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Exhibit 10.15
 
FIXED RATE TERM LOAN AGREEMENT
 
between
 
MISSION WEST PROPERTIES, L.P.,
MISSION WEST PROPERTIES, L.P. I, MISSION WEST PROPERTIES, L.P. II and MISSION
WEST PROPERTIES, L.P. III

each, an “Individual Borrower” and collectively, as “Borrower”
 
and
 
HARTFORD LIFE INSURANCE COMPANY,
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY and
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
 
collectively, as “Lender”
 
October 1, 2008
 
Hartford Loan No. BHM04X7M6
 

 
 

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TABLE OF CONTENTS
 
                                                                                                                                                                                                                                                             
    Page
 

ARTICLE 1.
CERTAIN DEFINITIONS 
1

 
 
Section 1.1.
Certain Definitions 
1

 
 
Section 1.2.
General Construction 
10

 
 
Section 1.3.
Lender’s Discretion 
11

 
 
Section 1.4.
Knowledge of Borrower Parties 
11

 
ARTICLE 2.
LOAN TERMS 
11

 
 
Section 2.1.
The Loan 
11

 
 
Section 2.2.
Interest Rate; Late Charge 
12

 
 
Section 2.3.
Terms of Payment; Maturity Date 
12

 
 
Section 2.4.
Prepayment 
13

 
ARTICLE 3.
INSURANCE, CONDEMNATION, AND IMPOUNDS 
15

 
 
Section 3.1.
Insurance 
15

 
 
Section 3.2.
Use and Application of Insurance Proceeds 
18

 
 
Section 3.3.
Condemnation Awards 
22

 
 
Section 3.4.
Impounds 
22

 
ARTICLE 4.
LEASING MATTERS 
23

 
 
Section 4.1.
Representations and Warranties 
23

 
 
Section 4.2.
Lender’s Lease Approval Rights 
23

 
 
Section 4.3.
Covenants 
24

 
 
Section 4.4.
Tenant Estoppels 
24

 
 
Section 4.5.
Conflict with Assignment of Leases and Rents 
25

 
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES 
25

 
 
Section 5.1.
Organization and Power 
25

 
 
Section 5.2.
Validity of Loan Documents 
25

 
 
Section 5.3.
Liabilities; Litigation 
25

 
 
Section 5.4.
Taxes and Assessments 
25

 
 
Section 5.5.
Other Agreements; Defaults 
25

 
 
Section 5.6.
Compliance with Legal Requirements 
25

 
 
Section 5.7.
Location of Borrower 
26

 
 
Section 5.8.
ERISA 
26

 
 
i
 

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TABLE OF CONTENTS
(continued)
                                                                                                                                                                                                                                                             
    Page
 
 
 
Section 5.9.
Margin Stock 
26

 
 
Section 5.10.
Tax Filings 
26

 
 
Section 5.11.
Solvency 
26

 
 
Section 5.12.
Full and Accurate Disclosure 
26

 
 
Section 5.13.
Property Conditions 
27

 
 
Section 5.14.
Terrorism and Anti-Money Laundering 
27

 
 
Section 5.15.
Financing Transaction 
27

 
 
Section 5.16.
Personal Property 
27

 
 
Section 5.17.
Additional Real Property 
27

 
 
Section 5.18.
Material Agreements 
27

 
ARTICLE 6.
FINANCIAL REPORTING; AUDITS 
28

 
 
Section 6.1.
Financial Statements 
28

 
 
Section 6.2.
Accounting Principles 
28

 
ARTICLE 7.
COVENANTS 
29

 
 
Section 7.1.
Due on Sale and Encumbrance; Transfers of Interests 
29

 
 
Section 7.2.
Taxes; Charges 
32

 
 
Section 7.3.
Alterations and Renovations 
32

 
 
Section 7.4.
Operation; Maintenance 
32

 
 
Section 7.5.
Taxes on Security 
33

 
 
Section 7.6.
Compliance with Loan Documents; Further Assurances33

 
 
Section 7.7.
Estoppel Certificates 
34

 
 
Section 7.8.
Notice of Certain Events 
34

 
 
Section 7.9.
Indemnification 
34

 
 
Section 7.10.
Property Management 
34

 
 
Section 7.11.
Material Agreements 
35

 
 
Section 7.12.
Intentionally Omitted 
35

 
 
Section 7.13.
ERISA 
35

 
 
Section 7.14.
Appraisal 
36

 
 
Section 7.15.
Release of Collateral 
36

 
 
Section 7.16.
Substitution of Collateral 
37

 
 
 
ii
 

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TABLE OF CONTENTS
(continued)
                                                                                                                                                                                                                                                             
    Page
 
 
 
Section 7.17.
Excess Collateral 
39

 
ARTICLE 8.
EVENTS OF DEFAULT 
40

 
 
Section 8.1.
Defaults 
40

 
 
Section 8.2.
Remedies 
42

 
 
Section 8.3.
Lender’s Right to Perform the Obligations 
43

 
ARTICLE 9.
MISCELLANEOUS 
43

 
 
Section 9.1.
Notices 
43

 
 
Section 9.2.
Amendments and Waivers 
44

 
 
Section 9.3.
Limitation on Interest 
44

 
 
Section 9.4.
Invalid Provisions 
44

 
 
Section 9.5.
Payment and Reimbursement of Expenses 
44

 
 
Section 9.6.
Approvals; Third Parties; Conditions 
45

 
 
Section 9.7.
Lender Not in Control; No Partnership 
45

 
 
Section 9.8.
Time of the Essence 
45

 
 
Section 9.9.
Successors and Assigns 
46

 
 
Section 9.10.
Servicing, Transfers, Assignments and Participations 
46

 
 
Section 9.11.
Replacement Documents 
46

 
 
Section 9.12.
Renewal, Extension or Rearrangement 
47

 
 
Section 9.13.
Waivers 
47

 
 
Section 9.14.
Cumulative Rights 
47

 
 
Section 9.15.
Exhibits and Schedules 
47

 
 
Section 9.16.
Titles of Articles, Sections and Subsections 
47

 
 
Section 9.17.
Promotional Material 
47

 
 
Section 9.18.
Survival 
47

 
 
Section 9.19.
Governing Law 
47

 
 
Section 9.20.
Entire Agreement 
47

 
 
Section 9.21.
Counterparts 
47

 
 
Section 9.22.
Obligations of Borrower, Joint and Several 
47

 
 
Section 9.23.
WAIVER OF PUNITIVE OR CONSEQUENTIAL DAMAGES 
48

 
 
iii
 

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TABLE OF CONTENTS
(contunued)
                                                                                                                                                                                                                                                             
    Page
 
 
 
 
 
Section 9.24.
WAIVER OF JURY TRIAL 
48

 
ARTICLE 10.
LIMITATIONS ON LIABILITY 
48

 
 
Section 10.1.
Limitation on Liability 
48

 

iv 
 

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LIST OF EXHIBITS AND SCHEDULES
 
Exhibit A-1 through A-12              -           Legal Description of each
Property
 
Exhibit B                                           -           Closing
Statement
 
Schedule 1                                       -           Allocated Loan
Amounts
 
Schedule 2                                       -           Excess Collateral
 
Schedule 4.1                                    -           Rent Roll
 
Schedule 5.16                                  -           Personal Property
 
Schedule 5.18                                  -           List of Material
Agreements
 

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Hartford Loan No. BHM04X7M6
 
FIXED RATE TERM LOAN AGREEMENT
 
This FIXED RATE TERM LOAN AGREEMENT (this “Agreement”) is entered into as of
October 1, 2008 by and among MISSION WEST PROPERTIES, L.P., MISSION WEST
PROPERTIES, L.P. I, MISSION WEST PROPERTIES, L.P. II and MISSION WEST
PROPERTIES, L.P. III, each a Delaware limited partnership (each an “Individual
Borrower” and collectively, “Borrower”), and HARTFORD LIFE INSURANCE COMPANY,
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY and HARTFORD LIFE AND ANNUITY
INSURANCE COMPANY, each a Connecticut corporation (together with their
respective successors and assigns, collectively, “Lender”).
 
RECITALS:
 
WHEREAS, Borrower desires to obtain the Loan (as defined herein) from Lender;
and
 
WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in
accordance with the conditions and terms of this Agreement and the other Loan
Documents,
 
NOW, THEREFORE, in consideration of the covenants set forth in this Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree, represent and warrant
as follows:
 
             ARTICLE 1.                             
 
CERTAIN DEFINITIONS
 
Section 1.1. Certain Definitions.  As used herein, the following terms have the
meanings indicated:
 
“Affiliate” means, as to any Person, any other Person that directly or
indirectly (through one or more intermediaries) controls, is controlled by or is
under common control with the specified Person.  For purposes of this
definition, “Control” shall be deemed to exist if a Person possesses, directly
or indirectly, the power to direct or cause the direction of the management and
decision making policies of such other Person, whether through ownership of
voting securities, by contract, or otherwise.
 
“Allocated Loan Amount” means, for any Property, the Allocated Loan Amount set
forth on Schedule 1.
 
“Anti-Money Laundering Laws” means the USA Patriot Act of 2001, the Bank Secrecy
Act, as amended through the date hereof, Executive Order 13324 – Blocking
Property and Prohibiting Transactions with Persons Who Commit, Threaten to
Commit, or Support Terrorism, together with all annexes thereto, as amended from
time to time, and other federal laws and regulations and executive orders
administered by the United States Department of the Treasury, Office of Foreign
Assets Control (“OFAC”) which prohibit, among other things, the engagement in
transactions with, and the provision of services to, certain foreign countries,
territories, entities and individuals (such individuals include specially
designated nationals, specially designated narcotics traffickers and other
parties subject to OFAC sanction and embargo programs), and such additional laws
and programs administered by OFAC which prohibit dealing with individuals or
entities in certain countries regardless of whether such individuals or entities
appear on any of the OFAC lists.
 
“Applicable Prepayment Fee” means a prepayment fee payable by Borrower to Lender
in an amount equal to:
 
(a)    For any prepayment tendered (or deemed tendered) during the Lockout
Period, other than a prepayment tendered in connection with a Partial Release
pursuant to Section 7.15, the Lockout Prepayment Fee;
 
 
 
 

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(b)    For any prepayment tendered (or deemed tendered) for the period from and
including October 1, 2009 through the end of the Lockout Period in connection
with a Partial Release pursuant to Section 7.15, a prepayment fee equal to
Lockout Yield Maintenance;
 
(c)    For any prepayment tendered (or deemed tendered) during the period from
and including the first Business Day following the expiration of the Lockout
Period through and including June 30, 2018, a prepayment fee equal to Standard
Yield Maintenance;
 
(d)     For any prepayment tendered (or deemed tendered) during the period from
and including July 1, 2018 through and including the Scheduled Maturity Date, no
prepayment fee (including Lockout Yield Maintenance or Standard Yield
Maintenance) shall be payable in connection with a prepayment.
 
“Application” means the Mortgage Loan Application dated September 7, 2008,
submitted by Carveout Indemnitor to Lender, as the same was modified (if at all)
by the Commitment (as defined in the Application).
 
“Assignment of Leases and Rents” means, collectively, each Assignment of Leases
and Rents, now or hereafter executed by any Borrower Party for the benefit of
Lender, which, collectively, convey to Lender an interest in the Leases and the
Rents, as more fully described therein.
 
“Assignment of Management Agreement” means, collectively, each Assignment of
Management Agreement and Subordination of Management Fees, now or hereafter
executed by any Borrower Party, and consented to by each Property Manager
thereto, for the benefit of Lender, which, collectively, convey to Lender an
interest in each Management Agreement as more fully described therein.
 
“Assignment of Property Documents” means, collectively, each Assignment of
Property Documents, now or hereafter executed by any Borrower Party for the
benefit of Lender, which, collectively, convey to Lender an interest in all
contracts, licenses, permits, agreements and warranties associated with the
ownership and operation of each Property, as more fully described therein.
 
“Assumption Fee” has the meaning ascribed to such term in Section 7.1(c).
 
“Assumption Request” has the meaning ascribed to such term in Section 7.1(c).
 
“Assumption Work Fee” has the meaning ascribed to such term in Section 7.1(c).
 
“Authorized Representative” means, for any Person, an authorized executive
officer (which, for purposes of this Agreement, means a president, vice
president, secretary, treasurer, chief executive officer or chief operating
officer), member, manager or partner of such Person acting in a representative
(and not such Person’s individual) capacity, who is duly authorized by all
necessary action to bind Borrower contractually and whose responsibilities with
such Person require that he/she has knowledge relating to the subject matter of
the applicable certification or affidavit.
 
“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”, as amended from time to time, and any successor statute or
statutes and all rules and regulations from time to time promulgated thereunder.
 
“Borrower” shall have the meaning ascribed to such term in the preamble hereof.
 
“Borrower Party” or “Borrower Parties” means, individually and/or collectively,
Borrower, Carveout Indemnitor, any General Partner and their respective
Affiliates (including any Property Manager that is an Affiliate); provided,
however, that any Person who is an officer, director, shareholder, or employee
of Carveout Indemnitor or any General Partner shall be included as a Borrower
Party only to the extent that such Person is acting solely in such capacity as
an officer, director, shareholder, or employee.
 
 
 
2

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“Business Day” means any day, other than a Saturday, Sunday, legal holiday or
any other day on which national banks in Hartford, Connecticut are authorized or
required by law to close for general banking business.
 
“Carveout Indemnitor” means Mission West Properties, Inc., a Maryland
corporation.
 
“Carveout Indemnity” means the Carveout Indemnity Agreement, dated as of the
Funding Date, and executed by Carveout Indemnitor to and for the benefit of
Lender.
 
“Casualty Consultant” has the meaning ascribed to such term in Section 3.2(e).
 
“Closing Affidavit” means the Closing Affidavit dated as of the Funding Date
executed by Borrower and Carveout Indemnitor to and for the benefit of Lender,
setting forth certain representations and warranties of Borrower and Carveout
Indemnitor as of the Funding Date.
 
“Closing Statement” means the closing statement attached as Exhibit B showing
total costs relating to the subject transaction and use of the Loan proceeds.
 
“Collateral” has the collective meaning ascribed to such term in the Mortgage.
 
“Collateral Substitution” has the meaning ascribed to such term in Section 7.16.
 
“Collateral Substitution Fee” has the meaning ascribed to such term in
Section 7.16.
 
“Contract Rate” means, as the context so requires, the non-default per annum
rate of interest accruing on the outstanding principal balance of the Loan as
set forth in Section 2.2(a).
 
“Converted Treasury Yield” means the yield available, or if there is more than
one yield available, the average yields of United States Treasury non-callable
bonds and notes having a maturity date closest to (before, on, or after) the
Scheduled Maturity Date, as reported in the Wall Street Journal or similar
publication on the fifth (5th) Business Day preceding the date prepayment will
be made, converted to a monthly equivalent yield (the monthly “equivalent yield”
being the rate which, when compounded monthly, is equivalent to the selected
Treasury rate when compounded semi-annually).  The Converted Treasury Yield
shall be calculated by Lender and, absent manifest error, shall be deemed
conclusive.
 
“Debt” means, for any Person, without duplication:  (i) all indebtedness of such
Person for borrowed money, for amounts drawn under a letter of credit, or for
the deferred purchase price of property for which such Person or its assets is
liable, (ii) all unfunded amounts under a loan agreement, letter of credit, or
other credit facility for which such Person would be liable, if such amounts
were advanced under the credit facility, (iii) all amounts required to be paid
by such Person as a guaranteed payment, including guaranteed payments to
partners, members or other equity owners, or a preferred or special dividend,
including any mandatory redemption of shares or interests, (iv) all indebtedness
guaranteed by such Person, directly or indirectly, (v) all obligations under
leases that constitute capital leases for which such Person is liable, and (vi)
all obligations of such Person under interest rate swaps, caps, floors, collars
and other interest hedge agreements, in each case whether such Person is liable
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations such Person otherwise assures a creditor against loss.
 
“Debt Service” means the monthly payments of interest, principal and any other
scheduled payments due in connection with the Loan for the period of time in
question, but excluding escrows or reserves required pursuant to the terms of
the
 
“Debt Service Coverage Ratio” means a quotient, expressed as a percentage, of
(i) projected Net Operating Income for the period in question, divided by (ii)
projected Debt Service to become due and payable for such period.  The Net
Operating Income and Debt Service shall be determined by Lender in the exercise
of its reasonable judgment.
 
 
 
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“Default Rate” means the lesser of (i) the maximum rate of interest allowed by
applicable law for commercial loans of this type, and (ii) four percent (4%) per
annum in excess of the Contract Rate.
 
“Demand Period” means a period of fifteen (15) days, commencing on the date a
written demand is issued by Lender and expiring at Lender’s close of business on
the fifteenth (15th) day following the date of said demand.
 
“Environmental Indemnity Agreement” means the Environmental Indemnity Agreement
dated as of the Funding Date, executed by Borrower and Carveout Indemnitor for
the benefit of Lender, and pertaining to environmental matters affecting the
Portfolio.
 
“Equipment” means all “equipment” as defined in the UCC, in which Borrower has
any right, title or interest, whether now owned or hereafter acquired, including
all of the following (regardless of how classified under the UCC):  all building
materials, construction materials, personal property constituting furniture,
fittings, signage, computer equipment, leasehold improvements, machinery,
devices, interior improvements, appurtenances, equipment, plant, fixtures,
computers, electronic data processing equipment, telecommunications equipment
and other fixed assets now owned or hereafter acquired by Borrower, all Proceeds
(as defined in the UCC) thereof and all additions to, substitutions for,
replacements of or accessions to any of the foregoing items and all attachments,
components, parts (including spare parts) and accessories, whether installed
thereon or affixed thereto, all regardless of whether the same are located at a
Property or are located elsewhere (including in warehouses or other storage
facilities or in the possession of or on the premises of a bailee, vendor or
manufacturer) for purposes of manufacture, storage, fabrication or
transportation.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
 
“Escrow Agent” means First American Title Insurance Company, responsible for the
consummation of the transaction contemplated by this Agreement pursuant to the
Escrow Instructions.
 
“Escrow Instructions” mean Lender’s written escrow instruction to Escrow Agent
relating to the consummation of the transaction contemplated by this Agreement.
 
“Event of Default” has the meaning ascribed to such term in Article 8.
 
“Excess Collateral” has the meaning ascribed to such term in Section 7.17.
 
“Excess Collateral Release” has the meaning ascribed to such term in Section
7.17.
 
“Funding Date” shall be considered the date that the proceeds of the Loan are
wired or delivered to the Escrow Agent, regardless of the date that the Escrow
Agent releases such funds to Borrower.
 
“GAAP” means generally accepted accounting principles in the United States of
America in effect as of the date of determination, in all cases, consistently
applied from year to year.
 
“General Partner” means, individually and/or collectively, Carveout Indemnitor
and any other Person who may at any time in the future, with Lender’s approval
(such approval not to be unreasonably withheld), become a general partner of any
Individual Borrower.
 
“Governmental Authority” means any court, board, agency, commission, office or
other authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence, claiming jurisdiction over the Collateral or any part thereof, or
any rights or remedies available to Lender under the Loan Documents, at law or
in equity.
 
“Guaranty” means the Carveout Indemnity.
 
“Impounds” has the meaning ascribed to such term in Section 3.4(a).
 
 
 
4

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“Improvements” has the collective meaning ascribed to such term in the Mortgage.
 
“Individual Borrower” has the meaning ascribed to such term in the preamble
hereof.
 
“Insurance” has the meaning ascribed to such term in Section 3.1(a).
 
“Insurance Premiums” has the meaning ascribed to such term in Section 3.1(b).
 
“Lease” or “Leases” have the collective meanings ascribed to such terms in the
Mortgage.
 
“Legal Requirements” means all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions of Governmental Authorities affecting the Collateral or
any part thereof, or the construction, use, alteration or operation thereof, or
any part thereof, whether now or hereafter enacted and in force, and all
permits, licenses and authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to any Borrower, at any time in force
affecting the Collateral or any part thereof, including any which may
(i) require repairs, modifications or alterations in or to any Property or any
part thereof or (ii) in any way limit the use and enjoyment of the Collateral.
 
“Lien” means any interest in or to, or claim against, the Collateral, securing
an obligation owed to, or evidencing a claim by, any Person other than the owner
of the subject Property, whether such interest or claim is based on common law,
statute or contract, including the lien or security interest arising from a deed
of trust, mortgage, assignment, encumbrance, pledge, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes.  The term “Lien” shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting the subject
Property.
 
“Loan” means the loan in the aggregate principal amount of One Hundred Fifteen
Million Dollars ($115,000,000.00) to be funded by Lender to Borrower under and
subject to this Agreement, to be evidenced by the Note and to be secured by the
Loan Documents.
 
“Loan Documents” means, collectively: (i) this Agreement, (ii) the Note, (iii)
the Mortgage, (iv) the Assignment of Leases and Rents, (v) the Assignment of
Property Documents, (vi) the Carveout Indemnity, (vii) the Environmental
Indemnity Agreement, (viii) the Closing Affidavit, (ix) Uniform Commercial Code
financing statements, (x) such assignments of management agreements, contracts
and other rights as may be requested by Lender, (xi) all other documents now or
hereafter executed by Borrower, Carveout Indemnitor or any other Person to
evidence or secure the payment or the performance of the Obligations or
otherwise executed in connection with the documents described in the foregoing
items (i) through (x), including the Assignment of Management Agreement and
including all documents hereafter executed in connection with any Collateral
Substitution, (xii) the Application (provided that any inconsistency between the
terms of the Application and the terms of the Loan Documents shall be controlled
by the terms of the Loan Documents), and (xiii) all amendments, modifications,
renewals, restatements, extensions, substitutions and replacements of any of the
foregoing items.
 
“Lockout Period” means the period commencing on the Funding Date and ending on
September 30, 2010.
 
“Lockout Prepayment Fee” has the meaning ascribed to such term in Section
2.4(f).
 
“Lockout Yield Maintenance” means a yield maintenance prepayment premium equal
to the greater of: (A) one percent (1%) of the outstanding principal balance of
the Note being prepaid; and (B) an amount determined by:
 
(i)    Calculating the sum of the present values of all unpaid principal and
interest payments required under the Loan Documents from and including the date
a prepayment is tendered through and including the Scheduled Maturity Date,
including the present value of the outstanding principal balance of the Note as
of such
 
 
 
5

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Scheduled Maturity Date (prior to the application of the principal being
prepaid), utilizing a discount rate equal to the Converted Treasury Yield,
divided by the frequency of the interest payments made during a calendar year;
and
 
(ii)    Subtracting from such sum the outstanding principal balance (prior to
application of the principal being prepaid) as of the date prepayment will be
made; and
 
(iii)    Multiplying such remainder by the quotient of (A) the principal being
prepaid, divided by (B) the outstanding principal balance as of the date of
prepayment (prior to application of the principal being prepaid.
 
“Major Damage Event” means any fire or other casualty to any Property or the
other Collateral, or any condemnation proceeding relating to any Property: (i)
for which the total cost to repair or restore, as determined in the reasonable
estimation of Lender after reasonable prior consultation with Borrower, will
exceed five percent (5.00%) of the Allocated Loan Amount associated with the
affected Property, and (ii) that occurs while an Event of Default exists.
 
“Major Lease” means any Lease (i) covering 250,000 square feet or more of space
within any Property (including any series of Leases to the Tenant or an
Affiliate of such Tenant covering in the aggregate 250,000 square feet or more
of space within the Portfolio), (ii) which includes a material modification
(meaning any material increase in the economic obligations of the “lessor” or
“landlord” under the Lease, any material diminution of the economic obligations
of the “lessee” or “tenant” under the Lease, or any material diminution in the
rights or protections afforded the “lessor” or “landlord” under the Lease) to
the standard form lease approved by Lender (such approval not to be unreasonably
withheld), (iii) with an initial term of less than three (3) years or more than
ten (10) years, (iv) that either (y) grants the “lessee” or “tenant” under the
Lease any purchase option or right of first refusal to purchase all or any
portion of any Property, or (z) grants the “lessee” or “tenant” under the Lease
any interest in the ownership of any Property or provides any incentives
equivalent to an ownership interest in any Property, (v) that is not part of an
arms length transaction, or is to Borrower, Carveout Indemnitor, an Affiliate of
Borrower or Carveout Indemnitor, or a creditor of Borrower or Carveout
Indemnitor, or (vi) pursuant to which the “lessee” or “tenant” under the Lease
is not obligated to take possession within 30 days following completion of the
required improvements.
 
“Management Agreement” means any property management agreement hereafter entered
into between any Borrower Party and a Property Manager related to any Property
and any and all amendments, modifications, renewals, extensions, replacements or
supplements thereto permitted in accordance with the terms of the Loan
Documents.
 
“Material Agreement” means any contract or agreement entered into by any
Borrower Party or any Property Manager which cannot be terminated within thirty
(30) days without cause or payment of a termination fee and would be binding on
Lender or any Property upon Lender foreclosing its Lien on the affected Property
(or otherwise accepting a deed-in-lieu of foreclosure).
 
“Maturity Date” means the earlier to occur of (i) the Scheduled Maturity Date
and (ii) any earlier date on which the Loan is required to be paid in full, by
acceleration or otherwise, under this Agreement or any of the other Loan
Documents.
 
“Mortgage” means, collectively, each deed of trust, mortgage or other property
security instrument now or hereafter executed by any Borrower Party in favor of
Lender, securing such Borrower Party’s obligations under the Loan Documents and
encumbering, among other things, any Property.
 
“Net Operating Income” means, for any period, the amount by which Operating
Revenues exceed Operating Expenses for such period.
 
“Net Proceeds” has the meaning ascribed to such term in Section 3.2(b).
 
“Net Proceeds Deficiency” has the meaning ascribed to such term in Section
3.2(g).
 
 
 
6

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“Note” means, collectively, each promissory note evidencing the repayment of the
Loan, now or hereafter executed or assumed by Borrower and payable to the order
of Lender, including: (i) the Promissory Note dated as of the Funding Date, in
the stated principal amount of $90,000,000.00, executed by Borrower and payable
to the order of Hartford Life Insurance Company, a Connecticut corporation, (ii)
the Promissory Note dated as of the Funding Date, in the stated principal amount
of $15,000,000.00, executed by Borrower and payable to the order of Hartford
Life and Annuity Insurance Company, a Connecticut corporation, and (iii) the
Promissory Note dated as of the Funding Date, in the stated principal amount of
$10,000,000.00, executed by Borrower and payable to the order of Hartford Life
and Accident Insurance Company, a Connecticut corporation.
 
“Obligations” means, collectively: (i) the Loan, (ii) all other principal and
all interest, fees, expenses, charges, reimbursements, and other amounts due
under or secured by the Loan Documents, (iii) all principal, interest and other
amounts which may hereafter be loaned by Lender, its successors or assigns, to
or for the benefit of Borrower or Carveout Indemnitor, when evidenced by a
promissory note or other instrument which, by its terms, is governed or secured
by any of the Loan Documents, and (iv) all other indebtedness, obligations,
covenants, and liabilities now or hereafter existing of any kind of Borrower or
Carveout Indemnitor to Lender under any of the Loan Documents.
 
“OFAC Prohibited Person” means a country, territory or Person (i) listed on,
included within or associated with any of the countries, territories or Persons
referred to on The Office of Foreign Assets Control’s List of Specially
Designated Nationals and Blocked Persons or any other prohibited person lists
maintained by any Governmental Authority, or otherwise included within or
associated with any of the countries, territories or Persons referred to in or
prohibited by OFAC or any other Anti-Money Laundering Laws, or (ii) which pays,
donates, transfers or otherwise assigns any property, money, goods, services, or
other benefits from any Property directly or indirectly, to any countries,
territories or Persons on or associated with any country, territory or Person on
such list or included in such laws.
 
“Operating Expenses” means, without duplication, all reasonable and necessary
expenses of operating any Property or Properties in question in the ordinary
course of business which are computed in accordance with GAAP (on an accrual
basis) and which are directly associated with and fairly allocable to such
Property or Properties in question for the applicable period, including Taxes,
insurance premiums, maintenance and utility costs, a reserve for replacements
and/or repairs, management fees and costs payable under any Management Agreement
(which fees and costs under any Management Agreement shall not exceed prevailing
market rates), recurring accounting, legal, and other professional fees, fees
relating to environmental audits and income and expense audits and other
expenses incurred by Lender and reimbursed by Borrower under this Agreement and
the other Loan Documents, wages, salaries, and personnel expenses properly
allocated to such Property or Properties in question, and any other category of
recurring property expense that is customary for a property of the type and size
as such Property or Properties in question and is reasonably approved by Lender;
but excluding Debt Service, capital expenditures, any of the foregoing expenses
which are paid from deposits to cash reserves previously included as Operating
Expenses, any payment or expense for which any Borrower Party was or is to be
paid or reimbursed from proceeds of the Loan or for which any Borrower Party was
or is to be reimbursed from proceeds under insurance or by any third party, any
non-cash charges such as depreciation and amortization, and federal, state or
local income taxes, or legal and other professional fees unrelated to the
operation of such Property or Properties in question, in each case subject to
reasonable adjustment by Lender in accordance with its then current audit
policies and procedures.
 
“Operating Revenues” means, without duplication, all cash receipts and other
income of any Borrower Party attributable to the ownership and operation of any
Property or Properties in question, or otherwise arising in respect of such
Property or Properties in question after the Funding Date, computed in
accordance with GAAP (on an accrual basis, but without treating any Rents on a
straight-line basis), and which are properly allocable to such Property or
Properties in question for the applicable period, including receipts from Leases
and parking agreements, license and concession fees and charges and other
miscellaneous operating revenues, proceeds from rental or business interruption
insurance, and withdrawals from cash reserves (except to the extent any expense
paid therewith are excluded from Operating Expenses); but excluding any interest
income from any source, security deposits and earnest money deposits until they
are forfeited by the depositor, income from Tenants in bankruptcy, advance
rentals until they are earned, capital contributions to any Borrower Party and
proceeds from a sale, casualty, condemnation or other disposition of any portion
of such Property or Properties in question, and other proceeds from
 
 
 
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non-recurring or extraordinary events, in each case subject to reasonable
adjustment by Lender in accordance with its then current audit policies and
procedures.
 
“Partial Release” has the meaning ascribed to such term in Section 7.15.
 
“Partial Release Prepayment” has the meaning ascribed to such term in Section
7.15.
 
“Payment Date” means the first (1st) calendar day of each calendar month,
commencing on November 1, 2008, and continuing on the first (1st) calendar day
of each calendar month thereafter; provided that if the first (1st) calendar day
of any month is not a Business Day, then the “Payment Date” shall be the first
Business Day immediately following the first (1st) calendar day of such month;
provided further that a change in the Payment Date in accordance with the
immediately preceding proviso shall not change the period for which interest is
calculated in accordance with Section 2.2(b).
 
“Permitted Encumbrances” has the collective meaning ascribed to such term in the
Mortgage.
 
“Permitted Transfer” means:
 
(a)    (i)  Transfers of shares or other securities of Carveout Indemnitor by
the holders thereof on any national securities exchange or other stock market on
which the shares or other securities of Carveout Indemnitor are listed or in
private transactions; provided that transfers made in connection with the sale
or merger of Carveout Indemnitor shall not be permitted by this subclause (i)
and shall be governed by subclause (iii) below;
 
  (ii)  Issuances of shares or other securities in Carveout Indemnitor
(including the issuance of such shares in connection with the conversion of
operating partnership units in any Individual Borrower or the issuance of such
shares in connection with the exercise of any stock options); provided that
issuances made in connection with the sale or merger of Carveout Indemnitor
shall not be permitted by this subclause (ii) and shall be governed by subclause
(iii) below; or
 
  (iii)  Transfers or issuances of shares or other securities in Carveout
Indemnitor in connection with the sale or merger of Carveout Indemnitor, or any
other transaction with Carveout Indemnitor subject to Rule 145(a) of the United
States Securities and Exchange Commission (“Rule 145(a)”); provided that (A)
immediately following any such Transfer or issuance under this subclause (iii),
Carveout Indemnitor or its successor (1) has a Tangible Net Worth of at least
$100,000,000; and (2) is an owner or manager of properties used for research and
development, office or industrial purposes whose executive officers have at
least ten (10) years experience in the ownership and/or management of properties
used for research and development, office or industrial purposes in major
metropolitan areas in the United States; and (B) if in connection with any such
sale or merger or other Rule 145(a) transaction, Carveout Indemnitor is no
longer a separate legal entity complying with the requirements of subclause (i)
above, then the successor to Carveout Indemnitor, prior to the effective date of
any such sale, merger or other Rule 145(a) transaction, must execute and deliver
to Lender a Carveout Indemnity and Environmental Indemnity Agreement
substantially in the form of the Carveout Indemnity and Environmental Indemnity
Agreement executed by Carveout Indemnitor as of the Funding Date, together with
reasonable evidence of such entity’s power and authority to execute, deliver and
perform under such agreements (including an opinion of counsel in form
reasonably required by Lender); or
 
(b)                 Issuances of limited partnership interests in any Individual
Borrower, including issuances of operating partnership units in any Individual
Borrower, and Transfers by a limited partner of limited partnership interests in
any Individual Borrower.
 
“Person” means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, trustee, estate, limited liability
company, limited liability partnership, unincorporated organization, real estate
investment trust, or any other form of entity.
 
“Personal Property” has the collective meaning ascribed to such term in the
Mortgage.
 
 
 
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“Policy” or “Policies” has the meaning ascribed to such term in Section 3.1(b).
 
“Portfolio” means, collectively, all of the Properties.
 
“Potential Default” means the occurrence of any event or condition that, with
the giving of notice, the passage of time, or both, would constitute an Event of
Default.
 
“Prepayment Notice” means the written notice to be given by Borrower to Lender
at least thirty (30) days but not more than sixty (60) days prior to any
prepayment of the Loan permitted under Section 2.4.
 
“Property” or “Properties” means, as of any date, each of the parcels of land
owned by a Borrower Party, encumbered by a Mortgage as of such date, together
with all Improvements located on such parcels.  As of the Funding Date, each
Property within the Portfolio is described within Exhibit A-1 through Exhibit
A-12.
 
“Property Manager” means any property manager hereafter engaged by any Borrower
Party pursuant to the terms and conditions of Section 7.10, and any replacement
or successor permitted under the terms of the Loan Documents.
 
“Qualified Insurer” has the meaning ascribed to such term in Section 3.1(b).
 
“Rent Roll” has the meaning ascribed to such term in Section 4.1.
 
“Rents” has the collective meaning ascribed to such term in the Mortgage.
 
“Restoration” has the meaning ascribed to such term in Section 3.2(a).
 
“Restoration Documents” has the meaning ascribed to such term in Section 3.2(e).
 
“Restoration Retainage” has the meaning ascribed to such term in Section 3.2(f).
 
“San Ignacio Properties” means those Properties located at 6311-51 San Ignacio
Avenue, San Jose, California and more particularly described on Exhibit A-12.
 
“Scheduled Maturity Date” means October 1, 2018.
 
“Servicer” has the meaning ascribed to such term in Section 9.10.
 
“Standard Yield Maintenance” means a yield maintenance prepayment premium equal
to the greater of: (A) in connection with a deemed or permitted partial
prepayment, one percent (1%) of the outstanding principal balance of the Note
being prepaid, and in connection with a deemed or permitted prepayment in full,
one percent (1%) of the outstanding principal balance of the Note (prior to
application of the principal being prepaid); and (B) an amount determined by:
 
(i) Calculating the sum of the present values of all unpaid principal and
interest payments required under the Loan Documents from and including the date
a prepayment is tendered through and including the Scheduled Maturity Date,
including the present value of the outstanding principal balance of the Note as
of such Scheduled Maturity Date (prior to the application of the principal being
prepaid), utilizing a discount rate equal to the sum of (A) the Converted
Treasury Yield plus (B) fifty (50) basis points, divided by the frequency of the
interest payments made during a calendar year; and
 
(ii) Subtracting from such sum the outstanding principal balance (prior to
application of the principal being prepaid) as of the date prepayment will be
made; and
 
 
 
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(iii) Multiplying such remainder by the quotient of (A) the principal being
prepaid, divided by (B) the outstanding principal balance as of the date of
prepayment (prior to application of the principal being prepaid.
 
“State” means the State of California.
 
“Tangible Net Worth” means tangible assets minus tangible liabilities as
determined in accordance with GAAP.
 
“Taxes” means all real estate taxes and assessments, franchise taxes and
charges, personal property taxes, and other governmental charges relating to any
Property (whether or not any such charge or imposition may become Lien upon the
applicable Property) that become due and payable during the term of the Loan.
 
“Tenants” has the collective meaning ascribed to such term in the Mortgage.
 
“Title Policy” means, collectively, the ALTA (or equivalent) mortgagee title
insurance policies issued by First American Title Insurance Company (the “Title
Company”) which are, in the aggregate, for the full amount of the Loan, and each
of which (i) has an effective date as of the Funding Date (unless any such
policy is issued subsequent to the Funding Date as provided in Section 7.16, in
which case such policy shall have an effective date as of the closing of such
Collateral Substitution), (ii) contains no exceptions (printed or otherwise)
other than those approved by Lender (in the exercise of its judgment), (iii)
includes all reasonable and customary endorsements required by Lender, and (iv)
otherwise complies with Lender’s title requirements and is otherwise in
substance and form acceptable to Lender (in the exercise of its reasonable
judgment).
 
“Transfer” means any direct or indirect, voluntary or involuntary sale,
transfer, conveyance, mortgage, pledge, assignment, encumbrance, alienation,
grant or other comparable action relating to the legal and/or beneficial
ownership of, title to or interests in any Property, or any Borrower Party;
provided, however, that “Transfer” shall not include (i) the leasing of space
within any Property, (ii) direct or indirect transfers of interests in any
Borrower Party in compliance with the requirements of Section 7.1(b), or (iii)
transfers of the Portfolio in compliance with the requirements of Section 7.1(c)
or any Property in compliance with the requirements of Section 7.15, Section
7.16 or Section 7.17, all of which are deemed to be Permitted Transfers.
 
“UCC” means the Uniform Commercial Code as in effect from time to time in each
state where any Property is located; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
or priority of the security interest in any item or portion of the Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than each state where any Property is located, “UCC” shall mean the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection or priority.  Wherever this Agreement refers to terms as defined
in the UCC, if such term is defined in more than one Article of the UCC, the
definition in Article 9 of the UCC shall control.
 
Section 1.2.    General Construction.  Unless otherwise noted or the context
shall indicate otherwise:  (i) all “Article” and “Section” references shall be
to Articles or Sections of this Agreement, (ii) all uses of the word “including”
shall mean “including, without limitation”, (iii) the words “hereof,” “herein”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, (iv) all references to “day” or “days” shall mean calendar days, (v)
all meanings attributed to defined terms herein shall be equally applicable to
both the singular and plural forms of the terms so defined, and (vi) all
references to a “Loan Document” shall mean such document as it is constituted as
of the Funding Date, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time. The use of the phrases
“upon the occurrence of an Event of Default,” “Event of Default exists,” “Event
of Default has occurred,” “Event of Default shall have occurred and remain
uncured” or similar phrases in this Agreement or the other Loan Documents are
intended to mean that an Event of Default will only cease to exist following
acceptance by Lender, in its discretion (unless acceptance of a cure and
reinstatement is mandatory under applicable law), of a cure of such Event of
Default upon such terms and conditions as Lender may require in its discretion
(with any such acceptance of a cure of an Event of Default to be evidenced by a
written reinstatement confirmation issued by Lender), and use of any of the
foregoing phrases does not mean that Borrower, Carveout
 
 
 
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Indemnitor or any other Person has the right to any additional grace periods or
cure rights following the occurrence of an Event of Default or that Lender is
obligated under any circumstance to accept any cure offered by Borrower,
Carveout Indemnitor or any other Person following the occurrence of an Event of
Default (unless acceptance of a cure and reinstatement is mandatory under
applicable law).
 
Section 1.3.    Lender’s Discretion.  When used in this Agreement and the other
Loan Documents, unless otherwise specifically qualified by a reasonableness
standard, the phrase (a) “satisfactory to Lender” (or comparable phrases) shall
mean “in form and substance satisfactory to Lender in all respects as determined
by Lender in the exercise of its sole and absolute discretion,” (b) “with
Lender’s consent” or “with Lender’s approval” (or comparable phrases) shall mean
such consent or approval may be granted or withheld in Lender’s sole and
absolute discretion, and (c) “acceptable to Lender,” “in Lender’s discretion” or
“in Lender’s judgment” (or comparable phrases) shall mean acceptable to Lender,
at Lender’s discretion and/or determined by Lender, in each instance in Lender’s
sole and absolute judgment or discretion.  Lender agrees that if Lender has
expressly agreed not to unreasonably withhold its consent or approval on a
particular issue, then use of the phrase “not to be unreasonably withheld” or
comparable phrases in this Agreement or the other Loan Documents shall mean “not
to be unreasonably withheld, conditioned or delayed”; provided, however, that if
Lender shall fail or refuse to give consent or approval, Borrower shall not be
entitled to any damages for any withholding or delay in issuance of such
approval or consent, and Borrower’s sole remedy shall be to bring an action
seeking injunction or specific performance.
 
Section 1.4.    Knowledge of Borrower Parties.  For purposes of the Loan
Documents, the phrases “to Borrower’s knowledge”, “to Carveout Indemnitor’s
knowledge”, “to Grantor’s knowledge”, “to Assignor’s knowledge”, “to
Indemnitor’s knowledge”, or comparable phrases (including “to the best of” a
Person’s knowledge) shall mean with respect to Borrower and Carveout Indemnitor,
the current knowledge of Carl E. Berg or Raymond V. Marino, who are Authorized
Representatives of one or more Borrower Parties and are charged with
responsibilities relating to the acquisition, ownership, management and
operation of the Portfolio, after reasonable and prudent inquiry consistent with
each of their management responsibilities, including inquiry of the Property
Manager (if any), but without any personal liability of any such individual to
Lender.
 
ARTICLE 2.                                

 
                                                                                                                                    
LOAN TERMS
 
Section 2.1.                     The Loan
 
(a)    The Loan evidenced by the Note shall be funded and repaid in accordance
with this Agreement, and any amount borrowed and repaid under this Agreement may
not be re-borrowed.  The proceeds of the Loan shall be used for the purposes set
forth on the Closing Statement attached hereto as Exhibit B.
 
(b)    The Loan shall be made upon Lender’s receipt, review, approval and/or
confirmation of each of the following:
 
           (i)    Each of the items specified in Section 5 of the Application
and/or on the preliminary closing agenda circulated by Lender’s legal counsel
(as the same may be amended from time to time prior to the Funding Date), each
to be delivered at Borrower’s cost and expense within the time periods specified
in Section 5 of the Application, and each in form and content reasonably
satisfactory to Lender;
 
           (ii) The Closing Affidavit executed by an Authorized Representative
of Borrower and by an Authorized Representative of Carveout Indemnitor,
confirming that (a) since the date of the Application (1) no material, adverse
change has occurred in the financial condition of any Borrower Party or in the
Net Operating Income of any Property; (2) no condemnation or adverse zoning or
usage change proceeding has been initiated or, to the knowledge of Borrower
Parties, has been threatened against any Property; (3) no Property has suffered
any material damage by fire or other casualty which has not been fully repaired;
and (4) to the knowledge of Borrower Parties, no law, regulation, ordinance,
moratorium, injunctive proceeding, restriction, litigation, action, citation or
similar proceeding or matter has been enacted, adopted,
 
 
 
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or threatened by any Governmental Authority, which could reasonably be
anticipated to have a material, adverse effect on any Borrower Party and/or any
Property; (b) to the knowledge of Borrower Parties, no Event of Default exists
as of the Funding Date; (c) no Leases currently exist in connection with any
Property other than as set forth in the Rent Roll; and (d) all fees and
commissions payable to real estate brokers, mortgage brokers, or any other
brokers or agents in connection with the Loan have been paid or will be paid on
the Funding Date, except for the fees and other costs incurred by the Borrower
and Lender in connection with any Excess Collateral Release;
 
           (iii) The Closing Statement, showing total costs relating to closing
of the Loan and all uses of the proceeds of the Loan in all material respects;
 
           (iv) Payment of Lender’s costs and expenses in documenting and
closing the Loan, including fees and expenses of Lender’s inspecting engineers,
appraiser, consultants, and outside legal counsel;
 
           (v) If the Funding Date occurs on a date other than the first (1st)
calendar day of a month, stub period interest for the period from the Funding
Date to and including the last day of the calendar month in which the Funding
Date occurs;
         
           (vi) Such other reasonable documents, items or information as Lender
or its counsel may require; and
 
           (vii) Evidence of compliance with the other terms and conditions
specified in this Agreement or any other Loan Document.
 
Section 2.2.    Interest Rate; Late Charge
 
(a)    The outstanding principal balance of the Loan shall bear interest at the
rate of six and twenty-one one hundredths percent (6.21%) per annum.
 
(b)    Interest shall be computed for the calendar month immediately preceding
the applicable Payment Date or the Maturity Date on the basis of a fraction, the
denominator of which is three hundred sixty (360) and the numerator of which is
thirty (30) (except for any partial month, in which case the numerator shall be
the actual number of days which have then elapsed during the period in
question).  Each determination by Lender of the amount of interest due and
payable on each Payment Date shall be conclusive and binding for all purposes,
absent manifest error.
 
(c)    If Lender does not receive any installment of Debt Service or Impounds
(if any Impounds are required) by 2:00 p.m. (Hartford, Connecticut time) on the
fifth (5th) calendar day of the month in which such installment is due
(excluding the full amount of the Obligations due on the Maturity Date, for
which no late charge or grace period shall apply), Borrower shall pay to Lender,
within the Demand Period, a one-time late charge on such overdue amount (for the
additional expense, time and effort in collecting and handling such overdue
payment, as liquidated damages and not as a penalty) equal to the lesser of
(i) the maximum amount permitted by applicable law, and (ii) five percent (5%)
of such delinquent amount.  Any such late charge shall be in addition to, and
not in lieu of, interest at the Default Rate and any other rights, powers and
remedies available to Lender and shall be in addition to any attorneys’ fees and
expenses incurred by Lender in connection with such overdue payment.  During the
existence of any Event of Default, the Loan shall bear interest at the Default
Rate.
 
Section 2.3.    Terms of Payment; Maturity Date
 
(a)     The Loan shall be payable as follows:
 
           (i)    Commencing on the first Payment Date and continuing to and
including the Payment Date immediately preceding the Maturity Date, Borrower
shall pay to Lender level monthly payments of principal and interest in the
amount of Eight Hundred Thirty-Seven Thousand Eight Hundred Eighty-Eight and
48/100 Dollars ($837,888.48) each, representing interest, calculated in arrears
for the calendar month
 
 
 
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 immediately preceding such Payment Date in accordance with Section 2.2(b), and
principal in monthly installments in accordance with an assumed 20-year
amortization schedule.
 
           (ii) From and after the payment of any Partial Release Prepayment,
the amount of the monthly payments of interest and/or principal shall be
recalculated by Lender and shall be based on the then-outstanding principal
balance of the Loan as of such prepayment date over an assumed amortization
period of 240 months minus the number of months elapsed since the first Payment
Date.
 
(b)    On the Maturity Date, Borrower shall pay to Lender all principal
outstanding under the Note or otherwise in respect of the Loan, accrued and
unpaid interest, and all other Obligations due under the Loan Documents.
 
(c)     Except during the existence of any Event of Default, all payments
received by Lender under the Loan Documents shall be applied: first, to any fees
and expenses due to Lender under the Loan Documents, including any Applicable
Prepayment Fee; second, to any Default Rate interest and/or late charges; third,
to Impounds (if any are required pursuant to the terms of the Loan Documents);
fourth to accrued and unpaid interest under the Note; fifth, to the principal
sum of the Note, and sixth, to any other amounts due under the Loan
Documents.  During the existence of an Event of Default, payments received by
Lender may be applied to the Obligations in the order or amounts determined by
Lender in its discretion.
 
(d)    Except as otherwise specifically provided herein, all payments and
prepayments under this Agreement and the Note shall be made to Lender not later
than 2:00 p.m. (Hartford, Connecticut time) on the date when due and shall be
made in lawful money of the United States of America by wire transfer in federal
or other immediately available funds to its account at such bank(s) as Lender
may from time to time designate by delivering written notice to Borrower.  Any
funds received by Lender after such time shall, for all purposes hereof, be
deemed to have been paid on the next succeeding Business Day.  All payments made
by Borrower hereunder, or by any Borrower Party under the other Loan Documents,
shall be made irrespective of, and without any deduction for, any defenses,
set-offs or counterclaims.  Whenever any payment to be made hereunder shall be
stated to be due on a day that is not a Business Day, the payment may be made on
the next succeeding Business Day.
 
Section 2.4.    Prepayment
 
(a)    Except as expressly hereinafter set forth in this Section 2.4 or as
otherwise provided in Sections 3.2(i), 3.3, 7.5, 7.15 or 9.3, no full or partial
prepayments of the principal balance of the Note shall be allowed.
 
(b)    At any time following the last day of the Lockout Period (or on and after
October 1, 2009 in connection with a Partial Release pursuant to Section 7.15),
upon issuance of a Prepayment Notice, Borrower shall have the right to prepay
the outstanding principal balance of the Note in full (but not in part, except
as expressly permitted in Sections 3.2(i), 3.3, 7.5, 7.15 or 9.3) on any
Business Day by paying the sum of (i) the entire remaining outstanding principal
balance of the Note, plus (ii) all unpaid interest accrued on the prepayment
amount, plus (iii) all other Obligations, plus (iv) a prepayment fee equal to
the Applicable Prepayment Fee.
 
(c)     Each Prepayment Notice shall specify the intended date of prepayment,
which date shall be a Business Day.  After delivery of a Prepayment Notice, the
amounts payable under Section 2.4(b) shall be due and payable in full on the
date specified in such Prepayment Notice unless a Borrower Party delivers a
written revocation notice to Lender at least three (3) Business Days prior to
the scheduled prepayment date, and failure to pay the same in full on such date
without proper revocation shall, at Lender’s option, constitute an Event of
Default, without notice or opportunity to cure.  If the amounts necessary to
prepay the Loan in accordance with the terms and provisions hereof are received
by Lender after 2:00 p.m. (Hartford, Connecticut time), such prepayment shall be
deemed to have been made on the next occurring Business Day and Lender shall be
entitled to (i) recalculate the Applicable Prepayment Fee associated with such
prepayment, and (ii) receive interest on the outstanding principal balance to be
prepaid, calculated at the Contract Rate or the Default Rate, as applicable,
through the effective date of such prepayment.
 
 
 
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(d)    Notwithstanding anything to the contrary set forth in this Agreement or
any other Loan Document, at any time between July 1, 2018 and the Scheduled
Maturity Date, upon issuance of a Prepayment Notice, Borrower shall have the
right to prepay the outstanding principal balance of the Loan in full (but not
in part, except as expressly permitted in Sections 3.2(i), 3.3, 7.5, 7.15 or
9.3), without premium or additional fees or expenses (including any Applicable
Prepayment Fee), by paying the entire remaining outstanding principal balance of
the Loan, all accrued and unpaid interest hereunder, and all other Obligations
(provided that Borrower shall not be entitled to the benefit of the
above-described open prepayment period when calculating the Applicable
Prepayment Fee for any prepayment that is tendered at any time prior to said
open prepayment period).
 
(e)    Borrower acknowledges that it possesses no right to prepay the Loan,
except as expressly provided in this Section 2.4 or as otherwise provided in
Sections 3.2(i), 3.3, 7.5, 7.15 or 9.3.  Borrower further acknowledges and
agrees that, except as so expressly provided, if the Loan is prepaid prior to
July 1, 2018, for any reason (including acceleration of the Scheduled Maturity
Date by reason of an Event of Default), any subsequent tender of payment of the
Loan made by Borrower or by any Person on behalf of Borrower or otherwise,
including any tender of payment at any time prior to or at foreclosure sale or
proceedings or during any redemption period following foreclosure, or during any
federal or state bankruptcy or insolvency proceedings, shall constitute an
evasion of the restrictions on prepayment set forth herein, and shall be deemed
a voluntary prepayment prior to the Scheduled Maturity Date requiring payment of
the Applicable Prepayment Fee, and Lender shall not be required to accept such
prepayment if it does not include payment of the Applicable Prepayment Fee.
 
(f)    If any actual or deemed prepayment is tendered or deemed tendered during
the Lockout Period (other than a prepayment tendered or deemed tendered pursuant
to Sections 3.2(i), 3.3, 7.5, 7.15 or 9.3), Borrower shall be obligated to pay
Lender, and the Obligations shall include, a prepayment fee (the “Lockout
Prepayment Fee”) calculated by Lender in its discretion (which may or may not
equal the Standard Yield Maintenance otherwise due in connection with any such
prepayment but for the operation of the Lockout Period), and Lender shall not be
required to accept such payment or credit any deemed payment if it does not
include payment of the Lockout Prepayment Fee as calculated by Lender.  Any
prepayment tendered during the Lockout Period in connection with a Partial
Release pursuant to Section 7.15 must include a prepayment fee equal to Lockout
Yield Maintenance.
 
(g)    Lender’s acceptance of a prepayment without the Applicable Prepayment Fee
shall not constitute or be deemed to constitute a waiver by Lender of its right
to require payment of the Applicable Prepayment Fee in accordance with the terms
hereof or a waiver of any rights and remedies Lender may have under the Loan
Documents, at law or in equity on account of Borrower’s failure to timely pay
the Applicable Prepayment Fee as and when required hereunder.
 
(h)    To the extent permitted by law, Lender may bid at any foreclosure sale,
as part of the Obligations, the amount of the Applicable Prepayment Fee
calculated as if prepayment of the Loan occurs on the date of such foreclosure
sale.  To the extent the amount of the Obligations must be determined as of a
date certain pursuant to a judicial foreclosure, the Loan will be deemed prepaid
as of the date judgment enters and the Applicable Prepayment Fee due and payable
hereunder (if any) will be calculated as if prepayment of the Obligations
occurred on the date of said judgment.
 
(i)     Borrower and Lender have negotiated the Loan upon the understanding that
if the Loan is paid or prepaid prior to July 1, 2018 for any reason, except as
expressly provided in this Section 2.4 or as otherwise provided in
Sections 3.2(i), 3.3, 7.5, 7.15 or 9.3, Lender shall receive the Applicable
Prepayment Fee as compensation for: (i) the cost of reinvesting the prepayment
proceeds and the loss of the contracted rate of return on the Loan; and (ii) the
privilege of early payment of the Loan, which Borrower has expressly bargained
for and which privilege Lender would not have granted to Borrower without
Borrower’s obligation to pay the Applicable Prepayment Fee.  Borrower agrees
that the Applicable Prepayment Fee provided for herein is reasonable and that
Lender shall not be obligated, as a condition subsequent to its receipt of the
Applicable Prepayment Fee, to actually reinvest all or any part of the amount
prepaid in any United States Treasury instruments or obligations or otherwise.
 
 
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ARTICLE 3.                                

                                                                                                  
INSURANCE, CONDEMNATION, AND IMPOUNDS
 
Section 3.1.    Insurance.
 
(a)    Insurance Coverage.  Borrower shall obtain and maintain, or cause to be
maintained, insurance for each Individual Borrower, Lender, each Property and
the other Collateral (collectively, the “Insurance”) providing at a minimum the
following:
 
           (i)    Insurance with respect to the Improvements and Personal
Property relating to each Property against any peril currently included within
the classification “All Risk” or “Special Perils,” in each case (1) in an amount
equal to 100% of the “Full Replacement Cost,” which for purposes of this
Agreement shall mean actual replacement value (exclusive of costs of
excavations, foundations, underground utilities and footings) with losses
adjusted on a replacement cost basis; (2) containing an agreed amount
endorsement (unless waived by Lender in its reasonable discretion) with respect
to the Improvements and Personal Property relating to such Property waiving all
co-insurance provisions; (3) providing for no deductible in excess of $25,000
and no self-retention (unless disclosed to and approved by Lender); (4) with an
“Ordinance or Law Coverage” or “Enforcement” endorsement (including demolition
costs); and (5) with coverage for “mold” and related damage with reasonable and
customary limits (a sublimit of $1,000,000 for “mold” coverage being deemed
“reasonable”).  The Full Replacement Cost of each Property shall be evaluated
from time to time at the request of Lender (but not more frequently than once in
any twelve (12) calendar months, unless an Event of Default exists, in which
case the Full Replacement Cost may be evaluated from time to time as Lender in
its discretion may deem necessary) by an appraiser or contractor designated and
paid by Borrower and approved by Lender, such approval not to be unreasonably
withheld (unless an Event of Default exists, in which case the appraiser or
contractor shall be designated by Lender and paid by Borrower).  No omission on
the part of Lender to request any such ascertainment of the Full Replacement
Cost for any Property shall relieve Borrower of any of its obligations under
this Subsection 3.1(a)(i);
 
           (ii)    Commercial general liability insurance against all claims for
personal injury or property damage occurring upon, in or about each Property,
including “Dram Shop” or other liquor liability coverage if alcoholic beverages
are sold from or may be consumed at any Property and garage keepers’ liability
coverage (if applicable), such insurance (1) to be on the so-called “occurrence”
form with a general aggregate limit of not less than $2,000,000.00 and a per
occurrence limit of not less than $1,000,000.00; (2) to be continued at not less
than the aforesaid limit until required to be increased by Lender in writing by
reason of changed economic conditions making such protection inadequate (in the
reasonable estimation of Lender); and (3) to cover at least the following
hazards:  (A) premises and operations (including Fire Damage Legal Liability);
(B) products and completed operations on an “if any” basis; (C) independent
contractors; (D) blanket contractual liability for advertising and all written
and oral contracts to the extent of tort liability; and (E) contractual
liability covering the indemnities contained in the Loan Documents to the extent
the same is available;
 
           (iii)    Business interruption/loss of rents insurance (1) with loss
payable to Lender; (2) covering “All Risks” or “Special Perils” as required to
be covered by the insurance provided for in Subsection 3.1(a)(i) and (ii); (3)
in an amount equal to 100% of the projected gross income from each Property (on
an actual loss sustained basis) for a period of not less than twelve (12) months
following the date of loss (the amount of such coverage shall be determined
prior to the Funding Date and at least once each year thereafter based on the
greater of: (x) reasonable estimate by Borrower Parties of the gross income from
each Property for the succeeding twelve (12) month period, and (y) the highest
gross income received during the term of the Note for any consecutive twelve
(12) month period prior to the date the amount of such insurance is being
determined); (4) with a deductible of not greater than an amount equal to 48
hours loss; and (5) containing an extended period of indemnity endorsement which
provides that after the physical loss to the affected Improvements has been
repaired, the continued loss of income will be insured until the earlier of such
income returning to the same level it was at prior to the loss or the expiration
of one
 
 
 
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hundred eighty (180) days from the date that normal operations are resumed at
the affected Property (notwithstanding that the policy may expire prior to the
end of such period).  All insurance proceeds payable to Lender pursuant to this
Subsection 3.1(a)(iii) shall be held by Lender and shall be applied to the
Obligations from time to time due and payable under the Note and this Agreement;
provided, however, that so long as no Event of Default exists, Lender shall
disburse to the applicable Individual Borrower, on a monthly basis (consistent
with an annual operating budget delivered to Lender) funds representing business
interruption proceeds (to the extent actually received by Lender) for payment of
Operating Expenses and Debt Service upon receipt by Lender of a written request
for disbursement from the applicable Individual Borrower, summarizing the
Operating Expenses and/or Debt Service to be paid with the subject disbursement;
provided, further, that nothing herein contained shall be deemed to relieve
Borrower of its obligation to pay the Obligations on the respective dates of
payment provided for in the Note and this Agreement except to the extent such
amounts are actually paid to and retained by Lender out of the proceeds of such
business interruption insurance;
 
           (iv)    At all times during which structural construction, repairs or
alterations are being made with respect to any Property, applicable contractors
shall provide: (1) owner’s and contractor’s protective liability insurance
covering claims not covered by or under the terms or provisions of the
commercial general liability insurance policy referenced in Subsection
3.1(a)(ii); and (2) the insurance provided for in Subsections 3.1(a)(i) and
(iii), written in a so-called “builder’s risk completed value form” (A) on a
non-reporting basis, (B) against “All Risks” or “Special Perils” as required
pursuant to Subsection 3.1(a)(i), (C) including permission to occupy such
Property, and (D) with an agreed amount endorsement waiving co-insurance
provisions;
 
           (v)    To the extent required by applicable Legal Requirements,
workers’ compensation, subject to the statutory limits of the State, and
employer’s liability insurance with a limit of at least $1,000,000.00 per
accident and per disease per employee, and $1,000,000.00 for disease aggregate
in respect of any work or operations on or about each Property, or in connection
with each Property or its operation (if applicable);
 
           (vi)    Comprehensive boiler and machinery insurance in customary and
reasonable amounts (to the extent Lender, in the exercise of its reasonable
judgment, deems such coverage reasonably necessary based on the equipment at a
particular Property);
 
           (vii)    If any portion of any Property is at any time located in an
area identified by the Secretary of Housing and Urban Development or any
successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973
or the National Flood Insurance Reform Act of 1994, as each may be amended, or
any successor or comparable law (the “Flood Insurance Acts”), flood hazard
insurance in an amount equal to the lesser of (1) 100% of the “Full Replacement
Cost,” determined in accordance with the provisions of Subsection 3.1(a)(i), and
(2) the maximum limit of coverage available for such Property under the Flood
Insurance Acts;
 
           (viii)    Umbrella liability insurance in an aggregate amount of not
less than $25,000,000.00 per occurrence, and with deductibles (including any
self insurance or retention) and on terms consistent with the commercial general
liability insurance policy required under Subsection 3.1(a)(ii); and
 
           (ix)     Such other insurance (other than terrorism or earthquake
insurance) and in such amounts as Lender from time to time may reasonably
require against such other insurable hazards which at the time are commonly
insured against for properties similar to each Property located in or around the
region in which the Portfolio is located.
 
(b)    Policies.  All insurance provided for in Subsection 3.1(a) shall be
obtained under valid and enforceable policies (collectively, the “Policies” and
individually, a “Policy”), in such forms and, from time to time after the
Funding Date, in such amounts as may be satisfactory to Lender (in the exercise
of its reasonable judgment), issued by financially sound and responsible
insurance companies authorized and admitted to do business in the State, having
a general policy rating of “A” or better and a financial class of “X” or better,
each as determined by AM Best Company, Inc., and otherwise acceptable to Lender
in the exercise of its reasonable judgment (each such insurer satisfying the
foregoing is referred to below as a “Qualified Insurer”).  Not less than ten
(10) days
 
 
 
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prior to the expiration dates of the Policies in force as of the Funding Date,
Borrower shall deliver to Lender certificates (in ACORD format 25 and ACORD
format 28 (2003/10 form)) evidencing renewal Policies complying with the
requirements of this Section 3.1, such certificates to be in format reasonably
required by Lender and to be marked “premium paid” (or Borrower shall provide
other evidence satisfactory to Lender (in its reasonable judgment) of the
payment in full of all premiums due under such Policies (the “Insurance
Premiums”)).
 
(c)    Blanket Policies.  Borrower shall not obtain (i) any blanket liability or
casualty Policy unless, in each case, such Policy is approved in advance by
Lender (Lender acknowledges its approval of the blanket policies in effect as of
the Funding Date, and Lender’s approval of Borrower’s blanket Policies following
the Funding Date will not be required so long as any replacement blanket Policy
is substantially similar to the blanket Policy approved by Lender on the Funding
Date, confirmed by the ACORD certificates described in Section 3.1(b)), or (ii)
without Lender’s prior written consent (issued or withheld in Lender’s
reasonable judgment), separate insurance concurrent in form or contributing in
the event of loss with that required in Subsection 3.1(a).  If a Borrower Party
obtains separate insurance or a blanket Policy, Borrower shall notify Lender of
the same and shall cause certificates with respect to each Policy to be
delivered to Lender as required in Subsection 3.1(b).
 
(d)    Lender as Insured.  All Policies, except for the Policies referenced in
Subsection 3.1(a)(v), shall name the applicable Individual Borrower as the named
insured and Lender as an additional insured and loss payee, as their respective
interests may appear, and in the case of property damage, boiler and machinery,
builder’s risk, and flood insurance, shall contain a so-called “New York
standard non-contributing mortgagee” clause in favor of Lender providing that
any loss thereunder covered by such Policy shall be payable to Lender.
 
(e)    Policy Endorsements.  All Policies shall contain clauses or endorsements
to the effect that:
 
           (i)    No act or negligence of any Borrower Party, of anyone acting
for a Borrower Party, or of any Tenant, or failure to comply with the provisions
of any Policy that might otherwise result in a forfeiture of the insurance or
any part thereof, shall in any way affect the validity or enforceability of the
insurance insofar as Lender is concerned;
 
           (ii)    No Policy may be materially changed (other than to increase
the coverage provided thereby) or cancelled without at least thirty (30) days
prior written notice to Lender and any other party named therein as an insured
or additional insured;
 
           (iii)    The issuers thereof shall give written notice to Lender if
the Policy has not been thirty (30) days prior to its expiration; and
 
           (iv)     Lender shall not be liable for any Insurance Premiums or
assessments thereon, except that Lender may, but shall have no obligation to,
pay any Insurance Premiums to continue any Policy in full force and effect in
the event Borrower fails to do so (any such amounts so paid by Lender shall be
paid by Borrower to Lender within the Demand Period, and until paid shall
constitute part of the Obligations, shall be secured by the Loan Documents and
shall bear interest at the Default Rate accruing from the expiration of the
Demand Period until Lender receives payment in full of such amount).
 
(f)                      Intentionally Omitted.
 
(g)             Lender Self-Help.  If at any time Lender is not in receipt of
written evidence that all Insurance required hereunder is in full force and
effect, Lender shall have the right, upon three (3) Business Days prior notice
to Borrower, to take such action as Lender deems necessary to protect its
interest in the Portfolio, including obtaining such Insurance as Lender, in its
discretion, deems appropriate, and all expenses incurred by Lender in connection
with such action or in obtaining and maintaining such Insurance shall be paid by
Borrower to Lender before the expiration of the Demand Period, and until paid
shall constitute part of the Obligations, shall be secured by the Loan Documents
and shall bear interest at the Default Rate from the expiration of the Demand
Period until Lender receives payment in full of such amount.
 
 
 
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(h)    Vesting in Lender.  In the event of a foreclosure or other transfer of
title to any Property to Lender or a third party purchaser at foreclosure in
extinguishment in whole or in part of the Obligations, and to the extent
permitted under the Policies, all right, title and interest of Borrower Parties
in and to all proceeds payable pursuant to the Policies as of the effective date
of transfer of title (including proceeds payable under blanket policies) shall
thereupon vest exclusively in Lender or the purchaser at such foreclosure.
 
(i)                      Subrogation.  All Insurance (as applicable) and all
renewals thereof shall contain, in form and substance reasonably acceptable to
Lender, a standard “Waiver of Subrogation” endorsement.
 
Section 3.2.    Use and Application of Insurance Proceeds.
 
(a)    Restoration.  If any portion of any Property (or any material portion of
the other Collateral) shall be damaged or destroyed, in whole or in part, by
fire or other casualty (a “Casualty”), Borrower shall give prompt written notice
of such damage to Lender.  If Net Proceeds are made available to a Borrower
Party for Restoration as provided in Subsections 3.2(c) and 3.2(d), the
applicable Individual Borrower shall, in accordance with the terms of this
Section 3.2, promptly commence and diligently prosecute to completion the repair
and restoration of the affected Collateral as nearly as possible to the
condition the affected Collateral was in immediately prior to such Casualty
(such repair and restoration, collectively, a “Restoration”) and shall pay all
costs of such Restoration (even if Net Proceeds are not sufficient to pay in the
full the cost of Restoration).  Regardless of whether Net Proceeds are made
available to any Individual Borrower, Borrower shall, promptly following the
occurrence of a Casualty and diligently thereafter, undertake all actions
necessary to keep the affected Property safe, secure and free from reasonably
foreseeable hazards and otherwise in material compliance with applicable Legal
Requirements.  Notwithstanding any Casualty, Borrower shall continue to pay the
Obligations at the time and in the manner provided for its payment in this
Agreement.
 
(b)    Adjustments by Lender.  Upon any Casualty covered by any Insurance, then
(i) if an Event of Default exists, Lender is hereby authorized, at its option
(exercisable in its discretion), to settle and adjust any claim without the
consent of Borrower Parties; or (ii) if the Casualty in question is a Major
Damage Event, Lender shall allow the applicable Individual Borrower up to one
hundred eighty (180) days following the occurrence of the Casualty to settle and
adjust such claim with the prior written consent of Lender (such consent not to
be unreasonably withheld); provided, however, that if the applicable Individual
Borrower has failed to settle and adjust any claim associated with a Casualty
within one hundred eighty (180) days after the occurrence of such Major Damage
Event, Lender is hereby authorized, at its option (exercisable in its reasonable
discretion), to settle and adjust any claim with the prior written consent of
the applicable Individual Borrower (such consent not to be unreasonably
withheld); provided, further, that in any case, Lender shall, and is hereby
authorized to, collect and hold (without interest) any and all such insurance
proceeds subject to the terms of this Section 3.2.  If a Casualty does not
constitute a Major Damage Event, then the applicable Individual Borrower shall
diligently pursue settlement of all insurance claims, shall hold all Net
Proceeds associated with such non-Major Damage Event in trust to be applied
toward the costs associated with the restoration of the affected Property, and
shall promptly commence and diligently pursue to completion all restoration and
repair work reasonably necessary to return the affected Property to the
condition it was in immediately prior to the non-Major Damage Event.  The
applicable Individual Borrower shall provide Lender with reasonable written
updates, at reasonable intervals, in connection with all restoration efforts
associated with non-Major Damage Events.  The reasonable third party expenses
incurred by Lender in the adjustment and collection of insurance proceeds shall
be reimbursed by Borrower to Lender within the Demand Period and until paid
shall constitute part of the Obligations, shall be secured by the Loan Documents
and shall bear interest at the Default Rate from expiration of the Demand Period
until payment in full is received by Lender, or, to the extent sufficient
insurance proceeds are available, said expenses shall be deducted from said
proceeds by Lender prior to any other application thereof.  Each Qualified
Insurer is hereby authorized and directed by Borrower to make payment for all
losses associated with a Major Damage Event to Lender alone, and not to Lender
and any Individual Borrower or any other Person jointly.  Borrower agrees to
promptly execute and deliver to Lender all documents and promptly make all
deliveries reasonably requested by Lender in order to permit Lender to adjust
any such claim and to authorize and direct any insurer to pay insurance proceeds
relating to a Major Damage Event to Lender alone and not jointly to Lender and
any Individual Borrower or any other Person.  “Net Proceeds” means the net
amount of all insurance proceeds received by Lender under the Policies described
in Subsections 3.1(a) as a result of a Casualty, after deduction of Lender’s
reasonable third party costs and expenses (including reasonable attorneys’
fees), if any, in collecting same.
 
 
 
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(c)    Conditions to Disbursements for Restoration.  The following provisions
shall apply in connection with any Restoration of a Major Damage Event:
 
 (i) Lender shall make the Net Proceeds associated with a Major Damage Event
available to the applicable Individual Borrower for Restoration, provided that
each of the following conditions are satisfied (satisfaction to be determined by
Lender in the exercise of its reasonable judgment):
 
(A)   As of the date of each distribution of Net Proceeds, no monetary Potential
Default (which solely for the purposes of this provision means a failure to make
a payment of a liquidated sum of money on the due date thereof but for which the
applicable grace period has yet to expire) then exists and no Event of Default
then exists;
 
(B)    Within ninety (90) days following the occurrence of the Casualty, the
applicable Individual Borrower shall prepare, or shall cause to be prepared, all
required Restoration Documents and applications for the issuance of all permits
required for the Restoration, with copies thereof delivered to Lender;
 
(C)    Lender and the Casualty Consultant shall have approved the Restoration
Documents in accordance with Subsection 3.2(e);
 
(D)    As of the date of each distribution of Net Proceeds, Lender shall be
satisfied, in the exercise of its reasonable judgment, that based upon a report
issued by the Casualty Consultant and such other factors as Lender reasonably
deems relevant, the costs of Restoration and ongoing Operating Expenses
(including Debt Service) allocated to the affected Property will be covered out
of (1) undisbursed Net Proceeds (including the proceeds of the coverage referred
to in Subsection 3.1(a)(iii)), (2) Rents that are and shall continue to be
generated by the affected Property despite the Casualty, and/or (3) other funds
of Borrower deposited with Lender pursuant to Subsection 3.2(g);
 
(E)    Prior to the initial disbursement of Net Proceeds, Lender shall be
satisfied that, within six (6) months following completion of the Restoration,
the Net Operating Income associated with the affected Property will be restored
to a level sufficient to generate a Debt Service Coverage Ratio (based on a
fully amortizing 20-year schedule) for such affected Property of at least 125%;
 
(F)    Prior to the initial disbursement of Net Proceeds, Lender shall be
satisfied that the Restoration will be completed on or before the earliest to
occur of (1) six (6) months prior to the Maturity Date, (2) twelve (12) months
after the occurrence of the Casualty, or (3) such time as may be required under
all Legal Requirements in order to repair and restore the affected Collateral to
the condition it was in immediately prior to such Casualty;
 
(G)    Prior to the initial disbursement of Net Proceeds, Borrower shall execute
and deliver to Lender a completion guaranty in form and substance reasonably
satisfactory to Lender and its counsel, pursuant to which Borrower shall
guaranty to Lender the lien-free completion of the Restoration in accordance
with the provisions of this Section 3.2;
 
(H)    Prior to the initial disbursement of Net Proceeds, Lender shall be
satisfied that the affected Property and the use thereof after the Restoration
will be in compliance (in all material respects) with and permitted under all
Legal Requirements;
 
(I)          Prior to the initial disbursement of Net Proceeds, Lender shall be
satisfied that the Restoration shall be undertaken and completed such that no
Lease (or combination of Leases), which are in place at the affected Property as
of the date of the Casualty and which cover (singularly or in the aggregate) 25%
or more of the gross rentable area of the affected Property, can be terminated
as a result of the Casualty;
 
 
 
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(J)                 Promptly following the issuance of all required permits and
the decision of Lender to make Net Proceeds available for Restoration in
accordance with this Subsection 3.2(c), the applicable Individual Borrower shall
commence the Restoration;
 
(K)    As of the date of each distribution of Net Proceeds, Lender shall be
satisfied (in the exercise of its reasonable judgment) that the applicable
Individual Borrower is diligently pursuing the Restoration to satisfactory
completion; and
 
(L)    As of the date of each distribution of Net Proceeds, Borrower must be in
compliance with the conditions specified in Subsections 3.2(d), (e) and (g)
below.
 
(d)    Disbursement Procedures.  The Net Proceeds shall be held by Lender (in a
non-interest bearing account) and, unless and until disbursed to the applicable
Individual Borrower in accordance with the provisions of this Section 3.2, shall
constitute additional security for the Obligations.  Subject to satisfaction of
the conditions of this Section 3.2, the Net Proceeds designated for Restoration
costs shall be disbursed by Lender to, or as directed by, the applicable
Individual Borrower from time to time prior to or during the course of the
Restoration, but not more than once per 30-day period, upon receipt of (i) a
disbursement request from the applicable Borrower Party in form and content
reasonably required by Lender, (ii) an inspection report from the Casualty
Consultant acceptable to Lender (in the exercise of its reasonable judgment),
(iii) evidence reasonably satisfactory to Lender that all materials installed
and work and labor performed in connection with the related Restoration item
have been paid for in full (except to the extent that they are to be paid for
out of the requested disbursement), including a certification from the
applicable Individual Borrower that there exist no notices of pendency, stop
orders, mechanic’s or material supplier’s liens or notices of intention to file
same, or any other liens or encumbrances of any nature whatsoever on the
affected Property which have not either been fully bonded to the reasonable
satisfaction of Lender and discharged of record or, in the alternative, fully
insured to the reasonable satisfaction of Lender by the Title Company, and (iv)
title insurance “date downs” and endorsements to the Title Policy without
exception as to mechanics’ or material supplier’s liens, intervening choate or
inchoate liens, judgments, survey matters, or other material matters of
record.  Any Net Proceeds received by Lender and held for application to
Operating Expenses and Debt Service shall be disbursed to the applicable
Individual Borrower in accordance with Subsection 3.1(a)(iii).  All Net Proceeds
disbursed to a Borrower for Restoration shall be held in trust by the recipient
and used for the sole purpose of completion of the Restoration in accordance
with the provisions of this Section 3.2.
 
(e)    Restoration Documents.  All plans and specifications and construction
agreements (collectively, “Restoration Documents”) necessary for the Restoration
shall be subject to prior review and approval by Lender and by a qualified
independent consulting engineer selected by Lender (the “Casualty Consultant”),
all such approvals not to be unreasonably withheld.  In the event Lender does
not notify the applicable Individual Borrower of the approval or disapproval by
Lender and the Casualty Consultant of the Restoration Documents within ten (10)
Business Days after receipt of a complete set thereof by Lender and the Casualty
Consultant, then Lender and the Casualty Consultant shall be deemed to have
approved the Restoration Documents.  Subject to all necessary approvals and
consents (the consent of Borrower Parties being deemed issued), Lender shall
have the use of the Restoration Documents and all permits, licenses and
approvals required or obtained in connection with the Restoration.  The identity
of the general contractor and other significant contractors engaged in the
Restoration shall be subject to prior review and approval by Lender and the
Casualty Consultant (each such approval not to be unreasonably withheld).  All
reasonable third party costs and expenses incurred by Lender in connection with
making the Net Proceeds available for the Restoration or for the payment of
Operating Expenses, including reasonable third party attorneys’ fees and
disbursements and the Casualty Consultant’s reasonable fees (which in no event
shall exceed then prevailing market rates), shall be deducted from the Net
Proceeds or if the Net Proceeds are not sufficient, paid by Borrower to Lender
within the Demand Period and until paid shall constitute part of the
Obligations, shall be secured by the Loan Documents and shall bear interest at
the Default Rate from the expiration of the Demand Period until payment in full
is received by Lender.
 
(f)    Amount of Disbursements.  In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal to the costs
actually incurred from time to time for work in place as part of the Restoration
(including Lender’s reasonable third party costs and expenses), as certified by
the Casualty Consultant, minus the Restoration Retainage.  “Restoration
Retainage” means an amount equal to the greater of (i) ten percent (10%) of the
costs actually incurred for work in place as part of the Restoration, as
certified by the
 
 
 
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Casualty Consultant, and (ii) the amount actually held back by the applicable
Individual Borrower from contractors, subcontractors and material suppliers
engaged in the Restoration.  The Restoration Retainage shall not be released
until the Casualty Consultant certifies to Lender that the Restoration has been
substantially completed in accordance with the provisions of this Section 3.2
and that all approvals necessary for the re-occupancy and use of the affected
Property have been obtained from all appropriate Governmental Authorities, and
Lender receives evidence reasonably satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the
Restoration Retainage, provided, however, that Lender will release the portion
of the Restoration Retainage being held with respect to any contractor,
subcontractor or material supplier engaged in the Restoration as of the date
upon which either (i) the Casualty Consultant certifies to Lender that the
contractor, subcontractor or material supplier has satisfactorily completed all
work and has supplied all materials in accordance with the provisions of that
contractor’s, subcontractor’s or material supplier’s contract, or (ii) the
applicable contractor, subcontractor or material supplier delivers to Lender
lien waivers and evidence of payment in full of all sums due to the contractor,
subcontractor or material supplier as may be reasonably requested by Lender or
by the Title Company.  If required by Lender, the release of any such portion of
the Restoration Retainage shall be approved by the surety company, if any, which
has issued a payment or performance bond with respect to the contractor,
subcontractor or material supplier.
 
(g)    Restoration Deficiency.  If at any time the Net Proceeds or the
undisbursed balance thereof, together with Rents that will continue to be
generated by the affected Property despite the Casualty, shall not, in the
reasonable opinion of Lender in consultation with the Casualty Consultant, be
sufficient to pay in full the balance of the costs estimated by the Casualty
Consultant to be incurred in connection with the completion of the Restoration
and ongoing Operating Expenses (including Debt Service) associated with the
affected Property, Borrower shall deposit the deficiency (the “Net Proceeds
Deficiency”) with Lender before any further disbursement of the Net Proceeds
shall be made (but in all events Borrower shall make such deposit within sixty
(60) days following demand).  The Net Proceeds Deficiency deposited with Lender
shall be held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration and/or for ongoing Operating Expenses (including
Debt Service) associated with the affected Property on the same conditions
applicable to the disbursement of the Net Proceeds, and until so disbursed shall
constitute additional security for the Obligations.
 
(h)    Release of Remaining Proceeds.  Provided (i) no monetary Potential
Default (which solely for the purpose of this provision means a failure to make
a payment of a liquidated sum of money on the due date thereof but for which the
applicable grace period has yet to expire) then exists and no Event of Default
then exists, (ii) Lender shall re-confirm that within six (6) months following
completion of the Restoration the Net Operating Income for the affected Property
will be restored to a level sufficient to generate a Debt Service Coverage Ratio
(based on a fully amortizing 20-year schedule) for such affected Property of at
least 125%, (iii) the Casualty Consultant certifies to Lender that the
Restoration has been substantially completed in accordance with the provisions
of Section 3.2, and (iv) Lender receives evidence reasonably satisfactory to
Lender that all costs incurred in connection with the Restoration have been paid
in full (except to the extent said costs shall be paid out of the final
disbursement), Lender shall promptly remit to the applicable Individual Borrower
the excess, if any, of the Net Proceeds and the remaining balance, if any, of
the Net Proceeds Deficiency deposited with Lender.
 
(i)    Application of Remaining Proceeds.  If Lender makes a determination (in
the exercise of its reasonable judgment) pursuant to this Section 3.2 that one
or more of the conditions to disbursement of Net Proceeds set forth in
Subsection 3.2(c)(i) has not or will not be satisfied, then all Net Proceeds
then held by Lender shall be retained and applied by Lender toward the payment
of the Obligations, whether or not then due and payable in such order, priority
and proportions as Lender in its reasonable discretion shall deem
proper.  Provided no Event of Default has occurred and is continuing as of the
date Lender applies the Net Proceeds to the Obligations, no Applicable
Prepayment Fee shall be payable in connection with any such prepayment.  If an
Event of Default exists while Lender is holding Net Proceeds, Lender may at its
option apply the Net Proceeds toward the payment of the Obligations, whether or
not then due and payable in such order, priority and proportions as Lender in
its discretion shall deem proper (including toward payment of any Applicable
Prepayment Fee applicable to such prepayment).  If Lender applies Net Proceeds
to the Obligations, the lien of the Loan Documents shall be reduced only by the
amount of Net Proceeds actually applied by Lender in reduction of the
Obligations, but if the Net Proceeds do not discharge the Allocated Loan Amount
relating only to the affected Property in full, then Lender may elect to
accelerate repayment of, or Borrower may elect to prepay, the entire remaining
outstanding balance of the Allocated Loan Amount relating only to the affected
Property, such prepayment to be made in either case within one hundred twenty
 
 
 
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(120) days following notice from the electing party to the other party (or such
longer period as may be reasonably necessary for Borrower to secure replacement
financing as long as Borrower Parties are diligently pursuing said refinancing
in good faith), without any Applicable Prepayment Fee due thereon so long as no
Event of Default exists as of either the date Lender so accelerates or Borrower
elects prepayment of said Allocated Loan Amount and the date said Allocated Loan
Amount is fully and finally repaid.
 
Section 3.3.    Condemnation Awards.  Borrower shall promptly notify Lender of
the receipt by a Borrower Party of notice of the institution of any proceeding
for the condemnation or other taking of any Property or any portion
thereof.  Lender may participate in any such proceeding relating to a Major
Damage Event and the applicable Individual Borrower shall deliver to Lender all
instruments necessary or required by Lender to permit such
participation.  Without Lender’s prior written consent (which consent shall not
be unreasonably withheld), no Borrower Party, in connection with any Major
Damage Event, shall agree to any compensation or award and/or take any action or
fail to take any action which would cause the compensation to be
determined.  All awards and compensation for the taking or purchase in lieu of
condemnation of any Property or any part thereof are hereby assigned to and
shall be paid to Lender for application to the Obligations (except as expressly
provided below).  Borrower Parties authorize Lender to collect and receive such
awards and compensation, to give proper receipts and acquittances therefor, and
to apply the same toward the payment of the Obligations in such order, priority
and proportions as Lender in its reasonable discretion shall deem proper (and
provided no Event of Default exists as of the date Lender applies such
condemnation proceeds to the Obligations, no Applicable Prepayment Fee shall be
payable in connection with any such prepayment), notwithstanding that the
Obligations may not then be due and payable; provided, however, that if the
condemnation in question does not constitute a Major Damage Event and the
applicable Individual Borrower requests that such proceeds be used for
non-structural site improvements (such as landscape, driveway, walkway and
parking area repairs) to the affected Property which are required to be made as
a result of such condemnation, Lender will apply the award to such restoration
in accordance with disbursement procedures applicable to Net Proceeds.  Borrower
Parties, upon request by Lender, shall execute all instruments reasonably
requested by Lender to confirm the assignment of the awards and compensation to
Lender, free and clear of all Liens, charges (except as expressly set forth
above) or encumbrances.  If Lender applies condemnation proceeds to the
Allocated Loan Amount relating only to the affected Property, the lien of the
Loan Documents shall be reduced only by the amount of such proceeds actually
applied by Lender in reduction of the Obligations, but if such proceeds do not
discharge the Obligations in full, then Lender may elect to accelerate repayment
of, or Borrower may elect to repay, the entire remaining outstanding balance of
the Allocated Loan Amount relating only to the affected Property, such
prepayment to be made in either case within one hundred twenty (120) days
following notice from the electing party to the other party (or such longer
period as may be reasonably necessary for Borrower Parties to secure replacement
financing as long as Borrower Parties are diligently pursuing said refinancing
in good faith), without any Applicable Prepayment Fee due thereon so long as no
Event of Default exists as of both the date Lender so accelerates or Borrower
elects repayment of said Allocated Loan Amount and the date said Allocated Loan
Amount is fully and finally repaid.
 
Section 3.4.    Impounds.
 
(a)    In connection with a permitted assumption or transfer of the Loan
pursuant to Subsection 7.1(c), and in order to assure compliance with Borrower’s
obligations pursuant to Section 7.2, but not in lieu of such obligations,
Borrower (or its permitted successor) shall deposit with Lender, monthly on each
Payment Date (commencing on the first Payment Date following Lender’s written
request), one-twelfth (1/12th) of the annual charges for Taxes (collectively,
“Impounds”). Each deposit shall be in an amount reasonably determined by Lender
that will be sufficient (when combined with other monthly installments) to make
full payment of all Impounds thirty (30) days prior to the date any delinquency
or penalty becomes due with respect to such Impounds.  Deposits shall be made on
the basis of the Impounds which have been fixed for the then current year;
provided, however, that prior to the date that such Impounds have been so fixed,
deposits shall be made on the basis of Lender’s reasonable estimate from time to
time of the amount of Impounds for the then current year (after giving effect to
any recalculation or reassessment or, at Lender’s election, on the basis of the
Impounds for the prior year).  All funds so deposited shall not be construed as
trust funds, may be held by Lender, without interest, and may be commingled with
Lender’s general funds.  Borrower Parties (including any permitted successor to
Borrower Parties) hereby grants to Lender a security interest in all Impounds so
deposited with Lender for the purpose of securing the Obligations.  Upon the
occurrence of an Event of Default, all Impounds deposited with Lender may be
applied in payment of the Impounds for which such funds have been deposited, or
to the payment of the Obligations, as Lender
 
 
 
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may elect, but no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Lender.  Borrower’s
permitted successor shall furnish Lender with bills for the Impounds at least
thirty (30) days prior to the date on which such Impounds first become
payable.  If at any time Lender determines that the amount on deposit with
Lender, together with the monthly installments to be deposited by Borrower’s
permitted successor before the Impounds are payable, are insufficient to pay the
Impounds, Borrower’s permitted successor shall deposit any deficiency with
Lender within the Demand Period.  Provided no Event of Default has occurred,
Lender shall pay the Impounds when the amount on deposit with Lender is
sufficient to pay such Impounds and Lender has received a bill for such
Impounds.
 
(b)    Borrower Parties acknowledges that Lender may, at any time Impounds are
not being collected by Lender pursuant to Section 3.4(a) and at the sole cost
and expense of Borrower, engage the services of a tax service company to verify
the status of taxes and assessments on the Portfolio.  Lender shall be entitled
to rely upon (regardless of whether or not Lender engages a tax service company)
any certificate, advice or bill from any authority (or any official thereof) to
which such payments are payable, and Lender shall have no duty to inquire as to
the validity or accuracy of any such certificate, advice or bill or to make any
protest in connection therewith.
 
(c)    Nothing contained in this Section 3.4 shall be deemed to affect any
right, power, privilege or remedy of Lender under any provision of this
Agreement, the Mortgage, any other Loan Document or any statute or rule of law,
to pay any amount required to be paid pursuant to Section 7.2, to add the amount
so paid to the Obligations and to require Borrower to reimburse Lender for such
amount, together with interest thereon at the Default Rate from the expiration
of the Demand Period until payment in full is received by Lender.  In the event
of any transfer of Borrower’s right, title and interest in or to all or any part
of the Portfolio (without implying any consent of Lender to any such transfer
except as expressly set forth in this Agreement), Lender shall be entitled to
treat such transfer as also effecting an assignment to the transferee of all
right, title and interest of Borrower Parties in and to any and all such
deposits relating to the transferred portion of the Portfolio.  After any
assignment by Lender of its interest in the Loan, any such deposits on hand
shall, in Lender’s discretion, be turned over to the assignee or returned to
Borrower Parties, and all further responsibility of Lender with respect to such
deposits shall terminate.
 
ARTICLE 4.                                
 
                                                                                                                              
LEASING MATTERS
 
Section 4.1.    Representations and Warranties.  Borrower represents and
warrants to Lender that:  (a) the rent roll delivered to Lender and attached
hereto as Schedule 4.1 (the “Rent Roll”) is true, complete and correct in all
material respects, and all Leases are valid and in and full force and effect;
(b) all of the Leases (including amendments) are in writing, and there are no
oral agreements with respect thereto; (c) the copies of the Leases delivered to
Lender are true, complete and correct and include any and all amendments; (d) to
Borrower’s knowledge, no Borrower Party as “landlord” nor any Tenant is in
default in any material respect under any of the Leases; (e) Borrower has no
knowledge of any notice of termination or “landlord” default issued by any
Tenant with respect to any Lease, and Borrower has provided to Lender copies of
all “tenant” default notices issued by or on behalf of an Individual Borrower in
respect of uncured tenant defaults; (f) Borrower has not assigned or pledged any
of the Leases, the Rents or any interests therein except to Lender; (g) except
as set forth in the Rent Roll, no Tenant or other party has an option to
purchase all or any portion of any Property; (h) except as set forth on the Rent
Roll, no Tenant has the right to terminate its Lease prior to expiration of the
stated term of such Lease; (i) no Tenant has prepaid more than one month’s Rent
in advance (except for bona fide security deposits as shown on the Rent Roll);
and (j) other than amounts applied or returned in accordance with the Leases,
the amount of all security deposits held by or on behalf of an Individual
Borrower is the entire amount required to be deposited with or on behalf of an
Individual Borrower pursuant to the Leases, and said deposits are held, to the
extent required by applicable Legal Requirements, in separate and/or
interest-bearing accounts.  Within ten (10) days after Lender’s request,
Borrower shall furnish to Lender a statement of all tenant security deposits
held by or on behalf of an Individual Borrower, certified by an Authorized
Representative of Borrower as being true, complete and correct.
 
Section 4.2.    Lender’s Lease Approval Rights.
 
 
 
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(a)    Any Leases entered into by or on behalf of any Individual Borrower
following the Funding Date that does not constitute a Major Lease shall be on a
standard form approved by Lender (such approval not to be unreasonably withheld)
with no material modifications (except as approved by Lender in writing, such
approval not to be unreasonably withheld), prior to execution by or on behalf of
any Individual Borrower.
 
(b)    From and after the Funding Date, no Borrower Party nor any Person acting
on behalf of a Borrower Party shall, without the prior written consent of Lender
(such consent not to be unreasonably withheld):  (i) enter into any Major Lease,
(ii) enter into any amendment, modification, replacement, extension of, or
renewal of any Major Lease (whether in existence as of the Funding Date or
entered into after the Funding Date), other than extensions and/or renewals
expressly contemplated by the terms of any approved Major Lease, (iii) enter
into any amendment, modification, replacement, extension, or renewal of any
non-Major Lease in a manner that would cause such non-Major Lease to become a
Major Lease, (iv) consent to an assignment or subletting associated with any
Major Lease, or (v) terminate or accept or acquiesce to the surrender of any
Lease (regardless of whether said termination relates to a Major Lease or a
non-Major Lease), other than a termination that is expressly provided for in
such Lease; provided that Lender’s approval for the termination or surrender of
a non-Major Lease shall not be required if following any such termination or
surrender, the aggregate Portfolio occupancy continues to be at least eighty
percent (80%) (“occupancy” means Tenants in occupancy, paying rent at the rates
stipulated in their respective Leases and without any other economic or material
non-economic default under such Leases).  If any Individual Borrower intends to
accept the termination or surrender of a non-Major Lease based on the
immediately preceding exception, then concurrently with the effectiveness of
said termination or surrender, the applicable Individual Borrower must provide
Lender with a current rent roll and affidavit, in form reasonably required by
Lender, confirming compliance with the conditions of said exception.  Lender may
condition its consent (when required) to any Lease termination on the deposit of
any termination or surrender proceeds with Lender for distribution for costs
associated with re-letting the subject space.  In connection with any request
for approval relating to a leasing matter, provided no Event of Default exists,
Lender shall notify Borrower whether Lender has approved any such Lease or
amendment, modification, replacement, extension, renewal, assignment,
subletting, termination or surrender within ten (10) Business Days following
Lender’s receipt of all information reasonably requested by Lender to review any
such leasing approval request.  If Lender does not so notify Borrower within ten
(10) Business Days following Lender’s receipt of all such information and if no
Event of Default exists, Lender’s approval of such leasing matter shall be
deemed granted.
 
Section 4.3.    Covenants.  Borrower shall (i) perform, observe, and comply with
each of the covenants and agreements which any Individual Borrower is required
to perform, observe or comply with under the Leases; (ii) use its commercially
reasonable efforts to enforce the obligations to be performed by the Tenants
under the Leases; (iii) promptly furnish to Lender any notice of default or
termination received by a or on behalf of any Individual Borrower from any
Tenant, and any notice of default or termination given by or on behalf of any
Individual Borrower to any Tenant; (iv) not collect any Rents for more than
thirty (30) days in advance of the time when the same shall become due, except
for bona fide security deposits (it being agreed by Borrower that Borrower shall
give prompt written notice to Lender if Borrower collects any security deposit
under any Lease equal to or in excess of an amount equal to three (3) month’s
Rent under such Lease; (v) not enter into any ground lease or master lease of
any part of the Portfolio; (vi) not further assign or encumber any Lease; (vii)
hold in trust all payments and other monetary consideration received by or for
the benefit of a Borrower Party in connection with any surrender or termination
of any Lease and shall immediately deposit or cause to be deposited with Lender
all such payments and other monetary consideration; and (viii) not, except as
permitted in Section 4.2, enter into any new Lease or enter into or accept any
extension, modification, termination or renewal of any existing Lease, and any
action in violation of clause (v), (vi), (vii), or (viii) of this Section 4.3
shall be void (as to all Borrower Parties ) at the election of Lender.
 
Section 4.4.    Tenant Estoppels.  Following the Funding Date, and within thirty
(30) days following Lender’s reasonable request, Borrower shall obtain and
furnish to Lender written estoppels in form and substance satisfactory to
Lender, executed by the Tenants under all Leases and confirming the term, rent
or daily rate, and other provisions and matters relating to the applicable Lease
(provided that unless an Event of Default has occurred, Lender shall not make a
request under this Section 4.4 with respect to any Lease not more than once
during the term of the Loan).
 
 
 
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Section 4.5.         Conflict with Assignment of Leases and Rents. Any
inconsistency between the terms of this Article 4 and the terms of the
Assignment of Leases and Rents shall be controlled by the terms of the
Assignment of Leases and Rents.
 
ARTICLE 5.                                
 
                                                                                                            
REPRESENTATIONS AND WARRANTIES
 
As of the Funding Date, Borrower represents and warrants to Lender that:
 
Section 5.1.    Organization and Power.  Each Borrower Party is duly organized,
validly existing and in good standing under the laws of the state of its
formation or existence, and is in compliance with all Legal Requirements
applicable to doing business in the State. No Borrower Party is a “foreign
person” within the meaning of § 1445(f)(3) of the Internal Revenue Code.
 
Section 5.2.    Validity of Loan Documents.  The execution, delivery and
performance by each Borrower Party (as applicable) of the Loan Documents (i) are
duly authorized and do not require the consent or approval of any other party or
Governmental Authority which has not been obtained (and copies of which have
been provided to Lender); and (ii) will not violate any Legal Requirement or
result in the imposition of any Lien upon the assets of any such party, except
as contemplated by the Loan Documents.  The Loan Documents constitute the legal,
valid and binding obligations of each Borrower Party (as applicable),
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, or similar laws generally affecting the enforcement of
creditors’ rights.
 
Section 5.3.    Liabilities; Litigation.
 
(a)    The general financial and operating information relating to each Borrower
Party and/or the Portfolio, submitted to Lender by or on behalf of any Borrower
Party concurrently with or prior to the date of the Application, is true,
complete and correct in all material respects with no significant change since
the date of submission.
 
(b)    No Borrower Party is contemplating either the filing of a petition by it
under state or federal bankruptcy or insolvency laws or the liquidation of all
or a major portion of its assets or property, and no Borrower Party has
knowledge of any Person contemplating the filing of any such petition against
any Borrower Party or any Property.
 
Section 5.4.    Taxes and Assessments.  Except for any Property that includes
Excess Collateral as of the Funding Date, each Property constitutes a separate
tax parcel, and no parcel forming part of the Portfolio is included within a tax
parcel, for ad valorem or local real estate tax purposes, that also includes
real property not encumbered by the Mortgage.  There are no pending or, to the
knowledge of Borrower Parties, any proposed special or other assessments for
public improvements or otherwise affecting any Property, nor are there any
contemplated improvements to any Property that may result in such special or
other assessments.
 
Section 5.5.    Other Agreements; Defaults.  No Borrower Party is a party to any
agreement or instrument or subject to any court order, injunction, permit, or
restriction which might adversely affect any Property or the business,
operations, or condition (financial or otherwise) of any Borrower Party.  No
Borrower Party is in violation of any agreement which violation would have an
adverse effect on any Property or any Borrower Party or the business,
properties, or assets, operations or condition (financial or otherwise) of any
Borrower Party.
 
Section 5.6.         Compliance with Legal Requirements.
 
(a)    Each Borrower Party has all requisite licenses, permits, franchises,
qualifications, certificates of occupancy or other governmental authorizations
to own, lease and operate each Property and carry on its business.  The use
being made of each Property is in conformity with the certificate of occupancy
and/or applicable permits or governmental authorizations and any other
restrictions, covenants or conditions affecting such Property.
 
 
 
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(b)    Each Property is in compliance with all applicable Legal Requirements
(including building, parking, subdivision, land use, health, fire, safety and
zoning ordinances and codes).
 
(c)    No Property constitutes, in whole or in part, a legally non-conforming
use under any Legal Requirements.
 
(d)    No condemnation has been commenced or, to Borrower’s knowledge, is
contemplated with respect to all or any portion of any Property or for the
relocation of roadways providing access to any Property.
 
(e)    Each Property has adequate rights of access to public ways, and all roads
necessary for the full utilization of each Property for its current purpose have
been completed and dedicated to public use and accepted by applicable
Governmental Authorities.
 
(f)    Except to the extent that any Property is adequately served by private
systems and facilities located on such Property (and disclosed on the survey
delivered to Lender on the Funding Date), each Property is served by adequate
water, sewer, sanitary sewer and storm drain facilities, all public utilities
necessary or convenient to the full use and enjoyment of such Property are
located in the public right-of-way abutting such Property, and all such
utilities are connected so as to serve such Property without passing over other
property, except to the extent such other property is subject to a perpetual
easement for such utility benefiting such Property.
 
(g)    Borrower and, to the knowledge of Borrower, each other party bound under
any declaration, reciprocal easement agreement, or other instrument of
covenants, conditions and restrictions affecting any of the Properties are
current in the payment of all sums that may be due thereunder and are otherwise
in compliance in all material respects with the other provisions thereof.
 
Section 5.7.    Location of Borrower.  The principal place of business and chief
executive offices of each Borrower Party are located at the addresses stated in
Section 9.1.
 
Section 5.8.    ERISA.  No Borrower Party has established any pension plan for
employees that would cause a Borrower Party to be subject to ERISA.
 
Section 5.9.    Margin Stock.  No part of proceeds of the Loan will be used for
purchasing or acquiring any “margin stock” within the meaning of Regulations T,
U or X of the Board of Governors of the Federal Reserve System.
 
Section 5.10.                   Tax Filings.  Each Borrower Party has filed (or
have obtained effective extensions for filing) all federal, state and local tax
returns required to be filed and have paid or made adequate provision for the
payment of all federal, state and local taxes, charges and assessments payable
by such  Borrower Party, respectively.
 
Section 5.11.                   Solvency.  The fair saleable value of each
Borrower Parties’  assets exceeds and will, immediately following the funding of
the Loan, exceed such Borrower Party’s total liabilities, including
subordinated, unliquidated, disputed and contingent liabilities.  The fair
saleable value of each Borrower Parties’ assets are and will, immediately
following the funding of the Loan, be greater than such Borrower Party’s
probable liabilities, including the maximum amount of its contingent liabilities
on its Debts as such Debts become absolute and matured.  Each Borrower Parties’
assets do not and, immediately following the funding of the Loan will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted.  No Borrower Party intends to, and does not believe
that it will, incur Debts and liabilities (including contingent liabilities and
other commitments) beyond its ability to pay such Debts as they mature (taking
into account the timing and amounts of cash to be received by such Borrower
Party and the amounts to be payable on or in respect of obligations of such
Borrower Party).
 
Section 5.12.                   Full and Accurate Disclosure.  No statement of
fact made by or on behalf of any Borrower Party in this Agreement or in any of
the other Loan Documents contains any untrue statement of a material
fact.  There is no fact presently known to any Borrower Party which has not been
disclosed to Lender that materially and adversely affects, or as far as any
Borrower Party can reasonably predict, might materially and
 
 
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adversely affect, any Property or the business, operations or condition
(financial or otherwise) of any Borrower Party.
 
Section 5.13.                   Property Conditions.  Each Property is free of
material structural defects, and all building systems contained therein are in
good working order in all material respects, subject to ordinary wear and tear.
 
Section 5.14.                   Terrorism and Anti-Money Laundering.
 
(a)    As of the Funding Date, no direct or indirect holder of a beneficial
interest in Borrower is an OFAC Prohibited Person.
 
(b)    To comply with the Anti-Money Laundering Laws, all payments by a Borrower
Party to Lender or from Lender to a Borrower Party shall only be made in the
name of a Borrower Party and to and from a bank account of a bank based or
incorporated in or formed under the laws of the United States or a bank that is
not a “foreign shell bank” within the meaning of the U.S. Bank Secrecy Act (31
U.S.C. § 5311 et seq.), as amended, and the regulations promulgated thereunder
by the U.S. Department of the Treasury, as such regulations may be amended from
time to time.
 
(c)    Each Borrower Party agrees to provide to Lender, or to cause any other
Person having a beneficial interest in a Borrower Party, to provide, at any time
and from time to time during the term of the Loan, such information as Lender
determines to be necessary or appropriate to comply with the Anti-Money
Laundering Laws of any applicable jurisdiction, or to respond to requests for
information concerning the identity of any Borrower Party or any Person having a
direct or indirect beneficial interest in any Borrower Party, from any
Governmental Authority, self-regulatory organization or financial institution in
connection with its anti-money laundering compliance procedures, or to update
such information.
 
(d)     The representations and warranties set forth in this Section 5.14 shall
be deemed repeated and reaffirmed by each Borrower Party as of each Payment Date
and as of each date on which any Borrower Party receives any funds from
Lender.  Each Borrower Party agrees to promptly notify Lender in writing should
it become aware of any change in the information set forth in this Section 5.14.
 
Section 5.15.                   Financing Transaction.  The Loan is (or shall
be) evidenced by debt instruments that are intended to be accounted for as
“debt” on the balance sheet of each Borrower Party, and each Borrower Party
shall account for the Loan as “debt” in all financial statements prepared by or
on behalf of each Borrower Party.
 
Section 5.16.                   Personal Property.  Except for the Personal
Property listed on Schedule 5.16 attached hereto, no material tangible Personal
Property is located within or outside any Property or used or proposed to be
used in any Property.  A Borrower Party has good title to all Personal Property
free and clear of all Liens, except as disclosed on Schedule 5.16.
 
Section 5.17.                   Additional Real Property.  Except for the Land
(as defined in the Mortgage) and Improvements and any contiguous public streets
and sidewalks, no Borrower Party nor any Property Manager uses or occupies any
other material real property in connection with the operation, occupancy and
management of any Property.
 
Section 5.18.                   Material Agreements.
 
(a)    As of the Funding Date, each Property owned by an Individual Borrower is
managed by Carveout Indemnitor in accordance with the partnership agreement for
such Individual Borrower, and no separate management or leasing agreements
currently exist.  Management fees payable to Carveout Indemnitor shall not be
modified to the extent that such modification would cause the management fees to
exceed market rates payable to unrelated and qualified third party property
managers and/or leasing agents.
 
 
 
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(b)    No Borrower Party other than Carveout Indemnitor has any right or claim
to, or obligation to pay, any fees, commissions, royalties, compensation or
other remuneration in connection with or arising out of the use, occupancy,
management, and operation of any Property.  Except as set forth in Schedule
5.18, there are no Material Agreements affecting any Property.
 
ARTICLE 6.                                
 
                                                                                                                   
FINANCIAL REPORTING; AUDITS
 
Section 6.1.    Financial Statements.  While any of the Obligations remain
outstanding, Borrower shall furnish to Lender, or in the case of the reporting
under Subsection 6.1(e) below, Borrower shall cause Carveout Indemnitor to
furnish to Lender, each of the following within the specified time period, each
in hardcopy and electronic form, and each to be in format reasonably required by
Lender:
 
(a)    If requested by Lender, within thirty (30) days after the end of each
calendar quarter (including the last calendar quarter of each year), a quarterly
rent roll for each Property, certified to Lender by an Authorized Representative
of Borrower as true, accurate and complete;
 
(b)               Intentionally omitted;
 
(c)    If requested by Lender, within thirty (30) days after the end of each
calendar quarter (including the last calendar quarter of each year), quarterly
operating statements for each Property, (including capital expenses), certified
by an Authorized Representative of Borrower as true, accurate and complete;
 
(d)    Within ninety (90) days following the end of each calendar year: (i)
annual operating statements and a current rent roll for each Property, certified
by an Authorized Representative of Borrower as true, accurate and complete, (ii)
a fully-executed copy (certified by an Authorized Representative of Borrower as
true, complete and correct) of any Lease executed by (or on behalf of) any
Borrower Party during the preceding year that did not require Lender’s consent,
and (iii) a capital expenditure summary for each Property for the preceding
calendar year, certified by an Authorized Representative of Borrower as true,
accurate and complete;
 
(e)    Within ninety (90) days following the end of each calendar year, annual
audited financial statements, including a balance sheet, for Carveout
Indemnitor, certified by an Authorized Representative of Carveout Indemnitor as
true, accurate and complete;
 
(f)    If prepared by Borrower in the ordinary course of its business, within
thirty (30) days following completion thereof by Borrower, final annual
operating and capital expenditure budgets for each Property for the ensuing
calendar year;
 
(g)               Promptly following receipt, copies of all material notices
(meaning written notices of violation of Legal Requirements or material notices
to or from any Tenants, but excluding routine correspondence) issued or received
in connection with the ownership and operation of any Property;
 
(h)               Within sixty (60) days following the occurrence of any
Permitted Transfer described in clause (a)(iii) of the definition of “Permitted
Transfer” in Section 1.1, a certification, executed by an Authorized
Representative of Carveout Indemnitor or any successor permitted under said
clause (a)(iii) (as the case may be), confirming that immediately following such
Permitted Transfer, Carveout Indemnitor or any such successor (as the case may
be) was in compliance with the conditions and requirements set forth in said
clause (a)(iii); and
 
(i)    Promptly following Lender’s request, such other reasonable financial
information relating to any Property or any Borrower Party as Lender may request
in writing from time to time.
 
Section 6.2.                      Accounting Principles.  All financial
statements for the Carveout Indemnitor set forth above shall be prepared in
accordance with GAAP, consistently applied, except for certain reclassifications
allowed by GAAP or to comply with new GAAP accounting pronouncements.  All
operating statements for a Property shall
 
 
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be prepared in accordance with GAAP, except rental income shall be prepared on
an accrual basis, and not straight-lined.
 
 
ARTICLE 7.                                
 
                                                                                                                                     
COVENANTS
 
Borrower covenants and agrees with Lender as follows:
 
Section 7.1.    Due on Sale and Encumbrance; Transfers of Interests.
 
(a)    Without the prior written consent of Lender and except as expressly
provided below:
 
(i)    No Borrower Party nor any Person having an ownership or beneficial
interest in a Borrower Party shall (A) consummate a Transfer, or (B) enter into
any easement or other agreement granting rights in or restricting the use or
development of the Collateral; and
 
(ii)    No new partners shall be admitted to or created in a Borrower Party (nor
shall any existing partner withdraw from a Borrower Party); and
 
(iii)    No change in the day-to-day control and management of a Borrower Party,
any Property or the Portfolio shall be implemented.
 
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default in order to declare the Obligations to
be immediately due and payable upon a Transfer in violation of this
Agreement.  This provision shall apply to every Transfer in violation of this
Agreement regardless of whether such Transfer was voluntary or not, or whether
or not Lender has previously consented to any Transfer.
 
(b)    Notwithstanding the restrictions in Subsection 7.1(a), Permitted
Transfers will be permitted without Lender’s prior consent.  Carveout Indemnitor
(or any successor permitted under clause (a)(iii) of the definition of
“Permitted Transfer” in Section 1.1) shall at all times, whether prior to or
following the occurrence of any Permitted Transfer, be the sole general partner
of each Individual Borrower.
 
(c)    Notwithstanding anything to the contrary set forth in this Agreement,
Lender shall consent to a one-time transfer of title to the Portfolio and
assumption of 100% of the Loan and the duties and obligations of Borrower and
Carveout Indemnitor under the Loan Documents, subject to satisfaction of each
and every one of the following conditions:
 
(i)    At least thirty (30) days prior to such assumption, Borrower Parties
shall provide to Lender: (A) written notice (a “Assumption Request”) of the
proposed transfer, (B) a work fee in the amount of $25,000.00 (the “Assumption
Work Fee”), (C) the name(s), address(es) and organizational documents of the
proposed purchaser and of the principals, affiliates and parent or other
majority owners, as applicable, of the proposed purchaser, (D) detailed and
complete financial statements of the proposed purchaser and of the principals,
affiliates and parent or other majority owners, as applicable, of the proposed
purchaser, (E) information with respect to the business and business experience
of the proposed purchaser and its principals, affiliates and parent or other
majority owners, as applicable, and their experience in the ownership and
operation of properties similar to the Portfolio and other commercial real
estate, (F) information on the proposed property management company and a copy
of the proposed property management agreement, (G) the terms and conditions of
the proposed sale and a copy of the executed purchase and sale agreement, (H) a
description of the ownership structure of the proposed purchaser and each of its
principals, affiliates and parent or other majority owners, as applicable, (I)
the purchaser’s pro-forma operating and management plan for the Portfolio, and
(J) promptly following Lender’s request, such other information as Lender may
reasonably request to permit it to determine the creditworthiness and management
abilities of the proposed purchaser and its principals, affiliates and parent or
other majority owners, as applicable;
 
 
 
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(ii)    Lender must approve, in the exercise of its discretion, the identity,
creditworthiness, management abilities and all other attributes of the proposed
purchaser and the proposed replacement Carveout Indemnitor(s), and their
respective principals, affiliates and parent or other majority owners, as
applicable;
 
(iii)    No Event of Default shall have occurred and be continuing, either as of
the date of the Assumption Request or thereafter through the date of transfer of
title to the Portfolio and assumption of the Loan;
 
(iv)    The Portfolio, as of the date of transfer and assumption and thereafter,
must be managed by a management company approved by Lender (in the exercise of
its reasonable judgment) under a management agreement satisfactory to Lender (in
the exercise of its reasonable judgment) and otherwise satisfying the
requirements of Section 7.10;
 
(v)    At the closing of any approved transfer and assumption, the proposed
purchaser shall assume the duties and obligations of Borrower Parties under the
Loan Documents (subject to the limitations on liability set forth in Article 10)
pursuant to assumption documents in form and substance satisfactory to Lender
(in the exercise of its reasonable judgment).  Additionally, at the time of the
approved transfer and assumption, the proposed purchaser shall provide to Lender
an environmental indemnity agreement from said purchaser and from another
financially responsible Person acceptable to Lender (in its discretion) in form
and substance reasonably satisfactory to Lender (which form may be different
from the form executed by Borrower Parties as a result of Lender’s updating its
standard form of environmental indemnity agreement or as a result of specific
environmental conditions at any Property) and a recourse carveout indemnity in
substantially the same form as the Carveout Indemnity, also from a financially
responsible Person acceptable to Lender (in its discretion).  Borrower Parties
and the proposed purchaser and such other Persons as Lender shall require shall
also deliver and, if applicable, execute (A) evidence of authority and entity
existence, (B) Uniform Commercial Code, judgment and bankruptcy searches, (C)
Uniform Commercial Code financing statements, (D) an endorsement to the Title
Policy updating the effective date to the date of the transfer, showing the
purchaser as the owner of each Property, showing no additional title exceptions,
except as shall be approved by Lender (in its discretion) and otherwise in form
and substance reasonably acceptable to Lender, (E) opinions of counsel
reasonably acceptable to Lender on such matters as Lender shall reasonably
require, (F) evidence of insurance as required by Section 3.1, and (G) such
other documents as Lender shall reasonably require in order to effectuate the
transaction as contemplated by this Subsection (c);
 
(vi)    At the closing of any approved transfer and assumption, the proposed
purchaser shall, in accordance with the terms and conditions of Sections 3.4,
deposit with Lender sufficient funds to pay when due all Impounds in accordance
with the terms of Section 3.4.  To the extent the Loan Documents require any
other reserves or deposits the same shall be established by the proposed
purchaser prior to the date of closing of the approved transfer and
assumption.  The foregoing requirement for deposits and reserves shall be
enforced notwithstanding that any of the foregoing may have been waived by
Lender with respect to Borrower Parties either in this Agreement, or in any side
letter or agreement executed by Lender;
 
(vii)    At the closing of any approved transfer and assumption, Borrower shall
pay to Lender a fee in the amount of one percent (1%) of the then outstanding
balance of the Loan in immediately available funds (the “Assumption Fee”).  The
obligation to pay the Assumption Fee is consideration to induce Lender to allow
the proposed purchaser to assume the obligations of Borrower Parties’ under the
Loan Documents and to release Borrower Parties from liability thereunder for all
periods of time from and after the date of transfer in accordance with this
Subsection (c); provided that in no event shall any Borrower Party be released
from any liability accruing prior to the date of the transfer of the Portfolio
pursuant to this Subsection (c), including acts or omissions leading to a
violation of Environmental Laws (as defined in the Environmental Indemnity
Agreement), whether known or unknown as of the closing of the approved transfer;
 
 
 
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(viii)    The proposed transfer and assumption shall not cause a violation of
any Legal Requirements governing any Property, the Loan, Borrower Parties, the
proposed purchaser, any proposed replacement carveout indemnitor or any of their
respective principals;
 
(ix)    Lender must confirm, in the exercise of its reasonable judgment, that as
of the date of the proposed transfer of the Portfolio and assumption of the
Loan, the Portfolio will generate (A) the lesser of (1) a Loan to Value Ratio of
not more than sixty-five percent (65%), and (2) a Loan to Cost Ratio of not more
than sixty-five percent (65%); and (B) a Debt Service Coverage Ratio of at least
125%, calculated for the 12-month period immediately following the proposed
transfer of the Portfolio and assumption of the Loan (based on a fully
amortizing 20-year schedule).  As used herein, “Loan to Value Ratio” means the
ratio of (A) the outstanding balance of the Loan, compared to (B) the aggregate
of the then “as is” value of the Portfolio, all as determined by Lender in the
exercise of its reasonable judgment.  As used herein, “Loan to Cost Ratio” means
the ratio of (A) the outstanding balance of the Loan, compared to (B) the
aggregate of the purchase price and other reasonable and customary closing
costs, as approved by Lender in its discretion, paid by the proposed purchaser
to acquire the Portfolio;
 
(x)    On the earlier of ten (10) days following demand by Lender or the closing
of the approved transfer and assumption, Borrower Parties shall pay all of
Lender’s reasonable costs and expenses incurred in connection with the proposed
transfer of the Portfolio whether or not the transfer actually occurs, including
attorneys’ fees, recording and filing charges, title company charges and the
cost of the endorsement to the Title Policy.  The Assumption Work Fee shall be
applied to reimburse Lender for its costs and expenses (with any excess after
full payment of all of Lender’s costs and expenses being applied to the
Assumption Fee or returned to Borrower Parties), but the Assumption Work Fee
shall not be deemed to be a cap or limitation on the  obligation of Borrower to
reimburse Lender for all costs and expenses incurred by Lender under this
Subsection (c), regardless of whether such amounts exceed the Assumption Work
Fee and/or Lender, in the exercise of its judgment, does not approve the
proposed purchaser, any proposed replacement guarantor or any other aspect of
the proposed transfer; and
 
(xi)    Lender shall have no obligation to review or process the request of
Borrower Parties for approval of a proposed transfer of the Portfolio and
assumption of the Loan until such time as Lender has received all of the items,
including the Assumption Work Fee, required to be delivered to Lender pursuant
to this Subsection (c).
 
(d)    Notwithstanding the restrictions in Subsection 7.1(a), Lender shall not
withhold its consent to any pledge by Carveout Indemnitor of the general
partnership interests in Borrower in order to secure so-called “mezzanine”
financing subject to satisfaction (to be determined by Lender in the exercise of
its reasonable judgment) of each and every one of the following conditions:
 
(i)      No Event of Default shall have occurred and be continuing, either as of
the date of the request for Lender’s consent or thereafter through the date of
the closing of such pledge and the proposed mezzanine financing;
 
(ii)      Lender must confirm (in the exercise of its reasonable discretion)
that following the closing of such pledge and the proposed mezzanine financing,
Carveout Indemnitor shall have a Tangible Net Worth of not less than
$100,000,000;
 
(iii)                      Each Borrower Party must deliver all information
reasonably requested by Lender with respect to such pledge and the proposed
mezzanine financing;
 
(iv)    Prior to Lender’s consent under this Subsection 7.1(d) becoming
effective, Borrower must reimburse Lender for all reasonable costs and expenses
incurred by Lender in connection with the mezzanine financing, including legal
fees and expenses; and
 
(v)          At all times following the closing of such pledge and the proposed
mezzanine financing, Carveout Indemnitor shall remain the sole general partner
of each Individual Borrower and shall continue
 
 
 
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to control the exercise of all rights, powers and privileges afforded to
Carveout Indemnitor in its capacity as general partner under the applicable
partnership agreements and other organizational documents and applicable laws,
and no pledgee of Carveout Indemnitor’s general partnership interests in any
Individual Borrower may take title to such general partnership interests or
exercise any of the rights, powers and privileges afforded to Carveout
Indemnitor in its capacity as general partner.
 
(e)    The prohibitions and restrictions set forth in this Article 7 shall not
preclude: (i) any Borrower Party from granting liens that encumber real property
other than the Collateral, or (ii) Carveout Indemnitor from providing
indemnities or guaranties in favor of creditors other than Lender; it being
agreed such actions may be effected without Lender’s consent.
 
Section 7.2.    Taxes; Charges.
 
(a)    Subject to the terms of Section 3.4, Borrower shall pay before any fine,
penalty, interest or cost may be added thereto, and shall not enter into any
agreement to defer, any Taxes.  Borrower shall not suffer or permit the joint
assessment of any Property with any other real or personal property not
encumbered by the Mortgage.
 
(b)    Borrower shall pay when due all claims and demands of mechanics, material
suppliers, laborers and others which, if unpaid, might result in a Lien on any
Property; provided, however, that Borrower Parties may contest the validity of
such claims and demands so long as (i) the applicable Individual Borrower
notifies Lender that it intends to contest such claim or demand, (ii) Borrower
Parties provide Lender with an indemnity, bond or other security satisfactory to
Lender (including an endorsement to the Title Policy insuring against such claim
or demand) assuring the discharge of the obligations of the applicable
Individual Borrower for such claims and demands, including interest and
penalties, and (iii) the applicable Individual Borrower is diligently contesting
the same by appropriate legal proceedings in good faith and at its own expense
and concludes such contest prior to the tenth (10th) day preceding the earlier
to occur of the Scheduled Maturity Date or the date on which such Property is
scheduled to be sold for non-payment.
 
Section 7.3.    Alterations and Renovations.  Borrower Parties shall obtain
Lender’s prior written consent (such consent not to be unreasonably withheld) to
any alterations or renovations to any of the Improvements; provided, however,
that Lender’s consent shall not be required in connection with any alterations
or renovations that (i) are contemplated in connection with any Restoration,
(ii) are permitted to be made by any Tenant under its Lease without the consent
or approval of any Borrower Party, or (iii) will not have a material adverse
effect on the financial condition of any Borrower Party, the value of the
affected Property or the Net Operating Income of the affected Property, provided
further that such alterations permitted under subsection (iii) do not adversely
affect any structural component of any Improvements relating to the affected
Property, any utility or HVAC system contained in any Improvements relating to
the affected Property, or the exterior of any building constituting a part of
any Improvements of the affected Property, and the aggregate cost thereof does
not exceed the lesser of either: (A) ten percent (10%) of the Allocated Loan
Amount of the affected Property, or (B) One Million Dollars ($1,000,000.00).  In
connection with any request for approval relating to any alterations or
renovations to any of the Improvements, provided no Event of Default exists,
Lender shall notify Borrower whether Lender has approved any such request within
ten (10) Business Days following Lender’s receipt of all information reasonably
requested by Lender to review any such request.  If Lender does not so notify
Borrower within ten (10) Business Days following Lender’s receipt of all such
information and if no Event of Default exists, Lender’s approval of such request
shall be deemed granted.
 
Section 7.4.    Operation; Maintenance.
 
(a)    Borrower shall not cause or permit any waste of any material portion of
any Property.
 
(b)    Borrower shall observe and comply with all Legal Requirements applicable
to the ownership, use and operation of each Property and shall promptly commence
a reasonable and good faith cure of any alleged violation of any Legal
Requirements; provided that the applicable Individual Borrower may, upon
providing Lender with security satisfactory to Lender (in the exercise of
Lender’s reasonable judgment) and so long as during any contest the Collateral
shall not be subject to any lien, charge, fine or other liability and shall not
be in danger of
 
 
 
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being forfeited, lost or closed, proceed diligently and in good faith to contest
the validity or applicability of any such alleged violation of Legal
Requirement.
 
(c)    Borrower shall maintain each Property in good condition and promptly
repair any damage or casualty (subject to the terms of this Agreement).
 
(d)     Upon reasonable prior notice (except during the existence of an Event of
Default, when no prior notice shall be required), Borrower Parties and any
Property Manager (if any) shall provide Lender and its agents, representatives
and contractors with access to each Property from time to time (subject to the
rights of Tenants) for the purposes of conducting appraisals, engineering
inspections and environmental assessments of such Property (provided that Lender
must have a good faith belief that an Individual Borrower is not in material
compliance with its warranties, covenants and agreements relating to physical
condition of the subject Property and/or compliance with Legal Requirements
(including Environmental Laws, as defined in the Environmental Indemnity
Agreement) prior to the commencement of any post-Funding Date engineering
inspection or environmental assessment or investigation with respect to that
Property) and with access to Borrower’s home office for purposes of examining
and copying the books and records relating to the Portfolio.  The costs relating
to such activities shall be paid by Lender unless (i) Lender has a good faith
basis for suspecting that an Individual Borrower is not in material compliance
with its warranties, covenants and agreements relating to the physical condition
of the subject Property and/or compliance with laws (including environmental
laws), (ii) the examination of such books and records reveals that financial
information submitted to Lender by Borrower Parties, Property Manager or anyone
on behalf of Borrower Parties is materially inaccurate, or (iii) an Event of
Default exists (or is discovered as a result of any such inspection or review),
in which case the reasonable third party fees and expenses relating to such
activities shall be paid by Borrower within the Demand Period.
 
(e)    All Operating Revenues shall be applied to Operating Expenses, Debt
Service and reasonable and necessary capital expenditures or costs, and then,
provided no Event of Default exists, to general operating purposes of Borrower,
including distributions to members and/or partners of Borrower.
 
Section 7.5.    Taxes on Security.  Borrower shall pay all taxes, charges,
filing, registration and recording fees, excises and levies payable with respect
to the Note or the Liens created or secured by the Loan Documents, other than
income, franchise and doing business taxes imposed on Lender.  If there shall be
enacted any law (a) deducting the Loan from the value of the Collateral for the
purpose of taxation, (b) affecting any Lien on any Property, or (c) changing
existing laws of taxation of mortgages, deeds of trust, security deeds, or debts
secured by real property, or changing the manner of collecting any such taxes,
Borrower shall promptly pay to Lender, within thirty (30) days following demand,
all taxes, costs and charges for which Lender is or may be liable as a result
thereof; provided, however, that if any such payment would be prohibited by law
or would render the Loan usurious, then instead of collecting such payment,
Lender may declare all amounts owing under the Loan Documents to be immediately
due and payable (provided that Borrower shall have no obligation to make payment
of any Applicable Prepayment Fee otherwise applicable to prepayment tendered as
a result of Lender’s exercise of its rights under this Section 7.5).
 
Section 7.6.    Compliance with Loan Documents; Further Assurances.
 
(a)    Each Borrower Party shall observe, perform and satisfy in a timely manner
all the terms, provisions, covenants, conditions, duties and obligations
required to be observed, performed or satisfied by them, and shall pay when due
all costs, fees and expenses required to be paid by them, under and pursuant to
this Agreement, the Note and the other Loan Documents.
 
(b)    Each Borrower Party shall promptly (i) cure, or cause to be cured, any
defects in the execution and delivery of the Loan Documents, and (ii) execute
and deliver, or cause to be executed and delivered, all such other documents,
agreements and instruments as Lender may reasonably request to further evidence
and more fully describe the collateral for the Obligations, to correct any
omissions or errors in the Loan Documents, to perfect, protect or preserve any
Liens created under any of the Loan Documents, or to make any recordings, file
any notices, or obtain any consents, as may be necessary or appropriate in
connection therewith.
 
 
 
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(c)     No Borrower Party shall (i) change the location of its chief executive
office/chief place of business from that specified in Section 9.1, or (ii)
change its name, or (iii) change the location where it maintains its records
with respect to the Portfolio, unless in each instance Borrower Parties shall
have given Lender at least thirty (30) days prior written notice of any such
change and shall have delivered to Lender all UCC financing statements and
amendments thereto as Lender shall request and taken all other actions deemed
necessary by Lender to continue its perfected first priority lien status in the
Collateral.
 
Section 7.7.    Estoppel Certificates.  Borrower Parties, within twenty (20)
days after request, shall furnish to Lender a written statement, duly
acknowledged by an Authorized Representative of Borrower Parties, setting forth
the amount due on the Loan, the terms of repayment of the Loan, the date to
which interest has been paid, whether any offsets or defenses exist against the
Loan and, if any are alleged to exist, the nature thereof in detail, and such
other reasonable matters as Lender may request.
 
Section 7.8.    Notice of Certain Events.  Borrower Parties shall, within three
(3) Business Days after gaining knowledge, notify Lender of (i) any Event of
Default, together with a detailed statement of the steps being taken to cure
such Event of Default (Lender having no obligation to accept any such cure of an
Event of Default unless acceptance of a cure and reinstatement is mandatory
under applicable law); (ii) any notice of any material default received by
Borrower Parties under other obligations relating to any Property or otherwise
material to Borrower’s business; and (iii) any threatened or pending legal,
judicial or regulatory proceedings, including any dispute between a Borrower
Party and any Governmental Authority, affecting a Borrower Party or any
Property.
 
Section 7.9.    Indemnification.  Borrower shall jointly and severally
indemnify, defend and hold Lender harmless from and against any and all losses,
liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever,
including the reasonable fees and actual expenses of Lender’s attorneys, in
connection with (i) any inspection, review or testing of or with respect to any
Property, (ii) any investigative, administrative, mediation, arbitration, or
judicial proceeding, whether or not Lender is designated a party thereto,
commenced or threatened at any time (including after the repayment of the Loan)
in any way related to the execution, delivery or performance of any Loan
Document or to any Property, (iii) any proceeding instituted by any Person
claiming a Lien, and (iv) any brokerage commissions or finder’s fees claimed by
any broker or other party in connection with the Loan, any Property, or any of
the transactions contemplated in the Loan Documents, including those arising
from the joint, concurrent, or comparative negligence of Lender, except to the
extent any of the foregoing is caused by Lender’s gross negligence or willful
misconduct.
 
Section 7.10.                   Property Management.
 
(a)    Each Property has been, and as of the Funding Date will be, managed by
Carveout Indemnitor.  If at any time any Individual Borrower wishes to engage a
third-party property manager (including any Affiliate of Borrower) to manage the
applicable Property, Borrower must request and receive Lender’s approval of such
proposed property manager and the proposed management agreement (Lender’s
approval not to be unreasonably withheld) prior to engaging such proposed
property manager.  Lender may condition its approval of a proposed property
manager and management agreement on such Individual Borrower’s and such proposed
property manager’s execution and delivery of an assignment of management
agreement and subordination of management fees in form and substance acceptable
to Lender whereby, among other things, the proposed property manager agrees to
subordinate payment of its management fees to the full and timely payment of the
Obligations, and such Individual Borrower assigns to Lender all of Borrower’s
rights under the proposed management agreement.
 
(b)    Borrower Parties shall (i) diligently perform and observe all of the
terms, covenants and conditions of any Management Agreement on the part of
Borrower Parties to be performed and observed and do all things necessary to
preserve and to keep unimpaired its rights thereunder, and (ii) within three (3)
Business Days following receipt, notify Lender of the giving of any notice by
any Property Manager to Borrower Parties of any default by a Borrower Party in
the performance or observance of any of the terms, covenants or conditions of
any Management Agreement on the part of a Borrower Party to be performed and
observed and deliver to Lender a true copy of each such notice.
 
(c)    Without the prior written consent of Lender (such consent not to be
unreasonably withheld if no Event of Default exists), no Borrower Party shall
(i) surrender any Management Agreement, (ii) consent to the
 
 
 
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assignment by the Property Manager of its rights, duties or obligations under
any Management Agreement, (iii) terminate or cancel any Management Agreement, or
(iv) modify, change, supplement, alter or amend any Management Agreement, either
orally or in writing.
 
(d)    Any change in ownership or control of any Property Manager shall be cause
for Lender to re-approve such Property Manager and the applicable Management
Agreement (such approval not to be unreasonably withheld if no Event of Default
exists).
 
(e)    Borrower hereby assigns to Lender all the rights, privileges and
prerogatives of Borrower in and under any Management Agreement (including the
right to surrender any Management Agreement or to terminate, cancel, modify,
change, supplement, alter or amend any Management Agreement in any respect, and
any such surrender of any Management Agreement or termination, cancellation,
modification, change, supplement, alteration or amendment of any Management
Agreement without the prior consent of Lender shall be void and of no force and
effect).
 
(f)     Upon the occurrence of an Event of Default, Lender may require, upon ten
(10) Business Days prior written notice to Borrower, that Borrower select a
Property Manager not affiliated with Borrower to manage each Property.  If a
Property Manager is so required by Lender, Borrower shall immediately seek to
appoint a Property Manager acceptable to Lender (in the exercise of its
reasonable discretion), which Property Manager shall (i) be a reputable
management company having at least ten (10) years’ experience in the management
of properties substantially similar to each Property and in the jurisdiction in
which each Property is located, (ii) not be paid management fees in excess of
market fees, (iii) enter into a property management agreement in form and
content acceptable to Lender (such approval not to be unreasonably withheld),
and (iv) enter into a subordination agreement with Lender in form and content
reasonably required by Lender.
 
Section 7.11.                   Material Agreements.  Borrower shall not enter
into or become obligated under, or permit Property Manager to enter into or
become obligated under, any Material Agreement pertaining to any Property,
without the prior written consent of Lender, which consent shall not be
unreasonably withheld.
 
Section 7.12.                   Intentionally Omitted.
 
Section 7.13.                   ERISA.
 
(a)    No Borrower Party shall engage in any transaction that would cause any
obligation, or action taken or to be taken, hereunder (or the exercise by Lender
of any of its rights under the Note, this Agreement or the other Loan Documents)
to be a non-exempt (under a statutory or administrative class exemption)
prohibited transaction under ERISA.
 
(b)    Borrower Parties shall deliver to Lender such certifications or other
evidence from time to time throughout the term of the Loan, as requested by
Lender, that (i) no Borrower Party is an “employee benefit plan” as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental
plan” within the meaning of Section 3(32) of ERISA; (ii) no Borrower Party is
subject to any state statute regulating investments of, or fiduciary obligations
with respect to, governmental plans; and (iii) one or more of the following
circumstances is true:
 
(i)    Equity interests in each Borrower Party are publicly offered securities,
within the meaning of 29 C.F.R. §2510.3-101(b)(2);
 
(ii)                    Less than twenty-five percent (25%) of each outstanding
class of equity interests in each Borrower Party is held by “benefit plan
investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or
 
(iii)                   Each Borrower Party qualifies as an “operating company”
or a “real estate operating company” within the meaning of 29 C.F.R.
§2510.3-101(c) or (e).
 
 
 
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Section 7.14.                   Appraisal.  Borrower Parties shall cooperate
with Lender’s request for reasonable information necessary to complete a new or
updated appraisal of each Property, and Borrower Parties shall reimburse Lender
for all costs associated with a new or updated appraisal of such Property;
provided that so long as no Event of Default has occurred, Borrower Parties
shall only be obligated to reimburse Lender for one (1) new or updated appraisal
for each Property after the Funding Date (the reimbursement obligations of
Borrower Parties being unlimited following the occurrence of an Event of
Default).
 
Section 7.15.                   Release of Collateral.
 
(a)    Subject to the terms and conditions of this Section 7.15, Lender agrees
to execute and deliver to Borrower in connection with the sale or transfer by
any Individual Borrower of any Property a partial release instrument (in
recordable form) of the lien of the Mortgage and the other Loan Documents as to
such Property (each, a “Partial Release”), provided that in connection with each
such Partial Release, each and every one of the following conditions are
satisfied (to be determined by Lender in the exercise of its reasonable
judgment):
 
(i)     As of the date Lender issues such Partial Release, no monetary Potential
Default (which solely for the purposes of this provisions means a failure to
make a payment of a liquidated sum of money on the due date thereof but for
which the applicable grace period has yet to expire) then exists, and no Event
of Default shall exist;
 
(ii)                Borrower shall have submitted a written request for such
Partial Release no less than thirty (30) days prior to the anticipated issuance
thereof, such request identifying the Property subject to such requested Partial
Release and containing all other information required hereunder;
 
(iii)               Borrower shall not be entitled to request, and Lender shall
have no obligation to issue: (A) a Partial Release prior to October 1, 2009, and
(B) Partial Releases for more than two (2) Properties in any 12-month period;
 
(iv)               Borrower shall not be entitled to request, and Lender shall
have no obligation to issue a Partial Release for any Property, if such
Property, together with all Properties previously released pursuant to this
Section 7.15, contains, in the aggregate, more than: (A) 807,000 square feet, if
the San Ignacio Properties shall have been previously released pursuant to this
Section 7.15 or substituted pursuant to Section 7.16; or (B) 600,000, if the San
Ignacio Properties shall remain in the Portfolio;
 
(v)                Concurrently with its delivery of a Partial Release, Lender
shall receive a partial release prepayment (each a “Partial Release Prepayment”)
in an amount equal to: (A) one hundred twenty percent (120%) of the Allocated
Loan Amount for the applicable Property and (B) the Applicable Prepayment Fee
(if any) relating to such Partial Release Prepayment, such amount to be applied
by Lender in satisfaction of the Obligations (including any such Applicable
Prepayment Fee);
 
(vi)               Lender shall have confirmed, in the exercise of its
reasonable judgment, that the remaining Properties within the Portfolio shall,
following the issuance of such Partial Release, generate a Debt Service Coverage
Ratio, calculated for the 12-month period immediately following the issuance of
the requested Partial Release (based on a fully amortizing 20-year schedule),
equal to or in excess of the greater of: (A) 125%, or (B) the Debt Service
Coverage Ratio for all Properties (inclusive of the Property subject to the
requested Partial Release and without giving effect to the Partial Release
Prepayment to be made for the requested Partial Release) calculated for the
12-month period immediately preceding the issuance of the requested Partial
Release;
 
(vii)              Lender shall have confirmed in the exercise of its reasonable
judgment, that the Loan to Value Ratio, calculated after giving effect to the
issuance of the requested Partial Release and application of the Partial Release
Prepayment to be made for such requested Partial Release, shall not exceed the
lesser of (1) 65%, or (2) the Loan to Value Ratio calculated immediately prior
to giving effect to the issuance of such Partial Release and application of the
Partial Release Prepayment to be made for such Partial Release.  As used herein,
“Loan to Value Ratio” means the ratio of (A) the then outstanding balance of the
Loan,
 
 
 
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                compared to (B) the aggregate of the then “as is” value of the
Portfolio, all as determined by Lender in the exercise of its reasonable
judgment;
 
(viii)             Concurrently with Lender’s execution and delivery of each
Partial Release, Lender must receive a partial release fee of $2,500.00 together
with payment of all reasonable costs and expenses incurred by Lender in
connection with such Partial Release, including reasonable outside counsel
attorneys’ fees and expenses; and
 
(ix)                Lender shall have confirmed in the exercise of its
reasonable judgment, that no Property remaining within the Portfolio will,
following the issuance of the requested Partial Release, be adversely affected
by such partial release because such remaining Property relied on the Property
to be released for compliance with all Legal Requirements (including zoning,
subdivision, shared parking, utilities, and/or access).
 
(b)    Upon approval of a requested Partial Release and satisfaction of the
terms and conditions specified in this Section 7.15, Lender shall execute and
deliver to Borrower Parties the Partial Release.
 
Section 7.16.                   Substitution of Collateral.
 
(a)    Subject to the terms and conditions of this Section 7.16, Lender agrees
to accept the substitution of collateral for a Property (each, a “Collateral
Substitution”), provided that in connection with each Collateral Substitution,
each and every one of the following conditions are satisfied (to be determined
by Lender in the exercise of its reasonable judgment):
 
(i)                  As of the date Lender consents to the Collateral
Substitution and as of the date the Collateral Substitution is deemed effective,
no monetary Potential Default (which solely for the purposes of this provisions
means a failure to make a payment of a liquidated sum of money on the due date
thereof but for which the applicable grace period has yet to expire) then
exists, and no Event of Default shall exist;
 
(ii)                 Borrower shall not be entitled to request, and Lender shall
have no obligation to approve: (A) a Collateral Substitution prior to October 1,
2009 or after October 1, 2017, and (B) Collateral Substitutions for more than
two (2) Properties in any 12-month period;
 
(iii)                Only Borrower, and not a permitted successor under Section
7.1(c), shall have the right to request a Collateral Substitution;
 
(iv)                Borrower shall not be entitled to request, and Lender shall
have no obligation to approve a Collateral Substitution for any Property, if
such Property, together with all Properties previously substituted pursuant to
this Section 7.16, contains, in the aggregate, more than: (A) 807,000 square
feet, if the San Ignacio Properties shall have been previously released pursuant
to Section 7.15 or substituted pursuant to this Section 7.16; or (B) 600,000, if
the San Ignacio Properties shall remain a portion of the Portfolio;
 
(v)                 Lender shall have confirmed, in the exercise of its
reasonable judgment, that the Portfolio will, following the closing of such
Collateral Substitution, generate a Debt Service Coverage Ratio, calculated for
the 12-month period immediately following the closing of the requested
Collateral Substitution (based on a fully amortizing 20-year schedule), equal to
or in excess of the greater of: (A) 125%, or (B) the Debt Service Coverage Ratio
(inclusive of the Property to be released from the Portfolio and exclusive of
the Substitute Property to be added to the Portfolio in connection with the
requested Collateral Substitution) calculated for the 12-month period
immediately preceding the closing of the requested Collateral Substitution;
 
(vi)                Lender shall have confirmed in the exercise of its
reasonable judgment, that the Loan to Value Ratio, calculated after giving
effect to the closing of the Collateral Substitution, will not exceed the lesser
of (1) 65%, or (2) the Loan to Value Ratio calculated immediately prior to
giving effect to the
 
 
 
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closing of the Collateral Substitution.  As used herein, “Loan to Value Ratio”
means the ratio of (A) the then outstanding balance of the Loan, compared to (B)
theaggregate of the then “as is” value of the Portfolio, all as determined by
Lender in the exercise of its reasonable judgment;
 
(vii)               Borrower Parties shall have submitted a written request for
the Collateral Substitution no less than sixty (60) days prior to the
anticipated consummation thereof, such request identifying the Property subject
to the requested Collateral Substitution and the proposed substitute collateral
therefor, and containing all other information reasonably requested by Lender in
connection with its consideration of the request for the Collateral Substitution
(said sixty (60) day review period commencing when Lender receives all
information reasonably requested by Lender).  At the time of submission of such
written request, Borrower Parties shall provide to Lender a work fee in the
amount of $25,000.00 (the “Substitution Work Fee”);
 
(viii)              Borrower Parties must provide the same scope and quality of
due diligence materials in connection with Lender’s consideration of the
proposed Substitute Property as provided in connection with Lender’s
underwriting and due diligence associated with the applicable Property for which
substitute collateral is being provided (including title, survey, property
condition, environmental and seismic reports, evidence of zoning compliance,
evidence of insurance and tenant estoppels) and any additional materials then
required as a result of changes to Lender’s standard underwriting or due
diligence processes;
 
(ix)                 Lender must approve, in the exercise of its reasonable
discretion, all aspects of the proposed substitute collateral (the “Substitute
Property”), including such factors as value, age, cash flow, quality, property
condition, location, tenancy and other factors then included in Lender’s
underwriting criteria;
 
(x)                  If requested by Lender in its reasonable discretion as a
condition to its approval of any Substitute Property, Lender and Borrower shall
have amended and restated the Allocated Loan Amounts for the Substitute Property
and each remaining Property within the Portfolio;
 
(xi)                 If approved, Lender shall receive a collateral substitution
fee in an amount equal to $25,000.00, payable concurrently with the consummation
of the Collateral Substitution; and
 
(xii)                Lender shall have confirmed in the exercise of its
reasonable judgment, that no Property remaining within the Portfolio will,
following the consummation of the Collateral Substitution, be adversely affected
by such Collateral Substitution because such remaining Property relied on the
Property to be released for compliance with all Legal Requirements (including
zoning, subdivision, shared parking, utilities, and/or access).
 
(b)    Borrower agrees to pay or reimburse Lender for all reasonable costs and
expenses incurred by Lender in connection with the proposed Collateral
Substitution, including reasonable outside counsel fees and expenses, regardless
of whether the Collateral Substitution is approved by Lender.  Payment of costs
and expenses must be tendered upon the earlier of consummation of the Collateral
Substitution or within the Demand Period.  The Substitution Work Fee shall be
applied to reimburse Lender for its costs and expenses (with any excess after
full payment of all of Lender’s costs and expenses being applied to the
collateral substitution fee of $25,000 or returned to Borrower Parties), but the
Substitution Work Fee shall not be deemed to be a cap or limitation on
the  obligation of Borrower to reimburse Lender for all costs and expenses
incurred by Lender under this Section 7.16, regardless of whether such amounts
exceed the Substitution Work Fee and/or Lender, in the exercise of its judgment,
does not approve the requested Collateral Substitution.
 
(c)    If a proposed Collateral Substitution is approved by Lender, Borrower
Parties shall, at their sole cost, execute and/or deliver: (i) all documents
reasonably required by Lender, which documentation shall be in form comparable
to the Loan Documents executed as of the date hereof and which shall include a
modification and/or reaffirmation agreement covering the existing Loan
Documents, a mortgage, deed of trust or other customary security instrument, an
assignment of leases and rents, an assignment of property documents, an
assignment of management agreement and subordination of management fees, an
environmental indemnity agreement, a closing affidavit and Uniform Commercial
Code financing statements; (ii) an ALTA (or equivalent) mortgagee title policy
 
 
 
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for the Substitute Property, such title policy to be in form and substance
satisfactory to Lender in its reasonable discretion; (iii) evidence of authority
and entity existence; (iv) Uniform Commercial Code, judgment and bankruptcy
searches; (v) opinions of counsel reasonably acceptable to Lender on such
matters as Lender shall reasonably require; (vi) evidence of insurance as
required by Section 3.1 for the Substitute Property; and (vii) such other
documents or items as Lender shall reasonably require in order to effectuate the
Collateral Substitution.
 
(d)    Upon approval of the proposed Collateral Substitution and satisfaction of
the terms and conditions specified in this Section 7.16, Lender shall execute
and deliver to Borrower Parties a partial release (in recordable form) of the
lien of the Mortgage and the other Loan Documents with respect to the Property
for which substitute collateral is being provided.  Following the consummation
of the Collateral Substitution, the Substitute Property shall be considered and
deemed to be a “Property” and included within the “Portfolio” for all purposes
under this Agreement and the other Loan Documents.
 
Section 7.17.                   Excess Collateral.
 
(a)    Lender acknowledges that, as a result of Borrower’s inability to complete
certain parcel splits in accordance with applicable Legal Requirements prior to
the Funding Date, certain portions of certain Properties (as more particularly
described on Schedule 2, collectively, the “Excess Collateral”) include Land and
Improvements and other Collateral which is encumbered by the lien of the
Mortgage and the other Loan Documents solely because such Excess Collateral is
included within the same tax parcel or lot of record as the portions of such
Properties that are intended to constitute Collateral hereunder.  Subject to the
terms and conditions of this Section 7.17, Lender agrees to execute and deliver
to Borrower a partial release instrument (in recordable form) of the lien of the
Mortgage and the other Loan Documents as to any portion of such Excess
Collateral (each, an “Excess Collateral Release”), provided that in connection
with each such Excess Collateral Release, each and every one of the following
conditions are satisfied (to be determined by Lender in the exercise of its
reasonable judgment):
 
(i)                  As of the date Lender issues such Excess Collateral
Release, no monetary Potential Default (which solely for the purposes of this
provisions means a failure to make a payment of a liquidated sum of money on the
due date thereof but for which the applicable grace period has yet to expire)
then exists, and no Event of Default shall exist;
 
(ii)                 Borrower shall have submitted a written request for such
Excess Collateral Release no less than thirty (30) days prior to the anticipated
issuance thereof, such request (A) identifying the portion of the Property
subject to such requested Excess Collateral Release, (B) to include an approved
site or subdivision plan delineating the portion of the Property subject to such
requested Excess Collateral Release and the portion of the Property to remain
within the Portfolio, (C) all necessary easements and other agreements
preserving all necessary rights associated with the Property to remain within
the Portfolio, and (D) containing all other information required
hereunder.  Such written request shall also include a certificate in form
reasonably acceptable to Lender from an Authorized Representative of Borrower
certifying that: (1) in connection with any subdivision of the applicable
Property necessary to accommodate the subject Excess Collateral Release,
Borrower Parties have complied with all Legal Requirements and obtained all
approvals required under any Leases, Permitted Encumbrances, or other contracts
or agreements applicable to such Property (said certification to include copies
of all such approvals required pursuant to Legal Requirements, Leases, Permitted
Encumbrances or other contracts or agreements applicable to such Property); (2)
that the requested Excess Collateral Release does not violate any of the
provisions of Leases, Permitted Encumbrances, or other contracts or agreements
and that the purchaser or transferee has assumed all of Borrower Parties’
obligations, if any, relating to the portion of such Property subject to the
Excess Collateral Release under such Leases, Permitted Encumbrances, or other
contracts or agreements and Borrower Parties have been released from the payment
or performance of any obligations thereunder thereafter arising; (3) that any
subdivision necessary for the requested Excess Collateral Release shall not
materially and adversely affect the utility, access, driveways, parking,
drainage flows, operation or any other use of the remaining portion of the
affected Property and the Improvements thereon in conformance with all Legal
Requirements; and (4) no Tenants at the remaining portion of the affected
Property will be relocated to the portion of such Property subject to the Excess
Collateral Release (but the foregoing prohibition on the relocation of any
Tenant shall not prohibit any Tenant from expanding into all or any portion of
such Property subject to the Excess Collateral Release);
 
 
 
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(iii)                Concurrently with Lender’s execution and delivery of each
Excess Collateral Release, Lender must receive payment of all reasonable costs
and expenses incurred by Lender in connection with such Excess Collateral
Release, including reasonable outside counsel attorneys’ fees and expenses; and
 
(iv)                Lender shall have confirmed in the exercise of its
reasonable judgment, that no Property remaining within the Portfolio will,
following the issuance of the requested Excess Collateral Release, be adversely
affected by such partial release because such remaining Property relied on the
Property to be released for compliance with all Legal Requirements (including
zoning, subdivision, shared parking, utilities and/or access).
 
(b)    Upon approval of a requested Excess Collateral Release and satisfaction
of the terms and conditions specified in this Section 7.17, Lender shall execute
and deliver to Borrower Parties the Excess Collateral Release.
 
ARTICLE 8.                                

 
                                                                                                                              
EVENTS OF DEFAULT
 
Section 8.1.    Defaults.  The Obligations shall, at the option of Lender,
become immediately due and payable, interest under the Note shall begin to
accrue at the Default Rate, and Lender shall be entitled to pursue all available
rights and remedies, upon the occurrence and during the existence of any one or
more of the following events (individually an “Event of Default” and
collectively, “Events of Default”); provided that the following acts, omissions
or conditions shall not be deemed to constitute an “Event of Default” (and
thereby cause interest to accrue at the Default Rate and/or entitle Lender to
pursue all available rights and remedies) until any and all specified grace or
cure periods have expired:
 
(a)   If any monthly installment of Debt Service and/or Impounds (if any) is not
received by Lender on or before 2 p.m. (Hartford, Connecticut time) on the fifth
(5th) day of the month in which such installment is due;
 
(b)   If the Obligations are not paid in full on the Maturity Date;
 
(c)   If any other amounts reserved under this Agreement (including payments
required under Section 9.5) are not received by Lender prior to the expiration
of the applicable Demand Period;
 
(d)   If Borrower Parties (1) fail to comply with any of their duties and
obligations under Subsection 3.1(a) in any respects, or (2) fail to comply with
their duties and obligations under Subsection 3.1(b) through (i) in all material
respects, subject to the notice and cure periods specified in Section 3.1(g);
 
(e)   If any Borrower Party fails to provide any material aspect of the
financial reporting required pursuant to Section 6.1, and such failure continues
for thirty (30) days following written notice from Lender of such failure;
 
(f)   If any fact, circumstance or event (other than those specifically
addressed elsewhere in this Article 8) shall occur that is specifically
characterized under any provision of any other Loan Document as an “Event of
Default” under such Loan Document;
 
(g)   If any Federal or state tax Lien (other than an inchoate lien for local
real estate taxes and assessments not yet due and payable) is filed against any
Borrower Party and the same is not discharged of record within sixty (60) days
after the same is filed, unless (1) such tax Lien is being diligently contested
by the applicable Borrower Party in good faith, (2) the applicable Borrower
Party, as the case may be, shall have deposited with Lender cash reserves (or
other appropriate security acceptable to Lender in its discretion) which, in the
opinion of Lender, will be sufficient to cover the tax Lien and all interest and
penalties thereon, and (3) Lender is satisfied that such tax Lien does not have
a materially adverse effect on the business, assets or financial or other
condition of any Borrower Party, as the case may be, or on any Property, the
Mortgage or the Lien thereof;
 
 
 
 
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(h)   If a Transfer occurs in violation of the covenants set forth in Section
7.1;
 
(i)   Intentionally omitted;
 
(j)   If any representation or warranty of or on behalf of any Borrower Party,
made in this Agreement, the Carveout Indemnity, the Environmental Indemnity
Agreement or in any of the other Loan Documents, or in any certificate, report,
financial statement or other instrument furnished by or on behalf of any
Borrower Party in connection with this Agreement, the Carveout Indemnity, the
Environmental Indemnity Agreement or any other Loan Document, shall prove false
or misleading in any material respect as of the date made or furnished;
 
(k)   If any Borrower Party shall make an assignment for the benefit of
creditors;
 
(l)   If a court of competent jurisdiction enters a decree or order appointing a
receiver, liquidator, assignee, trustee, custodian, examiner, magistrate,
arbitrator, sequestrator (or similar official) of any Borrower Party, or of any
substantial part of their respective properties or assets, or if such court
decrees or orders the winding up or liquidation of the affairs of any Borrower
Party, and any such decree or order is not dismissed, discharged or vacated of
record within ninety (90) days after the same has been entered;
 
(m)   If any Borrower Party voluntarily files a petition for relief or an answer
or consent seeking relief under the Bankruptcy Code, or under any other Federal
or state bankruptcy, insolvency or other similar law, rule or regulation;
 
(n)   If an involuntary case or other proceeding is commenced against any
Borrower Party or any Property which seeks liquidation, reorganization or other
relief with respect to debts or other liabilities under any bankruptcy,
insolvency or other similar law now or hereafter in effect, and such involuntary
case or other proceeding shall remain undismissed or unstayed for a period of
ninety (90) days;
 
(o)   If any Borrower Party, whether by operation of law or otherwise,
dissolves, is wound up or its existence is otherwise terminated or dissolved;
 
(p)   If Carveout Indemnitor is not the sole general partner of each Individual
Borrower or does not control the exercise of all rights, powers and privileges
related thereto in violation of the terms, conditions and covenants set forth in
Section 7.1(d);
 
(q)   If any Property becomes subject to any lis pendens, notice of pendency,
stop order, notice of intention to file mechanic’s or material supplier’s lien,
mechanic’s or material supplier’s lien (excluding, however, any noticed filed
pursuant to applicable state law solely to preserve future lien rights) or other
Lien of any nature whatsoever (other than Permitted Encumbrances) and the same
shall not either be discharged of record or in the alternative insured over to
the satisfaction of Lender by the Title Company within a period of sixty (60)
days after the same is filed or recorded (irrespective of whether the same is
superior or subordinate in Lien or other priority to the Lien of the Mortgage
and irrespective of whether the same constitutes a perfected or inchoate Lien or
encumbrance on such Property or is only a matter of record or notice), subject
to the right of Borrower Parties to contest same as set forth in Section 7.2(b);
 
(r)   If Borrower fails to remit payment in full of the Loan and other
Obligations (1) pursuant to Section 2.4(b) on the date identified in the
Prepayment Notice following the issuance of any Prepayment Notice, unless the
Prepayment Notice is revoked in accordance with Section 2.4(c), or (2) within
the time period specified in Sections 3.2 or 3.3 if Borrower Parties make an
election to, or are required by Lender to, prepay the Obligations following a
Casualty or condemnation;
 
(s)   If any Borrower Party ceases to operate any Property in a manner
consistent with the uses of such Property effective as of the Funding Date or
terminates such business for any reason whatsoever (other than temporary
cessation in connection with any renovations to any Property or completion of a
Restoration);
 
 
 
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(t)   If any Borrower Party (as the case may be) fails to comply with its duties
and obligations under (1) the Assignment of Property Documents and such failure
continues for thirty (30) days after written notice from Lender; (2) the
Environmental Indemnity Agreement and such failure continues for thirty (30)
days after written notice from Lender (provided, however, that if a shorter cure
period is required by Lender (in the exercise of its discretion) because of a
potential impairment to human safety or a potential material impairment to the
value of any Property, then Borrower Parties shall have such shorter cure period
as set forth in Lender’s written notice); (3) the Carveout Indemnity and such
failure continues for fifteen (15) days after written notice from Lender); (4)
the Assignment of Leases and Rents and such failure continues for fifteen (15)
days after written notice from Lender; or (5) any Assignment of Management
Agreement and such failure continues for fifteen (15) days after written notice
from Lender; provided, however, that so long as (A) any such failure does not
involve the failure to make payment of a liquidated sum of money (which must be
paid within any applicable Demand Period), (B) an extension of the applicable
cure period will not, in the reasonable estimation of Lender, cause a material
impairment to the value, use, utility, or operation of any Property, the
Portfolio or the other Collateral, (C) an extension of the applicable cure
period will not, in the reasonable estimation of Lender, expose Lender to any
fines or penalties (whether civil or criminal), (D) any such failure cannot
reasonably be cured within the applicable cure period, and (E) the applicable
Borrower Party shall have commenced a reasonable cure for such Potential Default
within the applicable cure period and thereafter diligently and expeditiously
proceeds to cure the same, then the applicable cure period shall be extended for
so long as it shall be reasonably necessary for such Borrower Party, in the
exercise of due diligence, to cure such Potential Default (Borrower Parties
agreeing that they shall bear the burden of proof before any court, arbitrator
or other trier of fact in connection with establishing the reasonableness of any
cure or extended cure period and/or that Lender is acting in a commercially
unreasonable manner if Lender makes a determination adverse to such Borrower
Party under subsections (B) or (C) of this subparagraph (t)); provided further,
that in no event shall the cure period available under this subparagraph (t)
exceed ninety (90) days in the aggregate; or
 
(u)   If any Borrower Party shall fail to comply with any of their respective
covenants, agreements, warranties, duties or obligations under this Agreement or
any other Loan Document that is not otherwise specifically addressed in this
Article 8 and such failure continues for thirty (30) days after written notice
from Lender; provided, however, that so long as (A) any such failure does not
involve the failure to make payment of a liquidated sum of money (which must be
paid within any applicable Demand Period), (B) an extension of the thirty (30)
day cure period will not, in the reasonable estimation of Lender, cause a
material impairment to the value, use, utility, or operation of any Property,
the Portfolio or the other Collateral, (C) an extension of the thirty (30) day
cure period will not, in the reasonable estimation of Lender, expose Lender to
any fines or penalties (whether civil or criminal), (D) any such failure cannot
reasonably be cured within the thirty (30) day cure period, and (E) the
applicable Borrower Party shall have commenced a reasonable cure for such
Potential Default within the thirty (30) day cure period and thereafter
diligently and expeditiously proceeds to cure the same, then the thirty (30) day
cure period shall be extended for so long as it shall be reasonably necessary
for the applicable Borrower Party, in the exercise of due diligence, to cure
such Potential Default (Borrower Parties agreeing that they shall bear the
burden of proof before any court, arbitrator or other trier of fact in
connection with establishing the reasonableness of any cure or extended cure
period and/or that Lender is acting in a commercially unreasonable manner if
Lender makes a determination adverse to such Borrower Party under subsections
(B) or (C) of this subparagraph (u)); provided, further, that in no event shall
the cure period available under this subparagraph (u) exceed ninety (90) days in
the aggregate.
 
Section 8.2.    Remedies.
 
(a)   Upon the occurrence of any Event of Default, interest shall automatically
begin to accrue at the Default Rate, and at the option of Lender (except in
connection with any of the Events of Default described in Section 8.1(k) through
(o), when acceleration is automatic), all Obligations shall become immediately
due and payable, and Lender may exercise all rights and remedies under the Loan
Documents and at law or in equity, all without written notice and without
presentment, demand, protest, notice of protest or dishonor, notice of intent to
accelerate the maturity thereof, notice of acceleration of the maturity thereof,
or any other notice of default of any kind, all of which are hereby expressly
waived by each Borrower Party for itself and all other Borrower Parties.
 
(b)   Upon the occurrence of any of the events specified in Section 8.1(k)
through (o), interest shall automatically begin to accrue at the Default Rate,
all Obligations shall automatically become immediately due and payable, and
Lender may exercise all rights and remedies under the Loan Documents and at law
or in equity, all without written notice and without presentment, demand,
protest, notice of protest or dishonor, notice of intent to
 
 
 
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accelerate the maturity thereof, notice of acceleration of the maturity thereof,
or any other notice of default of any kind, all of which are hereby expressly
waived by each Borrower Party for itself and all other Borrower Parties.
 
Section 8.3.    Lender’s Right to Perform the Obligations.
 
(a)   If a Borrower Party shall fail, refuse or neglect to make any payment or
perform any act required by the Loan Documents and such failure constitutes an
Event of Default, then without notice to or demand upon any  Borrower Party or
any other Person, and without waiving or releasing any other right, remedy or
recourse Lender may have because of such Event of Default, Lender may (but shall
not be obligated to) make such payment or perform such act for the account of
and at the expense of Borrower Parties, and shall have the right to enter upon
any Property for such purpose and to take all such action thereon and with
respect to such Property as it may deem necessary or appropriate.
 
(b)   If Lender shall elect to pay any sum due with reference to any Property,
Lender may do so in reliance on any bill, statement or assessment procured from
the appropriate Governmental Authority or other issuer thereof without inquiring
into the accuracy or validity thereof. Similarly, in making any payments to
protect the security intended to be created by the Loan Documents, Lender shall
not be bound to inquire into the validity of any apparent or threatened adverse
title claim, Lien, encumbrance, claim or charge before making an advance for the
purpose of preventing or removing the same.
 
(c)   Each Individual Borrower shall jointly and severally indemnify, defend and
hold Lender harmless from and against any and all losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements of any kind or nature whatsoever, including reasonable attorneys’
fees, incurred or accruing by reason of any acts performed by Lender pursuant to
the provisions of this Section 8.3, including those arising from the joint,
concurrent, or comparative negligence of Lender, except as a result of Lender’s
gross negligence or willful misconduct.  All sums paid by Lender pursuant to
this Section 8.3, and all other sums expended by Lender to which it shall be
entitled to be indemnified, shall be paid by Borrower to Lender prior to
expiration of the Demand Period.  Any costs and expenses due and payable to
Lender pursuant to this Section 8.3 shall bear interest at the Default Rate from
the expiration of the Demand Period until payment in full is received by Lender,
and if Borrower fails to reimburse Lender within the Demand Period, then Lender
may, in its discretion, either (i) without additional notice to Borrower, add
such amounts to the principal balance of the Obligations to accrue interest at
the Contract Rate and be secured by the Loan Documents, or (ii) deem the failure
by Borrower to make timely reimbursement as an Event of Default and continue to
accrue interest at the Default Rate in connection with such unpaid amounts until
repayment in full.
 
ARTICLE 9.                                

 
                                                                                                                                
MISCELLANEOUS
 
Section 9.1.    Notices.  Any notice required or permitted to be given under
this Agreement shall be in writing and either shall be sent by overnight air
courier service, or personally delivered to a representative of the receiving
party.  All such communications shall be mailed or delivered, addressed to the
party for whom it is intended at its address set forth below.  Any single notice
sent to a Borrower Party pursuant to the terms of this Section 9.1 shall be
deemed to have been simultaneously given to all Borrower Parties.

If to a Borrower
Party:                                c/o Mission West Properties, Inc.
                                          10050 Bandley Drive
                                          Cupertino, California 95014
                                          Attention:      Ray V. Marino,
                                                                  President and
Chief Operating Officer
                                          Telephone:    408-725-0700
                                          E-mail:  rmarino@missionwest.com
 
 
 
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If to Lender:                           c/o Hartford Investment Management
Company
55 Farmington Avenue
Hartford, Connecticut 06105
Attn:  Steve Kalmin
Vice President - Real Estate Asset Management
Telephone:  (860) 297-6479
E-mail:  steve.kalmin@himco.com
 
with a copy to
concurrently to:                    Robert W. McKay, Esq.
c/o Hartford Investment Management Company
55 Farmington Avenue
Hartford, Connecticut 06105
Telephone: (860) 297-6449
E-mail: robert.mckay@himco.com
 
 
           Any communication so addressed and mailed shall be deemed to be given
on the earliest of (1) when actually delivered or (2) on the first Business Day
after deposit with an overnight air courier service, if such deposit is timely
and appropriate in accordance with the requirements of such courier service for
next business day delivery, in either case to the address of the intended
addressee (except as otherwise provided in the Mortgage), and any communication
so delivered in person shall be deemed to be given when receipted for by, or
actually received by Lender or a Borrower Party, as the case may be.  Either
party may designate a change of address within the United States of America by
written notice to the other by giving at least ten (10) days prior written
notice of such change of address.
 
Section 9.2.    Amendments and Waivers.  No purported amendment or waiver of any
provision of the Loan Documents shall be effective unless in writing and signed
by the party against whom enforcement is sought.
 
Section 9.3.    Limitation on Interest.  Under no circumstances shall the
aggregate amount paid or agreed to be paid as interest under the Loan Documents
exceed the highest lawful rate permitted under applicable usury law of the State
or of any state in which any Property is located, and the payment obligations of
Borrower Parties under the Loan Documents are hereby limited accordingly.  If
under any circumstances, whether by reason of advancement or acceleration of the
unpaid principal balance of the Loan or otherwise, the aggregate amounts paid on
the Loan shall include amounts which by law are deemed interest and which would
exceed such highest lawful rate, Borrower Parties hereby stipulate that payment
and collection of such excess amounts shall have been and will be deemed to have
been the result of a mistake on the part of both Borrower Parties and Lender,
and Lender shall, at its option, either return such excess to Borrower Parties
or credit such excess against the principal balance of the Obligations then
outstanding (without application of any Applicable Prepayment Fee), in which
event any and all penalties of any kind under applicable law as a result of such
excess interest shall be inapplicable.
 
Section 9.4.    Invalid Provisions.  If any provision of any Loan Document is
held to be illegal, invalid or unenforceable, then (i) such provision shall
automatically be deemed fully severable; (ii) the Loan Documents shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part thereof; (iii) the remaining provisions of the Loan
Documents shall remain in full effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance therefrom; and (iv) in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of such Loan Document a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible so that said
substitute provision is legal, valid and enforceable.
 
Section 9.5.    Payment and Reimbursement of Expenses.
 
(a)                 In addition to its reimbursement or payment obligations set
forth elsewhere in this Agreement or in the other Loan Documents, and prior to
the expiration of any Demand Period, Borrower Parties shall pay to Lender or, at
Lender’s option, shall reimburse Lender, for all reasonable costs and expenses
(including reasonable attorneys’ fees and disbursements and fees and expenses of
appraisers and environmental professionals) incurred by Lender in connection
with (i) intentionally omitted; (ii) intentionally omitted; (iii) the
negotiation, preparation,
 
 
 
 
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execution, delivery and administration of any consents, amendments, waivers or
other modifications to this Agreement and the other Loan Documents and any other
documents or matters (including leasing matters) requested by Borrower Parties;
(iv) the filing and recording fees and expenses, title insurance and reasonable
fees and expenses of attorneys for providing to Lender all required legal
opinions, and other similar expenses incurred, in creating and perfecting the
Liens and security interest in favor of Lender pursuant to this Agreement and
the other Loan Documents; (v) enforcing or preserving any rights, in response to
third party claims or the prosecuting or defending of any action or proceeding
or other litigation, in each case against, under or affecting a Borrower Party,
this Agreement, the other Loan Documents, the Portfolio, or any other security
given for the Obligations; and (vi) enforcing any obligations of or collecting
any payments due from Borrower Parties under this Agreement, the other Loan
Documents or with respect to the Portfolio or in connection with any refinancing
or restructuring of the credit arrangements provided under this Agreement in the
nature of a “work-out” or of any insolvency or bankruptcy proceedings.
 
(b)                Any costs and expenses due and payable to Lender pursuant to
this Section 9.5 shall bear interest at the Default Rate from the expiration of
the applicable Demand Period until Lender receives payment in full.  If Borrower
Parties fail to reimburse Lender prior to the expiration of the applicable
Demand Period, then Lender may, in its discretion, either (i) without additional
notice to Borrower Parties, add such amounts to the principal balance of the
Obligations to accrue interest at the Contract Rate and be secured by the Loan
Documents, or (ii) deem the failure of Borrower Parties to make timely
reimbursement to be an Event of Default and continue to accrue interest at the
Default Rate in connection with such unpaid amounts until repayment in full.
 
Section 9.6.    Approvals; Third Parties; Conditions.  All approval rights
retained or exercised by Lender with respect to Leases, contracts, plans,
studies and other matters shall not be deemed or construed as a determination
that Lender has passed on the adequacy thereof for any other purpose and may not
be relied upon by Borrower Parties or any other Person.  This Agreement is for
the sole and exclusive use of Borrower Parties and Lender and may not be
enforced, nor relied upon, by any Person other than Borrower Parties and Lender.
All conditions of the obligations of Lender hereunder, including Lender’s
discretionary right to make protective advances pursuant to Sections 8.3 or 9.5,
are imposed solely and exclusively for the benefit of Lender, its successors and
assigns, and no other Person shall have standing to require satisfaction of such
conditions or be entitled to assume that Lender will refuse to make advances (if
any) in the absence of strict compliance with any or all of such conditions, 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 Lender at any time in Lender’s discretion.
 
Section 9.7.    Lender Not in Control; No Partnership.  None of the covenants or
other provisions contained in this Agreement shall, or shall be deemed to, give
Lender the right or power to exercise control over the affairs or management of
a Borrower Party, the power of Lender being limited to the rights to exercise
the remedies referred to in the Loan Documents, at law or in equity.  The
relationship between Borrower Parties and Lender is, and at all times shall
remain, solely that of debtor and creditor. No covenant or provision of the Loan
Documents is intended, nor shall it be deemed or construed, to create a
partnership, joint venture, agency or common interest in profits or income
between Lender and Borrower Parties or to create any equity in the Portfolio in
Lender.  Lender neither undertakes nor assumes any responsibility or duty to
Borrower Parties or to any other Person with respect to the Portfolio or the
Loan, except as expressly provided in the Loan Documents, and notwithstanding
any other provision of the Loan Documents: (i) Lender is not, and shall not be
construed as, a partner, joint venturer, alter ego, manager, controlling person
or other business associate or participant of any kind of a Borrower Party or
its stockholders, members, or partners (as the case may be) and Lender does not
intend to ever assume such status; (ii) Lender shall in no event be liable for
any Debts, expenses or losses incurred or sustained by a Borrower Party; and
(iii) Lender shall not be deemed responsible for or a participant in any acts,
omissions or decisions of a Borrower Party or its stockholders, members, or
partners (as the case may be).  Lender and Borrower Parties each disclaim any
intention to create any partnership, joint venture, agency or common interest in
profits or income between Lender and a Borrower Party, or to create equity in
the Portfolio in Lender, or any sharing of liabilities, losses, costs or
expenses.
 
Section 9.8.    Time of the Essence.  Time is of the essence with respect to the
performance of each Borrower Parties’ obligations under the Loan Documents.
 
 
 
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Section 9.9.    Successors and Assigns.  This Agreement shall be binding upon
and inure to the benefit of Lender, Borrower Parties and their respective
successors and assigns, provided that no Borrower Party shall, without the prior
written consent of Lender (which may be granted or withheld in Lender’s
discretion) or except as expressly permitted pursuant to Section 7.1, assign any
rights, duties or obligations hereunder or under any other Loan Document.
 
Section 9.10.              Servicing, Transfers, Assignments and Participations.
 
(a)    At the option of Lender, the Loan may be serviced by a servicer (the
“Servicer”) selected by Lender from time to time and Lender may delegate all or
any portion of its responsibilities under this Agreement and the other Loan
Documents to the Servicer pursuant to a servicing agreement between Lender and
Servicer.  Servicer shall be entitled to reimbursement of costs and expenses as
and to the same extent (but without duplication) as Lender is entitled thereto
under the applicable provisions of this Agreement and the other Loan Documents,
provided that Borrower Parties shall not be obligated to pay any servicing fee
payable to the Servicer by Lender.  Upon notice thereof from Lender, Servicer
shall have the right to exercise all rights of Lender and enforce all
obligations of Borrower Parties pursuant to the provisions of this Agreement,
the Note and the other Loan Documents.  Provided Borrower Parties shall have
been given notice of Servicer’s address by Lender, Borrower Parties shall
deliver to Servicer duplicate originals of all notices and other instruments
which Borrower Parties may or shall be required to deliver to Lender pursuant to
this Agreement, the Note and the other Loan Documents (and no delivery of such
notices or other instruments by Borrower Parties shall be of any force or effect
unless delivered to Lender and Servicer as provided above).
 
(b)     Lender may at any time sell, transfer or assign the Note, this
Agreement, the Mortgage, and the other Loan Documents, and any or all servicing
rights with respect thereto or grant participations therein or issue mortgage
pass-through certificates, provided that Lender shall remain as the “lead”
lender and primary contact for all required consents and approvals under the
Loan Documents.  Lender may forward to any present, future or prospective
purchaser, assignee, servicer, participant or investor (each, a “Transferee”),
all documents and information which Lender now has or may hereafter acquire
relating to any Borrower Party or the Portfolio, whether furnished by a Borrower
Party, any Property Manager or any other Person, as Lender determines necessary
or desirable; provided that Lender receives a reasonable undertaking from the
applicable Transferee to maintain the confidential nature (if any) of such
information. Each Borrower Party shall cooperate with Lender in connection with
any transfer made pursuant to this Section 9.10, including the delivery of an
estoppel certificate and such other documents as may be reasonably requested by
Lender.  Each Borrower Party shall also furnish, and hereby consents to Lender
furnishing to such Transferee, any and all current or updated information
concerning its financial condition and any and all information concerning the
Portfolio as may be requested by Lender or any Transferee; provided that Lender
receives a reasonable undertaking from the applicable Transferee to maintain the
confidential nature (if any) of such information.  No exercise by Lender of any
transfer rights pursuant hereto shall operate to release or diminish the duties,
obligations or liabilities of any Borrower Party under this Agreement or the
other Loan Documents.
 
(c)    Without in any way limiting Lender’s other rights hereunder, Lender shall
have the right, in its discretion at any time after the Funding Date, to require
Borrower Parties to split the Loan into one or more loans secured by the
Portfolio (individually, a “Split Loan” and collectively, the “Split Loans”),
provided that (i) the aggregate principal amount of all notes evidencing the
Split Loans shall equal the outstanding principal balance of the Loan
immediately prior to the creation of such split notes, (ii) the aggregate debt
service payments on the Split Loans shall on the date created equal the debt
service payment which was due under the Loan immediately prior to the creation
of such Split Loans, and (iii) the other terms and provisions of the documents
evidencing and/or securing the Split Loans shall be substantially similar in
form and substance to the Loan Documents.  Borrower Parties, at no cost or
expense to it, shall cooperate with all reasonable requests of Lender in order
to establish the Split Loans and shall execute and deliver such documents as
shall be reasonably required by Lender in connection therewith, all in form and
substance reasonably satisfactory to Lender, including modified and severed
notes, mortgages and other security documents in such denominations as Lender
shall determine in its discretion, release documents and any and all documents
necessary to assign the Split Loans.
 
Section 9.11.              Replacement Documents.  Upon receipt of an affidavit
of an officer of Lender as to the loss, theft, destruction or mutilation of the
Note or any other document(s) which is not of public record and, in the
 
 
 
 
 
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case of any such destruction or mutilation, upon surrender and cancellation of
the Note or other document(s), Borrower Parties shall issue, in lieu thereof, a
replacement Note or other document(s) in the same principal amount thereof and
otherwise of like tenor.
 
Section 9.12.              Renewal, Extension or Rearrangement.  All provisions
of the Loan Documents shall apply with equal effect to each and all promissory
notes and amendments thereof hereinafter executed which in whole or in part
represent a renewal, extension, increase or rearrangement of the Loan.
 
Section 9.13.              Waivers.  No course of dealing on the part of Lender,
its officers, employees, attorneys, consultants or agents, nor any failure or
delay by Lender with respect to exercising any right, power, privilege or remedy
of Lender under any of the Loan Documents, shall operate as a waiver thereof.
 
Section 9.14.              Cumulative Rights.  All rights and remedies of Lender
under the Loan Documents, at law or in equity shall be cumulative, and the
exercise or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.
 
Section 9.15.              Exhibits and Schedules.  The exhibits and schedules
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for the purposes stated herein.
 
Section 9.16.              Titles of Articles, Sections and Subsections.  All
titles or headings to articles, sections, subsections or other divisions of this
Agreement and the other Loan Documents or the exhibits hereto and thereto, are
only for the convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such articles, sections,
subsections or other divisions, such other content being controlling as to the
agreement between the parties hereto.
 
Section 9.17.              Promotional Material.  Borrower Parties authorizes
Lender to issue press releases, advertisements and other promotional materials
in connection with Lender’s own promotional and marketing activities, and
describing the Loan in general terms or in detail and Lender’s participation in
the Loan.  All references to Lender contained in any press release,
advertisement or promotional material issued by any Borrower Party must be
approved in writing by Lender in advance of issuance.
 
Section 9.18.              Survival.  All of the representations, warranties,
covenants, and indemnities made in this Agreement, the Environmental Indemnity
Agreement or any other Loan Document shall survive the repayment in full of the
Obligations and the release of the Liens evidencing or securing the Loan, and
shall survive the transfer (by sale, foreclosure, conveyance in lieu of
foreclosure or otherwise) of any or all right, title and interest in and to all
or any portion of the Collateral to any party.
 
Section 9.19.              Governing Law.  The Loan Documents are being executed
and delivered, and are intended to be performed, in the State and the laws of
the State and of the United States of America shall govern the rights and duties
of the parties hereto and the validity, construction, enforcement and
interpretation of the Loan Documents, except to the extent otherwise specified
in any of the Loan Documents.
 
Section 9.20.              Entire Agreement.  This Agreement and the other Loan
Documents embody the entire agreement and understanding between Lender and
Borrower and supersede all prior agreements and understandings between such
parties relating to the subject matter hereof and thereof.  Accordingly, the
Loan Documents may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties.  There are no unwritten oral
agreements between the parties.
 
Section 9.21.              Counterparts.  This Agreement may be executed in
multiple counterparts, each of which shall constitute an original, but all of
which shall constitute one document.
 
Section 9.22.              Obligations of Borrower, Joint and Several.  If more
than one Person has executed this Agreement or any other Loan Document as
“Borrower”, “Grantor” or “Assignor”, the obligations of all such Persons
hereunder or thereunder shall be joint and several.
 
 
 
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Section 9.23.              WAIVER OF PUNITIVE OR CONSEQUENTIAL DAMAGES.  NEITHER
LENDER NOR BORROWER PARTIES SHALL BE RESPONSIBLE OR LIABLE TO THE OTHERS OR TO
ANY OTHER PERSON FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY
BE ALLEGED AS A RESULT OF THE LOAN OR THE TRANSACTION CONTEMPLATED HEREBY,
INCLUDING ANY BREACH OR OTHER DEFAULT BY ANY PARTY HERETO.
 
Section 9.24.              WAIVER OF JURY TRIAL.  TO THE MAXIMUM EXTENT
PERMITTED BY LAW, EACH BORROWER PARTY AND LENDER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR
WRITTEN) OR ACTION OF ANY PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE
RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN OR THE
COLLATERAL (INCLUDING ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND ANY
CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS FRAUDULENTLY INDUCED OR IS
OTHERWISE VOID OR VOIDABLE).  THIS WAIVER IS A MATERIAL INDUCEMENT FOR LENDER TO
ENTER THIS AGREEMENT.
 
ARTICLE 10.                                
 
                                                                                                                        
LIMITATIONS ON LIABILITY
 
Section 10.1.              Limitation on Liability.
 
(a)    Subject to the qualifications and exceptions set forth below, Lender
shall not enforce the liability and obligations of Borrower to perform and
observe its duties and obligations contained in the Note, this Agreement, the
Mortgage or the other Loan Documents by any action or proceeding wherein a money
judgment shall be sought against any Borrower Party, provided that Lender may
bring a foreclosure action, an action for specific performance or any other
appropriate action or proceeding to enable Lender to enforce and realize upon
its interest under the Note, any Guaranty, this Agreement, the Mortgage and the
other Loan Documents, or in the Collateral given to Lender pursuant to the Loan
Documents; provided, further, that, subject to the qualifications and exceptions
set forth below, any judgment in any such action or proceeding shall be
enforceable against Borrower only to the extent of its interest in the
Collateral, and Lender, by accepting the Note, this Agreement, the Mortgage and
the other Loan Documents, agrees that subject to the qualifications and
exceptions set forth below, it shall not sue for, seek or demand any deficiency
judgment against Borrower, any other Borrower Party or any officer, director,
manager, member or partner of Borrower in any such action or proceeding under or
by reason of or under or in connection with the Note, this Agreement, the
Mortgage or the other Loan Documents.
 
(b)    Notwithstanding anything to the contrary set forth in this Agreement or
the other Loan Documents:
 
(i)    the provisions of Section 10.1(a) shall not:
 
(A)    Constitute a waiver, release or impairment of any obligation evidenced or
secured by any of the Loan Documents;
 
(B)    Impair the right of Lender to name any Borrower Party as a party
defendant in any action or suit for foreclosure and sale under the Mortgage;
 
(C)    Affect the validity or enforceability of the Carveout Indemnity, affect
the liability, duties and obligations of Carveout Indemnitor under the Carveout
Indemnity, or affect any of the rights and remedies of Lender under the Carveout
Indemnity;
 
(D)    Impair the right of Lender to obtain the appointment of a receiver or
affect the validity or enforceability of the Assignment of Leases and Rents,
affect the liability, duties and
 
 
 
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                                obligations of any Borrower Party under the
Assignment of Leases and Rents, or affect any of the rights and remedies of
Lender under the Assignment of Leases and
                                Rents;
 
(E)    Affect the validity or enforceability of the Environmental Indemnity
Agreement, affect the liability, duties and obligations of any Borrower Party
under the Environmental Indemnity Agreement, or limit the rights and remedies of
Lender under the Environmental Indemnity Agreement; or
 
(F)    Constitute a prohibition against Lender to seek a deficiency judgment
against any Borrower Party solely in order to satisfy procedural requirements
necessary to fully realize the security granted by the Mortgage or under any
other Loan Documents, or to commence any other appropriate action or proceeding
in order for Lender to exercise its remedies against the Collateral; (and in no
event shall any such deficiency judgment issued solely in order to satisfy
procedural requirements be enforced against assets of any Borrower Party other
than the Collateral) and
 
(ii)     Each Individual Borrower, jointly and severally, and jointly and
severally with Carveout Indemnitor pursuant to the Carveout Indemnity, hereby
agrees to indemnify and reimburse Lender, within the Demand Period (and nothing
set forth in this Section 10.1 shall constitute a waiver of the right of Lender
to enforce the liability and obligation of Borrower Parties, by money judgment
or otherwise), to the extent of any and all liabilities, costs, losses
(including any reduction in value of any Property or any other Collateral or the
loss of Lender’s security interest therein), damages, expenses (including
reasonable attorneys’ fees and disbursements, and court costs, if any), or
claims suffered or incurred by Lender by reason of or in connection with any of
the following:
 
(A)    Any fraud committed by any Borrower Party in connection with the Loan;
 
(B)    Any material misrepresentation contained in any of the Loan Documents or
any report furnished pursuant to any of the Loan Documents by any Borrower
Party;
 
(C)    The failure by Borrower to maintain insurance in accordance with Section
3.1;
 
(D)    The failure of any Borrower Party to apply Operating Revenues received by
any Borrower Party to pay Debt Service, Impounds (if any), Operating Expenses
(including in fulfilling the obligations of any Individual Borrower as
“landlord” under any Lease) and reasonable and necessary capital expenditures or
costs during the 12-month period immediately preceding the occurrence of the
Event of Default triggering Lender’s exercise of remedies; provided, however,
that Borrower shall not have liability under this subparagraph (D) to the extent
Operating Revenues generated during the 12-month period immediately preceding
the occurrence of the Event of Default triggering Lender’s exercise of remedies
were not sufficient to pay in full all such amounts and all Operating Revenues
so received by any Borrower Party were applied to pay such amounts to the full
extent of Operating Revenues so received;
 
(E)    The misappropriation of any Net Proceeds or condemnation awards by any
Borrower Party;
 
(F)    The failure of any Borrower Party to (x) properly apply any and all
security deposits held by any Borrower Party, (y) properly return same to
Tenants when due, or (z) deliver security deposits to Lender, any receiver or
any Person purchasing any Property or any part thereof at a foreclosure sale or
upon the taking of possession of such Property or any part thereof by Lender,
such receiver or such other Person; provided, however, that Borrower shall not
have the liability under this subparagraph (F) if the required activity under
(z) above is limited or prohibited by applicable Legal Requirements or if
Borrower is operating under the express written direction of Lender;
 
 
 
49

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(G)    Intentional removal or destruction of property (without the concurrent
replacement thereof with property of at least equivalent value and utility)
constituting any material portion of the Collateral, or any other intentional
and material waste of any portion of the Collateral, by any Borrower Party;
 
(H)    Any Borrower Party contesting or in any way interfering with, directly or
indirectly, any foreclosure action, Uniform Commercial Code sale and/or deed in
lieu of foreclosure transaction commenced by Lender or with any other
enforcement of Lender’s rights, power or remedies under any of the Loan
Documents (whether by making any motion, bringing any counterclaim, claiming any
defense, seeking any injunction or other restraint, commencing any action or
otherwise) in connection with Lender’s rights arising from an Event of Default;
provided, however, that if any Borrower Party obtains a final, non-appealable
order successfully contesting the exercise by Lender of a right or remedy, then
Borrower shall not have liability under this subparagraph (H);
 
(I)    Any Borrower Party (i) filing a voluntary petition under the Bankruptcy
Code or any other Federal or state bankruptcy or insolvency law, or (ii) making
an assignment for the benefit of creditors; or
 
(J)    Any Borrower Party (i) filing, or joining in the filing of, an
involuntary petition against any other Borrower Party under the Bankruptcy Code
or any other Federal or state bankruptcy or insolvency law, or (ii) soliciting
or causing to be solicited petitioning creditors for any involuntary petition
against any other Borrower Party, or (iii) filing an answer consenting to or
otherwise acquiescing in or joining in any involuntary petition filed against
any other Borrower Party by any other Person under the Bankruptcy Code or any
other Federal or state bankruptcy or insolvency law, or (iv) voting adversely to
Lender’s interest in any proceeding under the Bankruptcy Code or any other state
or Federal bankruptcy or insolvency law which involves any Borrower Party or any
portion of the Collateral, or (v) consenting to or acquiescing or joining in an
application for the appointment of a custodian, receiver, trustee or examiner
for any Borrower Party or any portion of the Collateral (unless such action is
at the written request of Lender).
 
Notwithstanding the foregoing, if Borrower and any necessary Borrower Parties
consent, pursuant to a stipulation in form reasonably required by Lender (to be
executed by Borrower and any necessary Borrower Parties and delivered to Lender
within five (5) Business Days following Lender’s request), to the appointment of
a receiver for any Property identified by Lender (the identity of such receiver
to be designated by Lender and approved by Borrower Parties, such approval not
to be unreasonably withheld), and no Borrower Party seeks or participates in the
removal of said receiver (absent a material violation by said receiver of the
order appointing the receiver, in which case a substitute receiver designated by
Lender and approved by Borrower Parties, such approval not to be unreasonably
withheld, will be appointed) then Borrower shall not have liability under this
Subsection (b)(ii) solely as a result of any reduction in value of such Property
or any other Collateral during the period that Lender is pursuing its rights and
remedies as a result of an Event of Default.
 
(c)     Notwithstanding anything to the contrary set forth in this Agreement or
any of the other Loan Documents: (i) Lender shall not be deemed to have waived
any right which Lender may have under Section 506(a), 506(b), 1111(b) or any
other provisions of the Bankruptcy Code to file a claim for the full amount of
the Obligations or to require that all Collateral shall continue to secure all
of the Obligations owing to Lender in accordance with the Loan Documents; and
(ii) the Obligations shall be fully recourse to Borrower in the event any
Transfer occurs in violation of Section 7.1 (including the voluntary placement
of a Lien on all or any portion of the Collateral in violation of the Loan
Documents).
 
[Remainder of this page intentionally blank.  Signature Page follows.]
 

 
50

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IN WITNESS WHEREOF, this Agreement has been executed by the undersigned and is
effective as of the day and year first above written.
 
BORROWER:
 
MISSION WEST PROPERTIES, L.P.,
MISSION WEST PROPERTIES, L.P. I,
MISSION WEST PROPERTIES, L.P. II,
MISSION WEST PROPERTIES, L.P. III,
each a Delaware limited partnership

By:          Mission West Properties, Inc.
a Maryland corporation
its general partner

By:           /s/ Raymond V.
Marino                                                                
Name:      Raymond V. Marino
Title:        President & COO
 

 

[Signature Page of Borrower to Fixed Rate Term Loan Agreement]

 
 

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IN WITNESS WHEREOF, this Agreement has been executed by the undersigned and is
effective as of the day and year first above written.
 
LENDER:
 
HARTFORD LIFE INSURANCE COMPANY,
HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY,
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY,
a Connecticut corporation

By:          Hartford Investment Management Company,
a Delaware corporation,
Its Agent and Attorney-in-Fact
 
By:           /s/ John M.
Maher                                                      
Name:      John M. Maher
Title:        Executive Vice President
 

 

[Signature Page of Lender to Fixed Rate Term Loan Agreement]

 
 

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EXHIBITS A-1 THROUGH A-12
 

 
LIST OF REPORTS

1.           That certain zoning compliance and informational report for the
Property known as 5400, 5500 and 5550 Hellyer Avenue, San Jose, California (the
“Hellyer Report”), entitled “Zoning and Site Requirements Summary, PZR Report
For: 5400-5550 Hellyer Avenue, San Jose, California” dated September 24, 2008,
prepared by The Planning & Zoning Resource Corporation for Hartford Life and
Annuity Insurance Company, Hartford Life Insurance Company, Hartford Life and
Accident Insurance Company, their affiliates, successors, assigns and
participants ATIMA c/o Hartford Investment Management Company.

2.           That certain zoning compliance and informational report for the
Property known as 1230, 1250, 1260, 1270 and 1280 East Arques Avenue, Sunnyvale,
California (the “Arques Report”), entitled “Zoning and Site Requirements
Summary, PZR Report For: 1230-1280 East Arques Avenue, Sunnyvale, California”
dated September 24, 2008, prepared by The Planning & Zoning Resource Corporation
for Hartford Life and Annuity Insurance Company, Hartford Life Insurance
Company, Hartford Life and Accident Insurance Company, their affiliates,
successors, assigns and participants ATIMA c/o Hartford Investment Management
Company.

3.           That certain zoning compliance and informational report for the
Property known as 1212 Bordeaux Drive, Sunnyvale, California (the “Bordeaux
Report”), entitled “Zoning and Site Requirements Summary, PZR Report For: 1212
Bordeaux Drive, Sunnyvale, California” dated September 24, 2008, prepared by The
Planning & Zoning Resource Corporation for Hartford Life and Annuity Insurance
Company, Hartford Life Insurance Company, Hartford Life and Accident Insurance
Company, their affiliates, successors, assigns and participants ATIMA c/o
Hartford Investment Management Company.

4.           That certain zoning compliance and informational report for the
Property known as 3540, 3542, 3544, 3550, 3560 and 3580 Bassett Street, Santa
Clara, California (the “Bassett Report”), entitled “Zoning and Site Requirements
Summary, PZR Report For: 3540-3580 Bassett Street, Santa Clara, California”
dated September 24, 2008, prepared by The Planning & Zoning Resource Corporation
for Hartford Life and Annuity Insurance Company, Hartford Life Insurance
Company, Hartford Life and Accident Insurance Company, their affiliates,
successors, assigns and participants ATIMA c/o Hartford Investment Management
Company.

5.           That certain zoning compliance and informational report for the
Property known as 3236 Scott Boulevard, Santa Clara, California (the “Scott
Report”), entitled “Zoning and Site Requirements Summary, PZR Report For: 3236
Scott Boulevard, Santa Clara, California” dated September 24, 2008, prepared by
The Planning & Zoning Resource Corporation for Hartford Life and Annuity
Insurance Company, Hartford Life Insurance Company, Hartford Life and Accident
Insurance Company, their affiliates, successors, assigns and participants ATIMA
c/o Hartford Investment Management Company.

6.           That certain zoning compliance and informational report for the
Property known as 5981 and 5970 Optical Court, San Jose, California (the
“Optical Report”), entitled “Zoning and Site Requirements Summary, PZR Report
For: 5981 Optical Court, San Jose, California” dated September 25, 2008,
prepared by The Planning & Zoning Resource Corporation for Hartford Life and
Annuity Insurance Company, Hartford Life Insurance Company, Hartford Life and
Accident Insurance Company, their affiliates, successors, assigns and
participants ATIMA c/o Hartford Investment Management Company.

7.           That certain zoning compliance and informational report for the
Property known as 2904 Orchard Parkway, San Jose, California (the “Orchard
Report”), entitled “Zoning and Site Requirements Summary, PZR Report For:
2904-06 Orchard Parkway, San Jose, California” dated September 23, 2008,
prepared by The Planning & Zoning Resource Corporation for Hartford Life and
Annuity Insurance Company, Hartford
 
 
 
 

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

 
 
Life Insurance Company, Hartford Life and Accident Insurance Company, their
affiliates, successors, assigns and participants ATIMA c/o Hartford Investment
Management Company.

8.           That certain zoning compliance and informational report for the
Property known as 4050 Starboard Drive, Fremont, California (the “Starboard
Report”), entitled “Zoning and Site Requirements Summary, PZR Report For:
4050-4070 Starboard Drive, Fremont, California” dated September 23, 2008,
prepared by The Planning & Zoning Resource Corporation for Hartford Life and
Annuity Insurance Company, Hartford Life Insurance Company, Hartford Life and
Accident Insurance Company, their affiliates, successors, assigns and
participants ATIMA c/o Hartford Investment Management Company.

9.           That certain zoning compliance and informational report for the
Property known as 45738 and 45778 Northport Loop West, Fremont, California (the
“Northport Report”), entitled “Zoning and Site Requirements Summary, PZR Report
For: 45738-45778 Northport Loop West, Fremont, California” dated September 23,
2008, prepared by The Planning & Zoning Resource Corporation for Hartford Life
and Annuity Insurance Company, Hartford Life Insurance Company, Hartford Life
and Accident Insurance Company, their affiliates, successors, assigns and
participants ATIMA c/o Hartford Investment Management Company.

10.           That certain zoning compliance and informational report for the
Property known as 233 South Hillview Drive, Milpitas, California (the “Hillview
Report”), entitled “Zoning and Site Requirements Summary, PZR Report For: 233
South Hillview, Milpitas, California” dated September 22, 2008, prepared by The
Planning & Zoning Resource Corporation for Hartford Life & Annuity Insurance
Company, Hartford Life Insurance Company, Hartford Life and Accident Insurance
Company, their affiliates, successors, assigns and participants ATIMA c/o
Hartford Investment Management Company.

11.           That certain zoning compliance and informational report for the
Property known as 6311, 6321-6325, 6331, and 6341-6351 San Ignacio Avenue, San
Jose, California (the “San Ignacio Report”), entitled “Zoning and Site
Requirements Summary, PZR Report For: 6311-6351 San Ignacio Avenue, San Jose,
California” dated September 25, 2008, prepared by The Planning & Zoning Resource
Corporation for Hartford Life & Annuity Insurance Company, Hartford Life
Insurance Company, Hartford Life and Accident Insurance Company, their
affiliates, successors, assigns and participants ATIMA c/o Hartford Investment
Management Company.

12.           That certain zoning compliance and informational report for the
Property known as 10300 Bubb Road, Cupertino, California (the “Bubb Report”),
entitled “Zoning and Site Requirements Summary, PZR Report For: 10300 Bubb Road,
Cupertino, California” dated September 26, 2008, prepared by The Planning &
Zoning Resource Corporation for Hartford Life and Annuity Insurance Company,
Hartford Life Insurance Company, Hartford Life and Accident Insurance Company,
their affiliates, successors, assigns and participants ATIMA c/o Hartford
Investment Management Company.

 
 

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EXHIBIT B
 

 
Hartford Loan No. BHM04X7M6
 
CLOSING AFFIDAVIT
 
The undersigned, Raymond V. Marino, the President and COO of MISSION WEST
PROPERTIES, INC., a Maryland corporation (“Carveout Indemnitor”), the General
Partner of each of MISSION WEST PROPERTIES, L.P., MISSION WEST PROPERTIES, L.P.
I, MISSION WEST PROPERTIES, L.P. II and MISSION WEST PROPERTIES, L.P. III, each
a Delaware limited partnership  (collectively, “Borrower”), acting in such
capacities on behalf of Borrower and Carveout Indemnitor, being duly sworn, does
hereby depose and state:
 
1.    Borrower and Carveout Indemnitor have entered into this Closing Affidavit
(this “Affidavit”) in connection with a loan made by Hartford Life Insurance
Company, Hartford Life and Annuity Insurance Company and Hartford Life and
Accident Insurance Company, each a Connecticut corporation (together with their
respective successors and assigns, collectively, “Lender”) to Borrower in the
principal amount of [$115,000,000.00] (the “Loan”) pursuant to that certain
Fixed Rate Term Loan Agreement dated as of even date herewith by and between
Borrower and Lender (the “Loan Agreement”).  In connection with the Loan,
Borrower has duly executed and delivered to Lender: (i) that certain Promissory
Note of even date herewith, executed by Borrower, payable to the order of
Hartford Life Insurance Company, a Connecticut corporation, in the stated
principal amount of [$90,000,000.00], (ii) that certain Promissory Note of even
date herewith, executed by Borrower, payable to the order of Hartford Life and
Annuity Insurance Company, a Connecticut corporation, in the stated principal
amount of [$15,000,000.00], and (iii) that certain Promissory Note of even date
herewith, executed by Borrower, payable to the order of Hartford Life and
Accident Insurance Company, a Connecticut corporation, in the stated principal
amount of [$10,000,000.00] (collectively, the “Note”).  The Note is secured by,
among other things, those certain mortgages, deeds of trust, deeds to secure
debt, and assignments of leases and rents, all dated as of even date herewith
encumbering certain improved real estate listed on Schedule 1 hereto
(collectively, the “Portfolio”).  Capitalized terms used and not defined herein
shall have the respective meanings given to such terms in the Loan Agreement.
 
2.    Since September 7, 2008, except as disclosed on Exhibit “A” attached
hereto, (1) no material, adverse change has occurred in the financial condition
of Borrower and/or Carveout Indemnitor, or in the Net Operating Income of the
Portfolio or any Property; (2) no condemnation or adverse zoning or usage change
proceeding has been initiated or, to the knowledge of Borrower and Carveout
Indemnitor, has been threatened against any Property; (3) no Property has
suffered any material damage by fire or other casualty which has not been fully
repaired; and (4) to the knowledge of Borrower and Carveout Indemnitor, no law,
regulation, ordinance, moratorium, injunctive proceeding, restriction,
litigation, action, citation or similar proceeding or matter has been enacted,
adopted, or threatened by any Governmental Authority, which could reasonably be
anticipated to have a material, adverse effect on Borrower, Carveout Indemnitor,
the Portfolio and/or any Property.
 
3.    To the knowledge of Borrower and Carveout Indemnitor, no Event of Default
exists as of the Funding Date.
 
4.     No Leases currently exist in connection with the Portfolio other than as
set forth in the Rent Roll.
 
5.    All fees and commissions payable to real estate brokers, mortgage brokers,
or any other brokers or agents in connection with the Loan have been paid as of
the Funding Date.
 
6.     The other representations and warranties contained in the Loan Agreement
and in all other Loan Documents are true, accurate and complete as of the
Funding Date.
 
 
 
 

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

 
 
7. This Affidavit is made as to matters as of the date hereof and with the
knowledge that the statements herein made will be relied upon by Lender in
making the Loan and this Affidavit is made for the purpose of inducing Lender to
consummate and close the transactions contemplated hereby.  This Affidavit shall
survive the closing of the Loan and shall inure to the benefit of Lender, its
successors and assigns, and loan participants.  Borrower and Carveout Indemnitor
hereby agree, jointly and severally, to indemnify and hold Lender harmless
against any loss that Lender (or its successors and assigns) suffers as a result
of the failure of the statements made herein to be true, accurate, and complete.
 
[Remainder of page intentionally left blank; Signature and oath page(s) to
follow]
 

 
 

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The Closing Affidavit has been executed by and on behalf of the Borrower and
Carveout Indemnitor on October 1, 2008.
 
BORROWER:
 
MISSION WEST PROPERTIES, L.P.,
MISSION WEST PROPERTIES, L.P. I,
MISSION WEST PROPERTIES, L.P. II,
MISSION WEST PROPERTIES, L.P. III,
each a Delaware limited partnership

By:          Mission West Properties, Inc.
a Maryland corporation
its general partner

By:           /s/ Raymond V. Marino                                           
Name:      Raymond V. Marino
Title:        President & COO
 
CARVEOUT GUARANTOR:
 
MISSION WEST PROPERTIES, INC.,
a Maryland corporation

By:           /s/ Raymond V. Marino                                           
Name:      Raymond V. Marino
Title:        President & COO

Exhibit B-1

 
 

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SCHEDULE 1
 
ALLOCATED LOAN AMOUNTS
 
Borrower                                                                      Property                                                                                                      Allocated
Loan Amount
 
Mission West Properties, L.P. I                                10300 Bubb Road,
Cupertino, California                                                
$3,250,000.00
 
Mission West Properties, L.P. II                               1212 Bordeaux
Drive, Sunnyvale, California                                         
$7,380,000.00
 
Mission West Properties, L.P.                                   5981 Optical
Court, San Jose, California                                                
$11,520,000.00
                                                                                        5970
Optical Court, San Jose, California*
 
Mission West Properties, L.P.                                   5400 Hellyer
Avenue, San Jose, California*                                      
   $12,930,000.00
                                                                                       
5500 Hellyer Avenue, San Jose, California
                                                                                       
5550 Hellyer Avenue, San Jose, California
 
Mission West Properties, L.P. II                               2904 Orchard
Parkway, San Jose, California                                       
  $8,590,000.00
 
Mission West Properties, L.P. II                               3236 Scott
Boulevard, Santa Clara, California                                   
    $5,870,000.00
 
Mission West Properties, L.P. III                              3540, 3542, 3544
Bassett Street, Santa Clara, California                        $21,990,000.00
                                                                                       
3550 Bassett Street, Santa Clara, California      
                                                                                       
3560 Bassett Street, Santa Clara, California
                                                                                       
3580 Bassett Street, Santa Clara, California
 
Mission West Properties, L.P.                                   4050 Starboard
Drive, Fremont, California                                            
$3,460,000.00
 
Mission West Properties, L.P.                                   45738 & 45778
Northport Loop West, Fremont, California                 $3,610,000.00
 
Mission West Properties, L.P. II                               6311 San Ignacio
Avenue, San Jose, California                                    $18,070,000.00
                                                                                        6321-6325
San Ignacio Avenue, San Jose, California
                                                                                       
6331 San Ignacio Avenue, San Jose, California
                                                                                       
6341-6351 San Ignacio Avenue, San Jose, California
 
Mission West Properties, L.P.                                   233 South
Hillview Drive, Milpitas, California                                  
    $9,430,000.00
 
Mission West Properties, L.P. I                                 1230 East Arques
Avenue, Santa Clara, California                              $8,900,000.00
                                                                                   
    1250 East Arques Avenue, Santa Clara, California
                                                                                     
  1260 East Arques Avenue, Santa Clara, California
 
 
 
 
Schedule 1-1

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1270 East Arques Avenue, Santa Clara, California
                                                                                       
1280 East Arques Avenue, Santa Clara, California
 

 
*  These properties are Excess Collateral as described in Section 7.17 and
Schedule 2, were not appraised and are not included in the Allocated Loan
Amount.
 

 

 

Schedule 1-2

 
 

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SCHEDULE 2
 
EXCESS COLLATERAL
 
1.           5970 Optical Court, San Jose, California
 
2.           5400 Hellyer Avenue, San Jose, California
 

 

Schedule 2-1

 
 

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SCHEDULE 4.1
 
RENT ROLL
 

CONFEIDENTIAL TREATMENT - THE RENT ROLLS ARE OMITTED

 

Schedule 4.1-1

 
 

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SCHEDULE 5.16
 
PERSONAL PROPERTY
 

 
NONE
 

Schedule 5.16-1
 
 

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SCHEDULE 5.18
 
LIST OF MATERIAL AGREEMENTS
 

 
NONE

 
 
 

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