepayment
of the Loans and the principal amount to be prepaid (provided that any such
notice may be revoked or modified upon one (1) day’s prior notice to the Agent).
     §3.4 Partial Prepayments. Each partial prepayment of the Loans under §3.3
shall be in a minimum amount of $1,000,000.00 or an integral multiple of
$100,000.00 in excess thereof, shall be accompanied by the payment of accrued
interest on the principal prepaid to the date of payment. Each partial payment
under §3.2 and §3.3 shall be applied to the principal of Loans (first to the
principal of Base Rate Loans, and then to the principal of LIBOR Rate Loans).
     §3.5 Effect of Prepayments. Amounts of the Loans prepaid under §3.2 and
§3.3 prior to the Maturity Date may be reborrowed as provided in §2; provided
however that after January 1, 2010, amounts of the Loans that are prepaid or
applied to Cash Collateralize a Letter of Credit under §3.2(c) may not be
reborrowed or redrawn and shall result in a dollar for dollar reduction in the
Total Commitment.
§4. CERTAIN GENERAL PROVISIONS.
     §4.1 Conversion Options.
          (a) The Borrower may elect from time to time to convert any of its
outstanding Loans to a Loan of another Type and such Loans shall thereafter bear
interest as a Base Rate Loan or a LIBOR Rate Loan, as applicable; provided that
(i) with respect to any such conversion of a LIBOR Rate Loan to a Base Rate
Loan, the Borrower shall give the Agent at least one (1) Business Day’s prior
written notice of such election, and such conversion shall only be made on the
last day of the Interest Period with respect to such LIBOR Rate Loan; (ii) with
respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, the
Borrower shall give the Agent at least three (3) LIBOR Business Days’ prior
written notice of such election and the Interest Period requested for such Loan,
the principal amount of the Loan so converted shall be in a minimum aggregate
amount of $1,000,000.00 or an integral multiple of $100,000.00 in excess thereof
and, after giving effect to the making of such Loan, there shall be no more than

33

--------------------------------------------------------------------------------

 

four (4) LIBOR Rate Loans outstanding at any one time; and (iii) no Loan may be
converted into a LIBOR Rate Loan when any Default or Event of Default has
occurred and is continuing. All or any part of the outstanding Loans of any Type
may be converted as provided herein, provided that no partial conversion shall
result in a Base Rate Loan in a principal amount of less than $1,000,000.00 or
an integral multiple of $100,000.00 or a LIBOR Rate Loan in a principal amount
of less than $1,000,000.00 or an integral multiple of $100,000.00. On the date
on which such conversion is being made, each Lender shall take such action as is
necessary to transfer its Commitment Percentage of such Loans to its Domestic
Lending Office or its LIBOR Lending Office, as the case may be. Each
Conversion/Continuation Request relating to the conversion of a Base Rate Loan
to a LIBOR Rate Loan shall be irrevocable by the Borrower.
          (b) Any LIBOR Rate Loan may be continued as such Type upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the terms of §4.1; provided that no LIBOR Rate Loan may be
continued as such when any Default or Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the last
day of the Interest Period relating thereto ending during the continuance of any
Default or Event of Default.
          (c) In the event that the Borrower does not notify the Agent of its
election hereunder with respect to any LIBOR Rate Loan, such Loan shall be
automatically continued at the end of the applicable Interest Period as a LIBOR
Rate Loan with a one-month Interest Period.
     §4.2 Fees. The Borrower agrees to pay to KeyBank and Agent for their own
account certain fees for services rendered or to be rendered in connection with
the Loans as provided pursuant to a fee letter dated of even date herewith
between the Borrower and KeyBank (the “Agreement Regarding Fees”). All such fees
shall be fully earned when paid and nonrefundable under any circumstances.
     §4.3 Funds for Payments.
          (a) All payments of principal, interest, facility fees, Letter of
Credit fees, closing fees and any other amounts due hereunder or under any of
the other Loan Documents shall be made to the Agent, for the respective accounts
of the Lenders and the Agent, as the case may be, at the Agent’s Head Office,
not later than 2:00 p.m. (Cleveland time) on the day when due, in each case in
lawful money of the United States in immediately available funds. The Agent is
hereby authorized to charge the accounts of the Borrower with KeyBank, on the
dates when the amount thereof shall become due and payable, with the amounts of
the principal of and interest on the Loans and all fees, charges, expenses and
other amounts owing to the Agent and/or the Lenders under the Loan Documents.
Subject to the foregoing, all payments made to Agent on behalf of the Lenders,
and actually received by Agent, shall be deemed received by the Lenders on the
date actually received by Agent.
          (b) All payments by the Borrower hereunder and under any of the other
Loan Documents shall be made without setoff or counterclaim and free and clear
of and without deduction for any taxes (other than income or franchise taxes
imposed on any Lender), levies, imposts, duties, charges, fees, deductions,
withholdings, compulsory loans, restrictions or

34

--------------------------------------------------------------------------------

 

conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein unless
the Borrower is compelled by law to make such deduction or withholding. If any
such obligation is imposed upon the Borrower with respect to any amount payable
by it hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Lenders or (as the case may be) the Agent,
on the date on which such amount is due and payable hereunder or under such
other Loan Document, such additional amount in Dollars as shall be necessary to
enable the Lenders or the Agent to receive the same net amount which the Lenders
or the Agent would have received on such due date had no such obligation been
imposed upon the Borrower. The Borrower will deliver promptly to the Agent
certificates or other valid vouchers for all taxes or other charges deducted
from or paid with respect to payments made by the Borrower hereunder or under
any other Loan Document.
          (c) Each Lender organized under the laws of a jurisdiction outside the
United States, if requested in writing by the Borrower (but only so long as such
Lender remains lawfully able to do so), shall provide the Borrower with such
duly executed form(s) or statement(s) which may, from time to time, be
prescribed by law and, which, pursuant to applicable provisions of (i) an income
tax treaty between the United States and the country of residence of such
Lender, (ii) the Code, or (iii) any applicable rules or regulations in effect
under (i) or (ii) above, indicates the withholding status of such Lender;
provided that nothing herein (including without limitation the failure or
inability to provide such form or statement) shall relieve the Borrower of its
obligations under §4.3(b). In the event that the Borrower shall have delivered
the certificates or vouchers described above for any payments made by the
Borrower and such Lender receives a refund of any taxes paid by the Borrower
pursuant to §4.3(b), such Lender will pay to the Borrower the amount of such
refund promptly upon receipt thereof; provided that if at any time thereafter
such Lender is required to return such refund, the Borrower shall promptly repay
to such Lender the amount of such refund.
          (d) The obligations of the Borrower to reimburse drawings under
Letters of Credit pursuant to this Agreement (and of the Lenders to make
payments to the Issuing Lender with respect to Letters of Credit) shall be
absolute, unconditional and irrevocable, and shall be paid and performed
strictly in accordance with the terms of this Agreement, under all circumstances
whatsoever, including, without limitation, the following circumstances: (i) any
lack of validity or enforceability of this Agreement, any Letter of Credit or
any of the other Loan Documents; (ii) any improper use which may be made of any
Letter of Credit or any improper acts or omissions of any beneficiary or
transferee of any Letter of Credit in connection therewith; (iii) the existence
of any claim, set-off, defense or any right which the Borrower or any of its
Subsidiaries or Affiliates may have at any time against any beneficiary or any
transferee of any Letter of Credit (or persons or entities for whom any such
beneficiary or any such transferee may be acting) or the Lenders (other than the
defense of payment to the Lenders in accordance with the terms of this
Agreement) or any other person, whether in connection with any Letter of Credit,
this Agreement, any other Loan Document, or any unrelated transaction; (iv) any
draft, demand, certificate, statement or any other documents presented under any
Letter of Credit proving to be insufficient, forged, fraudulent or invalid in
any respect or any statement therein being untrue or inaccurate in any respect
whatsoever; (v) any breach of any agreement between the Borrower or any of its
Subsidiaries or Affiliates and any beneficiary or transferee of any Letter of
Credit; (vi) any irregularity in the transaction with respect to which any
Letter of Credit

35

--------------------------------------------------------------------------------

 

is issued, including any fraud by the beneficiary or any transferee of such
Letter of Credit; (vii) payment by the Issuing Lender under any Letter of Credit
against presentation of a sight draft, demand, certificate or other document
which does not comply with the terms of such Letter of Credit, provided that
such payment shall not have constituted gross negligence or willful misconduct
on the part of the Issuing Lender as determined by a court of competent
jurisdiction after the exhaustion of all applicable appeal periods; (viii) any
non-application or misapplication by the beneficiary of a Letter of Credit of
the proceeds of such Letter of Credit; (ix) the legality, validity, form,
regularity or enforceability of the Letter of Credit; (x) the failure of any
payment by Issuing Lender to conform to the terms of a Letter of Credit (if, in
Issuing Lender’s good faith judgment, such payment is determined to be
appropriate); (xi) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
(xii) the occurrence of any Default or Event of Default; and (xiii) any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing, provided that such other circumstances or happenings shall not have
been the result of gross negligence or willful misconduct on the part of the
Issuing Lender as determined by a court of competent jurisdiction after the
exhaustion of all applicable appeal periods.
     §4.4 Computations. All computations of interest on the Loans and of other
fees to the extent applicable shall be based on a 360-day year (or a 365 or
366 day year, as applicable, in the case of Base Rate Loans) and paid for the
actual number of days elapsed. Except as otherwise provided in the definition of
the term “Interest Period” with respect to LIBOR Rate Loans, whenever a payment
hereunder or under any of the other Loan Documents becomes due on a day that is
not a Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and interest shall accrue during such extension. The
Outstanding Loans and Letter of Credit Liabilities as reflected on the records
of the Agent from time to time shall be considered prima facie evidence of such
amount absent demonstrable error.
     §4.5 Suspension of LIBOR Rate Loans. In the event that, prior to the
commencement of any Interest Period relating to any LIBOR Rate Loan, the Agent
shall determine that adequate and reasonable methods do not exist for
ascertaining LIBOR for such Interest Period, or the Agent shall reasonably
determine that LIBOR will not accurately and fairly reflect the cost of the
Lenders making or maintaining LIBOR Rate Loans for such Interest Period, the
Agent shall forthwith give notice of such determination (which shall be
conclusive and binding on the Borrower and the Lenders absent demonstrable
error) to the Borrower and the Lenders. In such event (a) any Loan Request with
respect to a LIBOR Rate Loan shall be automatically withdrawn and shall be
deemed a request for a Base Rate Loan and (b) each LIBOR Rate Loan will
automatically, on the last day of the then current Interest Period applicable
thereto, become a Base Rate Loan, and the obligations of the Lenders to make
LIBOR Rate Loans shall be suspended until the Agent determines that the
circumstances giving rise to such suspension no longer exist, whereupon the
Agent shall so notify the Borrower and the Lenders.
     §4.6 Illegality. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or the interpretation or
application thereof shall make it unlawful, or any central bank or other
governmental authority having jurisdiction over a Lender or its LIBOR Lending
Office shall assert that it is unlawful, for any Lender to make or maintain
LIBOR Rate Loans, such Lender shall forthwith give notice of such circumstances
to the Agent and the Borrower and thereupon (a) the commitment of the Lenders to
make LIBOR Rate Loans

36

--------------------------------------------------------------------------------

 

shall forthwith be suspended and (b) the LIBOR Rate Loans then outstanding shall
be converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such LIBOR Rate Loans or within such earlier period as may
be required by law. Notwithstanding the foregoing, before giving such notice,
the applicable Lender shall designate a different lending office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Lender, be otherwise materially disadvantageous to such Lender
or increase any costs payable by the Borrower hereunder.
     §4.7 Additional Interest. If any LIBOR Rate Loan or any portion thereof is
repaid or is converted to a Base Rate Loan for any reason on a date which is
prior to the last day of the Interest Period applicable to such LIBOR Rate Loan,
or if repayment of the Loans has been accelerated as provided in §12.1, the
Borrower will pay to the Agent upon demand for the account of the applicable
Lenders in accordance with their respective Commitment Percentages, in addition
to any amounts of interest otherwise payable hereunder, the Breakage Costs. The
Borrower understands, agrees to and acknowledges the following: (i) no Lender
has any obligation to purchase, sell and/or match funds in connection with the
use of LIBOR as a basis for calculating the rate of interest on a LIBOR Rate
Loan; (ii) LIBOR is used merely as a reference in determining such rate; and
(iii) the Borrower has accepted LIBOR as a reasonable and fair basis for
calculating such rate and any Breakage Costs. The Borrower further agrees to pay
the Breakage Costs, if any, whether or not a Lender elects to purchase, sell
and/or match funds.
     §4.8 Additional Costs, Etc. Notwithstanding anything herein to the
contrary, if any future applicable law, or change in or phasing in of any
presently existing law, which expression, as used herein, includes statutes,
rules and regulations thereunder and interpretations thereof by any competent
court or by any governmental or other regulatory body or official charged with
the administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender or the Agent by any central bank or other fiscal,
monetary or other authority (whether or not having the force of law), shall:
          (a) subject any Lender or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan Documents, such Lender’s Commitment, a Letter of
Credit or the Loans (other than taxes based upon or measured by the gross
receipts, income or profits of such Lender or the Agent or its franchise tax),
or
          (b) materially change the basis of taxation (except for changes in
taxes on gross receipts, income or profits or its franchise tax) of payments to
any Lender of the principal of or the interest on any Loans or any other amounts
payable to any Lender under this Agreement or the other Loan Documents, or
          (c) impose or increase or render applicable any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law and which are not already reflected in
any amounts payable by the Borrower hereunder) against assets held by, or
deposits in or for the account of, or loans by, or commitments of an office of
any Lender, or

37

--------------------------------------------------------------------------------

 

          (d) impose on any Lender or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, such Lender’s Commitment, a Letter of Credit or any class of loans or
commitments of which any of the Loans or such Lender’s Commitment forms a part;
and the result of any of the foregoing is:
               (i) to increase the cost to any Lender (beyond the cost that
would be applicable on the date hereof) of making, funding, issuing, renewing,
extending or maintaining any of the Loans, the Letters of Credit or such
Lender’s Commitment, or
               (ii) to reduce the amount of principal, interest or other amount
payable to any Lender or the Agent hereunder on account of such Lender’s
Commitment or any of the Loans or the Letters of Credit, or
               (iii) to require any Lender or the Agent (beyond the requirement
that would be applicable on the date hereof) to make any payment or to forego
any interest or other sum payable hereunder, the amount of which payment or
foregone interest or other sum is calculated by reference to the gross amount of
any sum receivable or deemed received by such Lender or the Agent from the
Borrower hereunder,
     then, and in each such case, the Borrower will, within fifteen (15) days of
demand made by such Lender or (as the case may be) the Agent at any time and
from time to time and as often as the occasion therefor may arise, pay to such
Lender or the Agent such additional amounts as such Lender or the Agent shall
determine in good faith to be sufficient to compensate such Lender or the Agent
for such additional cost, reduction, payment or foregone interest or other sum.
Each Lender and the Agent in determining such amounts may use any reasonable
averaging and attribution methods generally applied by such Lender or the Agent.
     §4.9 Capital Adequacy. If after the date hereof any Lender determines that
(a) the adoption of or change in any law, rule, regulation or guideline
regarding capital requirements for banks or bank holding companies or any change
in the interpretation or application thereof by any governmental authority
charged with the administration thereof, or (b) compliance by such Lender or its
parent bank holding company with any guideline, request or directive of any such
entity regarding capital adequacy (whether or not having the force of law), has
the effect of reducing the return on such Lender’s or such holding company’s
capital as a consequence of such Lender’s commitment to make Loans or
participate in Letters of Credit hereunder to a level below that which such
Lender or holding company could have achieved but for such adoption, change or
compliance (taking into consideration such Lender’s or such holding company’s
then existing policies with respect to capital adequacy and assuming the full
utilization of such entity’s capital) by any amount deemed by such Lender to be
material, then such Lender may notify the Borrower thereof. The Borrower agrees
to pay to such Lender the amount of such reduction in the return on capital as
and when such reduction is determined, upon presentation by such Lender of a
statement of the amount setting forth the Lender’s calculation thereof. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods generally applied by such Lender.
     §4.10 Breakage Costs. The Borrower shall pay all Breakage Costs required to
be paid by them pursuant to this Agreement and incurred from time to time by any
Lender upon demand

38

--------------------------------------------------------------------------------

 

within fifteen (15) days from receipt of written notice from Agent, or such
earlier date as may be required by this Agreement.
     §4.11 Default Interest; Late Charge. Following the occurrence and during
the continuance of any Event of Default, and regardless of whether or not the
Agent or the Lenders shall have accelerated the maturity of the Loans, all Loans
shall bear interest payable on demand at a rate per annum equal to four percent
(4.0%) above the rate for Base Rate Loans that would otherwise be applicable at
such time (the “Default Rate”), until such amount shall be paid in full (after
as well as before judgment), and the fee payable with respect to Letters of
Credit shall be increased to a rate equal to four percent (4.0%) above the
Letter of Credit fee that would otherwise be applicable at such time, or if any
of such amounts shall exceed the maximum rate permitted by law, then at the
maximum rate permitted by law. In addition, the Borrower shall pay a late charge
equal to three percent (3.0%) of any amount of interest and/or principal payable
on the Loans or any other amounts payable hereunder or under the other Loan
Documents (other than payments due at maturity or upon acceleration), which is
not paid by the Borrower within five (5) Business Days of the date when due.
     §4.12 Certificate. A certificate setting forth any amounts payable pursuant
to §4.7, §4.8, §4.9, §4.10 or §4.11 and a reasonably detailed explanation of
such amounts which are due, submitted by any Lender or the Agent to the
Borrower, shall be conclusive in the absence of demonstrable error.
     §4.13 Limitation on Interest. Notwithstanding anything in this Agreement or
the other Loan Documents to the contrary, all agreements between or among the
Borrower, the Lenders and the Agent, whether now existing or hereafter arising
and whether written or oral, are hereby limited so that in no contingency,
whether by reason of acceleration of the maturity of any of the Obligations or
otherwise, shall the interest contracted for, charged or received by the Lenders
exceed the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to the Lenders in
excess of the maximum lawful amount, the interest payable to the Lenders shall
be reduced to the maximum amount permitted under applicable law; and if from any
circumstance the Lenders shall ever receive anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive interest shall be applied to the reduction of the principal balance of
the Obligations and to the payment of interest or, if such excessive interest
exceeds the unpaid balance of principal of the Obligations, such excess shall be
refunded to the Borrower. All interest paid or agreed to be paid to the Lenders
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment in full of the
principal of the Obligations (including the period of any renewal or extension
thereof) so that the interest thereon for such full period shall not exceed the
maximum amount permitted by applicable law. This Section shall control all
agreements between or among the Borrower, the Lenders and the Agent.
     §4.14 Certain Provisions Relating to Increased Costs and Non-Funding
Lenders. If a Lender gives notice of the existence of the circumstances set
forth in §4.6 or any Lender requests compensation for any losses or costs to be
reimbursed pursuant to any one or more of the provisions of §4.3(b) (as a result
of the imposition of U.S. withholding taxes on amounts paid to such Lender under
this Agreement), §4.8 or §4.9, then, upon request of the Borrower, such

39

--------------------------------------------------------------------------------

 

Lender, as applicable, shall use reasonable efforts in a manner consistent with
such institution’s practice in connection with loans like the Loan of such
Lender to eliminate, mitigate or reduce amounts that would otherwise be payable
by the Borrower under the foregoing provisions, provided that such action would
not be otherwise materially disadvantageous to such Lender, including, without
limitation, by designating another of such Lender’s offices, branches or
affiliates; the Borrower agreeing to pay all reasonably incurred costs and
expenses incurred by such Lender in connection with any such action.
Notwithstanding anything to the contrary contained herein, if no Default or
Event of Default shall have occurred and be continuing, and if any Lender
(a) has given notice of the existence of the circumstances set forth in §4.6 or
has requested payment or compensation for any losses or costs to be reimbursed
pursuant to any one or more of the provisions of §4.3(b) (as a result of the
imposition of U.S. withholding taxes on amounts paid to such Lender under this
Agreement), §4.8 or §4.9 and following the request of the Borrower has been
unable to take the steps described above to mitigate such amounts (each, an
“Affected Lender”) or (b) has failed to make available to Agent its pro rata
share of any Loan or participation in a Letter of Credit and such failure has
not been cured (a “Non-Funding Lender”), then, the Borrower shall have the
one-time right as to such Affected Lender or Non-Funding Lender, as applicable,
to be exercised by delivery of written notice delivered to the Agent and the
Affected Lender or Non-Funding Lender, as applicable, within sixty (60) days
after receipt of such notice or request for payment or compensation or failure
to fund, as applicable, to elect to cause the Affected Lender or Non-Funding
Lender, as applicable, to transfer its Commitment. Such one-time right shall
apply to each event or circumstances, or continuation of the same event or
circumstances, that give rise to the right of the Borrower to cause such a
transfer of a Lender’s Commitment, but the Borrower shall have an additional
such one-time right with respect to any separate such event or circumstances.
The Agent shall promptly notify the remaining Lenders that each of such Lenders
shall have the right, but not the obligation, to acquire a portion of the
Commitment, pro rata based upon their relevant Commitment Percentages, of the
Affected Lender or Non-Funding Lender, as applicable (or if any of such Lenders
does not elect to purchase its pro rata share, then to such remaining Lenders in
such proportion as approved by the Agent). In the event that the Lenders do not
elect to acquire all of the Affected Lender’s or Non-Funding Lender’s
Commitment, then the Agent shall endeavor to obtain a new Lender to acquire such
remaining Commitment, with the prior written consent of the Borrower (so long as
no Event of Default has occurred and is continuing), such consent not to be
unreasonably withheld, conditioned or delayed. Upon any such purchase of the
Commitment of the Affected Lender or Non-Funding Lender, as applicable, the
Affected Lender’s or Non-Funding Lender’s interest in the Obligations and its
rights hereunder and under the Loan Documents shall terminate at the date of
purchase, and the Affected Lender or Non-Funding Lender, as applicable, shall
promptly execute all documents reasonably requested to surrender and transfer
such interest. The purchase price for the Affected Lender’s or Non-Funding
Lender’s Commitment shall equal any and all amounts outstanding and owed by the
Borrower to the Affected Lender or Non-Funding Lender, as applicable, including
principal, prepayment premium or fee, and all accrued and unpaid interest or
fees.
§5. COLLATERAL SECURITY; GUARANTORS.
     §5.1 Collateral. The Obligations shall be secured by a perfected first
priority lien and security interest to be held by the Agent for the benefit of
the Lenders on the Collateral, pursuant

40

--------------------------------------------------------------------------------

 

to the terms of the Security Documents. The Obligations shall be guaranteed by
the Guarantor pursuant to the Guaranty.
     §5.2 Additional Guarantors. In the event any Subsidiary of the Borrower
shall satisfy the definition of “Material Subsidiary” after the date hereof
(other than any Subsidiary which is prohibited from guarantying indebtedness by
the express terms of its organizational documents or any Senior Loan Document to
which such Subsidiary is party), the Borrower shall cause each such Subsidiary
to promptly execute and deliver to Agent a Joinder Agreement, and such
Subsidiary shall become a Guarantor hereunder and thereunder. Each such
Subsidiary shall be authorized, in accordance with its respective organizational
documents, to be a Guarantor hereunder and thereunder and to execute the
Contribution Agreement and such Security Documents as Agent may reasonably
require. The Borrower shall further cause all representations, covenants and
agreements in the Loan Documents with respect to Guarantors to be true and
correct with respect to each such Subsidiary. In connection with the delivery of
such Joinder Agreement, the Borrower shall deliver to the Agent such
organizational agreements, resolutions, consents, opinions and other documents
and instruments as the Agent may reasonably require.
     §5.3 Additional Collateral. Promptly upon the occurrence of any event,
including, without limitation, any acquisition of Real Estate or the acquisition
or creation of a Subsidiary by the Borrower, or the refinancing, prepayment or
repayment of any indebtedness, whether or not secured by any Real Estate, which
permits, or removes or terminates any prohibition on, the granting of a mortgage
or a pledge of Equity Interests in any such Real Estate or Subsidiary, the
Borrower shall, and shall cause each of its Subsidiaries to, execute and deliver
such documents, instruments, agreements and certificates as the Agent may
reasonably request, including any amendments to or additional Security Documents
(“Additional Security Documents”), in order to grant to the Agent, for the
benefit of the Lenders, a first priority lien and security interest (i) in the
Real Estate if such Real Estate is not encumbered by a Mortgage within 90 days
of the acquisition of such Real Estate or if such Real Estate is no longer
encumbered by a mortgage following refinancing, prepayment or repayment of any
indebtedness or (ii) if such Real Estate is encumbered by a mortgage or security
instrument (or will be encumbered by a mortgage or security interest within
90 days of the acquisition of such Real Estate), then in 100% of the Equity
Interests in the Wholly Owned Subsidiary owning or leasing the Real Estate or
(iii) if such Real Estate is encumbered by a mortgage or security instrument (or
will be encumbered by a mortgage or security interest within 90 days of the
acquisition of such Real Estate) and if the Equity Interests of the entity that
owns such Real Estate is encumbered, then in 100% of the Equity Interests in
each Wholly Owned Subsidiary owning the Equity Interests of the Wholly Owned
Subsidiary owning or leasing the Real Estate, each of (i), (ii) and (iii) above
as may be granted by any such Additional Pledgor without violating any agreement
or security instruments with any unaffiliated third party. In furtherance of the
foregoing and in connection with (i), (ii) and (iii), each Loan Party covenants
and agrees to enter into loan documentation, upon terms and conditions
reasonably satisfactory to the Agent, in connection with the acquisition of Real
Estate or the acquisition or creation of a Subsidiary of the Borrower or any
refinancing, prepayment or repayment of any indebtedness of the Borrower or any
Wholly Owned Subsidiary which owns or leases a Borrowing Base Asset, whether or
not secured by such Borrowing Base Asset, which permits, or removes or
terminates any prohibition on, the granting of a pledge of Equity Interests in
any such Subsidiary so as to permit a first priority lien and security interest
in as much of the

41

--------------------------------------------------------------------------------

 

Equity Interests in such Subsidiary in favor of the Administrative Agent and the
Lenders. Lender agrees that it shall subordinate its Mortgage in a Borrowing
Base Asset on terms reasonably acceptable to Lender or shall release its
Mortgage in a Borrowing Base Asset in exchange for a mezzanine interest in a
Borrowing Base Asset if such is required by a third party lender in order for
Borrower or its Subsidiary to obtain financing in connection with a Borrowing
Base Asset. In connection with the delivery of such documents, instruments,
agreements and certificates, the Borrower shall also deliver to the Agent such
loan documents, organizational agreements, UCC search results, resolutions,
consents, opinions and other due diligence documents and instruments as the
Agent may reasonably require.
     §5.4 Release of Collateral.
          (a) Upon the refinancing or repayment of the Obligations in full and
termination of the obligation to provide additional Loans or Letters of Credit
to the Borrower, then the Agent shall be entitled to release the Collateral from
the lien and security interest of the Security Documents and to release the
Borrower.
          (b) Upon the satisfaction of the conditions set forth in the
definition of “Removed Borrowing Base Property”, the Administrative Agent shall,
within ten (10) Business Days following the date such requirements are
satisfied, execute and deliver such documents, instruments and other agreements
as may be reasonably required to evidence and effect the release of the
Collateral relating to such Removed Borrowing Base Property from the lien and
security interest of the Security Documents.
§6. REPRESENTATIONS AND WARRANTIES.
     The Borrower represents and warrants to the Agent and the Lenders as
follows.
     §6.1 Corporate Authority, Etc.
          (a) Incorporation; Good Standing. REIT is a Maryland corporation duly
organized pursuant to articles of incorporation filed with the Secretary of
State of the State of Maryland, and is validly existing and in good standing
under the laws of Maryland. REIT conducts its business in a manner which enables
it to qualify as a real estate investment trust under, and to be entitled to the
benefits of, §856 of the Code, and has elected to be treated as and is entitled
to the benefits of a real estate investment trust thereunder. The Borrower is a
Delaware limited partnership duly organized pursuant to its certificate of
limited partnership filed with the Delaware Secretary of State, and is validly
existing and in good standing under the laws of Delaware. The Borrower (i) has
all requisite power to own its property and conduct its business as now
conducted and as presently contemplated, and (ii) is in good standing and is
duly authorized to do business in the jurisdiction of its organization and in
each other jurisdiction where a failure to be so qualified in such other
jurisdiction could have a Material Adverse Effect.
          (b) Subsidiaries. Each of the Guarantors, the Carve-Out Guarantors and
each of the Subsidiaries of the Borrower, the Carve-Out Guarantors and the
Guarantors (i) is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized under the laws of its State of
organization and is validly existing and in good standing under the laws
thereof, (ii) has all requisite power to own its property and conduct its
business as

42

--------------------------------------------------------------------------------

 

now conducted and as presently contemplated and (iii) is in good standing and is
duly authorized to do business in each jurisdiction where it is organized and in
each other jurisdiction where a failure to be so qualified could have a Material
Adverse Effect.
          (c) Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which any of the Borrower, the
Carve-Out Guarantors or any Guarantor is a party and the transactions
contemplated hereby and thereby (i) are within the authority of such Person,
(ii) have been duly authorized by all necessary proceedings on the part of such
Person, (iii) do not and will not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which such
Person is subject or any judgment, order, writ, injunction, license or permit
applicable to such Person, (iv) do not and will not conflict with or constitute
a default (whether with the passage of time or the giving of notice, or both)
under any provision of the partnership agreement, articles of incorporation or
other charter documents or bylaws of, or any agreement or other instrument
binding upon, such Person or any of its properties, (v) do not and will not
result in or require the imposition of any lien or other encumbrance on any of
the properties, assets or rights of such Person other than the liens and
encumbrances in favor of Agent contemplated by this Agreement and the other Loan
Documents, and (vi) do not require the approval or consent of any Person other
than those already obtained and delivered to Agent.
          (d) Enforceability. The execution and delivery of this Agreement and
the other Loan Documents to which any of the Borrower, the Carve-Out Guarantors
or any Guarantor is a party are valid and legally binding obligations of such
Person enforceable in accordance with the respective terms and provisions hereof
and thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors’ rights and general principles of equity.
     §6.2 Governmental Approvals. The execution, delivery and performance of
this Agreement and the other Loan Documents to which the Borrower, any Carve-Out
Guarantor or any Guarantor is a party and the transactions contemplated hereby
and thereby do not require the approval or consent of, or filing or registration
with, or the giving of any notice to, any court, department, board, governmental
agency or authority other than those already obtained or made and the filing of
the Security Documents in the appropriate records office with respect thereto.
     §6.3 Title to Properties. Except as indicated on Schedule 6.3 hereto or
other adjustments that are not material in amount, REIT, the Borrower and their
respective Subsidiaries own or lease all of the assets reflected in the
consolidated balance sheet of REIT as of the Balance Sheet Date or acquired or
leased since that date (except property and assets sold or otherwise disposed of
in the ordinary course since that date) subject to no rights of others,
including any mortgages, leases pursuant to which REIT, the Borrower or any of
their respective Subsidiaries or any of their respective Affiliates is the
lessee, conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
     §6.4 Financial Statements. The Borrower has furnished to Agent: (a) the
unaudited consolidated balance sheet of REIT and its Subsidiaries as of the
Balance Sheet Date and the related unaudited consolidated statement of
operations for the fiscal period then ended, certified by the chief financial or
accounting officer of REIT, (b) an unaudited statement of Consolidated

43

--------------------------------------------------------------------------------

 

Net Operating Income of REIT and its Subsidiaries for the fiscal period ended
June 30, 2008 reasonably satisfactory in form to the Agent and certified by the
chief financial or accounting officer of REIT as fairly presenting the
Consolidated Net Operating Income for such period, (c) the unaudited
consolidated balance sheet of Borrower and its Subsidiaries as of the Balance
Sheet Date and the related unaudited consolidated statement of operations for
the fiscal period then ended, certified by the chief financial or accounting
officer of Borrower, (d) an unaudited statement of Consolidated Net Operating
Income of Borrower and its Subsidiaries for the fiscal period ended June 30,
2008 (which may separately include adjustments giving pro forma affect to
acquisitions made prior to June 30, 2008) reasonably satisfactory in form to the
Agent and certified by the chief financial or accounting officer of Borrower as
fairly presenting the Consolidated Net Operating Income for such period, and
(e) certain other financial information relating to the Borrower, the
Guarantors, the Carve-Out Guarantors and the Collateral. Such balance sheet and
statements have been prepared in accordance with generally accepted accounting
principles and fairly present the consolidated financial condition of REIT and
its Subsidiaries and Borrower and its Subsidiaries, as applicable, as of such
dates and the consolidated results of the operations of REIT and its
Subsidiaries and Borrower and its Subsidiaries, as applicable, for such periods.
There are no liabilities, contingent or otherwise, of REIT or any of its
Subsidiaries or Borrower and its Subsidiaries, as applicable, involving material
amounts not disclosed in said financial statements and the related notes
thereto.
     §6.5 No Material Changes. Since the Balance Sheet Date or the date of the
most recent financial statements delivered pursuant to §7.4, as applicable,
there has occurred no materially adverse change in the financial condition,
prospects or business of REIT, the Borrower, the Carve-Out Guarantors and their
respective Subsidiaries taken as a whole as shown on or reflected in the
consolidated balance sheet of REIT or the Carve-Out Guarantors, as appropriate,
as of the Balance Sheet Date, or its consolidated statement of operations or
cash flows for the fiscal period then ended, other than changes in the ordinary
course of business that have not and could not reasonably be expected to have a
Material Adverse Effect. As of the date hereof, except as set forth on
Schedule 6.5 hereto, there has occurred no materially adverse change in the
financial condition, prospects, operations or business activities of any of the
Borrowing Base Assets from the condition shown on the statements of operations
delivered to the Agent pursuant to §6.4 other than changes in the ordinary
course of business that have not had any materially adverse effect either
individually or in the aggregate on the business, prospects, operation or
financial condition of any of the Borrowing Base Assets.
     §6.6 Franchises, Patents, Copyrights, Etc. The Borrower, the Guarantors and
their respective Subsidiaries possess all franchises, patents, copyrights,
trademarks, trade names, service marks, licenses and permits, and rights in
respect of the foregoing, adequate for the conduct of their business
substantially as now conducted without known conflict with any rights of others
except with respect to Subsidiaries of the Borrower that are not Guarantors
where such failure individually or in the aggregate has not had and could not
reasonably be expected to have a Material Adverse Effect.
     §6.7 Litigation. Except as stated on Schedule 6.7, there are no actions,
suits, proceedings or investigations of any kind pending or to the knowledge of
the Borrower threatened against the Borrower, any Guarantor, any Carve-Out
Guarantor or any of their respective Subsidiaries before any court, tribunal,
arbitrator, mediator or administrative agency

44

--------------------------------------------------------------------------------

 

or board which question the validity of this Agreement or any of the other Loan
Documents, any action taken or to be taken pursuant hereto or thereto or any
lien, security title or security interest created or intended to be created
pursuant hereto or thereto, or which if adversely determined could reasonably be
expected to cause a Default or have a Material Adverse Effect. Except as set
forth on Schedule 6.7, there are no judgments, final orders or awards
outstanding against or affecting the Borrower, any Guarantor, any Carve-Out
Guarantor any of their respective Subsidiaries or any Collateral, individually
or in the aggregate, in excess of $1,000,000.00.
     §6.8 No Material Adverse Contracts, Etc. None of the Borrower, any
Guarantor, any Carve-Out Guarantor or any of their respective Subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation that has or is expected in the future to have
a Material Adverse Effect. None of the Borrower, any Guarantor, any Carve-Out
Guarantors or any of their respective Subsidiaries is a party to any contract or
agreement that has or could reasonably be expected to have a Material Adverse
Effect.
     §6.9 Compliance with Other Instruments, Laws, Etc. None of the Borrower,
any Guarantor, any Carve-Out Guarantor or any of their respective Subsidiaries
is in violation of any provision of its charter or other organizational
documents, bylaws, or any agreement or instrument to which it is subject or by
which it or any of its properties is bound or any decree, order, judgment,
statute, license, rule or regulation, in any of the foregoing cases in a manner
that has had or could reasonably be expected to have a Material Adverse Effect.
     §6.10 Tax Status. Each of the Borrower, the Guarantors, the Carve-Out
Guarantors and their respective Subsidiaries (a) has made or filed all federal
and state income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject or has obtained an extension for filing,
(b) has paid prior to delinquency all taxes and other governmental assessments
and charges shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and by appropriate
proceedings and (c) has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers or partners of such Person know of no basis for any such claim.
There are no audits pending or to the knowledge of the Borrower threatened with
respect to any tax returns filed by the Borrower, any Guarantor, any Carve-Out
Guarantor or their respective Subsidiaries. The taxpayer identification number
for REIT is 86-0602478 and for the Borrower is 26-2182193.
     §6.11 No Event of Default. No Default or Event of Default has occurred and
is continuing.
     §6.12 Investment Company Act. None of the Borrower, the Guarantors or any
of their respective Subsidiaries is an “investment company”, or an “affiliated
company” or a “principal underwriter” of an “investment company”, as such terms
are defined in the Investment Company Act of 1940.
     §6.13 Setoff, Etc. The Collateral and the rights of the Agent and the
Lenders with respect to the Collateral are not subject to any setoff, claims,
withholdings or other defenses by

45

--------------------------------------------------------------------------------

 

the Borrower or any of their Subsidiaries or Affiliates or, to the best
knowledge of the Borrower, any other Person other than Permitted Liens described
in §8.2(i)(A) and (v).
     §6.14 Certain Transactions. Except as disclosed on Schedule 6.14 hereto,
none of the partners, officers, trustees, managers, members, directors, or
employees of the Borrower, any Guarantor or any of their respective Subsidiaries
is, nor shall any such Person become, a party to any transaction with the
Borrower, any Guarantor or any of their respective Subsidiaries or Affiliates
(other than for services as partners, managers, members, employees, officers and
directors and services under the Advisory Agreement or the Managements
Agreements described on Schedule 7.13 or otherwise approved by Agent), including
any agreement or other arrangement providing for the furnishing of services to
or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any partner, officer, trustee, director
or such employee or, to the knowledge of the Borrower, any corporation,
partnership, trust or other entity in which any partner, officer, trustee,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, which are on terms less favorable to the Borrower,
a Guarantor or any of their respective Subsidiaries than those that would be
obtained in a comparable arms-length transaction.
     §6.15 Employee Benefit Plans. The Borrower, each Guarantor and each ERISA
Affiliate has fulfilled its obligation, if any, under the minimum funding
standards of ERISA and the Code with respect to each Employee Benefit Plan,
Multiemployer Plan or Guaranteed Pension Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the Code
with respect to each Employee Benefit Plan, Multiemployer Plan or Guaranteed
Pension Plan. Neither the Borrower, any Guarantor nor any ERISA Affiliate has
(a) sought a waiver of the minimum funding standard under §412 of the Code in
respect of any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension
Plan, (b) failed to make any contribution or payment to any Employee Benefit
Plan, Multiemployer Plan or Guaranteed Pension Plan, or made any amendment to
any Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, which
has resulted or could result in the imposition of a Lien or the posting of a
bond or other security under ERISA or the Code, or (c) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums under
§4007 of ERISA. None of the assests of REIT, the Borrower or any of their
respective Subsidiaries constitutes a “plan asset” of any Employee Plan,
Multiemployer Plan or Guaranteed Pension Plan.
     §6.16 Disclosure. All of the representations and warranties made by or on
behalf of the Borrower, the Guarantors and their respective Subsidiaries in this
Agreement and the other Loan Documents or any document or instrument delivered
to the Agent or the Lenders pursuant to or in connection with any of such Loan
Documents are true and correct in all material respects, and neither the
Borrower nor any Guarantor has failed to disclose such information as is
necessary to make such representations and warranties not misleading. All
information contained in this Agreement, the other Loan Documents or otherwise
furnished to or made available to the Agent or the Lenders by or on behalf of
the Borrower, any Subsidiary or any Guarantor is and will be true and correct in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
therein not misleading. The written information, reports and other papers and
data with respect to the Borrower, any Subsidiary, any Guarantor or the
Collateral (other than projections and estimates) furnished to the Agent or the
Lenders in connection with this Agreement or the obtaining of the

46

--------------------------------------------------------------------------------

 

Commitments of the Lenders hereunder was, at the time so furnished, complete and
correct in all material respects, or has been subsequently supplemented by other
written information, reports or other papers or data, to the extent necessary to
give in all material respects a true and accurate knowledge of the subject
matter in all material respects; provided that such representation shall not
apply to (a) the accuracy of any appraisal, title commitment, survey, or
engineering and environmental reports prepared by third parties or legal
conclusions or analysis provided by the Borrower’s or Guarantor’s counsel
(although the Borrower and the Guarantors have no reason to believe that the
Agent and the Lenders may not rely on the accuracy thereof) or (b) budgets,
projections and other forward-looking speculative information prepared in good
faith by the Borrower (except to the extent the related assumptions were when
made demonstrably unreasonable).
     §6.17 Trade Name; Place of Business. Neither the Borrower nor any Guarantor
uses any trade name and conducts business under any name other than its actual
name set forth in the Loan Documents. The principal place of business of the
Borrower is located at 233 Wilshire Boulevard, Suite 830, Santa Monica,
California 90401.
     §6.18 Regulations T, U and X. No portion of any Loan is to be used for the
purpose of purchasing or carrying any “margin security” or “margin stock” as
such terms are used in Regulations T, U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 220, 221 and 224. Neither the Borrower
nor any Guarantor is engaged, nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any “margin security” or “margin stock” as such terms are
used in Regulations T, U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 220, 221 and 224.
     §6.19 Environmental Compliance. Except as specifically set forth in the
written environmental site assessment reports of an Environmental Engineer
provided to the Agent on or before the date hereof or as set forth in
Schedule 6.19 hereto, or in the case of Real Estate acquired after the date
hereof, the environmental site assessment reports with respect thereto provided
to the Agent, the Borrower makes the following representations and warranties,
without any duty of inquiry or investigation:
          (a) None of the Borrower, the Guarantors or their respective
Subsidiaries nor to the best knowledge and belief of Borrower any operator of
the Real Estate, nor any tenant or operations thereon, is in material violation,
or alleged violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without limitation,
those arising under any Environmental Law, which violation involves Real Estate
and has had or could reasonably be expected to have a Material Adverse Effect or
involves a Borrowing Base Asset.
          (b) None of the Borrower, the Guarantors nor any of their respective
Subsidiaries has received notice from any third party including, without
limitation, any federal, state or local governmental authority, (i) that it has
been identified by the United States Environmental Protection Agency (“EPA”) as
a potentially responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that
any Hazardous Substance which it has generated, transported or disposed of has

47

--------------------------------------------------------------------------------

 

been found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that the Borrower, any Guarantor or any of
their respective Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is or shall
be a named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising out of
any third party’s incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the release of Hazardous Substances, which in any
case involves Real Estate and has had or could reasonably be expected to have a
Material Adverse Effect or involves a Borrowing Base Asset.
          (c) (i) No portion of the Real Estate has been used for the handling,
processing, storage or disposal of Hazardous Substances except in accordance
with applicable Environmental Laws, and no underground tank or other underground
storage receptacle for Hazardous Substances is located on any portion of the
Real Estate except those which are being operated and maintained in compliance
with applicable Environmental Laws; (ii) in the course of any activities
conducted by the Borrower, the Guarantors, their respective Subsidiaries or, to
the best knowledge and belief of the Borrower, the tenants and operators of
their properties, no Hazardous Substances have been generated or are being used
on the Real Estate except in the ordinary course of Borrower’s, the Guarantors’
and their respective Subsidiaries’ respective businesses and in accordance with
applicable Environmental Laws; (iii) there has been no past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping (other than the use and storage of
Hazardous Substances in reasonable quantities to the extent necessary for the
operation of office properties of the type and size of those owned by Borrower,
the Guarantors or any of their respective Subsidiaries in the ordinary course of
their business, and in any event in compliance with all applicable Environmental
Laws) (a “Release”) or threatened Release of Hazardous Substances on, upon, into
or from the Real Estate, which Release would have a material adverse effect on
the value of such Real Estate or adjacent properties; (iv) to the Borrower’s
actual knowledge, there have been no Releases on, upon, from or into any real
property in the vicinity of any of the Real Estate which, through soil or
groundwater contamination, may have come to be located on, and which could be
reasonably anticipated to have a material adverse effect on the value of, the
Real Estate; and (v) any Hazardous Substances that have been generated on any of
the Real Estate have been transported off-site in accordance with all applicable
Environmental Laws (except with respect to the foregoing in this §6.19(c) as to
any Real Estate other than a Borrowing Base Asset where the foregoing has not
had or could not reasonably be expected to have a Material Adverse Effect).
          (d) None of the Borrower, the Guarantors, their respective
Subsidiaries nor the Real Estate is subject to any applicable Environmental Law
requiring the performance of Hazardous Substances site assessments, or the
removal or remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or statement in each case by virtue of the
transactions set forth herein and contemplated hereby, or as a condition to the
effectiveness of any other transactions contemplated hereby except for such
matters that shall be complied with as of the Closing Date.
          (e) There are no existing or closed sanitary landfills, solid waste
disposal sites, or hazardous waste treatment, storage or disposal facilities on
or, to Borrower’s actual

48

--------------------------------------------------------------------------------

 

knowledge, affecting the Real Estate other than a Borrowing Base Asset except
where such existence has not had or could not reasonably be expected to have a
Material Adverse Effect.
          (f) The Borrower has not received any written notice of any claim by
any party that any use, operation, or condition of the Real Estate has caused
any nuisance or any other liability or adverse condition on any other property
which as to any Real Estate other than a Borrowing Base Asset has had or could
reasonably be expected to have a Material Adverse Effect, nor is there any
actual knowledge of any basis for such a claim.
     §6.20 Subsidiaries; Organizational Structure. Schedule 6.20(a) sets forth,
as of the date hereof, all of the Subsidiaries of REIT, the form and
jurisdiction of organization of each of the Subsidiaries, and REIT’s direct and
indirect ownership interests therein. Schedule 6.20(b) sets forth, as of the
date hereof, all of the Unconsolidated Affiliates of REIT and its Subsidiaries,
the form and jurisdiction of organization of each of the Unconsolidated
Affiliates, REIT’s or its Subsidiary’s ownership interest therein and the other
owners of the applicable Unconsolidated Affiliate. No Person owns any legal,
equitable or beneficial interest in any of the Persons set forth on
Schedules 6.20(a) and 6.20(b) except as set forth on such Schedules.
     §6.21 Real Estate. All of the Real Estate of the Borrower, the Guarantors
and their respective Subsidiaries is structurally sound, in good condition and
working order, subject to ordinary wear and tear, except for such portion of
such Real Estate which is not occupied by any tenant and where such defects have
not had and could not reasonably be expected to have a Material Adverse Effect.
The Real Estate, and the use and operation thereof, is in material compliance
with all applicable federal and state law and governmental regulations and any
local ordinances, orders or regulations, including without limitation, laws,
regulations and ordinances relating to zoning, building codes, subdivision, fire
protection, health, safety, handicapped access, historic preservation and
protection, wetlands, tidelands, and Environmental Laws. There are no unpaid or
outstanding real estate or other taxes or assessments on or against any of the
Real Estate which are payable by the Borrower, any Guarantor or any of their
respective Subsidiaries (except only real estate or other taxes or assessments,
that are not yet delinquent or are being protested as permitted by this
Agreement). Except as disclosed on Schedule 6.21 hereto, each Real Estate asset
is separately assessed for purposes of real estate tax assessment and payment.
There are no unpaid or outstanding real estate or other taxes or assessments on
or against any other property of the Borrower, the Guarantors or any of their
respective Subsidiaries which are payable by any of such Persons in any material
amount (except only real estate or other taxes or assessments, that are not yet
delinquent or are being protested as permitted by this Agreement). There are no
pending, or to the knowledge of the Borrower, threatened or contemplated,
eminent domain proceedings against any Real Estate. None of the Real Estate is
now damaged as a result of any fire, explosion, accident, flood or other
casualty. None of the Borrower, the Guarantors or any of their respective
Subsidiaries has received any outstanding written notice from any insurer or its
agent requiring performance of any work with respect to any of the Real Estate
or canceling or threatening to cancel any policy of insurance, and each of the
Real Estate complies with the material requirements of all of the Borrower’s,
Guarantors’ and their respective Subsidiaries’ insurance carriers. No person or
entity has any right or option to acquire any Real Estate or any Building
thereon or any portion thereof or interest therein, except for certain tenants
of such Real Estate pursuant to the terms of their Leases.

49

--------------------------------------------------------------------------------

 

     §6.22 Brokers. None of REIT, the Borrower nor any of their respective
Subsidiaries has engaged or otherwise dealt with any broker, finder or similar
entity in connection with this Agreement or the Loans contemplated hereunder.
     §6.23 Other Debt. None of the Borrower, any Guarantor nor any of their
respective Subsidiaries is in default of the payment of any Indebtedness or the
performance of any material obligation under any related agreement, mortgage,
deed of trust, security agreement, financing agreement or indenture to which any
of them is a party. Neither the Borrower nor any Guarantor is a party to or
bound by any agreement, instrument or indenture that may require the
subordination in right or time or payment of any of the Obligations to any other
indebtedness or obligation of the Borrower or any Guarantor. Schedule 6.23
hereto sets forth all agreements, mortgages, deeds of trust, financing
agreements or other material agreements binding upon the Borrower and each
Guarantor or their respective properties and entered into by the Borrower and/or
such Guarantor as of the date of this Agreement with respect to any Indebtedness
of the Borrower or any Guarantor in an amount greater than $1,000,000.00, and
the Borrower has provided the Agent with true, correct and complete copies
thereof.
     §6.24 Solvency. As of the Closing Date and after giving effect to the
transactions contemplated by this Agreement and the other Loan Documents,
including all Loans made or to be made hereunder, neither the Borrower nor any
Guarantor is insolvent on a balance sheet basis such that the sum of such
Person’s assets exceeds the sum of such Person’s liabilities, the Borrower and
each Guarantor is able to pay its debts as they become due, and the Borrower and
each Guarantor has sufficient capital to carry on its business.
     §6.25 No Bankruptcy Filing. Neither the Borrower nor any Guarantor is
contemplating either the filing of a petition by it under any state or federal
bankruptcy or insolvency laws or the liquidation of its assets or property, and
the Borrower has no knowledge of any Person contemplating the filing of any such
petition against it or any Guarantor.
     §6.26 No Fraudulent Intent. Neither the execution and delivery of this
Agreement or any of the other Loan Documents nor the performance of any actions
required hereunder or thereunder is being undertaken by the Borrower, any
Guarantor or any of their respective Subsidiaries with or as a result of any
actual intent by any of such Persons to hinder, delay or defraud any entity to
which any of such Persons is now or will hereafter become indebted.
     §6.27 Transaction in Best Interests of Borrower and Guarantors;
Consideration. The transaction evidenced by this Agreement and the other Loan
Documents is in the best interests of the Borrower, each Guarantor and their
respective Subsidiaries. The direct and indirect benefits to inure to the
Borrower, each Guarantor and their respective Subsidiaries pursuant to this
Agreement and the other Loan Documents constitute substantially more than
“reasonably equivalent value” (as such term is used in §548 of the Bankruptcy
Code) and “valuable consideration,” “fair value,” and “fair consideration,” (as
such terms are used in any applicable state fraudulent conveyance law), in
exchange for the benefits to be provided by the Borrower, the Guarantors and
their respective Subsidiaries pursuant to this Agreement and the other Loan
Documents, and but for the willingness of each Guarantor to guaranty the Loan,
the Borrower would be unable to obtain the financing contemplated hereunder
which financing will enable the

50

--------------------------------------------------------------------------------

 

Borrower, each Guarantor and their respective Subsidiaries to have available
financing to conduct and expand their business.
     §6.28 Contribution Agreement. The Borrower and the Guarantors have executed
and delivered the Contribution Agreement, and the Contribution Agreement
constitutes the valid and legally binding obligations of such parties
enforceable against them in accordance with the terms and provisions thereof,
except as enforceability is limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the enforcement of
creditors’ rights and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of the
court before which any proceeding therefor may be brought.
     §6.29 OFAC. None of the Borrower or the Guarantors is (or will be) a person
with whom any Lender is restricted from doing business under OFAC (including,
those Persons named on OFAC’s Specially Designated and Blocked Persons list) or
under any statute, executive order (including the September 24, 2001 Executive
Order Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism), or other governmental action and is
not and shall not engage in any dealings or transactions or otherwise be
associated with such persons. In addition, the Borrower hereby agrees to provide
to the Lenders any additional information that a Lender deems necessary from
time to time in order to ensure compliance with all applicable laws concerning
money laundering and similar activities.
     §6.30 First Insurance Ground Lease. POP Ward Avenue has a ground lease
interest pursuant to that certain First Insurance Ground Lease in connection
with the First Insurance Real Estate which leasehold interest is free of any
monetary liens or encumbrances that would be superior in priority to such
leasehold interest and the foreclosure of which could terminate such leasehold
interest, including specifically but not limited to any lien or encumbrance by
any fee mortgagee of such First Insurance Real Estate, or following the
occurrence of a First Insurance Ground Lease Subordination Event, Borrower has
delivered to Agent a commercially reasonable subordination, attornment and
non-disturbance agreement from such fee mortgagee in favor of the holder of the
leasehold interest which is reasonably acceptable to Agent.
     §6.31 POPTLP, LLC. POPTLP, LLC, a Delaware limited liability company, is a
wholly owned subsidiary of REIT which does not own any assets. POPTLP, LLC is
not obligated with respect to any indebtedness or obligations to any Person.
§7. AFFIRMATIVE COVENANTS.
     The Borrower covenants and agrees that, so long as any Loan, Note or Letter
of Credit is outstanding or any Lender has any obligation to make any Loans or
issue Letters of Credit:
     §7.1 Punctual Payment. The Borrower will duly and punctually pay or cause
to be paid the principal and interest on the Loans and all interest and fees
provided for in this Agreement, all in accordance with the terms of this
Agreement and the Notes, as well as all other sums owing pursuant to the Loan
Documents.

51

--------------------------------------------------------------------------------

 

     §7.2 Maintenance of Office. The Borrower and each Guarantor will maintain
their respective chief executive office at 233 Wilshire Boulevard, Suite 830,
Santa Monica, California 90401, or at such other place in the United States of
America as the Borrower or any Guarantor shall designate upon thirty (30) days
prior written notice to the Agent and the Lenders, where notices, presentations
and demands to or upon the Borrower or such Guarantor in respect of the Loan
Documents may be given or made.
     §7.3 Records and Accounts. The Borrower and each Guarantor will (a) keep,
and cause each of their respective Subsidiaries to keep, true and accurate
records and books of account in which full, true and correct entries will be
made in accordance with GAAP and (b) maintain adequate accounts and reserves for
all taxes (including income taxes), depreciation and amortization of its
properties and the properties of their respective Subsidiaries, contingencies
and other reserves. Neither the Borrower, any Guarantor nor any of their
respective Subsidiaries shall, without the prior written consent of the Agent,
(x) make any material change to the accounting policies/principles used by such
Person in preparing the financial statements and other information described in
§6.4 or §7.4, unless otherwise required by GAAP, or (y) change its fiscal year.
Agent and the Lenders acknowledge that REIT’s fiscal year is a calendar year.
     §7.4 Financial Statements, Certificates and Information. The Borrower will
deliver or cause to be delivered to the Agent with sufficient copies for each of
the Lenders:
          (a) within five (5) days of the filing of REIT’s Form 10-K with the
SEC, but in any event not later than ninety (90) days after the end of each
calendar year, (i) the audited Consolidated balance sheet of REIT and its
Subsidiaries at the end of such year, and the related audited consolidated
statements of operations, changes in capital and cash flows for such year,
setting forth in comparative form the figures for the previous fiscal period or
year and all such statements to be in reasonable detail, prepared in accordance
with GAAP, together with a certification by the chief financial officer or
accounting officer of REIT that the information contained in such financial
statements fairly presents the financial position of REIT and its Subsidiaries,
and accompanied by an auditor’s report prepared without qualification as to the
scope of the audit by a nationally recognized accounting firm reasonably
approved by Agent, and any other information the Lenders may reasonably request
to complete a financial analysis of REIT and its Subsidiaries and (ii) the
Consolidated balance sheet of Borrower and its Subsidiaries at the end of such
year, and the related consolidated statements of operations, changes in capital
for such year, setting forth in comparative form the figures for the previous
fiscal period or year and all such statements to be in reasonable detail,
prepared in accordance with GAAP, together with a certification by the chief
financial officer or accounting officer of Borrower that the information
contained in such financial statements fairly presents the financial position of
Borrower and its Subsidiaries, and any other information the Lenders may
reasonably request to complete a financial analysis of Borrower and its
Subsidiaries;
          (b) within five (5) days of the filing of REIT’s Form 10-Q with the
SEC, if applicable, but in any event not later than fifty (50) days after the
end of each calendar quarter of each year, (i) copies of the unaudited
Consolidated balance sheet of REIT and its Subsidiaries, as at the end of such
quarter, and the related unaudited consolidated statements of operations and
cash flows for the portion of REIT’s fiscal year then elapsed, all in reasonable
detail and

52

--------------------------------------------------------------------------------

 

prepared in accordance with GAAP, together with a certification by the chief
financial officer or accounting officer of REIT that the information contained
in such financial statements fairly presents the financial position of REIT and
its Subsidiaries on the date thereof (subject to year-end adjustments) and
(ii) copies of the unaudited Consolidated balance sheet of Borrower and its
Subsidiaries, as at the end of such quarter, and the related unaudited
consolidated statements of operations for the portion of Borrower’s fiscal year
then elapsed, all in reasonable detail and prepared in accordance with GAAP,
together with a certification by the chief financial officer or accounting
officer of Borrower that the information contained in such financial statements
fairly presents the financial position of Borrower and its Subsidiaries on the
date thereof (subject to year-end adjustments);
          (c) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above and prior to the inclusion of or
removal of a Borrowing Base Asset from the Borrowing Base, a statement (a
“Compliance Certificate”) certified by the chief financial officer or chief
accounting officer of Borrower in the form of Exhibit F hereto (or in such other
form as the Agent may approve from time to time) setting forth in reasonable
detail computations evidencing compliance or non-compliance (as the case may be)
with the covenants contained in §9 and the other covenants described in such
certificate and (if applicable) setting forth reconciliations to reflect changes
in GAAP since the Balance Sheet Date. All income, expense and value associated
with Real Estate or other Investments disposed of during any quarter will be
eliminated from calculations, where applicable. The Compliance Certificate shall
be accompanied by copies of the statements of Funds from Operations and Net
Operating Income for such calendar quarter, prepared on a basis consistent with
the statements furnished to the Agent prior to the date hereof and otherwise in
form and substance reasonably satisfactory to the Agent, together with a
certification by the chief financial officer or chief accounting officer of
Borrower that the information contained in such statement fairly presents the
Funds from Operations and Net Operating Income for such periods. The Compliance
Certificate shall also be accompanied by a certificate (a “Borrowing Base
Certificate”) in the form of Exhibit G hereto (or in such other form as the
Agent may approve from time to time) pursuant to which the Borrower shall
include a list of the Borrowing Base Assets, the outstanding principal balance
and maturity date under any applicable Senior Loan Document, the Borrowing Base
Asset Value for each Borrowing Base Asset and the aggregate Borrowing Base, and
a certification as to whether such Borrowing Base Assets satisfy each and every
requirement in this Agreement to qualify as a Borrowing Base Asset, all
certified by an Authorized Officer;
          (d) simultaneously with the delivery of the financial statements
referred to in clause (a) above, a statement of all contingent liabilities
involving amounts of $1,000,000.00 or more of the REIT and its Subsidiaries
which are not reflected in such financial statements or referred to in the notes
thereto (including, without limitation, all guaranties, endorsements and other
contingent obligations in respect of the indebtedness of others, and obligations
to reimburse the issuer in respect of any letters of credit);
          (e) promptly following a request by the Agent, (i) a Rent Roll for
each Real Estate asset constituting a Borrowing Base Asset and a summary thereof
in form reasonably satisfactory to Agent, as of the end of the most recently
completed calendar quarter, together with a listing of each tenant that has
taken occupancy of such Real Estate in the calendar year to date, (ii) an
operating statement for each Real Estate asset constituting a Borrowing Base
Asset,

53

--------------------------------------------------------------------------------

 

for the period commencing on January 1 of the then current year to the end of
the most recently completed calendar quarter, and a consolidated operating
statement for the Real Estate assets constituting Borrowing Base Assets for such
period (such statements and reports to be in form reasonably satisfactory to
Agent), and (iii) a copy of each Lease or amendment to any Lease entered into in
the calendar year to date with respect to a Real Estate asset constituting a
Borrowing Base Asset;
          (f) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement (i) listing the Real
Estate owned by REIT, the Borrower and their respective Subsidiaries (or in
which REIT, the Borrower or any of their respective Subsidiaries owns an
interest) and stating the location thereof, the date acquired and the
acquisition cost, (ii) listing the Indebtedness of REIT, the Borrower and their
respective Subsidiaries, which statement shall include, without limitation, a
statement of the original principal amount of such Indebtedness and the current
amount outstanding, the holder thereof, the maturity date and any extension
options, the interest rate, the collateral provided for such Indebtedness and
whether such Indebtedness is recourse or non-recourse;
          (g) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature, reports or proxy statements sent to the
owners of the Borrower or REIT;
          (h) promptly after they are filed with the Internal Revenue Service,
copies of all annual federal income tax returns and amendments thereto of the
Borrower and REIT;
          (i) promptly upon the filing hereof, copies of any registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and any annual, quarterly or monthly reports and
other statements and reports which the Borrower or REIT shall file with the SEC;
          (j) notice of any audits pending or threatened with respect to any tax
returns filed by the Borrower or REIT promptly following notice of such audit;
          (k) within five (5) Business Days of notice or receipt, copies of any
and all notices of default under any of the organizational agreements of any
Company or Subsidiary Company (as defined in the Assignment) in which the
Borrower, a Pledgor or a Company, as applicable, is a member, shareholder or
partner or of any failure by the Borrower, such Pledgor or such Company to
perform any obligation under any of such organizational agreements;
          (l) promptly upon receipt thereof, copies of any and all notices of
default under any loan document securing or evidencing a mortgage loan made to
the Borrower or any of its Subsidiaries secured by a Lien on Real Estate or any
Equity Interest;
          (m) not later than January 31 of each year, a budget and business plan
for the Borrower and its Subsidiaries for the next calendar year; and
          (n) from time to time such other financial data and information in the
possession of REIT, the Borrower or their respective Subsidiaries (including
without limitation auditors’ management letters, status of litigation or
investigations against REIT, the Borrower or

54

--------------------------------------------------------------------------------

 

any of their respective Subsidiaries and any settlement discussions relating
thereto, property inspection and environmental reports and information as to
zoning and other legal and regulatory changes affecting the Borrower or any of
its Subsidiaries) as the Agent may reasonably request.
Any material to be delivered pursuant to this §7.4 may be delivered
electronically directly to Agent and the Lenders provided that such material is
in a format reasonably acceptable to Agent, and such material shall be deemed to
have been delivered to Agent and the Lenders upon Agent’s receipt thereof. Upon
the request of Agent, the Borrower shall deliver paper copies thereof to Agent
and the Lenders. The Borrower authorizes Agent and Arranger to disseminate any
such materials through the use of Intralinks, SyndTrak or any other electronic
information dissemination system, and the Borrower releases Agent and the
Lenders from any liability in connection therewith, except in the case of gross
negligence or willful misconduct of the Agent or any Lender.
     §7.5 Notices.
          (a) Defaults. The Borrower will promptly upon becoming aware of same
notify the Agent in writing of the occurrence of any Default or Event of
Default, which notice shall describe such occurrence with reasonable specificity
and shall state that such notice is a “notice of default”. If any Person shall
give any notice or take any other action in respect of a claimed default
(whether or not constituting an Event of Default) under this Agreement or under
any note, evidence of indebtedness, indenture or other obligation to which or
with respect to which the Borrower, any Guarantor or any of their respective
Subsidiaries is a party or obligor, whether as principal or surety, and such
default would permit the holder of such note or obligation or other evidence of
indebtedness to accelerate the maturity thereof, which acceleration would either
cause a Default or have a Material Adverse Effect, the Borrower shall forthwith
give written notice thereof to the Agent and each of the Lenders, describing the
notice or action and the nature of the claimed default.
          (b) Environmental Events. The Borrower will give notice to the Agent
within ten (10) Business Days of becoming aware of (i) any potential or known
Release, or threat of Release, of any Hazardous Substances in material violation
of any applicable Environmental Law; (ii) any violation of any Environmental Law
that the Borrower, any Guarantor or any of their respective Subsidiaries reports
in writing or is reportable by such Person in writing (or for which any written
report supplemental to any oral report is made) to any federal, state or local
environmental agency or (iii) any inquiry, proceeding, investigation, or other
action, including a notice from any agency of potential environmental liability,
of any federal, state or local environmental agency or board, that in any case
involves (A) a Borrowing Base Asset, (B) any Real Estate and could reasonably be
expected to have a Material Adverse Effect, or (C) the Agent’s liens or security
title on the Collateral pursuant to the Security Documents.
          (c) Notification of Claims Against Collateral. The Borrower will give
notice to the Agent in writing within five (5) Business Days of becoming aware
of any material setoff, claims, withholdings or other defenses to which any of
the Collateral, or the rights of the Agent or the Lenders with respect to the
Collateral, are subject.

55

--------------------------------------------------------------------------------

 

          (d) Notice of Litigation and Judgments. The Borrower will give notice
to the Agent in writing within five (5) Business Days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting the Borrower, any Guarantor or any of their respective
Subsidiaries or to which the Borrower, any Guarantor or any of their respective
Subsidiaries is or is to become a party involving an uninsured claim against the
Borrower, any Guarantor or any of their respective Subsidiaries that could
either cause a Default or could reasonably be expected to have a Material
Adverse Effect and stating the nature and status of such litigation or
proceedings. The Borrower will give notice to the Agent, in writing, in form and
detail reasonably satisfactory to the Agent and each of the Lenders, within ten
(10) days of any judgment not covered by insurance, whether final or otherwise,
against the Borrower or any of their respective Subsidiaries in an amount in
excess of $1,000,000.00.
          (e) ERISA. The Borrower will give notice to the Agent within five
(5) Business Days after the Borrower or any ERISA Affiliate (i) gives or is
required to give notice to the PBGC of any “reportable event” (as defined in
§4043 of ERISA) with respect to any Guaranteed Pension Plan, Multiemployer Plan
or Employee Benefit Plan, or knows that the plan administrator of any such plan
has given or is required to give notice of any such reportable event; (ii) gives
a copy of any notice of complete or partial withdrawal liability under Title IV
of ERISA; or (iii) receives any notice from the PBGC under Title IV or ERISA of
an intent to terminate or appoint a trustee to administer any such plan.
          (f) Notification of Lenders. Within five (5) Business Days after
receiving any notice under this §7.5, the Agent will forward a copy thereof to
each of the Lenders, together with copies of any certificates or other written
information that accompanied such notice.
     §7.6 Existence; Maintenance of Properties.
          (a) The Borrower and each Guarantor will and will cause each of their
respective Subsidiaries to preserve and keep in full force and effect their
legal existence in the jurisdiction of its incorporation or formation. The
Borrower and each Guarantor will preserve and keep in full force all of their
rights and franchises and those of their Subsidiaries, the preservation of which
is necessary to the conduct of their business. REIT shall at all times comply
with all requirements and applicable laws and regulations necessary to maintain
REIT Status and shall continue to receive REIT Status. The common stock of REIT
shall at all times be listed for trading and be traded on the American Stock
Exchange or another national exchange reasonably approved by Agent, unless
otherwise consented to by the Required Lenders.
          (b) The Borrower and each Guarantor (i) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or the business of its Subsidiaries to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted) and
supplied with all necessary equipment, and (ii) will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof
in all cases in which the failure so to do would have a material adverse effect
on the condition of any Real Estate or would cause a Material Adverse Effect.

56

--------------------------------------------------------------------------------

 

     §7.7 Insurance. The Borrower, the Guarantors and their respective
Subsidiaries (as applicable) will, at their expense, procure and maintain
insurance covering such Person and its properties and assets in such amounts and
against such risks and casualties as are customary for properties and assets of
similar character and location, due regard being given to the type of
improvements thereon, their construction, location, use and occupancy.
     §7.8 Taxes; Liens. The Borrower and the Guarantors will, and will cause
their respective Subsidiaries to, duly pay and discharge, or cause to be paid
and discharged, before the same shall become delinquent, all taxes, assessments
and other governmental charges imposed upon them or upon their properties, sales
and activities, or any part thereof, or upon the income or profits therefrom as
well as all claims for labor, materials or supplies that if unpaid might by law
become a lien or charge upon any of its property or other Liens affecting any of
the Collateral or other property of the Borrower, the Guarantors or their
respective Subsidiaries, provided that any such tax, assessment, charge or levy
or claim need not be paid if the validity or amount thereof shall currently be
contested in good faith by appropriate proceedings which shall suspend the
collection thereof with respect to such property, neither such property nor any
portion thereof or interest therein would be in any danger of sale, forfeiture
or loss by reason of such proceeding and the Borrower, such Guarantor or any
such Subsidiary shall have set aside on its books adequate reserves in
accordance with GAAP; and provided, further, that forthwith upon the
commencement of proceedings to foreclose any lien that may have attached as
security therefor, the Borrower, such Guarantor or any such Subsidiary either
(i) will provide a bond issued by a surety reasonably acceptable to the Agent
and sufficient to stay all such proceedings or (ii) if no such bond is provided,
will pay each such tax, assessment, charge or levy.
     §7.9 Inspection of Properties and Books. The Borrower and the Guarantors
will, and will cause their respective Subsidiaries to, permit the Agent and the
Lenders, at the Borrower’s expense and upon reasonable prior notice, to visit
and inspect any of the properties of the Borrower, each Guarantor or any of
their respective Subsidiaries (subject to the rights of tenants under their
Leases), to examine the books of account of the Borrower, any Guarantor and
their respective Subsidiaries (and to make copies thereof and extracts
therefrom) and to discuss the affairs, finances and accounts of the Borrower,
any Guarantor and their respective Subsidiaries with, and to be advised as to
the same by, their respective officers, partners or members, all at such
reasonable times and intervals as the Agent or any Lender may reasonably
request, provided that so long as no Default or Event of Default shall have
occurred and be continuing, the Borrower shall not be required to pay for such
visits and inspections more often than once in any twelve (12) month period, and
no such payment shall exceed $10,000.00 during any such period. The Lenders
shall use good faith efforts to coordinate such visits and inspections so as to
minimize the interference with and disruption to the normal business operations
of such Persons.
     §7.10 Compliance with Laws, Contracts, Licenses, and Permits. The Borrower
and the Guarantors will, and will cause each of their respective Subsidiaries
to, comply in all respects with (i) all applicable laws and regulations now or
hereafter in effect wherever its business is conducted, including all applicable
Environmental Laws, (ii) the provisions of its corporate charter, partnership
agreement, limited liability company agreement or declaration of trust, as the
case may be, and other charter documents and bylaws, (iii) all agreements and
instruments to which it is a party or by which it or any of its properties may
be bound, (iv) all applicable decrees, orders, and judgments, and (v) all
licenses and permits required by applicable laws and

57

--------------------------------------------------------------------------------

 

regulations for the conduct of its business or the ownership, use or operation
of its properties, except where a failure to so comply with any of clauses
(i) through (v) could not reasonably be expected to have a Material Adverse
Effect. If any authorization, consent, approval, permit or license from any
officer, agency or instrumentality of any government shall become necessary or
required in order that the Borrower, any Guarantor or their respective
Subsidiaries may fulfill any of its obligations hereunder, the Borrower, such
Guarantor or such Subsidiary will immediately take or cause to be taken all
steps necessary to obtain such authorization, consent, approval, permit or
license and furnish the Agent and the Lenders with evidence thereof. The
Borrower shall develop and implement such programs, policies and procedures as
are necessary to comply with the Patriot Act and shall promptly advise Agent in
writing in the event that the Borrower shall determine that any investors in the
Borrower are in violation of such act.
     §7.11 Further Assurances. The Borrower and each Guarantor will and will
cause each of their respective Subsidiaries to, cooperate with the Agent and the
Lenders and execute such further instruments and documents as the Lenders or the
Agent shall reasonably request to carry out to their satisfaction the
transactions contemplated by this Agreement and the other Loan Documents.
     §7.12 Business Operations. REIT, the Borrower and their respective
Subsidiaries shall operate their respective businesses in substantially the same
manner (including adherence to its hedging strategy) and in substantially the
same fields and lines of business as such business is now conducted and in
compliance with the terms and conditions of this Agreement and the Loan
Documents. Neither REIT nor the Borrower will, or will permit any Subsidiary to,
directly or indirectly, engage in any line of business other than the ownership,
operation and development of office properties located in Arizona, California or
Hawaii, or businesses incidental thereto.
     §7.13 Subordination of Advisory Fees and Management Fees. The Borrower
shall cause the advisory fees payable to the Advisor under the Advisory
Agreement and the management fees payable under the Management Agreements and
any and all other similar agreements, whether written or oral, to be
subordinated to the prior payment in full of the Obligations on terms and
conditions satisfactory to the Agent. Any fees payable by Borrower or any of its
Subsidiaries in connection with any Management Agreement and any and all other
similar agreements, whether written or oral, shall be subordinated to the prior
payment in full of the Obligations and to the rights of the Agent and the
Lenders under the Loan Documents on terms and conditions satisfactory to the
Agent. The Borrower shall not enter into any Management Agreement with a third
party manager for any Real Estate without the prior written consent of the Agent
(which shall not be unreasonably withheld), and after such approval, no such
Management Agreement shall be modified in any material respect or terminated
without Agent’s prior written approval, such approval not to be unreasonably
withheld. Agent may condition any approval of a new manager upon the execution
and delivery to Agent of collateral assignment of such Management Agreement to
Agent and a subordination of the manager’s rights thereunder to the prior
payment in full of the Obligations and to the rights of the Agent and the
Lenders under the Loan Documents. The Advisory Agreement and Management
Agreements described on Schedule 7.13 hereto are approved by Agent.
     §7.14 Ownership of Real Estate. Without the prior written consent of Agent,
all Real Estate and all interests (whether direct or indirect) of REIT or the
Borrower in any such Real

58

--------------------------------------------------------------------------------

 

Estate now owned or leased or acquired or leased after the date hereof shall be
owned or leased directly by the Borrower or a Wholly Owned Subsidiary of the
Borrower; provided, however that the Borrower shall be permitted to own or lease
interests in Real Estate through non-Wholly Owned Subsidiaries and
Unconsolidated Affiliates as permitted by §8.3.
     §7.15 Distributions of Income to Borrower. The Borrower shall cause all of
its Subsidiaries (subject to the terms of any loan documents under which such
Subsidiary is the borrower) to promptly distribute to the Borrower (but not less
frequently than once each calendar quarter, unless otherwise approved by the
Agent), whether in the form of dividends, distributions or otherwise, all
profits, proceeds or other income relating to or arising from its Subsidiaries’
use, operation, financing, refinancing, sale or other disposition of their
respective assets and properties after (a) the payment by each Subsidiary of its
debt service, operating expenses, capital improvements and leasing commissions
for such quarter and (b) the establishment of reasonable reserves for the
payment of operating expenses not paid on at least a quarterly basis and capital
improvements and tenant improvements to be made to such Subsidiary’s assets and
properties approved by such Subsidiary in the course of its business consistent
with its past practices.
     §7.16 Plan Assets. The Borrower, the Guarantors and each of their
respective Subsidiaries will do, or cause to be done, all things necessary to
ensure that none of its Real Estate will be deemed to be Plan Assets at any
time.
     §7.17 Borrowing Base Assets.
          (a) Generally. The Borrowing Base Assets shall at all times satisfy,
and shall be included in the calculation of the Borrowing Base so as to ensure
the satisfaction of, at all times, all of the following conditions:
               (i) each of the Borrowing Base Assets included in the calculation
of the Borrowing Base shall be owned one hundred percent (100%) by the Borrower
or a Subsidiary Guarantor which is a Wholly Owned Subsidiary of Borrower;
               (ii) each Borrowing Base Asset shall be an Eligible Asset which
has been approved by the Required Lenders following receipt and approval of all
due diligence materials reasonably requested by Agent in connection with such
Eligible Asset;
               (iii) each Borrowing Base Asset shall be subject to a valid first
priority lien to be held by Lender as required by § 5.3;
               (iv) each Borrowing Base Asset shall be free and clear of all
Liens other than the valid first priority lien of Lender; and
               (v) unless the written consent of the applicable contracting
party is obtained, each Borrowing Base Asset shall not be subject to a
contractual obligation binding on the Borrower or the Subsidiary Guarantor that
owns such Borrowing Base Asset which contractual obligation contains a covenant
prohibiting the sale, transfer, pledge, assignment, hypothecation or other
encumbrance of such Borrowing Base Asset.

59

--------------------------------------------------------------------------------

 

          (b) Additions and Removals from Borrowing Base. Subject to the
requirements of §§5.3 and 7.17(a), the Borrower may elect to add or remove one
or more Borrowing Base Assets from the calculation of the Borrowing Base;
provided that (x) in the event of the addition of any Borrowing Base Assets to
the calculation of the Borrowing Base, the Borrower or the relevant Subsidiary
Guarantor, as applicable, shall prior to such addition to the Borrowing Base
deliver to the Agent such documents as Lender shall reasonably require
including, without limitation, a determination of the Borrowing Base Asset
Value, a Borrowing Base Certificate, an executed Acknowledgement with respect to
such Borrowing Base Asset, if applicable, such Security Documents as are
required under §5.3 to the extent not previously executed and delivered and all
due diligence items reasonably required by Agent in connection with such
Borrowing Base Asset (including but not limited to current title insurance,
surveys, environmental reports and leases) and (y) the Borrower may not elect to
remove a Borrowing Base Asset from the calculation of the Borrowing Base if at
the time of such removal a Default or Event of Default shall have occurred and
be continuing or would result therefrom. Notwithstanding the foregoing, in the
event any Borrowing Base Asset fails to satisfy the requirements of the
definition thereof, the Borrower shall immediately remove such Borrowing Base
Asset from the calculation of the Borrowing Base. In the event of any such
addition or removal, the Borrower shall deliver to the Agent, simultaneously
therewith, a revised Borrowing Base Certificate giving effect to such addition
or removal and, to the extent required by §3.2, the Borrower shall make a
prepayment of the Loans. Schedule 7.17 hereto shall be deemed amended to reflect
any addition or removal of any Borrowing Base Asset in accordance with this
§7.17.
     §7.18 Senior Loan Document Defaults. Upon the occurrence of any default or
event of default under any loan evidenced by Senior Loan Documents, the Agent
shall have the right, but not the obligation, to pay any sums or to take any
action which the Agent deems necessary or advisable to cure any default or
alleged default under the Senior Loan Documents (whether or not the Borrower or
any of its Subsidiaries is undertaking efforts to cure such default or the same
is an event of default under the Senior Loan Documents or a Default or Event of
Default hereunder), and such payment or such action is hereby authorized by the
Borrower, and any sum so paid and any expense incurred by the Agent in taking
any such action shall be evidenced by this Agreement and secured by the Security
Documents and shall be immediately due and payable by Borrower to the Agent with
interest at the rate for overdue amounts set forth in §4.11 until paid. The
Agent shall be authorized to take such actions upon the assertion by the holder
of the Senior Loan Documents of the existence of such “default” or “event of
default” without any duty to inquire or determine whether such “default” or
“event of default” exists. The consent or waiver by the holder of the Senior
Loan Documents of any “event of default” under the Senior Loan Documents shall
not annul the occurrence of an Event of Default hereunder unless otherwise
approved by the Required Lenders, such approval not to be unreasonably withheld,
conditioned or delayed. The Borrower shall cause its Subsidiaries to permit the
Agent to enter upon the property that is the subject of the Borrowing Base Asset
for the purpose of curing any default or alleged default under the Senior Loan
Documents or hereunder.

60

--------------------------------------------------------------------------------

 

§8. NEGATIVE COVENANTS.
     The Borrower covenants and agrees that, so long as any Loan, Note or Letter
of Credit is outstanding or any of the Lenders has any obligation to make any
Loans or issue any Letter of Credit:
     §8.1 Restrictions on Indebtedness. The Borrower will not, and will not
permit any Guarantor or their respective Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
          (a) Indebtedness to the Lenders arising under any of the Loan
Documents;
          (b) current liabilities of the Borrower, the Guarantor or their
respective Subsidiaries incurred in the ordinary course of business but not
incurred through (i) the borrowing of money, or (ii) the obtaining of credit
except for credit on an open account basis customarily extended and in fact
extended in connection with normal purchases of goods and services;
          (c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment therefor shall not at the time be required to be made in accordance
with the provisions of §7.8;
          (d) Indebtedness in respect of judgments only to the extent, for the
period and for an amount not resulting in a Default;
          (e) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business; and
          (f) Indebtedness pursuant to the loans and agreements listed on
Schedule 8.1(f) and any refinancings, refundings, renewals or extensions thereof
(without any increase in the principal amount thereof or any shortening of the
maturity of any principal amount thereof and so long as such continues to remain
Non-Recourse Indebtedness); and
          (g) Excluded Affiliate Debt; and
          (h) with respect to Real Estate acquired from and after the date
hereof, Non-Recourse Indebtedness of the Subsidiaries of Borrower secured by
Real Estate or Equity Interests under Senior Loan Documents and any
refinancings, refundings, renewals or extensions thereof (without any increase
in the principal amount thereof or any shortening of the maturity of any
principal amount thereof).
     §8.2 Restrictions on Liens, Etc. The Borrower will not, and will not permit
any Guarantor or their respective Subsidiaries to (a) create or incur or suffer
to be created or incurred or to exist any lien, security title, encumbrance,
mortgage, pledge, negative pledge, charge, restriction or other security
interest of any kind upon any of their respective property or assets of any
character whether now owned or hereafter acquired, or upon the income or profits
therefrom; (b) transfer any of their property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in

61

--------------------------------------------------------------------------------

 

priority to payment of its general creditors; (c) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement;
(d) suffer to exist for a period of more than thirty (30) days after the same
shall have been incurred any Indebtedness or claim or demand against any of them
that if unpaid could by law or upon bankruptcy or insolvency, or otherwise, be
given any priority whatsoever over any of their general creditors; (e) sell,
assign, pledge or otherwise transfer any accounts, contract rights, general
intangibles, chattel paper or instruments, with or without recourse; or
(f) incur or maintain any obligation to any holder of Indebtedness of any of
such Persons which prohibits the creation or maintenance of any lien securing
the Obligations (collectively, “Liens”); provided that notwithstanding anything
to the contrary contained herein, the Borrower, any Guarantor or any such
Subsidiary may create or incur or suffer to be created or incurred or to exist
the following (collectively, “Permitted Liens”):
               (i) (A) Liens on properties to secure taxes, assessments and
other governmental charges (excluding any Lien imposed pursuant to any of the
provisions of ERISA or pursuant to any Environmental Laws) or claims for labor,
material or supplies incurred in the ordinary course of business in respect of
obligations not then delinquent or not otherwise required to be paid or
discharged under the terms of this Agreement or any of the other Loan Documents
and (B) Liens on assets other than (I) the Collateral and (II) any direct or
indirect interest of the Borrower and any Subsidiary of the Borrower in any
Guarantor, any Company or any Subsidiary Company in respect of judgments
permitted by §8.1(d);
               (ii) deposits or pledges made in connection with, or to secure
payment of, workers’ compensation, unemployment insurance, old age pensions or
other social security obligations;
               (iii) encumbrances on properties consisting of ground leases,
easements, rights of way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto, landlord’s or
lessor’s liens under leases to which the Borrower or any such Subsidiary is a
party, purchase money security interests and other liens or encumbrances, which
do not individually or in the aggregate have a Material Adverse Effect;
               (iv) liens granted by Borrower and its respective Subsidiaries on
property or assets (other than Borrowing Base Assets) to secure Indebtedness
permitted pursuant to §8.1(f) and §8.1(h); and
               (v) Liens in favor of the Agent and the Lenders under the Loan
Documents to secure the Obligations.
     §8.3 Restrictions on Investments. Neither the Borrower nor any Guarantor
will, nor will it permit any of its Subsidiaries to, make or permit to exist or
to remain outstanding any Investment except Investments in:
          (a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase by Borrower
or its Subsidiary;
          (b) marketable direct obligations of any of the following: Federal
Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal Home
Loan Banks, Federal

62

--------------------------------------------------------------------------------

 

National Mortgage Association, Government National Mortgage Association, Bank
for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Banks,
Export-Import Bank of the United States, Federal Land Banks, or any other agency
or instrumentality of the United States of America;
          (c) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks having total assets in excess of
$100,000,000.00; and demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total assets of less
than $100,000,000.00, provided that the aggregate amount at any time so invested
with any one such bank shall not exceed $200,000.00;
          (d) securities commonly known as “commercial paper” issued by a
corporation organized and existing under the laws of the United States of
America or any State which at the time of purchase are rated by Moody’s or S&P
at not less than “P 1” if then rated by Moody’s and not less than “A 1”, if then
rated by S&P;
          (e) mortgage-backed securities guaranteed by the Government National
Mortgage Association, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation and other mortgage-backed bonds which at the time
of purchase are rated by Moody’s or S&P at not less than “Aa” if then rated by
Moody’s and not less than “AA” if then rated by S&P;
          (f) repurchase agreements having a term not greater than ninety
(90) days and fully secured by securities described in the foregoing subsection
(a), (b) or (e) with banks described in the foregoing subsection (c) or with
financial institutions or other corporations having total assets in excess of
$500,000,000.00;
          (g) shares of so-called “money market funds” registered with the SEC
under the Investment Company Act of 1940 which maintain a level per-share value,
invest principally in investments described in the foregoing subsections
(a) through (f) and have total assets in excess of $50,000,000.00;
          (h) the acquisition of fee interests or long-term ground lease
interests by the Borrower or its Subsidiaries in Real Estate which is utilized
for income-producing office properties located in Arizona, California or Hawaii
and businesses and investments incidental thereto;
          (i) Investments in Wholly Owned Subsidiaries of the Borrower; and
          (j) Investments in non-wholly owned Subsidiaries and Unconsolidated
Affiliates, provided that the aggregate Investment therein shall not exceed
fifteen percent (15%) of Gross Asset Value.
     §8.4 Merger, Consolidation. The Borrower will not, nor will it permit the
Guarantors or any of their respective Subsidiaries to, become a party to any
dissolution, liquidation, disposition of all or substantially all of its assets
or business, merger, reorganization, consolidation or other business combination
or agree to effect any asset acquisition, stock acquisition or other acquisition
individually or in a series of transactions which may have a

63

--------------------------------------------------------------------------------

 

similar effect as any of the foregoing, in each case without the prior written
consent of the Required Lenders. Notwithstanding the foregoing, so long as no
Default or Event of Default has occurred and is continuing immediately before
and after giving effect thereto, the following shall be permitted: (i) the
merger or consolidation of one or more of the Subsidiaries of the Borrower
(other than any Subsidiary that is a Guarantor) with and into the Borrower (it
being understood and agreed that in any such event the Borrower will be the
surviving Person) and (ii) the merger or consolidation of two or more
Subsidiaries of the Borrower; provided that no such merger or consolidation
shall involve any Subsidiary that is a Guarantor.
     §8.5 Sale and Leaseback. The Borrower will not, and will not permit its
Subsidiaries, to enter into any arrangement, directly or indirectly, whereby the
Borrower or any such Subsidiary shall sell or transfer any Real Estate owned by
it in order that then or thereafter the Borrower or any such Subsidiary shall
lease back such Real Estate without the prior written consent of Agent, such
consent not to be unreasonably withheld.
     §8.6 Compliance with Environmental Laws. None of the Borrower nor any
Guarantor will, nor will any of them permit any of their respective Subsidiaries
or any other Person to, do any of the following: (a) use any of the Real Estate
or any portion thereof as a facility for the handling, processing, storage or
disposal of Hazardous Substances, except for quantities of Hazardous Substances
used in the ordinary course of operating office properties and non-office
properties as permitted under this Agreement and in material compliance with all
applicable Environmental Laws, (b) cause or permit to be located on any of the
Real Estate any underground tank or other underground storage receptacle for
Hazardous Substances except in full compliance with applicable Environmental
Laws, (c) generate any Hazardous Substances on any of the Real Estate except in
full compliance with applicable Environmental Laws, (d) conduct any activity at
any Real Estate or use any Real Estate in any manner that could reasonably be
contemplated to cause a Release of Hazardous Substances on, upon or into the
Real Estate or any surrounding properties or any threatened Release of Hazardous
Substances which might give rise to liability under CERCLA or any other
Environmental Law, or (e) directly or indirectly transport or arrange for the
transport of any Hazardous Substances (except in material compliance with all
applicable Environmental Laws), except with respect to any Real Estate not
related to a Borrowing Base Asset where any such use, generation, conduct or
other activity has not had and could not reasonably be expected to have a
Material Adverse Effect.
     The Borrower and the Guarantors shall, and shall cause their respective
Subsidiaries to:
               (i) in the event of any change in Environmental Laws governing
the assessment, release or removal of Hazardous Substances, take all reasonable
action (including, without limitation, the conducting of engineering tests at
the sole expense of the Borrower) to confirm that no Hazardous Substances are or
ever were Released or disposed of on any Real Estate in violation of applicable
Environmental Laws; and
               (ii) if any Release or disposal of Hazardous Substances which any
Person may be legally obligated to contain, correct or otherwise remediate or
which may otherwise expose it to liability shall occur or shall have occurred on
any Real Estate (including without limitation any such Release or disposal
occurring prior to the acquisition or leasing of

64

--------------------------------------------------------------------------------

 

such Real Estate by the Borrower, any such Guarantor or any such Subsidiary),
the Borrower shall, after obtaining knowledge thereof, cause the prompt
containment and removal of such Hazardous Substances and remediation of the Real
Estate in full compliance with all applicable Environmental Laws; provided, that
the Borrower, the Guarantors and their respective Subsidiaries shall be deemed
to be in compliance with Environmental Laws for the purpose of this clause
(ii) so long as it or a responsible third party with sufficient financial
resources is taking reasonable action to remediate or manage any event of
noncompliance to the satisfaction of the Agent and no action shall have been
commenced by any enforcement agency. The Agent may engage its own Environmental
Engineer to review the environmental assessments and the compliance with the
covenants contained herein.
               (iii) At any time after an Event of Default shall have occurred
hereunder the Agent may at its election (and will at the request of the Required
Lenders) obtain such environmental assessments of any or all of the Real Estate
prepared by an Environmental Engineer as may be necessary or advisable for the
purpose of evaluating or confirming (i) whether any Hazardous Substances are
present in the soil or water at or adjacent to any such Real Estate and
(ii) whether the use and operation of any such Real Estate complies with all
Environmental Laws to the extent required by the Loan Documents. Additionally,
at any time (i) that the Agent or the Required Lenders shall have reasonable and
objective grounds to believe that a Release or threatened Release of Hazardous
Substances which any Person may be legally obligated to contain, correct or
otherwise remediate or which otherwise may expose such Person to liability may
have occurred, relating to any Real Estate, or (ii) that any of the Real Estate
is not in compliance with Environmental Laws to the extent required by the Loan
Documents, or (iii) that the Agent or the Required Lenders shall believe it is
necessary or desirable in connection solely with the Clifford Center Real Estate
(provided however that the rights of Agent and Required Lenders under this
clause (iii) may only be exercised one time during the term of the Loan), the
Borrower shall promptly upon the request of Agent obtain and deliver to Agent
such environmental assessments of such Real Estate prepared by an Environmental
Engineer as may be necessary or advisable for the purpose of evaluating or
confirming (i) whether any Hazardous Substances are present in the soil or water
at or adjacent to such Real Estate and (ii) whether the use and operation of
such Real Estate comply with all Environmental Laws to the extent required by
the Loan Documents. Environmental assessments may include detailed visual
inspections of such Real Estate including, without limitation, any and all
storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil samples, as well as such other investigations or analyses as are
reasonably necessary or appropriate for a complete determination of the
compliance of such Real Estate and the use and operation thereof with all
applicable Environmental Laws. All environmental assessments contemplated by
this §8.6 shall be at the sole cost and expense of the Borrower.
     §8.7 Distributions.
          (a) The Borrower shall not pay any Distribution to the partners,
members or other owners of the Borrower, and REIT shall not pay any Distribution
to its partners, members or other owners, if such Distribution is in excess of
the amount which when added to the amount of all other Distributions paid in the
same calendar quarter and the shorter of (A) the preceding calendar quarters
from the date of this Agreement or (B) the preceding three (3) calendar
quarters, would exceed ninety-five percent (95%) of such Person’s Funds from
Operations for

65

--------------------------------------------------------------------------------

 

such period; provided that the limitations contained in this §8.7(b) shall not
preclude the Borrower from making Distributions in an amount equal to the
minimum distributions required under the Code to maintain the REIT Status of
REIT, as evidenced by a certification of the principal financial or accounting
officer of REIT containing calculations in detail reasonably satisfactory in
form and substance to the Agent.
          (b) In the event that an Event of Default shall have occurred and be
continuing, the Borrower shall make no Distributions, and REIT shall not pay any
Distribution to its partners, members or other owners, other than Distributions
in an amount equal to the minimum distributions required under the Code to
maintain the REIT Status of REIT, as evidenced by a certification of the
principal financial or accounting officer of REIT containing calculations in
detail reasonably satisfactory in form and substance to the Agent.
          (c) Notwithstanding the foregoing, at any time when an Event of
Default under §12.1(a), (b), (g), (h) or (i) shall have occurred or the maturity
of the Obligations has been accelerated, neither the Borrower nor REIT shall
make any Distributions whatsoever, directly or indirectly.
     §8.8 Asset Sales. The Borrower will not, and will not permit the Guarantors
or their respective Subsidiaries to, sell, transfer or otherwise dispose of any
material asset other than pursuant to a bona fide arm’s length transaction.
Neither the Borrower, any Guarantor nor any Subsidiary thereof shall sell,
transfer or otherwise dispose of any Real Estate in one transaction or a series
of transactions during any four (4) consecutive fiscal quarters in excess of an
amount equal to twenty percent (20%) of Gross Asset Value, except as the result
of a condemnation or casualty and except for the granting of Permitted Liens, as
applicable, without the prior written consent of Agent and the Required Lenders.
     §8.9 Restriction on Prepayment of Indebtedness. The Borrower and the
Guarantors will not, and will not permit their respective Subsidiaries to,
(a) prepay, redeem, defease, purchase or otherwise retire the principal amount,
in whole or in part, of any Indebtedness other than the Obligations after the
occurrence and during the continuance of any Event of Default; provided, that
the foregoing shall not prohibit (x) the prepayment of Indebtedness which is
financed solely from the proceeds of a new loan which would otherwise be
permitted by the terms of §8.1; and (y) the prepayment, redemption, defeasance
or other retirement of the principal of Indebtedness secured by Real Estate
constituting a Borrowing Base Asset or Equity Interests therein which is
satisfied solely from the proceeds of a sale of the Real Estate or Equity
Interest therein securing such Indebtedness; and (b) modify any document
evidencing any Indebtedness (other than the Obligations) to accelerate the
maturity date of such Indebtedness after the occurrence and during the
continuance of an Event of Default.
     §8.10 Derivatives Contracts. Neither the Borrower, the Guarantors nor any
of their respective Subsidiaries shall contract, create, incur, assume or suffer
to exist any Derivatives Contracts except for interest rate swap, collar, cap or
similar agreements providing interest rate protection and currency swaps and
currency options made in the ordinary course of business and permitted pursuant
to §8.1.

66

--------------------------------------------------------------------------------

 

     §8.11 Transactions with Affiliates. The Borrower shall not, and shall not
permit any Guarantor or Subsidiary of any of them to, permit to exist or enter
into, any transaction (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate (but not including
any Subsidiary of REIT, the Borrower or any other Guarantor), except (i) 
transactions set forth on Schedule 6.15 attached hereto, (ii) transactions
pursuant to the reasonable requirements of the business of such Person and upon
fair and reasonable terms which are no less favorable to such Person than would
be obtained in a comparable arm’s length transaction with a Person that is not
an Affiliate and (iii) Excluded Affiliate Debt entered into from and after the
date hereof which is based on fair and reasonable terms which are no less
favorable to such Person than would be obtained in a comparable arm’s length
transaction with a Person that is not an Affiliate.
     §8.12 Equity Pledges. REIT will not create or incur or suffer to be created
or incurred any Lien on any of its direct or indirect legal, equitable or
beneficial interest in the Borrower, including, without limitation, any
Distributions or rights to Distributions on account thereof.
     §8.13 Management Fees. The Borrower and the Guarantors shall not, and shall
not permit any of their respective Subsidiaries to, pay any management fees or
other payments under any Management Agreement to any manager that is an
Affiliate of the Borrower, such Guarantor or such Subsidiary in the event that a
Default or Event of Default shall have occurred and be continuing.
     §8.14 Material Agreements and Loan Documents. Borrower and the Guarantors
shall not enter into, consent to or permit the termination, modification or
amendment of any economic or other material terms of any Senior Loan Documents,
the Advisory Agreement, any ground leases relating to any Borrowing Base Asset
or any other material agreements to which Borrower or any Guarantor is a party
without the prior written consent of Agent.
     §8.15 Excluded Affiliate Debt. Without the prior written consent of the
Required Lenders, which consent may be withheld by the Required Lenders in their
sole and absolute discretion, the Borrower shall not (i) modify or amend the
Excluded Affiliate Debt, (ii) prepay, amortize, purchase, retire, redeem or
otherwise acquire the Excluded Affiliate Debt, or (iii) make any payments on the
Excluded Affiliate Debt. Provided that no Default or Event of Default exists
under §8.7 or this §8.15 and no default, material misrepresentation or breach of
warranty has occurred under the Subordination and Standstill Agreement, payments
or accruals of interest on Excluded Affiliate Debt shall not be included in the
calculation of Consolidated Interest Expense or Consolidated Fixed Charges.
     §8.16 POPTLP, LLC. REIT will not allow POPTLP, LLC to acquire or own any
assets or to incur any indebtedness or obligations.
§9. FINANCIAL COVENANTS.
     The Borrower covenants and agrees that, so long as any Loan, Note or Letter
of Credit is outstanding or any Lender has any obligation to make any Loans or
issue any Letter of Credit:

67

--------------------------------------------------------------------------------

 

     §9.1 Consolidated Total Indebtedness to Gross Asset Value. The Borrower
will not at any time permit Consolidated Total Indebtedness to exceed
seventy-five percent (75%) of Gross Asset Value.
     §9.2 Adjusted Consolidated EBITDA to Consolidated Fixed Charges. The
Borrower will not at any time permit the ratio of Adjusted Consolidated EBITDA
determined for the most recently ended calendar quarter to Consolidated Fixed
Charges for such period, to be less than (i) 1.25 to 1.00 on any date of
determination that is prior to June 30, 2009 and (ii) 1.35 to 1.00 on any date
of determination that is on or after June 30, 2009.
     §9.3 Adjusted Consolidated EBITDA to Adjusted Consolidated Fixed Charges.
The Borrower will not at any time permit the ratio of Adjusted Consolidated
EBITDA determined for the most recently ended calendar quarter to Adjusted
Consolidated Fixed Charges for such period to be less than 1.15 to 1.00.
     §9.4 Minimum Consolidated Tangible Net Worth. The Borrower will not at any
time permit Consolidated Tangible Net Worth to be less than the sum of
(i) $150,000,000.00, plus (ii) eighty percent (80%) of the sum of (A) any
additional Net Offering Proceeds after the date hereof, plus (B) the value of
interests in the Borrower or interests in REIT issued upon the contribution of
assets to the Borrower or its Subsidiaries.
     §9.5 Available Amount. The Borrower shall not at any time permit the
Outstanding Loans and Letter of Credit Liabilities to be greater than the
Borrowing Base.
§10. CLOSING CONDITIONS.
     The obligation of the Lenders to make the Loans or issue Letters of Credit
shall be subject to the satisfaction of the following conditions precedent:
     §10.1 Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto and shall be in full
force and effect. The Agent shall have received a fully executed counterpart of
each such document.
     §10.2 Certified Copies of Organizational Documents. The Agent shall have
received from the Borrower and each Guarantor a copy, certified as of a recent
date by the appropriate officer of each State in which such Person is organized
and a duly authorized officer, partner or member of such Person, as applicable,
to be true and complete, of the partnership agreement, corporate charter or
operating agreement and/or other organizational agreements of the Borrower and
each such Guarantor, as applicable, and its qualification to do business, as
applicable, as in effect on such date of certification.
     §10.3 Resolutions. All action on the part of the Borrower and each
Guarantor, as applicable, necessary for the valid execution, delivery and
performance by such Person of this Agreement and the other Loan Documents to
which such Person is or is to become a party shall have been duly and
effectively taken, and evidence thereof reasonably satisfactory to the Agent
shall have been provided to the Agent.

68

--------------------------------------------------------------------------------

 

     §10.4 Incumbency Certificate; Authorized Signers. The Agent shall have
received from the Borrower and each Guarantor an incumbency certificate, dated
as of the Closing Date, signed by a duly authorized officer of such Person and
giving the name and bearing a specimen signature of each individual who shall be
authorized to sign, in the name and on behalf of such Person, each of the Loan
Documents to which such Person is or is to become a party. The Agent shall have
also received from the Borrower a certificate, dated as of the Closing Date,
signed by a duly authorized representative of the Borrower and giving the name
and specimen signature of each Authorized Officer who shall be authorized to
make Loan Requests, Letter of Credit Requests and Conversion/Continuation
Requests and to give notices and to take other action on behalf of the Borrower
under the Loan Documents.
     §10.5 Opinion of Counsel. The Agent shall have received an opinion
addressed to the Lenders and the Agent and dated as of the Closing Date from
counsel to the Borrower and each Guarantor in form and substance reasonably
satisfactory to the Agent.
     §10.6 Payment of Fees. The Borrower shall have paid to the Agent the fees
payable pursuant to §4.2.
     §10.7 Performance; No Default. The Borrower and each Guarantor shall have
performed and complied with all terms and conditions herein required to be
performed or complied with by it on or prior to the Closing Date, and on the
Closing Date there shall exist no Default or Event of Default.
     §10.8 Representations and Warranties. The representations and warranties
made by the Borrower and each Guarantor in the Loan Documents or otherwise made
by or on behalf of the Borrower, the Guarantors and their respective
Subsidiaries in connection therewith or after the date thereof shall have been
true and correct in all material respects when made and shall also be true and
correct in all material respects on the Closing Date.
     §10.9 Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory to the Agent and the Agent’s counsel in form and
substance, and the Agent shall have received all information and such
counterpart originals or certified copies of such documents and such other
certificates, opinions, assurances, consents, approvals or documents as the
Agent and the Agent’s counsel may reasonably require.
     §10.10 Compliance Certificate and Borrowing Base Certificate. The Agent
shall have received a Compliance Certificate and Borrowing Base Certificate
dated as of the date of the Closing Date demonstrating compliance with each of
the covenants calculated therein as of the most recent calendar quarter for
which REIT has provided financial statements under §6.4 adjusted in the best
good faith estimate of REIT as of the Closing Date.
     §10.11 Consents. The Agent shall have received evidence reasonably
satisfactory to the Agent that all necessary stockholder, partner, member or
other consents required in connection with the consummation of the transactions
contemplated by this Agreement and the other Loan Documents have been obtained.

69

--------------------------------------------------------------------------------

 

     §10.12 Contribution Agreement. The Agent shall have received an executed
counterpart of the Contribution Agreement.
     §10.13 Other. The Agent shall have reviewed such other documents,
instruments, certificates, opinions, assurances, consents and approvals as the
Agent or the Agent’s Special Counsel may reasonably have requested.
§11. CONDITIONS TO ALL BORROWINGS.
     The obligations of the Lenders to make any Loan or issue any Letter of
Credit, whether on or after the Closing Date, shall also be subject to the
satisfaction of the following conditions precedent:
     §11.1 Prior Conditions Satisfied. All conditions set forth in §10 shall
continue to be satisfied as of the date upon which any Loan is to be made or any
Letter of Credit is to be issued.
     §11.2 Representations True; No Default. Each of the representations and
warranties made by or on behalf of the Borrower, the Guarantors or any of their
respective Subsidiaries contained in this Agreement, the other Loan Documents or
in any document or instrument delivered pursuant to or in connection with this
Agreement shall be true in all material respects both as of the date as of which
they were made and shall also be true in all material respects as of the time of
the making of such Loan or the issuance of such Letter of Credit, with the same
effect as if made at and as of that time, except to the extent of changes
resulting from transactions permitted by the Loan Documents (it being understood
and agreed that any representation or warranty which by its terms is made as of
a specified date shall be required to be true and correct only as of such
specified date), and no Default or Event of Default shall have occurred and be
continuing.
     §11.3 Borrowing Documents. The Agent shall have received a fully completed
Loan Request for such Loan and the other documents and information, or a fully
completed Letter of Credit Request required by §2.8 in the form of Exhibit D
hereto fully completed, as applicable.
§12. EVENTS OF DEFAULT; ACCELERATION; ETC.
     §12.1 Events of Default and Acceleration. If any of the following events
(“Events of Default” or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, “Defaults”) shall occur:
          (a) the Borrower shall fail to pay any principal of the Loans when the
same shall become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;
          (b) the Borrower shall fail to pay any interest on the Loans, any
reimbursement obligations with respect to the Letters of Credit or any fees or
other sums due hereunder or under any of the other Loan Documents when the same
shall become due and payable, whether at the stated date of maturity or any
accelerated date of maturity or at any other date fixed for payment;

70

--------------------------------------------------------------------------------

 

          (c) the Borrower, the Guarantors or any of their respective
Subsidiaries shall fail to perform any other term, covenant or agreement
contained in §9;
          (d) the Borrower, the Guarantors, the Carve-Out Guarantors or any of
their respective Subsidiaries shall fail to perform any other term, covenant or
agreement contained herein or in any of the other Loan Documents which they are
required to perform (other than those specified in the other subclauses of this
§12 or in the other Loan Documents);
          (e) any representation or warranty made by or on behalf of the
Borrower, the Carve-Out Guarantors, the Guarantors or any of their respective
Subsidiaries in this Agreement or any other Loan Document, or any report,
certificate, financial statement, request for a Loan, Letter of Credit Request,
or in any other document or instrument delivered pursuant to or in connection
with this Agreement, any advance of a Loan, the issuance of any Letter of Credit
or any of the other Loan Documents shall prove to have been false in any
material respect upon the date when made or deemed to have been made or
repeated;
          (f) the Borrower, any Guarantor or any of their Subsidiaries shall
fail to pay when due (including, without limitation, at maturity), or within any
applicable period of grace, any principal, interest or other amount on account
any obligation for borrowed money or credit received or other Indebtedness, or
shall fail to observe or perform any term, covenant or agreement contained in
any agreement by which it is bound, evidencing or securing any obligation for
borrowed money or credit received or other Indebtedness for such period of time
as would permit (assuming the giving of appropriate notice if required) the
holder or holders thereof or of any obligations issued thereunder to accelerate
the maturity thereof; provided that the events described in §12.1(f) shall not
constitute an Event of Default unless such failure to perform, together with
other failures to perform as described in §12.1(f), involve singly or in the
aggregate obligations for Indebtedness totaling in excess of $5,000,000.00;
          (g) the Borrower, any Carve-Out Guarantor, any Guarantor or any of
their respective Subsidiaries, (i) shall make an assignment for the benefit of
creditors, or admit in writing its general inability to pay or generally fail to
pay its debts as they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator or receiver for it or
any substantial part of its assets, (ii) shall commence any case or other
proceeding relating to it under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or (iii) shall take any action to
authorize or in furtherance of any of the foregoing;
          (h) a petition or application shall be filed for the appointment of a
trustee or other custodian, liquidator or receiver of the Borrower, any
Carve-Out Guarantor, any Guarantor or any of their respective Subsidiaries or
any substantial part of the assets of any thereof, or a case or other proceeding
shall be commenced against any such Person under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, and any such Person
shall indicate its approval thereof, consent thereto or acquiescence therein or
such petition, application, case or proceeding shall not have been dismissed
within sixty (60) days following the filing or commencement thereof;

71

--------------------------------------------------------------------------------

 

          (i) a decree or order is entered appointing a trustee, custodian,
liquidator or receiver for the Borrower, any Carve-Out Guarantor, any Guarantor
or any of their respective Subsidiaries or adjudicating any such Person,
bankrupt or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of any such
Person in an involuntary case under federal bankruptcy laws as now or hereafter
constituted;
          (j) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than sixty (60) days, whether or not consecutive, one or more
uninsured or unbonded final judgments against (x) the Borrower, any Guarantor or
any of their Subsidiaries that, either individually or in the aggregate, exceed
$5,000,000.00;
          (k) any of the Loan Documents or the Contribution Agreement shall be
canceled, terminated, revoked or rescinded otherwise than in accordance with the
terms thereof or the express prior written agreement, consent or approval of the
Lenders, or any action at law, suit in equity or other legal proceeding to
cancel, revoke or rescind any of the Loan Documents or the Contribution
Agreement shall be commenced by or on behalf of the Borrower or any Guarantor,
or any court or any other governmental or regulatory authority or agency of
competent jurisdiction shall make a determination, or issue a judgment, order,
decree or ruling, to the effect that any one or more of the Loan Documents or
the Contribution Agreement is illegal, invalid or unenforceable in accordance
with the terms thereof;
          (l) any dissolution, termination, partial or complete liquidation,
merger or consolidation of the Borrower, any Guarantor or any of their
respective Subsidiaries shall occur or any sale, transfer or other disposition
of the assets of the Borrower, any Carve-Out Guarantor, any Guarantor or any of
their respective Subsidiaries shall occur other than as permitted under the
terms of this Agreement or the other Loan Documents;
          (m) with respect to any Guaranteed Pension Plan, an ERISA Reportable
Event shall have occurred and the Required Lenders shall have determined in
their reasonable discretion that such event reasonably could be expected to
result in liability of the Borrower, the Guarantors or any of their respective
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount
exceeding $5,000,000.00 and (x) such event in the circumstances occurring
reasonably could constitute grounds for the termination of such Guaranteed
Pension Plan by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such Guaranteed Pension Plan; or (y) a
trustee shall have been appointed by the United States District Court to
administer such Plan; or (z) the PBGC shall have instituted proceedings to
terminate such Guaranteed Pension Plan;
          (n) the Borrower, any Carve-Out Guarantor, any Guarantor or any of
their respective Subsidiaries or any shareholder, officer, director, partner or
member of any of them shall be indicted for a federal crime, a punishment for
which could include the forfeiture of (i) any assets of the Borrower or any of
their respective Subsidiaries which in the good faith judgment of the Required
Lenders could have a Material Adverse Effect, or (ii) the Collateral;
          (o) any Guarantor or any Carve-Out Guarantors denies that it has any
liability or obligation under the Guaranty or the Carve-Out Guaranty, as
applicable, or any other Loan

72

--------------------------------------------------------------------------------

 

Document, or shall notify the Agent or any of the Lenders of its intention to
attempt to cancel or terminate the Guaranty or the Carve-Out Guaranty, as
applicable, or any other Loan Document;
          (p) any Change of Control shall occur; or
          (q) an Event of Default under any of the other Loan Documents shall
occur;
then, and in any such event, the Agent may, and upon the request of the Required
Lenders shall, by notice in writing to the Borrower declare all amounts owing
with respect to this Agreement, the Notes, the Letters of Credit and the other
Loan Documents to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower; provided that in the
event of any Event of Default specified in §12.1(g), §12.1(h) or §12.1(i), all
such amounts shall become immediately due and payable automatically and without
any requirement of presentment, demand, protest or other notice of any kind from
any of the Lenders or the Agent. Upon demand by Agent or the Required Lenders in
their absolute and sole discretion after the occurrence of an Event of Default,
and regardless of whether the conditions precedent in this Agreement for a Loan
have been satisfied, the Lenders will cause a Loan to be made in the undrawn
amount of all Letters of Credit. The proceeds of any such Loan will be pledged
to and held by Agent as security for any amounts that become payable under the
Letters of Credit and all other Obligations. In the alternative, if demanded by
Agent in its absolute and sole discretion after the occurrence of an Event of
Default, the Borrower will deposit with and pledge to Agent cash in an amount
equal to the amount of all undrawn Letters of Credit. Such amounts will be
pledged to and held by Agent for the benefit of the Lenders as security for any
amounts that become payable under the Letters of Credit and all other
Obligations. Upon any draws under Letters of Credit, at Agent’s sole discretion,
Agent may apply any such amounts to the repayment of amounts drawn thereunder
and upon the expiration of the Letters of Credit any remaining amounts will be
applied to the payment of all other Obligations or if there are no outstanding
Obligations and Lenders have no further obligation to make Loans or issue
Letters of Credit or if such excess no longer exists, such proceeds deposited by
the Borrower will be released to the Borrower.
     §12.2 Certain Cure Periods; Limitation of Cure Periods.
          (a) Notwithstanding anything contained in §12.1 to the contrary,
(i) no Event of Default shall exist hereunder upon the occurrence of any failure
described in §12.1(b) in the event that the Borrower cures such failure within
five (5) Business Days after the date such payment is due, provided that no such
cure period shall apply to any payments due upon the maturity of the Notes, and
(ii) no Event of Default shall exist hereunder upon the occurrence of any
failure described in §12.1(d) in the event that the Borrower cures such failure
within thirty (30) days following receipt of written notice of such failure,
provided that the provisions of this clause (ii) shall not pertain to any
default consisting of a failure to comply with §7.4(c), §8.1, §8.2, §8.3, §8.4,
§8.7, §8.8, §8.15 or to any Default excluded from any provision of cure of
defaults contained in any other of the Loan Documents.
     §12.3 Termination of Commitments. If any one or more Events of Default
specified in §12.1(g), §12.1(h) or §12.1(i) shall occur, then immediately and
without any action on the part of

73

--------------------------------------------------------------------------------

 

the Agent or any Lender any unused portion of the credit hereunder shall
terminate and the Lenders shall be relieved of all obligations to make Loans or
issue Letters of Credit to the Borrower. If any other Event of Default shall
have occurred, the Agent may, and upon the election of the Required Lenders
shall, by notice to the Borrower terminate the obligation to make Loans and
issue Letters of Credit to the Borrower. No termination under this §12.3 shall
relieve the Borrower of its obligations to the Lenders arising under this
Agreement or the other Loan Documents.
     §12.4 Remedies. In case any one or more Events of Default shall have
occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to §12.1, the Agent on behalf of
the Lenders may, and upon the direction of the Required Lenders shall, proceed
to protect and enforce their rights and remedies under this Agreement, the Notes
and/or any of the other Loan Documents by suit in equity, action at law or other
appropriate proceeding, including to the full extent permitted by applicable law
the specific performance of any covenant or agreement contained in this
Agreement and the other Loan Documents, the obtaining of the ex parte
appointment of a receiver, and, if any amount shall have become due, by
declaration or otherwise, the enforcement of the payment thereof. No remedy
herein conferred upon the Agent or the holder of any Note is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or any other provision of law.
Notwithstanding the provisions of this Agreement providing that the Loans may be
evidenced by multiple Notes in favor of the Lenders, the Lenders acknowledge and
agree that only the Agent may exercise any remedies arising by reason of a
Default or Event of Default. If the Borrower or any Guarantor fails to perform
any agreement or covenant contained in this Agreement or any of the other Loan
Documents beyond any applicable period for notice and cure, Agent may itself
perform, or cause to be performed, any agreement or covenant of such Person
contained in this Agreement or any of the other Loan Documents which such Person
shall fail to perform, and the out-of-pocket costs of such performance, together
with any reasonable expenses, including reasonable attorneys’ fees actually
incurred (including attorneys’ fees incurred in any appeal) by Agent in
connection therewith, shall be payable by the Borrower upon demand and shall
constitute a part of the Obligations and shall if not paid within five (5) days
after demand bear interest at the rate for overdue amounts as set forth in this
Agreement. In the event that all or any portion of the Obligations is collected
by or through an attorney-at-law, the Borrower shall pay all costs of collection
including, but not limited to, reasonable attorney’s fees.
     §12.5 Distribution of Collateral Proceeds. In the event that, following the
occurrence and during the continuance of any Event of Default, any monies are
received in connection with the enforcement of any of the Loan Documents, or
otherwise with respect to the realization upon any of the Collateral or other
assets of the Borrower or the Guarantors, such monies shall be distributed for
application as follows:
          (a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of, all reasonable out-of-pocket
costs, expenses, disbursements and losses which shall have been paid, incurred
or sustained by the Agent to protect or preserve the Collateral or in connection
with the collection of such monies by the Agent, for the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and

74

--------------------------------------------------------------------------------

 

privileges of the Agent or the Lenders under this Agreement or any of the other
Loan Documents or in respect of the Collateral or in support of any provision of
adequate indemnity to the Agent against any taxes or liens which by law shall
have, or may have, priority over the rights of the Agent or the Lenders to such
monies;
          (b) Second, to all other Obligations (including any interest, expenses
or other obligations incurred after the commencement of a bankruptcy) in such
order or preference as the Required Lenders shall determine; provided, that
(i) distributions in respect of such other Obligations shall include, on a pari
passu basis, any Agent’s fee payable pursuant to §4.2; (ii) in the event that
any Lender shall have wrongfully failed or refused to make an advance under
§2.5(d), §2.7 or §2.8(f) and such failure or refusal shall be continuing,
advances made by other Lenders during the pendency of such failure or refusal
shall be entitled to be repaid as to principal and accrued interest in priority
to the other Obligations described in this subsection (b), and (iii) except as
otherwise provided in clause (ii), Obligations owing to the Lenders with respect
to each type of Obligation such as interest, principal, fees and expenses shall
be made among the Lenders pro rata; and provided, further that the Required
Lenders may in their discretion make proper allowance to take into account any
Obligations not then due and payable; and
          (c) Third, the excess, if any, shall be returned to the Borrower or to
such other Persons as are entitled thereto.
§13. SETOFF.
     Regardless of the adequacy of any Collateral, during the continuance of any
Event of Default, any deposits (general or specific, time or demand, provisional
or final, regardless of currency, maturity, or the branch where such deposits
are held) or other sums credited by or due from any Lender to the Borrower or
the Guarantors and any securities or other property of the Borrower or the
Guarantors in the possession of such Lender may, without notice to the Borrower
or any Guarantor (any such notice being expressly waived by the Borrower and
each Guarantor) but with the prior written approval of Agent, be applied to or
set off against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, of the Borrower or the Guarantors to such Lender. Each of
the Lenders agree with each other Lender that if such Lender shall receive from
the Borrower or the Guarantors, whether by voluntary payment, exercise of the
right of setoff, or otherwise, and shall retain and apply to the payment of the
Note or Notes held by such Lender any amount in excess of its ratable portion of
the payments received by all of the Lenders with respect to the Notes held by
all of the Lenders, such Lender will make such disposition and arrangements with
the other Lenders with respect to such excess, either by way of distribution,
pro tanto assignment of claims, subrogation or otherwise as shall result in each
Lender receiving in respect of the Notes held by it its proportionate payment as
contemplated by this Agreement; provided that if all or any part of such excess
payment is thereafter recovered from such Lender, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.

75

--------------------------------------------------------------------------------

 

§14. THE AGENT.
     §14.1 Authorization. The Agent is authorized to take such action on behalf
of each of the Lenders and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents delegated to the
Agent, together with such powers as are reasonably incident thereto, provided
that no duties or responsibilities not expressly assumed herein or therein shall
be implied to have been assumed by the Agent. The obligations of the Agent
hereunder are primarily administrative in nature, and nothing contained in this
Agreement or any of the other Loan Documents shall be construed to constitute
the Agent as a trustee for any Lender or to create an agency or fiduciary
relationship. Agent shall act as the contractual representative of the Lenders
hereunder, and notwithstanding the use of the term “Agent”, it is understood and
agreed that Agent shall not have any fiduciary duties or responsibilities to any
Lender by reason of this Agreement or any other Loan Document and is acting as
an independent contractor, the duties and responsibilities of which are limited
to those expressly set forth in this Agreement and the other Loan Documents. The
Borrower and any other Person shall be entitled to conclusively rely on a
statement from the Agent that it has the authority to act for and bind the
Lenders pursuant to this Agreement and the other Loan Documents.
     §14.2 Employees and Agents. The Agent may exercise its powers and execute
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Agreement and the other Loan Documents. The Agent may
utilize the services of such Persons as the Agent may reasonably determine, and
all reasonable fees and expenses of any such Persons shall be paid by the
Borrower.
     §14.3 No Liability. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent, or employee thereof, shall be liable for (a) any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, shall be liable for losses due to its willful
misconduct or gross negligence as finally determined by a court of competent
jurisdiction after the expiration of all applicable appeal periods or (b) any
action taken or not taken by Agent with the consent or at the request of the
Required Lenders. The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default, except with respect to
defaults in the payment of principal, interest and fees required to be paid to
the Agent for the account of the Lenders, unless the Agent has received notice
from a Lender or the Borrower referring to the Loan Documents and describing
with reasonable specificity such Default or Event of Default and stating that
such notice is a “notice of default”.
     §14.4 No Representations. The Agent shall not be responsible for the
execution or validity or enforceability of this Agreement, the Notes, any of the
other Loan Documents or any instrument at any time constituting, or intended to
constitute, collateral security for the Notes, or for the value of any such
collateral security or for the validity, enforceability or collectability of any
such amounts owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein, or any agreement, instrument or
certificate delivered in connection

76

--------------------------------------------------------------------------------

 

therewith or in any of the other Loan Documents or in any certificate or
instrument hereafter furnished to it by or on behalf of the Borrower, the
Guarantors or any of their respective Subsidiaries, or be bound to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
covenants or agreements herein or in any of the other Loan Documents. The Agent
shall not be bound to ascertain whether any notice, consent, waiver or request
delivered to it by the Borrower, the Guarantors or any holder of any of the
Notes shall have been duly authorized or is true, accurate and complete. The
Agent has not made nor does it now make any representations or warranties,
express or implied, nor does it assume any liability to the Lenders, with
respect to the creditworthiness or financial condition of the Borrower, the
Guarantors or any of their respective Subsidiaries, or the value of the
Collateral or any other assets of the Borrower, any Guarantor or any of their
respective Subsidiaries. Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender, and based upon such
information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender, based upon such information and documents as it deems
appropriate at the time, continue to make its own credit analysis and decisions
in taking or not taking action under this Agreement and the other Loan
Documents. Agent’s Special Counsel has only represented Agent and KeyBank in
connection with the Loan Documents and the only attorney client relationship or
duty of care is between Agent’s Special Counsel and Agent or KeyBank. Each
Lender has been independently represented by separate counsel on all matters
regarding the Loan Documents and the granting and perfecting of liens in the
Collateral.
     §14.5 Payments.
          (a) A payment by the Borrower or any Guarantor to the Agent hereunder
or under any of the other Loan Documents for the account of any Lender shall
constitute a payment to such Lender. The Agent agrees to distribute to each
Lender not later than one Business Day after the Agent’s receipt of good funds,
determined in accordance with the Agent’s customary practices, such Lender’s pro
rata share of payments received by the Agent for the account of the Lenders
except as otherwise expressly provided herein or in any of the other Loan
Documents. In the event that the Agent fails to distribute such amounts within
one Business Day as provided above, the Agent shall pay interest on such amount
at a rate per annum equal to the Federal Funds Effective Rate from time to time
in effect.
          (b) If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
such distribution until its right to make such distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the Agent
is to be repaid, each Person to whom any such distribution shall have been made
shall either repay to the Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
          (c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Lender that fails (i) to make
available to the Agent its pro rata share of any Loan or participation in a
Letter of Credit, (ii) to comply with the provisions of

77

--------------------------------------------------------------------------------

 

§13 with respect to making dispositions and arrangements with the other Lenders,
where such Lender’s share of any payment received, whether by setoff or
otherwise, is in excess of its pro rata share of such payments due and payable
to all of the Lenders, in each case as, when and to the full extent required by
the provisions of this Agreement, or (iii) to perform any other obligation
within the time period specified for performance, or if no time period is
specified, if such failure continues for a period of five (5) Business Days
after notice from the Agent shall be deemed delinquent (a “Delinquent Lender”)
and shall be deemed a Delinquent Lender until such time as such delinquency is
satisfied. In addition to the rights and remedies that may be available to the
Agent at law and in equity, a Delinquent Lender’s right to participate in the
administration of the Loan Documents, including, without limitation, any rights
to consent to or direct any action or inaction of the Agent pursuant to this
Agreement or otherwise, or to be taken into account in the calculation of
Required Lenders or any matter requiring approval of all of the Lenders, shall
be suspended while such Lender is a Delinquent Lender. A Delinquent Lender shall
be deemed to have assigned any and all payments due to it from the Borrower or
the Guarantors, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Lenders for application to, and
reduction of, their respective pro rata shares of all outstanding Loans. The
Delinquent Lender hereby authorizes the Agent to distribute such payments to the
nondelinquent Lenders in proportion to their respective pro rata shares of all
outstanding Loans. The provisions of this Section shall apply and be effective
regardless of whether an Event of Default occurs and is then continuing, and
notwithstanding (i) any other provision of this Agreement to the contrary or
(ii) any instruction of the Borrower as to its desired application of payments.
The Agent shall be entitled to (i) withhold or set off, and to apply to the
payment of the obligations of any Delinquent Lender any amounts to be paid to
such Delinquent Lender under this Agreement, (ii) to collect interest from such
Lender for the period from the date on which the payment was due at the rate per
annum equal to the Federal Funds Effective Rate plus one percent (1%), for each
day during such period, and (iii) bring an action or suit against such
Delinquent Lender in a court of competent jurisdiction to recover the defaulted
obligations of such Delinquent Lender. A Delinquent Lender shall be deemed to
have satisfied in full a delinquency when and if, as a result of application of
the assigned payments to all outstanding Loans of the nondelinquent Lenders or
as a result of other payments by the Delinquent Lenders to the nondelinquent
Lenders, the Lenders’ respective pro rata shares of all outstanding Loans have
returned to those in effect immediately prior to such delinquency and without
giving effect to the nonpayment causing such delinquency.
     §14.6 Holders of Notes. Subject to the terms of §18, the Agent may deem and
treat the payee of any Note as the absolute owner or purchaser thereof for all
purposes hereof until it shall have been furnished in writing with a different
name by such payee or by a subsequent holder, assignee or transferee.
     §14.7 Indemnity. The Lenders ratably agree hereby to indemnify and hold
harmless the Agent from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agent has not been reimbursed by the Borrower as
required by §15), and liabilities of every nature and character arising out of
or related to this Agreement, the Notes, or any of the other Loan Documents or
the transactions contemplated or evidenced hereby or thereby, or the Agent’s
actions taken hereunder or thereunder, except to the extent that any of the same
shall be directly caused by the Agent’s willful misconduct or gross negligence
as finally determined by a court of competent

78

--------------------------------------------------------------------------------

 

jurisdiction after the expiration of all applicable appeal periods. The
agreements in this §14.7 shall survive the payment of all amounts payable under
the Loan Documents.
     §14.8 Agent as Lender. In its individual capacity, KeyBank shall have the
same obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes as it
would have were it not also the Agent.
     §14.9 Resignation. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower. Any such resignation or removal
may at Agent’s option also constitute Agent’s resignation as Issuing Lender.
Upon any such resignation, the Required Lenders, subject to the terms of §18.1,
shall have the right to appoint as a successor Agent and, if applicable, Issuing
Lender, any Lender or any bank whose senior debt obligations are rated not less
than “A” or its equivalent by Moody’s or not less than “A” or its equivalent by
S&P and which has a net worth of not less than $500,000,000.00. Unless a Default
or Event of Default shall have occurred and be continuing, such successor Agent
and, if applicable, Issuing Lender, shall be reasonably acceptable to the
Borrower. If no successor Agent shall have been appointed and shall have
accepted such appointment within thirty (30) days after the retiring Agent’s
giving of notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be any Lender or any financial
institution whose senior debt obligations are rated not less than “A2” or its
equivalent by Moody’s or not less than “A” or its equivalent by S&P and which
has a net worth of not less than $500,000,000.00. Upon the acceptance of any
appointment as Agent and, if applicable, Issuing Lender, hereunder by a
successor Agent and, if applicable, Issuing Lender, such successor Agent and, if
applicable, Issuing Lender, shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent and, if
applicable, Issuing Lender, and the retiring Agent and, if applicable, Issuing
Lender, shall be discharged from its duties and obligations hereunder as Agent
and, if applicable, Issuing Lender. After any retiring Agent’s resignation, the
provisions of this Agreement and the other Loan Documents shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent, Issuing Lender. If the resigning Agent shall
also resign as the Issuing Lender, such successor Agent shall issue letters of
credit in substitution for the Letters of Credit, if any, outstanding at the
time of such succession or shall make other arrangements satisfactory to the
current Issuing Lender, in either case, to assume effectively the obligations of
the current Agent with respect to such Letters of Credit. Upon any change in the
Agent under this Agreement, the resigning Agent shall execute such assignments
of and amendments to the Loan Documents as may be necessary to substitute the
successor Agent for the resigning Agent.
     §14.10 Duties in the Case of Enforcement. In case one or more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent may and, if (a) so requested
by the Required Lenders and (b) the Lenders have provided to the Agent such
additional indemnities and assurances in accordance with their respective
Commitment Percentages against expenses and liabilities as the Agent may
reasonably request, shall proceed to exercise all or any legal and equitable and
other rights or remedies as it may have; provided, however, that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem to be in the

79

--------------------------------------------------------------------------------

 

best interests of the Lenders. Without limiting the generality of the foregoing,
if Agent reasonably determines payment is in the best interest of all the
Lenders, Agent may without the approval of the Lenders pay taxes and insurance
premiums and spend money for maintenance, repairs or other expenses which may be
necessary to be incurred, and Agent shall promptly thereafter notify the Lenders
of such action. Each Lender shall, within thirty (30) days of request therefor,
pay to the Agent its Commitment Percentage of the reasonable costs incurred by
the Agent in taking any such actions hereunder to the extent that such costs
shall not be promptly reimbursed to the Agent by the Borrower or the Guarantors
or out of the Collateral within such period. The Required Lenders may direct the
Agent in writing as to the method and the extent of any such exercise, the
Lenders hereby agreeing to indemnify and hold the Agent harmless in accordance
with their respective Commitment Percentages from all liabilities incurred in
respect of all actions taken or omitted in accordance with such directions,
except to the extent that any of the same shall be directly caused by the
Agent’s willful misconduct or gross negligence as finally determined by a court
of competent jurisdiction after the expiration of all applicable appeal periods,
provided that the Agent need not comply with any such direction to the extent
that the Agent reasonably believes the Agent’s compliance with such direction to
be unlawful in any applicable jurisdiction or commercially unreasonable under
the UCC as enacted in any applicable jurisdiction.
     §14.11 Bankruptcy. In the event a bankruptcy or other insolvency proceeding
is commenced by or against the Borrower or any Guarantor with respect to the
Obligations, the Agent shall have the sole and exclusive right to file and
pursue a joint proof claim on behalf of all Lenders. Any votes with respect to
such claims or otherwise with respect to such proceedings shall be subject to
the vote of the Required Lenders or all of the Lenders as required by this
Agreement. Each Lender irrevocably waives its right to file or pursue a separate
proof of claim in any such proceedings unless Agent fails to file such claim
within thirty (30) days after receipt of written notice from the Lenders
requesting that Agent file such proof of claim.
     §14.12 Reliance by Agent. The Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
(including any electronic message, Internet or intranet website posting or other
distribution) believed by it to be genuine and to have been signed, sent or
otherwise authenticated by an Authorized Officer. The Agent also may rely upon
any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying
thereon. In determining compliance with any condition hereunder to the making of
a Loan, that by its terms must be fulfilled to the satisfaction of a Lender, the
Agent may presume that such condition is satisfactory to such Lender unless the
Agent shall have received notice to the contrary from such Lender prior to the
making of such Loan. The Agent may consult with legal counsel (who may be
counsel for the Borrower), independent accountants and other experts selected by
it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.
     §14.13 Approvals. If consent is required for some action under this
Agreement, or except as otherwise provided herein an approval of the Lenders,
the Required Lenders is required or permitted under this Agreement, each Lender
agrees to give the Agent, within ten (10) days of receipt of the request for
action together with all reasonably requested information related thereto (or
such lesser period of time required by the terms of the Loan Documents), notice
in writing of

80

--------------------------------------------------------------------------------

 

approval or disapproval (collectively “Directions”) in respect of any action
requested or proposed in writing pursuant to the terms hereof. To the extent
that any Lender does not approve any recommendation of Agent, such Lender shall
in such notice to Agent describe the actions that would be acceptable to such
Lender. If consent is required for the requested action, any Lender’s failure to
respond to a request for Directions within the required time period shall be
deemed to constitute a Direction to take such requested action. In the event
that any recommendation is not approved by the requisite number of Lenders and a
subsequent approval on the same subject matter is requested by Agent, then for
the purposes of this paragraph each Lender shall be required to respond to a
request for Directions within five (5) Business Days of receipt of such request.
Agent and each Lender shall be entitled to assume that any officer of the other
Lenders delivering any notice, consent, certificate or other writing is
authorized to give such notice, consent, certificate or other writing unless
Agent and such other Lenders have otherwise been notified in writing.
     §14.14 Borrower Not Beneficiary. Except for the provisions of §14.9
relating to the appointment of a successor Agent, the provisions of this §14 are
solely for the benefit of the Agent and the Lenders, may not be enforced by the
Borrower or any Guarantor, and except for the provisions of §14.9, may be
modified or waived without the approval or consent of the Borrower.
§15. EXPENSES.
     The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Agreement, the other Loan Documents and the other agreements
and instruments mentioned herein, (b) any imposed taxes (including any interest
and penalties in respect thereto) payable by the Agent or any of the Lenders
(other than taxes based upon the Agent’s or any Lender’s gross or net income,
except that the Agent and the Lenders shall be entitled to indemnification for
any and all amounts paid by them in respect of taxes based on income or other
taxes assessed by any State in which Collateral is located, such indemnification
to be limited to taxes due solely on account of the granting of Collateral under
the Security Documents and to be net of any credit allowed to the indemnified
party from any other State on account of the payment or incurrence of such tax
by such indemnified party), including any recording, mortgage, documentary or
intangibles taxes in connection with the Loan Documents, or other taxes payable
on or with respect to the transactions contemplated by this Agreement, including
any such taxes payable by the Agent or any of the Lenders after the Closing Date
(the Borrower hereby agreeing to indemnify the Agent and each Lender with
respect thereto), (c) all title insurance premiums or costs and environmental
review costs and expenses, (d) the reasonable fees, expenses and disbursements
of the counsel to the Agent and any local counsel to the Agent incurred in
connection with the preparation, administration, or interpretation of the Loan
Documents and other instruments mentioned herein, and amendments, modifications,
approvals, consents or waivers hereto or hereunder, (e) the out-of-pocket fees,
costs, expenses and disbursements of Agent incurred in connection with the
syndication and/or participation of the Loans, (f) all other reasonable out of
pocket fees, expenses and disbursements of the Agent incurred by the Agent in
connection with the preparation or interpretation of the Loan Documents and
other instruments mentioned herein, the addition or substitution of additional
Collateral, the making of each advance hereunder, the issuance of Letters of
Credit, and the syndication of the Commitments pursuant to §18 (without
duplication of those items addressed in subparagraph (e), above), (g) all

81

--------------------------------------------------------------------------------

 

out-of-pocket expenses (including attorneys’ fees and costs) incurred by any
Lender or the Agent in connection with (i) the enforcement of or preservation of
rights under any of the Loan Documents against the Borrower or the Guarantors or
the administration thereof after the occurrence of a Default or Event of Default
and (ii) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to the Agent’s or any of the Lenders’ relationship
with the Borrower or the Guarantors, (h) all reasonable fees, expenses and
disbursements of the Agent incurred in connection with UCC searches, UCC
filings, title rundowns, title searches or mortgage recordings, (i) all
reasonable out-of-pocket fees, expenses and disbursements (including reasonable
attorneys’ fees and costs) which may be incurred by KeyBank in connection with
the execution and delivery of this Agreement and the other Loan Documents
(without duplication of any of the items listed above), and (j) all expenses
relating to the use of Intralinks, SyndTrak or any other similar system for the
dissemination and sharing of documents and information in connection with the
Loans. The covenants of this §15 shall survive the repayment of the Loans and
the termination of the obligations of the Lenders hereunder.
§16. INDEMNIFICATION.
     The Borrower agrees to indemnify and hold harmless the Agent, the Lenders
and the Arranger and each director, officer, employee, agent and Affiliate
thereof and Person who controls the Agent or any Lender or the Arranger against
any and all claims, actions and suits, whether groundless or otherwise, and from
and against any and all liabilities, losses, damages and expenses of every
nature and character arising out of or relating to this Agreement or any of the
other Loan Documents or the transactions contemplated hereby and thereby
including, without limitation, (a) any and all claims for brokerage, leasing,
finders or similar fees which may be made relating to the Real Estate or the
Loans, (b) any non-environmental condition of the Real Estate, (c) any actual or
proposed use by the Borrower of the proceeds of any of the Loans or Letters of
Credit, (d) any actual or alleged infringement of any patent, copyright,
trademark, service mark or similar right of the Borrower, any Guarantor or any
of their respective Subsidiaries, (e) the Borrower and the Guarantors entering
into or performing this Agreement or any of the other Loan Documents, and
(f) any use of Intralinks, SyndTrak or any other system for the dissemination
and sharing of documents and information, in each case including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceeding;
provided, however, that the Borrower shall not be obligated under this §16 to
indemnify any Person for liabilities arising from such Person’s own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction after the exhaustion of all applicable appeal periods. In
litigation, or the preparation therefor, the Lenders and the Agent shall be
entitled to select a single law firm as their own counsel and, in addition to
the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees
and expenses of such counsel. If, and to the extent that the obligations of the
Borrower under this §16 are unenforceable for any reason, the Borrower hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The provisions of this
§16 shall survive the repayment of the Loans and the termination of the
obligations of the Lenders hereunder.

82

--------------------------------------------------------------------------------

 

§17. SURVIVAL OF COVENANTS, ETC.
     All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or the Guarantors or any of
their respective Subsidiaries pursuant hereto or thereto shall be deemed to have
been relied upon by the Lenders and the Agent, notwithstanding any investigation
heretofore or hereafter made by any of them, and shall survive the making by the
Lenders of any of the Loans, as herein contemplated, and shall continue in full
force and effect so long as any amount due under this Agreement or the Notes or
any of the other Loan Documents remains outstanding or any Letters of Credit
remain outstanding or any Lender has any obligation to make any Loans or issue
any Letters of Credit. The indemnification obligations of the Borrower provided
herein and in the other Loan Documents shall survive the full repayment of
amounts due and the termination of the obligations of the Lenders hereunder and
thereunder to the extent provided herein and therein. All statements contained
in any certificate delivered to any Lender or the Agent at any time by or on
behalf of the Borrower, any Guarantor or any of their respective Subsidiaries
pursuant hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by such Person hereunder.
§18. ASSIGNMENT AND PARTICIPATION.
     §18.1 Conditions to Assignment by Lenders. Except as provided herein, each
Lender may assign to one or more banks or other entities all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitment Percentage and Commitment and the same portion of the
Loans at the time owing to it and the Notes held by it); provided that (a) the
Agent, the Issuing Lender and, so long as no Default or Event of Default exists
hereunder, the Borrower shall have each given its prior written consent to such
assignment, which consent shall not be unreasonably withheld or delayed
(provided that such consent shall not be required for any assignment to another
Lender, to a lender or an Affiliate of a Lender which controls, is controlled by
or is under common control with the assigning Lender or to a wholly-owned
Subsidiary of such Lender), (b) each such assignment shall be of a constant, and
not a varying, percentage of all the assigning Lender’s rights and obligations
under this Agreement, (c) the parties to such assignment shall execute and
deliver to the Agent, for recording in the Register (as hereinafter defined) an
Assignment and Acceptance Agreement in the form of Exhibit H annexed hereto,
together with any Notes subject to such assignment, (d) in no event shall any
assignment be to any Person controlling, controlled by or under common control
with, or which is not otherwise free from influence or control by the Borrower
or any Guarantor, (e) such assignee of a portion of the Loans shall have a net
worth as of the date of such assignment of not less than $100,000,000.00 (unless
otherwise approved by Agent and, so long as no Default or Event of Default
exists hereunder, the Borrower), (f) such assignee shall acquire an interest in
the Loans of not less than $5,000,000.00 and integral multiples of $1,000,000.00
in excess thereof (or if less, the remaining Loans of the assignor), unless
waived by the Agent, and so long as no Default or Event of Default exists
hereunder, the Borrower, and (g) such assignee shall be subject to the terms of
any intercreditor agreement among the Lenders and the Agent. Upon execution,
delivery, acceptance and recording of such Assignment and Acceptance Agreement,
(i) the assignee thereunder shall be a party hereto and all other Loan Documents
executed by the Lenders and, to the extent provided in such Assignment and

83

--------------------------------------------------------------------------------

 

Acceptance Agreement, have the rights and obligations of a Lender hereunder,
(ii) the assigning Lender shall, upon payment to the Agent of the registration
fee referred to in §18.2, be released from its obligations under this Agreement
arising after the effective date of such assignment with respect to the assigned
portion of its interests, rights and obligations under this Agreement, and
(iii) the Agent may unilaterally amend Schedule 1.1 to reflect such assignment.
In connection with each assignment, the assignee shall represent and warrant to
the Agent, the assignor and each other Lender as to whether such assignee is
controlling, controlled by, under common control with or is not otherwise free
from influence or control by, the Borrower and/or any Guarantor.
     §18.2 Register. The Agent shall maintain on behalf of the Borrower a copy
of each assignment delivered to it and a register or similar list (the
“Register”) for the recordation of the names and addresses of the Lenders and
the Commitment Percentages of and principal amount of the Loans owing to the
Lenders from time to time. The entries in the Register shall be conclusive, in
the absence of demonstrable error, and the Borrower, the Guarantors, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower and the Lenders at any reasonable time
and from time to time upon reasonable prior notice. Upon each such recordation,
the assigning Lender agrees to pay to the Agent a registration fee in the sum of
$3,500.00.
     §18.3 New Notes. Upon its receipt of an Assignment and Acceptance Agreement
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall record the information contained therein in the
Register. Within five (5) Business Days after receipt of notice of such
assignment from Agent, the Borrower, at its own expense, shall execute and
deliver to the Agent, in exchange for each surrendered Note, a new Note to the
order of such assignee in an amount equal to the amount assigned to such
assignee pursuant to such Assignment and Acceptance Agreement and, if the
assigning Lender has retained some portion of its obligations hereunder, a new
Note to the order of the assigning Lender in an amount equal to the amount
retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such Assignment and Acceptance Agreement and
shall otherwise be in substantially the form of the assigned Notes. The
surrendered Notes shall be canceled and returned to the Borrower.
     §18.4 Participations. Each Lender may sell participations to one or more
Lenders or other entities in all or a portion of such Lender’s rights and
obligations under this Agreement and the other Loan Documents; provided that
(a) any such sale or participation shall not affect the rights and duties of the
selling Lender hereunder, (b) such participation shall not entitle such
participant to any rights or privileges under this Agreement or any Loan
Documents, including without limitation, rights granted to the Lenders under
§4.8, §4.9 and §4.10, (c) such participation shall not entitle the participant
to the right to approve waivers, amendments or modifications, (d) such
participant shall have no direct rights against the Borrower, (e) such sale is
effected in accordance with all applicable laws, and (f) such participant shall
not be a Person controlling, controlled by or under common control with, or
which is not otherwise free from influence or control by the Borrower and/or any
Guarantor; provided, however, such Lender may

84

--------------------------------------------------------------------------------

 

agree with the participant that it will not, without the consent of the
participant, agree to (i) increase, or extend the term or extend the time or
waive any requirement for the reduction or termination of, such Lender’s
Commitment, (ii) extend the date fixed for the payment of principal of or
interest on the Loans or portions thereof owing to such Lender (other than
pursuant to an extension of the Maturity Date pursuant to §2.12), (iii) reduce
the amount of any such payment of principal, (iv) reduce the rate at which
interest is payable thereon or (v) release any Guarantor (except as otherwise
permitted under this Agreement). Any Lender which sells a participation shall
promptly notify the Agent of such sale and the identity of the purchaser of such
interest.
     §18.5 Pledge by Lender. Any Lender may at any time pledge all or any
portion of its interest and rights under this Agreement (including all or any
portion of its Note) to any of the twelve Federal Reserve Banks organized under
§4 of the Federal Reserve Act, 12 U.S.C. §341 or to such other Person as the
Agent may approve to secure obligations of such lenders. No such pledge or the
enforcement thereof or foreclosure thereof shall release the pledgor Lender from
its obligations hereunder or under any of the other Loan Documents.
     §18.6 No Assignment by Borrower. The Borrower shall not assign or transfer
any of its rights or obligations under this Agreement without the prior written
consent of each of the Lenders.
     §18.7 Disclosure. The Borrower agrees to promptly cooperate with any Lender
in connection with any proposed assignment or participation of all or any
portion of its Commitment. The Borrower agrees that in addition to disclosures
made in accordance with standard banking practices any Lender may disclose
information obtained by such Lender pursuant to this Agreement to assignees or
participants and potential assignees or participants hereunder. Each Lender
agrees for itself that it shall use reasonable efforts in accordance with its
customary procedures to hold confidential all non-public information obtained
from the Borrower or any Guarantor that has been identified in writing as
confidential by any of them, and shall use reasonable efforts in accordance with
its customary procedures to not disclose such information to any other Person,
it being understood and agreed that, notwithstanding the foregoing, a Lender may
make (a) disclosures to its participants (provided such Persons agree to be
bound by the provisions of this §18.7), (b) disclosures to its directors,
officers, employees, Affiliates, accountants, appraisers, legal counsel and
other professional advisors of such Lender (provided that such Persons who are
not employees of such Lender are advised of the provision of this §18.7),
(c) disclosures customarily provided or reasonably required by any potential or
actual bona fide assignee, transferee or participant or their respective
directors, officers, employees, Affiliates, accountants, appraisers, legal
counsel and other professional advisors in connection with a potential or actual
assignment or transfer by such Lender of any Loans or any participations therein
(provided such assignees, transferees or participants agree to be bound by and
such other Persons are advised of the provisions of this §18.7), (d) disclosures
to bank regulatory authorities or self-regulatory bodies with jurisdiction over
such Lender, or (e) disclosures required or requested by any other governmental
authority or representative thereof or pursuant to legal process; provided that,
unless specifically prohibited by applicable law or court order, each Lender
shall notify the Borrower of any request by any governmental authority or
representative thereof prior to disclosure (other than any such request in
connection with any examination of such Lender by such government authority) for
disclosure of any such

85

--------------------------------------------------------------------------------

 

non-public information prior to disclosure of such information. In addition,
each Lender may make disclosure of such information to any contractual
counterparty in swap agreements or such contractual counterparty’s professional
advisors (so long as such contractual counterparty or professional advisors
agree to be bound by the provisions of this §18.7). Non-public information shall
not include any information which is or subsequently becomes publicly available
other than as a result of a disclosure of such information by a Lender, or prior
to the delivery to such Lender is within the possession of such Lender if such
information is not known by such Lender to be subject to another confidentiality
agreement with or other obligations of secrecy to the Borrower or the
Guarantors, or is disclosed with the prior approval of the Borrower. Nothing
herein shall prohibit the disclosure of non-public information to the extent
necessary to enforce the Loan Documents.
     §18.8 Amendments to Loan Documents. Upon any such assignment or
participation, the Borrower and the Guarantors shall, upon the request of the
Agent, enter into such documents as may be reasonably required by the Agent to
modify the Loan Documents to reflect such assignment or participation.
     §18.9 Titled Agents. The Titled Agents shall not have any additional rights
or obligations under the Loan Documents, except for those rights, if any, as a
Lender.
§19. NOTICES.
     Each notice, demand, election or request provided for or permitted to be
given pursuant to this Agreement (hereinafter in this §19 referred to as
“Notice”), but specifically excluding to the maximum extent permitted by law any
notices of the institution or commencement of foreclosure proceedings, must be
in writing and shall be deemed to have been properly given or served by personal
delivery or by sending same by overnight courier or by depositing same in the
United States Mail, postpaid and registered or certified, return receipt
requested, or as expressly permitted herein, by telecopy and addressed as
follows:
If to the Agent or KeyBank:
KeyBank National Association
800 Superior
Cleveland, Ohio 44114-1306
Attn: Real Estate Capital Services
With a copy to:
KeyBank National Association
1200 Abernathy Road, Suite 1550
Atlanta, Georgia 30328
Attn: Mr. Tayven Hike
Telecopy No.: (770) 510-2195

86

--------------------------------------------------------------------------------

 

and
McKenna Long & Aldridge LLP
Suite 5300
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attn: William F. Timmons, Esq.
Telecopy No.: (404) 527-4198
If to the Borrower:
c/o Pacific Office Properties, L.P.
233 Wilshire Boulevard, Suite 830
Santa Monica, California 90401
Attn: Mr. Jim Kasim, Chief Financial Officer
Telecopy No.: (310) 395-2741
With a copy to:
Pillsbury Winthrop Shaw Pittman LLP
725 South Figueroa Street
Los Angeles, California 90017
Attn: William S. Waller, Esq.
Telecopy No.: (213)629-1033
to any other Lender which is a party hereto, at the address for such Lender set
forth on its signature page hereto, and to any Lender which may hereafter become
a party to this Agreement, at such address as may be designated by such Lender.
Each Notice shall be effective upon being personally delivered or upon being
sent by overnight courier or upon being deposited in the United States Mail as
aforesaid, or if transmitted by telecopy is permitted, upon being sent and
confirmation of receipt. The time period in which a response to such Notice must
be given or any action taken with respect thereto (if any), however, shall
commence to run from the date of receipt if personally delivered or sent by
overnight courier, or if so deposited in the United States Mail, the earlier of
three (3) Business Days following such deposit or the date of receipt as
disclosed on the return receipt. Rejection or other refusal to accept or the
inability to deliver because of changed address for which no notice was given
shall be deemed to be receipt of the Notice sent. By giving at least fifteen
(15) days prior Notice thereof, the Borrower, a Lender or Agent shall have the
right from time to time and at any time during the term of this Agreement to
change their respective addresses and each shall have the right to specify as
its address any other address within the United States of America.
§20. RELATIONSHIP.
     Neither the Agent nor any Lender has any fiduciary relationship with or
fiduciary duty to the Borrower, any Guarantor or their respective Subsidiaries
arising out of or in connection with this Agreement or the other Loan Documents
or the transactions contemplated hereunder and thereunder, and the relationship
between each Lender and Agent, and the Borrower is solely that of a lender and
borrower, and nothing contained herein or in any of the other Loan Documents

87

--------------------------------------------------------------------------------

 

shall in any manner be construed as making the parties hereto partners, joint
venturers or any other relationship other than lender and borrower.
§21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.
     THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED HEREIN OR THEREIN, SHALL, PURSUANT TO NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK (INCLUDING ANY FEDERAL COURT SITTING
THEREIN). THE BORROWER FURTHER ACCEPTS, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF SUCH COURTS AND ANY RELATED APPELLATE COURT AND
IRREVOCABLY (i) AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY WITH RESPECT
TO THIS AGREEMENT AND ANY OF THE OTHER LOAN DOCUMENTS AND (ii) WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH A COURT IS AN INCONVENIENT FORUM. THE
BORROWER FURTHER AGREES THAT SERVICE OF PROCESS IN ANY SUCH SUIT MAY BE MADE
UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 19 HEREOF. IN
ADDITION TO THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING
THEREIN, THE AGENT OR ANY LENDER MAY BRING ACTION(S) FOR ENFORCEMENT ON A
NONEXCLUSIVE BASIS WHERE ANY COLLATERAL OR ASSETS OF THE BORROWER EXISTS AND THE
BORROWER CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS AND THE
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE
ADDRESS SPECIFIED IN SECTION 19 HEREOF.
§22. HEADINGS.
     The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.
§23. COUNTERPARTS.
     This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
§24. ENTIRE AGREEMENT, ETC.
     This Agreement and the other Loan Documents are intended by the parties as
the final, complete and exclusive statement of the transactions evidenced by
this Agreement and the Loan

88

--------------------------------------------------------------------------------

 

Documents. All prior or contemporaneous promises, agreements and understandings,
whether oral or written, are deemed to be superseded by this Agreement and the
Loan Documents, and no party is relying on any promise, agreement or
understanding not set forth in this Agreement and the Loan Documents. Neither
this Agreement nor any term hereof may be changed, waived, discharged or
terminated, except as provided in §27.
§25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.
     EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY WAIVES ITS RIGHT TO
A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS
AND OBLIGATIONS. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES
AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, PUNITIVE OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR THE AGENT HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR THE AGENT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT THE
AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS §25. THE BORROWER ACKNOWLEDGES THAT
IT HAS HAD AN OPPORTUNITY TO REVIEW THIS §25 WITH LEGAL COUNSEL AND THAT THE
BORROWER AGREES TO THE FOREGOING AS ITS FREE, KNOWING AND VOLUNTARY ACT.
§26. DEALINGS WITH THE BORROWER.
     The Agent, the Lenders and their affiliates may accept deposits from,
extend credit to, invest in, act as trustee under indentures of, serve as
financial advisor of, and generally engage in any kind of banking, trust or
other business with the Borrower, the Guarantors and their respective
Subsidiaries or any of their Affiliates regardless of the capacity of the Agent
or the Lender hereunder. The Lenders acknowledge that, pursuant to such
activities, KeyBank or its Affiliates may receive information regarding such
Persons (including information that may be subject to confidentiality
obligations in favor of such Person) and acknowledge that the Agent shall be
under no obligation to provide such information to them.
§27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
     Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term of
this Agreement or of any other instrument related hereto or mentioned herein may
be amended, and the performance or observance by the Borrower or the Guarantors
of any terms of this Agreement or such other

89

--------------------------------------------------------------------------------

 

instrument or the continuance of any Default or Event of Default may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Required Lenders.
Notwithstanding the foregoing, none of the following may occur without the
written consent of each Lender: (a) a reduction in the rate of interest on the
Notes (other than a reduction or waiver of default interest); (b) an increase in
the amount of the Commitments of the Lenders (except as provided in §2.10 and
§18.1); (c) a forgiveness, reduction or waiver of the principal of any unpaid
Loan or any interest thereon or fee payable under the Loan Documents; (d) a
change in the amount of any fee payable to a Lender hereunder; (e) the
postponement of any date fixed for any payment of principal of or interest on
the Loans; (f) an extension of the Maturity Date (except as provided in §2.9);
(g) a change in the manner of distribution of any payments to the Lenders or the
Agent; (h) the release of the Borrower, any Guarantor or any Collateral except
as otherwise provided in this Agreement; (i) an amendment of the definition of
Required Lenders or of any requirement for consent by all of the Lenders;
(j) any modification to require a Lender to fund a pro rata share of a request
for an advance of the Loan made by the Borrower other than based on its
Commitment Percentage; (k) an amendment to this §27; or (l) an amendment of any
provision of this Agreement or the Loan Documents which requires the approval of
all of the Lenders or the Required Lenders to require a lesser number of Lenders
to approve such action. The provisions of §14 may not be amended without the
written consent of the Agent. There shall be no amendment, modification or
waiver of any provision in the Loan Documents with respect to Letters of Credit
without the consent of the Issuing Lender. The Borrower agrees to enter into
such modifications or amendments of this Agreement or the other Loan Documents
as reasonably may be requested by KeyBank in connection with the syndication of
the Loan, provided that no such amendment or modification materially affects or
increases any of the obligations of the Borrower hereunder. No waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon. No course of dealing or delay or omission on the part of the
Agent or any Lender in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall
entitle the Borrower to other or further notice or demand in similar or other
circumstances.
§28. SEVERABILITY.
     The provisions of this Agreement are severable, and if any one clause or
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
§29. TIME OF THE ESSENCE.
     Time is of the essence with respect to each and every covenant, agreement
and obligation of the Borrower under this Agreement and the other Loan
Documents.
§30. NO UNWRITTEN AGREEMENTS.
     THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF

90

--------------------------------------------------------------------------------

 

PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. ANY ADDITIONAL TERMS OF THE
AGREEMENT BETWEEN THE PARTIES ARE SET FORTH BELOW.
§31. REPLACEMENT NOTES.
     Upon receipt of evidence reasonably satisfactory to the Borrower of the
loss, theft, destruction or mutilation of any Note, and in the case of any such
loss, theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory to the Borrower or, in the case of any such mutilation, upon
surrender and cancellation of the applicable Note, the Borrower will execute and
deliver, in lieu thereof, a replacement Note, identical in form and substance to
the applicable Note and dated as of the date of the applicable Note and upon
such execution and delivery all references in the Loan Documents to such Note
shall be deemed to refer to such replacement Note.
§32. NO THIRD PARTIES BENEFITED.
     This Agreement and the other Loan Documents are made and entered into for
the sole protection and legal benefit of the Borrower, the Guarantors, the
Lenders, the Agent and their permitted successors and assigns, and no other
Person shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents. All conditions to the performance of the obligations
of the Agent and the Lenders under this Agreement, including the obligation to
make Loans and issue Letters of Credit, are imposed solely and exclusively for
the benefit of the Agent and the Lenders and no other Person shall have standing
to require satisfaction of such conditions in accordance with their terms or be
entitled to assume that the Agent and the Lenders will refuse to make Loans or
issue Letters of Credit in the absence of strict compliance with any or all
thereof and no other Person shall, under any circumstances, be deemed to be a
beneficiary of such conditions, any and all of which may be freely waived in
whole or in part by the Agent and the Lenders at any time if in their sole
discretion they deem it desirable to do so. In particular, the Agent and the
Lenders make no representations and assume no obligations as to third parties
concerning the quality of the construction by the Borrower or any of their
Subsidiaries of any development or the absence therefrom of defects.
§33. PATRIOT ACT.
     Each Lender and the Agent (for itself and not on behalf of any Lender)
hereby notifies the Borrower that, pursuant to the requirements of the Patriot
Act, it is required to obtain, verify and record information that identifies the
Borrower, which information includes names and addresses and other information
that will allow such Lender or the Agent, as applicable, to identify the
Borrower in accordance with the Patriot Act.
[remainder of page intentionally left blank]

91

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, each of the undersigned have caused this Agreement to
be executed by its duly authorized representatives as of the date first set
forth above.
BORROWER:

            PACIFIC OFFICE PROPERTIES, L.P.,
a Delaware limited partnership
      By:   Pacific Office Properties Trust, Inc.,
a Maryland corporation    

            Its:   Sole general partner    

                  By:   /s/ James M. Kasim       Name:  James M. Kasim      
Its:  Chief Financial Officer
                    (SEAL)     

92

--------------------------------------------------------------------------------

 

            AGENT AND LENDERS:       KEYBANK NATIONAL ASSOCIATION, individually
and as Agent
      By:   /s/ Tayven Hike       Name:   Tayven Hike        Title:   Vice
President       

93