EXHIBIT 10.1
PROMISSORY NOTE
LOAN TERMS TABLE
Lender: KeyBank National Association, a national banking association, its
successors and assigns
Loan No.:
Lender’s Address: 911 Main Street, Suite #1500, Kansas City, Missouri 64105
Lender’s Facsimile No.: (816) 221-8848
Borrower: BMR-Shady Grove B LLC
Borrower’s Address: 17140 Bernardo Center Drive, Suite 222, San Diego,
California 92128
Borrower’s Facsimile No.: (858) 485-9843
Borrower’s Tax Identification Number:
Note Date: August 23, 2006
Original Principal Amount: $147,000,000.00
Maturity Date: September 1, 2016
Interest Rate: 5.97 percent (5.97%) per annum
Initial Interest Payment Per Diem: $24,377.50
Monthly P&I Commencement Date: October 1, 2011
Monthly P&I Payment: $878,506.00
Monthly Payment Date: October 1, 2006 and on the first day of each successive
month thereafter
     1. Loan Amount and Rate. FOR VALUE RECEIVED, Borrower promises to pay to
the order of Lender, the Original Principal Amount (or so much thereof as is
outstanding from time to time, which is referred to herein as the “Outstanding
Principal Balance” or “OPB”), with interest on the unpaid OPB from the date of
disbursement of the Loan (as hereinafter defined) evidenced by this Promissory
Note (“Note”) at the Interest Rate. Interest shall be calculated based on the
daily rate which is produced assuming a three hundred sixty (360) day year
multiplied by the actual number of days elapsed. The loan evidenced by this Note
will sometimes hereinafter be called the “Loan.” The above Loan Terms Table
(hereinafter referred to as the “Table”) is a part of the Note and all terms
used in this Note that are defined in the Table shall have the meanings set
forth therein.
     2. Principal and Interest Payments. Payments of principal and interest
shall be made as follows:
     (a) An interest payment on the date of disbursement of the Loan proceeds in
an amount calculated by multiplying the Initial Interest Payment Per Diem by the
number of days from (and including) the date of the disbursement of the Loan
proceeds through the last day of the calendar month in which the disbursement
was made;

 

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     (b) An interest only payment on each Monthly Payment Date prior to the
Monthly P&I Commencement Date, each of such payments to be applied to the
payment of interest computed at the Interest Rate;
     (c) Commencing on the Monthly P&I Commencement Date, a Monthly P&I Payment
on each Monthly Payment Date until the Maturity Date, each of such payments to
be applied: (i) to the payment of interest computed at the Interest Rate; and
(ii) the balance applied toward the reduction of the principal balance of the
Loan; and
     (d) If not sooner paid, the balance of the principal amount of the Loan,
all unpaid interest thereon, and all other amounts owed to Lender pursuant to
this Note or any other Loan Document (as hereinafter defined) or otherwise in
connection with the Loan or the security for the Loan shall be due and payable
on the Maturity Date.
     (e) All references to “Monthly Payment” in this Note shall mean either the
Monthly Interest Only Payment or the Monthly P&I Payment, as applicable.
     3. Security for Note. This Note is secured by an Indemnity Guaranty (the
“Indemnity Guaranty”) given by BMR-Shady Grove Road HQ LLC, a Maryland limited
liability company (“Property Owner”) which Indemnity Guaranty is secured by that
certain Indemnity Deed of Trust, Assignment of Leases and Rents, Security
Agreement and Fixture filing (the “Security Instrument”) encumbering the
Property. This Note, the Indemnity Guaranty, the Security Instrument, and all
other documents and instruments existing now or after the date hereof that
evidence, secure or otherwise relate to the Loan, including any assignments of
leases and rents, other assignments, security agreements, financing statements,
guaranties, indemnity agreements (including environmental indemnity agreements),
letters of credit, or escrow/holdback or similar agreements or arrangements,
together with all amendments, modifications, substitutions or replacements
thereof, to which Borrower, Property Owner, Key Principal, Guarantor or
Indemnitor, or their successors or assigns are a party are sometimes herein
collectively referred to as the “Loan Documents” or individually as a “Loan
Document.” All amounts that are now or in the future become due and payable
under this Note, the Indemnity Guaranty, the Security Instrument, or any other
Loan Document, including any Prepayment Consideration (as hereinafter defined)
and all applicable expenses, costs, charges, and fees, will be referred to
herein as the “Debt.” The remedies of Lender as provided in this Note, any other
Loan Document, or under applicable law shall be cumulative and concurrent, may
be pursued singularly, successively, or together at the discretion of Lender,
and may be exercised as often as an occasion shall occur. The failure to
exercise any right or remedy shall not be construed as a waiver or release of
the right or remedy respecting the same or any subsequent default.
     4. Payments. All amounts payable hereunder shall be payable in lawful money
of the United States of America to Lender at Lender’s Address or such other
place as the holder hereof may designate in writing. Each payment made hereunder
shall be made in immediately available funds and must state the Borrower’s Loan
Number. If any payment of principal or interest on this Note is due on a day
other than a Business Day (as hereinafter defined), such payment shall be made
on the next succeeding Business Day, and such extension of time shall be
included in computing interest in connection with such payment. Any payment on
this Note received after 2:00 o’clock p.m. local time at the place then
designated as the place

 

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for receipt of payments hereunder shall be deemed to have been made on the next
succeeding Business Day. All amounts due under this Note shall be payable
without set off, counterclaim, or any other deduction whatsoever. All payments
from Borrower to Lender following the occurrence and during the continuation of
an Event of Default shall be applied in such order and manner as Lender elects
in reduction of costs, expenses, charges, disbursements and fees payable by
Borrower hereunder or under any other Loan Document, in reduction of interest
due on unpaid principal, or in reduction of principal. Lender may, without
notice to Borrower or any other person, accept one or more partial payments of
any sums due or past due hereunder from time to time while an uncured Event of
Default exists hereunder, after Lender accelerates the indebtedness evidenced
hereby, and/or after Lender commences enforcement of its remedies under any Loan
Document or applicable law, without thereby waiving any Event of Default,
rescinding any acceleration, or waiving, delaying, or forbearing in the pursuit
of any remedies under the Loan Documents. Lender may endorse and deposit any
check or other instrument tendered in connection with such a partial payment
without thereby giving effect to or being bound by any language purporting to
make acceptance of such instrument an accord and satisfaction of the
indebtedness evidenced hereby. As used herein, the term “Business Day” shall
mean a day upon which commercial banks are not authorized or required by law to
close in the city designated from time to time as the place for receipt of
payments hereunder.
     5. Late Charge. If any sum payable under this Note or any other Loan
Document is not received by Lender by close of business on the fifth (5th) day
after the date on which it was due, Borrower shall pay to Lender an amount (the
“Late Charge”) equal to the lesser of (a) two percent (2%) of the full amount of
such sum or (b) the maximum amount permitted by applicable law in order to help
defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment. Any such Late Charge shall be secured by the Guaranty and
the other Loan Documents. The collection of any Late Charge shall be in addition
to, and shall not constitute a waiver of or limitation of, a default or Event of
Default hereunder or a waiver of or limitation of any other rights or remedies
that Lender may be entitled to under any Loan Document or applicable law.
     6. Default Rate. Upon the occurrence of an Event of Default (including the
failure of Borrower to make full payment on the Maturity Date), Lender shall be
entitled to receive and Borrower shall pay interest on the Outstanding Principal
Balance at the rate of three percent (3%) per annum above the Interest Rate
(“Default Rate”) but in no event greater than the maximum rate permitted by
applicable law. Interest shall accrue and be payable at the Default Rate from
the occurrence of an Event of Default until all Events of Default have been
fully cured or waived in writing by Lender. Such accrued interest shall be added
to the Outstanding Principal Balance, and interest shall accrue thereon at the
Default Rate until fully paid. Such accrued interest shall be secured by the
Indemnity Guaranty and the other Loan Documents. Borrower agrees that Lender’s
right to collect interest at the Default Rate is given for the purpose of
compensating Lender at reasonable amounts for Lender’s added costs and expenses
that occur as a result of Borrower’s default and that are difficult to predict
in amount, such as increased general overhead, concentration of management
resources on problem loans, and increased cost of funds. Lender and Borrower
agree that Lender’s collection of interest at the Default Rate is not a fine or
penalty, but is intended to be and shall be deemed to be reasonable compensation
to Lender for increased costs and expenses that Lender will incur if

 

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there occurs an Event of Default hereunder. Collection of interest at the
Default Rate shall not be construed as an agreement or privilege to extend the
Maturity Date or to limit or impair any rights and remedies of Lender under any
Loan Documents. If judgment is entered on this Note, interest shall continue to
accrue post-judgment at the greater of (a) the Default Rate or (b) the
applicable statutory judgment rate.
     7. Origination, Administration, Enforcement, and Defense Expenses. Borrower
shall pay Lender, on demand, all Administration and Enforcement Expenses (as
hereinafter defined) now or hereafter incurred by Lender, together with interest
thereon at the Default Rate, from the date paid or incurred by Lender until such
fees and expenses are paid by Borrower, whether or not an Event of Default or
Default then exists. For the purpose of this Note, “Administration and
Enforcement Expenses” shall mean all reasonable fees and expenses incurred at
any time or from time to time by Lender, including legal (whether for the
purpose of advice, negotiation, documentation, defense, enforcement or
otherwise), accounting, financial advisory, auditing, rating agency, appraisal,
valuation, title or title insurance, engineering, environmental, collection
agency, or other expert or consulting or similar services, in connection with:
(a) the origination of the Loan, including the negotiation and preparation of
the Loan Documents and any amendments or modifications of the Loan or the Loan
Documents, whether or not consummated; (b) the administration, servicing or
enforcement of the Loan or the Loan Documents, including any request for
interpretation or modification of the Loan Documents or any matter related to
the Loan or the servicing thereof (which shall include the consideration of any
requests for consents, waivers, modifications, approvals, lease reviews or
similar matters and any proposed transfer of the Property or any interest
therein), (c) any litigation, contest, dispute, suit, arbitration, mediation,
proceeding or action (whether instituted by or against Lender, including actions
brought by or on behalf of Borrower, Property Owner or Borrower’s or Property
Owner’s bankruptcy estate or any indemnitor or guarantor of the Loan or any
other person) in any way relating to the Loan or the Loan Documents including in
connection with any bankruptcy, reorganization, insolvency, or receivership
proceeding; (d) any attempt to enforce any rights of Lender against Borrower,
Property Owner or any other person that may be obligated to Lender by virtue of
any Loan Document or otherwise whether or not litigation is commenced in
pursuance of such rights; and (e) protection, enforcement against, or
liquidation of the Property or any other collateral for the Loan, including any
attempt to inspect, verify, preserve, restore, collect, sell, liquidate or
otherwise dispose of or realize upon the Loan, the Property or any other
collateral for the Loan. All Administration and Enforcement Expenses shall be
additional Debt hereunder secured by the Indemnity Guaranty, and may be funded,
if Lender so elects, by Lender paying the same to the appropriate persons and
thus making an advance on Borrower’s behalf.
     8. Prepayment; Defeasance.
     (a) Restrictions. Voluntary prepayment of this Note is prohibited except
during the last one hundred twenty (120) days of the term when prepayment may be
made in whole, but not in part, without payment of any Prepayment Consideration
(as hereinafter defined), on any Monthly Payment Date. Notwithstanding anything
contained in this Article 8 to the contrary, no Prepayment Consideration shall
be due in connection with a complete or partial prepayment resulting from: (i)
the application of insurance proceeds or condemnation awards pursuant to the
Security Instrument; or (ii) changes in tax or debt credit laws as may be
required

 

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pursuant to the Security Instrument, but Borrower shall be required to pay all
other sums due hereunder together with all interest accrued thereon. Any such
partial prepayments shall reduce the Outstanding Principal Balance, but shall
not reduce the amount of the Monthly Payment.
     (b) Defeasance.
          (i) Provided that as of the Release Date (as hereinafter defined) the
Debt has not been accelerated, no Event of Default exists, and no event has
occurred that with the passage of time, giving of notice, or modification or
termination of the automatic stay of Section 362 of the United States Bankruptcy
Code may become an Event of Default (“Default”), Borrower may cause the release
of the Property from the lien of the Security Instrument and the other Loan
Documents (“Defeasance”) on any Monthly Payment Date following the earlier of
(x) August 22, 2009 or (y) the date that is two (2) years and fifteen (15) days
after the “startup day” within the meaning of Section 860G(a)(9) of the Internal
Revenue Code of 1986, as amended (together with any successor statute and the
related Treasury Department Regulations including temporary regulations, the
“Code”) of any “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code (“REMIC”) that holds this Note upon Borrower’s
satisfaction of the following conditions:
     (A) Borrower shall provide Lender not less than thirty (30) days’ prior
written notice specifying a Business Day (such Business Day, or any extended
Business Day upon which Borrower and Lender may mutually agree is referred to
herein as the “Release Date”) on which the Defeasance Collateral (as hereinafter
defined) is to be delivered. Borrower may withdraw any proposed Defeasance, and
not obtain the release of the Property from the lien of the Security Instrument
pursuant to this Article 8, provided (x) notice of such withdrawal is delivered
to Lender not later than ten (10) days prior to the proposed Release Date, and
(y) Borrower reimburses Lender, its servicers or other agent(s) or third parties
for all reasonable costs and expenses (including reasonable attorneys’ fees)
incurred in connection with the withdrawn Defeasance proposal;
     (B) On the Release Date Borrower shall pay in full all accrued and unpaid
interest and all other sums due under this Note and under the other Loan
Documents up to the Release Date, including all reasonable costs and expenses
(including reasonable attorneys’ fees) incurred by Lender or its servicers or
other agent(s) or to or on behalf of any rating agencies or other third parties
in connection with such release and related transactions (including the review
of the proposed Defeasance Collateral and the preparation of the Defeasance
Security Agreement (as hereinafter defined) and related documentation), together
with a defeasance processing fee in the amount of $5,000; and
     (C) Borrower shall deliver the following, all of which must be satisfactory
to Lender, at or prior to the release of the Property and substitution of the
Defeasance Collateral:
          (1) Direct, non-callable and non-redeemable securities evidencing an
obligation to pay principal and interest in a full and timely

 

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manner that are direct obligations of the United States of America for the
payment of which its full faith and credit is pledged (the “Defeasance
Collateral”) in amounts sufficient to pay all scheduled principal and interest
payments required under this Note, which securities provide for payments on or
prior to, but as close as possible to all successive Monthly Payment Dates
occurring after the Release Date, with each such payment being equal to or
greater than the amount of the corresponding Monthly Payment required to be made
hereunder for the balance of the term hereof plus the amount required to be paid
on the Maturity Date (the “Scheduled Defeasance Payments”), each of which shall
be duly endorsed by the holder thereof as directed by Lender or accompanied by a
written instrument of transfer in form and substance reasonably satisfactory to
Lender (including such instruments as may be required by the depository
institution or other entity holding such securities or the issuer thereof, as
the case may be, to effectuate book-entry transfers and pledges through the
book-entry facilities of such institution) in order to perfect upon the delivery
of the Defeasance Security Agreement (as hereinafter defined) a valid, first
priority lien and security interest therein in favor of Lender in conformity
with all applicable state and federal laws governing granting of such security
interest;
          (2) any and all agreements, certificates, opinions, documents or
instruments reasonably required by Lender in connection with the Defeasance
including (a) a pledge and security agreement, in form and substance
satisfactory to Lender, creating a first priority security interest in favor of
Lender in the Defeasance Collateral (the “Defeasance Security Agreement”), and
(b) any and all agreements, certificates, opinions, documents, or instruments
reasonably required by Lender that affect or relate in any way to the
maintenance by any REMIC that holds this Note of its qualification and status
for tax purposes as a REMIC;
          (3) a certificate of Borrower certifying that (a) all of the
requirements set forth in this Section 8(b) have been satisfied, and (b) the
transactions that are being carried out pursuant to this Section 8(b) (including
specifically the release of the lien of the Security Instrument) are being
effected to facilitate the disposition of the Property or any other customary
commercial transaction and not as part of an arrangement to collateralize a
REMIC offering with obligations that are not real estate mortgages;
          (4) an opinion of counsel for Borrower, delivered by counsel
reasonably acceptable to Lender, stating, among other things but without
substantive qualification, other than customary qualifications, assumptions and
exceptions, that (a) Lender has a valid, duly perfected, first priority security
interest in the Defeasance Collateral and that the Defeasance Security Agreement
is enforceable against Borrower in accordance with its terms, (b) neither the
Defeasance nor any other transaction that occurs pursuant to the provisions of
this Section 8(b) has caused or will cause the Loan (including for this purpose
the Loan Documents) to cease to be a “qualified mortgage” within the meaning of
Section 860G of the Code, either under the provisions of Treasury
Regulation Sections 1.860G-2(a)(8) or 1.860G-2(b) (as such regulations may be
amended or superseded from time to time) or under any other provision of the
Code or otherwise, and (c) the tax qualification and status of any REMIC

 

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or any other entity that holds this Note will not be adversely impaired or
affected as a result of the Defeasance and/or any other transaction that occurs
pursuant to the provisions of this Section 8(b). The opinions set forth in
clauses (b) and (c) above may, in Lender’s discretion, be rendered by counsel to
Lender at Borrower’s sole cost and expense;
          (5) a certificate and opinion delivered by an independent certified
public accounting firm reasonably acceptable to Lender certifying that the
amounts of the Defeasance Collateral comply with all the requirements of this
Section including the requirement that the Defeasance Collateral shall generate
monthly amounts equal to or greater than the Scheduled Defeasance Payments
required to be paid under this Note through the Maturity Date;
          (6) Upon Lender’s request, written confirmation from the rating
agencies that have rated any of the securities issued by any REMIC that holds
this Note to the effect that the Defeasance will not result in a downgrading,
withdrawal or qualification of the respective ratings in effect immediately
prior to such Defeasance for any rated securities then outstanding or a waiver
from any such rating agency stating that it has declined to review the
Defeasance. If required by any rating agency or Lender, a non-consolidation
opinion with respect to the Defeasance Obligor (as hereinafter defined) in form
and substance reasonably satisfactory to Lender and such rating agency; and
          (7) Borrower shall (unless otherwise agreed to in writing by Lender),
at Borrower’s expense, assign all of its obligations under this Note, together
with the Defeasance Collateral, to a successor entity (“Defeasance Obligor”)
designated by Lender (which may include an entity that is owned and/or
controlled by Lender) that is a single purpose, bankruptcy remote entity as
determined by Lender in its reasonable discretion. The Defeasance Obligor shall
execute an assumption agreement pursuant to which it shall assume Borrower’s and
Property Owner’s obligations under this Note, the Loan Documents, and the
Defeasance Security Agreement. As conditions to such assignment and assumption,
Borrower shall (a) deliver to Lender an opinion of counsel delivered by counsel
reasonably acceptable to Lender stating, among other things, that such
assumption agreement has been duly authorized and is enforceable against
Borrower, Property Owner and the Defeasance Obligor in accordance with its
terms, that the Note, the Defeasance Security Agreement and the other Loan
Documents, as so assumed, have been duly authorized and are enforceable against
the Defeasance Obligor in accordance with their respective terms, and (b) pay
all costs and expenses including reasonable attorneys’ fees incurred by Lender
or its servicer or other agent(s) in connection with such assignment and
assumption (including the review of the proposed transferee and the preparation
of the assumption agreement and related documentation). Upon such assumption,
Borrower, Property Owner, and Guarantor shall be relieved of their obligations
under this Note, the Defeasance Security Agreement and the other Loan Documents,
other than those obligations which are specifically intended to survive the
payment of this Note and the termination, satisfaction or assignment of this
Note, the Defeasance Security Agreement or the other Loan Documents, or the
exercise of Lender’s rights and remedies under any of such documents and
instruments.

 

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     (ii) Upon compliance with the requirements of this Section, Lender shall
release the Property from the lien of the Security Instrument and the other Loan
Documents, and the Defeasance Collateral shall secure this Note and all other
obligations under the Loan Documents. Lender will, at Borrower’s expense,
execute and deliver any agreements reasonably requested by Borrower or Property
Owner to release the lien of the Security Instrument from the Property.
Borrower, pursuant to the Defeasance Security Agreement, shall authorize and
direct that the payments received from Defeasance Collateral be made directly to
Lender and applied to satisfy the obligations of Borrower under this Note.
     (iii) Upon the release of the Property in accordance with this
Section 8(b), Borrower shall have no further right to prepay this Note. Borrower
shall pay all costs and expenses incurred or to be incurred in connection with
the Defeasance and related transactions, including all charges imposed by any
rating agencies and any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of this Note or
otherwise required to accomplish the Defeasance and related transactions.
     (iv) If any notice of defeasance is given pursuant to Section 8(b)(i)(A),
Borrower shall be required to defease the Loan on the Release Date (unless such
notice is revoked by Borrower prior to the Release Date in which event Borrower
shall immediately reimburse Lender for any and all reasonable costs and expenses
incurred by Lender in connection with Borrower’s giving of such notice and
revocation).
     (v) At Borrower’s request, Lender may agree that Lender or its servicer or
other agent, acting on Borrower’s behalf as Borrower’s agent and
attorney-in-fact, shall purchase the Defeasance Collateral that Borrower is
required to deliver to Lender pursuant to Section 8(b)(i)(C)(1). If such an
agreement is made then Borrower shall deposit with Lender or Lender’s servicer
or other agent, as directed by Lender or Lender’s agent(s), on or prior to the
Release Date a sum of money sufficient to purchase the Defeasance Collateral. By
making such deposit Borrower shall thereby appoint Lender or Lender’s servicer
or other agent as Borrower’s agent and attorney-in-fact, with full power of
substitution, for the purpose of purchasing the Defeasance Collateral with the
funds so provided and delivering the Defeasance Collateral to Lender pursuant to
Section 8(b)(i)(C)(1).
     (vi) Notwithstanding any release of the Security Instrument or any
Defeasance hereunder, the Defeasance Obligor shall be bound by and obligated
under Sections 2.1 (Secured Obligations), 7.2 (Further Acts), 7.4(a) (Estoppel
Certificates), 11.2 (Application of Proceeds), 11.7 (Other Rights Etc.) and 14.2
(Marshalling and Other Matters) and Article 13 (Indemnification) of the Security
Instrument; provided, however, that all references therein to “Property” or
“Personal Property” shall be deemed to refer only to the Defeasance Collateral
delivered to Lender.
     (c) Default Prepayment. If a Default Prepayment (as hereinafter defined)
occurs, such Default Prepayment shall be deemed to be a voluntary prepayment
under this Note and in such case the applicable Prepayment Consideration (as
hereinafter defined) shall be due and payable to Lender in connection with such
Default Prepayment (unless Lender voluntarily and expressly waives in writing
the right to collect such Prepayment Consideration). The Prepayment
Consideration shall be secured by all security and collateral for the Loan and

 

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shall, after it becomes due and payable, be treated as if it were added to the
Outstanding Principal Balance for all purposes including accrual of interest,
judgment on the Note, foreclosure (whether through power of sale, judicial
proceeding, or otherwise) (“Foreclosure Sale”), redemption, and bankruptcy
(including pursuant to Section 506 of the United States Bankruptcy Code or any
successor provision); without limiting the generality of the foregoing, it is
understood and agreed that the Prepayment Consideration may be added to Lender’s
bid at any Foreclosure Sale. If Prepayment Consideration is due hereunder,
Lender shall deliver to Borrower a statement setting forth the amount and
determination of the Prepayment Consideration, and, provided that Lender shall
have in good faith applied the formula described below, Borrower shall not have
the right to challenge the calculation or the method of calculation set forth in
any such statement in the absence of manifest error, which calculation may be
made by Lender on any day during the thirty (30) day period preceding the date
of such prepayment.
     The term “Default Prepayment” shall mean a prepayment of any portion of the
principal amount of this Note made after the occurrence and during the
continuance of an Event of Default under any circumstances including a
prepayment in connection with (i) reinstatement of the Security Instrument
provided by statute under foreclosure proceedings or exercise of power of sale,
(ii) any statutory right of redemption exercised by Borrower or any other party
having a statutory right to redeem or prevent foreclosure or power of sale,
(iii) any sale in foreclosure or under exercise of a power of sale or otherwise
(including pursuant to a credit bid made by Lender in connection with such
sale), (iv) any other collection action by Lender, or (v) exercise by any
governmental authority of any civil or criminal forfeiture action with respect
to any collateral for the Loan. Prepayment Consideration shall be due and
payable upon acceleration of the Loan in accordance with the terms of this Note,
and the “Prepayment Date”, for the purpose of computing Prepayment
Consideration, shall be the date of acceleration of the Loan in accordance with
the terms of this Note. Exchange of this Note for a different instrument or
modification of the terms of this Note, including classification and treatment
of Lender’s claim (other than non-impairment under Section 1124 of the United
States Bankruptcy Code or any successor provision) pursuant to a plan of
reorganization in bankruptcy shall also be deemed to be a Default Prepayment
hereunder.
     The “Prepayment Consideration” (as the term is used in this Note) shall
mean the present value, as of the date of the occurrence of the Event of
Default, of the remaining scheduled payments of principal and interest from the
date of the occurrence of the Default through the Maturity Date (including any
balloon payment), which shall be determined by discounting such payments at the
Discount Rate (hereinafter defined) less the amount of principal being prepaid.
The term “Discount Rate” shall mean the rate that, when compounded monthly, is
equivalent to the Treasury Rate (hereinafter defined) when compounded
semi-annually. The term “Treasury Rate” shall mean the yield calculated by the
linear interpolation of the yields, as reported in Federal Reserve Statistical
Release H.15-Selected Interest Rates under the heading U.S. Government
Securities/Treasury Constant Maturities for the week ending prior to the
Prepayment Date, of U.S. Treasury constant maturities with maturity dates (one
longer and one shorter) most nearly approximating the Maturity Date. (If Release
H.15 is no longer published, Lender shall reasonably select a comparable
publication to determine the Treasury Rate.)

 

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     Borrower acknowledges that: (i) Lender has made the Loan to Borrower in
reliance on, and the Loan has been originated for the purpose of selling the
Loan in the secondary market to investors who will purchase the Loan or direct
or indirect interests therein in reliance on, the actual receipt over time of
the stream of payments of principal and interest agreed to by Borrower herein;
and (ii) Lender or any subsequent investor in the Loan will incur substantial
additional costs and expenses in the event of a prepayment of the Loan; and
(iii) the Prepayment Consideration is reasonable and is a bargained for
consideration and not a penalty and the terms of the Loan are in various
respects more favorable to Borrower than they would have been absent Borrower’s
agreement to pay Prepayment Consideration as provided herein. Borrower agrees
that Lender shall not, as a condition to receiving the Prepayment Consideration,
be obligated to actually reinvest the amount prepaid in any treasury obligation
or in any other manner whatsoever. Nothing contained herein shall be deemed to
be a waiver by Lender of any right it may have to require specific performance
of any obligation of Borrower hereunder including to make payments hereunder
strictly according to the terms hereof or to furnish Defeasance Collateral.
     In addition to Prepayment Consideration, Borrower shall pay all hedging and
breakage costs of any kind and in any amount incurred by Lender due to any
prepayment (including a Default Prepayment).
     9. Maximum Rate Permitted by Law. All agreements in this Note and all other
Loan Documents are expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount agreed to be paid hereunder for
the use, forbearance, or detention of money exceed the highest lawful rate
permitted under applicable usury laws. If, from any circumstance whatsoever,
fulfillment of any provision of this Note or any other Loan Document at the time
performance of such provision shall be due shall involve exceeding any usury
limit prescribed by law that a court of competent jurisdiction may deem
applicable hereto, then, ipso facto, the obligations to be fulfilled shall be
reduced to allow compliance with such limit, and if, from any circumstance
whatsoever, Lender shall ever receive as interest an amount that would exceed
the highest lawful rate, the receipt of such excess shall be deemed a mistake
and shall be canceled automatically or, if theretofore paid, such excess shall
be credited against the principal amount of the indebtedness evidenced hereby to
which the same may lawfully be credited, and any portion of such excess not
capable of being so credited shall be refunded immediately to Borrower.
     10. Events of Default; Acceleration of Amount Due. Lender may in its
discretion, without notice to Borrower, declare the entire Debt, including the
principal balance of the Loan, all accrued interest, all costs, expenses,
charges and fees payable under any Loan Document, and Prepayment Consideration
immediately due and payable, and Lender shall have all remedies available to it
at law or equity for collection of the amounts due, if any of the following (the
“Events of Default”) occurs:
     (a) Borrower fails to make full and punctual payment of any Monthly Payment
or any other amount payable on a monthly basis under this Note or any other Loan
Document within five (5) days of the date on which such payment was due; or

 

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     (b) Borrower fails to make full payment of the Debt when due, whether on
the Maturity Date, upon acceleration or prepayment, or otherwise; or
     (c) Borrower fails to make full and punctual payment of any Late Charges,
costs and expenses due hereunder, or any other sum of money required to be paid
to Lender under this Note, or under any other Loan Document (other than any
payment described in subclauses (a) and (b) immediately above), which failure is
not cured on or before the 5th business day after Lender’s written notice that
such payment is required; or
     (d) an Event of Default occurs under the Indemnity Guaranty, the Security
Instrument or any other Loan Document (as “Event of Default” is defined in such
document) that has continued beyond any applicable cure period therefor.
     11. Time of Essence. Time is of the essence with regard to each provision
contained in this Note.
     12. Transfer and Assignment. This Note may be freely transferred and
assigned by Lender. Borrower’s right to transfer its rights and obligations with
respect to the Debt, and to be released from liability under this Note, shall be
governed by Section 8 of this Note in the case of Defeasance, and otherwise
under the Security Instrument.
     13. Authority of Persons Executing Note. Borrower warrants and represents
that the persons or officers who are executing this Note and the other Loan
Documents on behalf of Borrower have full right, power and authority to do so,
and that this Note and the other Loan Documents executed by Borrower constitute
valid and binding documents, enforceable against Borrower in accordance with
their terms, and that no other person, entity, or party is required to sign,
approve, or consent to, this Note.
     14. Severability. The terms of this Note are severable, and should any
provision be declared by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions shall, at the option of Lender, remain
in full force and effect and shall in no way be impaired.
     15. Borrower’s Waivers. Without limiting Borrower’s rights to the notices
expressly provided hereunder (including under Section 10 hereof), Borrower and
all others liable hereon hereby waive presentation for payment, demand, notice
of dishonor, protest, and notice of protest, notice of intent to accelerate, and
notice of acceleration, stay of execution and all other suretyship defenses to
payment generally. No release of any security held for the payment of this Note,
or extension of any time periods for any payments due hereunder, or release of
collateral that may be granted by Lender from time to time, and no alteration,
amendment or waiver of any provision of this Note or of any of the other Loan
Documents, shall modify, waive, extend, change, discharge, terminate or affect
the liability of any guarantor or others (except Borrower) that may at any time
be liable for the payment of this Note or the performance of any covenants
contained in any of the Loan Documents.
     16. Governing Law. This Note shall be governed and construed generally
according to the laws of the State of Maryland without regard to the conflicts
of law provisions thereof (“Governing State”).

 

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     17. JURISDICTION AND VENUE. BORROWER AND LENDER HEREBY CONSENT TO PERSONAL
JURISDICTION IN THE GOVERNING STATE. VENUE OF ANY ACTION BROUGHT TO ENFORCE THIS
NOTE OR ANY OTHER LOAN DOCUMENT OR ANY ACTION RELATING TO THE LOAN OR THE DEBT
OR THE RELATIONSHIPS CREATED BY OR UNDER THE LOAN DOCUMENTS (“ACTION”)SHALL BE
IN A STATE OR FEDERAL COURT OF APPROPRIATE JURISDICTION LOCATED IN THE GOVERNING
STATE. BORROWER AND LENDER HEREBY CONSENT AND SUBMIT TO THE PERSONAL
JURISDICTION OF THE STATE COURTS OF THE GOVERNING STATE AND OF FEDERAL COURTS
LOCATED IN THE GOVERNING STATE IN CONNECTION WITH ANY ACTION AND HEREBY WAIVES
ANY AND ALL PERSONAL RIGHTS UNDER THE LAWS OF ANY OTHER STATE TO OBJECT TO
JURISDICTION WITHIN SUCH STATE FOR PURPOSES OF ANY ACTION. Borrower and Lender
hereby waive and agree not to assert, as a defense to any Action or a motion to
transfer venue of any Action, (i) any claim that it is not subject to such
jurisdiction, (ii) any claim that any Action may not be brought against it or is
not maintainable in those courts or that this Note or any of the other Loan
Documents may not be enforced in or by those courts, or that it is exempt or
immune from execution, (iii) that the Action is brought in an inconvenient
forum, or (iv) that the venue for the Action is in any way improper.
     18. Notices. Any notice or request required or permitted to be given
hereunder must be in writing and given (a) by depositing same in the United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested; (b) by delivering the
same in person to such party; (c) by transmitting a facsimile copy to the
correct facsimile phone number of the intended recipient (with a second copy to
be sent to the intended recipient by any other means permitted under this
Section 19); or (d) by depositing the same into the custody of a nationally
recognized overnight delivery service addressed to the party to be notified. In
the event of mailing, notices shall be deemed effective three (3) days after
posting; in the event of overnight delivery, notices shall be deemed effective
on the next Business Day following deposit with the delivery service; in the
event of personal service or facsimile transmissions, notices shall be deemed
effective when delivered. For purposes of notice, the addresses of the parties
shall be as set forth in the Table. From time to time either party may designate
another address than the address set forth for all purposes of this Note by
giving the other party no less than ten (10) days advance notice of such change
of address in accordance with the notice provisions hereof. A copy of any notice
sent, transmitted or delivered to Lender shall also be delivered to Cynthia M.
Hajost, Esq., Ballard Spahr Andrews & Ingersoll, LLP, 601 13th Street, N.W.,
Suite 1000 South, Washington, D.C. 20005, facsimile number: (202-626-9007).
     19. Avoidance of Debt Payments. To the extent that any payment to Lender
and/or any payment or proceeds of any collateral received by Lender in reduction
of the Debt is subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, to Borrower
(or Borrower’s successor) as a debtor in possession, or to a receiver, creditor,
or any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then the portion of the Debt intended to have been satisfied by
such payment or proceeds shall remain due and payable hereunder, be evidenced by
this Note, and shall continue in full force and effect as if such payment or
proceeds had never been received by Lender whether or not this Note has been
marked “paid” or otherwise cancelled or satisfied

 

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and/or has been delivered to Borrower, and in such event Borrower shall be
immediately obligated to return the original Note to Lender and any marking of
“paid” or other similar marking shall be of no force and effect.
     20. Nonrecourse.
     (a) Subject to the provisions of subsections (b) and (c) of this
Section 20, Lender shall not be entitled to recover any deficiency judgment
against Borrower or any member of Borrower on this Note, provided, however, the
foregoing shall not be interpreted to: (i) impair or affect the right of Lender
to enforce any of its rights or remedies (other than any right to a deficiency
judgment) provided for in any of the Loan Documents or under applicable law in
full accordance with the terms thereof including the right of Lender to name
Borrower, or Property Owner, as applicable, as a party defendant in any action
or suit for specific performance, foreclosure, or sale (or similar remedy) under
the Security Instrument or any other Loan Document; (ii) impair or affect the
validity or enforceability of any guaranty, indemnity agreement (including any
environmental indemnity agreement), letter of credit, or other similar third
party agreement or undertaking made in connection with this Note, Indemnity
Guaranty, the Security Instrument, or any other Loan Document; (iii) impair or
affect Lender’s right to offset any and all amounts outstanding under any of the
Loan Documents against any claim or amount that may be asserted against Lender
by Borrower, or Property Owner or any partners, members, shareholders, or other
owners of legal or beneficial interests in Borrower or Property Owner; or
(iv) affect the validity or enforceability of or impair the right of Lender to
bring suit and obtain specific performance or personal, recourse judgment to
enforce the liability of Borrower or any guarantor or indemnitor to the extent
of, and Borrower hereby agrees to be personally liable for, any loss, damage,
cost, expense or liability incurred by Lender (including all reasonable
attorneys’ fees and expenses and other collection and litigation expenses)
arising out of or in connection with any of the following:
     (A) Property Owner or any agent or employee of Property Owner
misappropriates any rents or other Property income or collateral proceeds
including insurance or condemnation proceeds or awards;
     (B) Property Owner or any agent or employee of Property Owner fails to
apply or pay over any tenant security deposits or other refundable deposits in
accordance with the terms of the applicable lease or other agreement or the
Security Instrument or any other Loan Document;
     (C) Property Owner or any agent or employee of Property Owner receives
rents or other payments from tenants more than one month in advance and fails to
apply them in accordance with the Loan Documents;
     (D) following the occurrence and during the continuation of an Event of
Default, Property Owner or any agent or employee of Property Owner (including
Property Owner in its capacity as a debtor or debtor in possession in a
bankruptcy proceeding) fails either to apply rents or other Property income,
whether collected before or after such Event of Default, to the ordinary,

 

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customary, and necessary expenses of operating the Property or, upon demand, to
deliver such rents or other Property income to Lender;
     (E) waste is committed on the Property during a period while Property Owner
or any agent or employee of Property Owner is in possession thereof (“waste”
meaning the diminution in the Property’s value resulting from Property Owner’s
gross negligence or willful failure to manage, maintain, repair and otherwise
operate the Property in a commercially reasonable manner);
     (F) any damage to the Property is caused as a result of the intentional
misconduct or gross negligence of Property Owner or any agent, or employee of
Property Owner;
     (G) a Prohibited Transfer (as defined in the Security Instrument) occurs
without Lender’s prior written consent pursuant to the provisions of Article 8
of the Security Instrument;
     (H) Subject to Property Owner’s right to contest set forth in the Security
Instrument, and subject to Permitted Exceptions, such governmental, public
utility and private restrictions, covenants, reservations, easements, licenses
or other agreements of an immaterial nature which may be granted by Grantor
after the date hereof and which do not have a material adverse effect on the
Property, and other liens permitted under the Security Instrument, if Property
Owner fails to apply Rents (1) received from tenants to pay insurance, taxes or
assessments, and liens in accordance with the terms of the Loan Documents,
(2) to pay insurance, taxes, assessments, and liens if the tenants under the
Leases fail to make such payments, or (3) received from tenants to pay other
liens or claims that could create liens affecting the Property (unless, if
applicable, Lender is escrowing funds for taxes and insurance and fails to make
such payments to the extent required under the Security Instrument or Lender has
taken possession of the Property following an Event of Default and has received
all Rents from the Property applicable to the period for which such insurance,
taxes or other items are due, and thereafter fails to make such payments to the
extent of the Rents received);
     (I) fraud or material misrepresentation by Borrower, Property Owner or any
guarantor, any indemnitor (or any agent, employee, or other person with actual
or apparent authority to make statements or representations on behalf of
Borrower, Property Owner, any guarantor or indemnitor (“apparent authority”
meaning such authority as the principal knowingly or negligently permits the
agent to assume, or which he holds the agent out as possessing)) other than
misrepresentations of a non-material nature which are not materially adverse to
the interest of Lender;
     (J) Property Owner fails, following the occurrence and during the
continuation of an Event of Default, to deliver to Lender on demand all security
deposits, books and records relating to the Property and in the possession or
control of Property Owner or any agent or employee of Property Owner; or

 

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     (K) at any time prior to the Release (as defined in the Security
Instrument) there occurs a Material Impairment on account of an Easement (each
as defined in the Security Instrument) which Lender shall not have approved
under Exhibit C of the Security Instrument and which shall have become an Event
of Default; provided, however, that for the avoidance of doubt (1) there shall
at no time occur a “Material Impairment” under this Section 20(a)(K) on account
of any Easement for which Property Owner sought and obtained Lender’s approval
pursuant to the provisions of Exhibit C of the Security Instrument and
(2) Lender shall not be permitted to enforce the provisions of this
Section 20(a)(K) against Borrower, Property Owner or any Guarantor or Indemnitor
at any time on or after the Release.
     (b) Notwithstanding anything to the contrary in the provisions of
subsection (a) of this Section, subsection (a) of this Section shall not apply
and Borrower shall be personally liable for the Debt if (i) there shall be any
violation of the due-on-sale or due-on-encumbrance provisions of the Security
Instrument, (ii) Borrower or Property Owner shall at any time hereafter make an
assignment for the benefit of its creditors, or (iii) the Property or any part
thereof shall at any time hereafter become property of the estate or an asset in
(a) a voluntary bankruptcy, insolvency, receivership, liquidation, winding up,
or other similar type of proceeding, or (b) an involuntary bankruptcy or
insolvency proceeding (other than one filed by Lender) that is not dismissed
within sixty (60) days of filing.
     (c) Nothing herein shall be deemed to constitute a waiver by Lender of any
right Lender may have under Sections 506(a), 506(b), 1111(b) or any other
provision of the United States Bankruptcy Code to file a claim for the full
amount of the Debt (as defined in the Security Instrument) or to require that
all collateral shall continue to secure all of the Debt.
     21. Miscellaneous. Neither this Note nor any of the terms hereof, including
the provisions of this Section, may be terminated, amended, supplemented, waived
or modified orally, but only by an instrument in writing executed by the party
against which enforcement of the termination, amendment, supplement, waiver or
modification is sought, and the parties hereby: (a) expressly agree that it
shall not be reasonable for any of them to rely on any alleged, non-written
amendment to this Note; (b) irrevocably waive any and all right to enforce any
alleged, non-written amendment to this Note; and (c) expressly agree that it
shall be beyond the scope of authority (apparent or otherwise) for any of their
respective agents to agree to any non-written modification of this Note. This
Note may be executed in several counterparts, each of which counterpart shall be
deemed an original instrument and all of which together shall constitute a
single Note. The failure of any party hereto to execute this Note, or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder. As used in this Note, (i) the terms “include,”
“including” and similar terms shall be construed as if followed by the phrase
“without being limited to,” (ii) any pronoun used herein shall be deemed to
cover all genders, and words importing the singular number shall mean and
include the plural number, and vice versa, (iii) all captions to the Sections
hereof are used for convenience and reference only and in no way define, limit
or describe the scope or intent of, or in any way affect, this Note, (iv) no
inference in favor of, or against, Lender or Borrower shall be drawn from the
fact that such party has drafted any portion hereof or any other Loan Document,
(v) the words “Lender”, “Borrower” and “Property Owner” shall include their
respective successors (including, in the case of Property Owner, any subsequent
owner or owners of the Property or any part thereof or

 

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any interest therein and Property Owner in its capacity as debtor-in-possession
after the commencement of any bankruptcy proceeding), assigns, heirs, personal
representatives, executors and administrators, and (vi) the words “hereof”,
“herein”, “hereby”, “hereunder”, and similar terms in this Note refer to this
Note as a whole and not to any particular provision or section of this Note.
Wherever Lender’s judgment, consent, approval or discretion is required under
this Note or Lender shall have an option, election, or right of determination or
any other power to decide any matter relating to the terms of this Note,
including any right to determine that something is satisfactory or not
(“Decision Power”), such Decision Power shall be exercised in the sole and
absolute discretion of Lender except as may be otherwise expressly and
specifically provided herein. Such Decision Power and each other power granted
to Lender upon this Note or any other Loan Document may be exercised by Lender
or by any authorized agent of Lender (including any servicer and/or
attorney-in-fact), and Borrower hereby expressly agrees to recognize the
exercise of such Decision Power by such authorized agent. BORROWER ACKNOWLEDGES
AND AGREES THAT IT HAS BEEN PROVIDED WITH SUFFICIENT AND NECESSARY TIME AND
OPPORTUNITY TO REVIEW THE TERMS OF THIS NOTE, THE GUARANTY, THE SECURITY
INSTRUMENT, AND EACH OF THE LOAN DOCUMENTS, WITH ANY AND ALL COUNSEL IT DEEMS
APPROPRIATE, AND THAT NO INFERENCE IN FAVOR OF, OR AGAINST, LENDER OR BORROWER
SHALL BE DRAWN FROM THE FACT THAT EITHER SUCH PARTY HAS DRAFTED ANY PORTION
HEREOF, OR THE SECURITY INSTRUMENT, OR ANY OF THE LOAN DOCUMENTS.
     22. Waiver of Jury Trial. BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED ON THE LOAN OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THE LOAN, THIS NOTE, THE SECURITY INSTRUMENT, OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN), OR
ACTION OF BORROWER OR LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER’S MAKING OF THE LOAN.
     23. Local Law Provisions. In the event of any inconsistencies between the
terms and conditions of this Section and any other terms and conditions of this
Note (other than the terms and conditions of Section 25), the terms and
conditions of this Section shall be binding.
Commercial Loan. The Loan is a commercial loan as that term is used in the
provisions of Title 12 of the Commercial Law Article of the Annotated Code of
Maryland.
Confession of Judgment. IN THE EVENT THIS NOTE OR ANY INSTALLMENT DUE HEREUNDER
IS NOT PAID WHEN DUE (WHETHER ON THE DATE DUE OR BY ACCELERATION) OR UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT UNDER ANY OF THE LOAN DOCUMENTS, THE BORROWER
AUTHORIZES THE CLERK OR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR IT AND
ENTER JUDGMENT BY CONFESSION FOR THE PRINCIPAL BALANCE THEN

 

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OUTSTANDING UNDER THIS NOTE, TOGETHER WITH INTEREST, COURT COSTS AND ACTUAL
REASONABLE ATTORNEY’S FEES.
     24. Additional Provisions. In the event of any inconsistencies between the
terms and conditions of this Section and any other terms and conditions of this
Note, the terms and conditions of this Section shall be binding.
NONE.
[SIGNATURE PAGE FOLLOWS]

 

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Intending to be fully bound, Borrower has executed this Note effective as of the
day and year first above written.

            BORROWER:

BMR-SHADY GROVE B LLC,
a Delaware limited liability company
      By:   BMR-SHADY GROVE HOLDINGS LLC,       a Delaware limited liability
company, its Member            By:   BIOMED REALTY, L.P.,       a Maryland
limited partnership, its Member        By:   /s/ R. Kent Griffin         R. Kent
Griffin        Chief Financial Officer