Document:

ex10_88.htm

EXHIBIT 10.88

 

 

 

 

LOAN AGREEMENT

 

Dated as of May 19, 2010

 

By and among

 

THE ENTITIES SET FORTH ON SCHEDULE I

 

 

ATTACHED HERETO,

 

 

collectively, as Borrower

 

 

and

 

JPMORGAN CHASE BANK, N.A.,

 

 

as Lender

 

 

 

 

 

 

 

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TABLE OF CONTENTS

 

	 	
 

	  	
 

	  	
Page

	  

 

 

	
ARTICLE 1 – DEFINITIONS; PRINCIPLES OF CONSTRUCTION

	  	
1

	  
	  	
Section 1.1

	  	
Definitions

	  	
1

	  
	  	
Section 1.2

	  	
Principles of Construction

	  	
28

	  

	
ARTICLE 2 – GENERAL TERMS

	  	
28

	  
	  	
Section 2.1

	  	
Loan Commitment; Disbursement to Borrower

	  	
28

	  
	  	
2.1.1

	  	
Agreement to Lend and Borrow

	  	
28

	  
	  	
2.1.2

	  	
Single Disbursement to Borrower

	  	
28

	  
	  	
2.1.3

	  	
The Note, Mortgage and Loan Documents

	  	
29

	  
	  	
2.1.4

	  	
Use of Proceeds

	  	
29

	  
	  	
Section 2.2

	  	
Interest Rate

	  	
29

	  
	  	
2.2.1

	  	
Interest Rate

	  	
29

	  
	  	
2.2.2

	  	
Interest Calculation

	  	
29

	  
	  	
2.2.3

	  	
Default Rate

	  	
29

	  
	  	
2.2.4

	  	
Usury Savings

	  	
29

	  
	  	
Section 2.3

	  	
Loan Payment

	  	
31

	  
	  	
2.3.1

	  	
Monthly Debt Service Payments

	  	
31

	  
	  	
2.3.2

	  	
Payments Generally

	  	
31

	  
	  	
2.3.3

	  	
Payment on Maturity Date

	  	
32

	  
	  	
2.3.4

	  	
Late Payment Charge

	  	
32

	  
	  	
2.3.5

	  	
Method and Place of Payment

	  	
32

	  
	  	
Section 2.4

	  	
Prepayments

	  	
32

	  
	  	
2.4.1

	  	
Voluntary Prepayments

	  	
32

	  
	  	
2.4.2

	  	
Mandatory Prepayments

	  	
32

	  
	  	
2.4.3

	  	
Prepayments After Default

	  	
33

	  
	  	
Section 2.5

	  	
Intentionally omitted

	  	
33

	  
	  	
Section 2.6

	  	
Release of Property

	  	
33

	  
	  	
2.6.1

	  	
Release of Property

	  	
33

	  
	  	
2.6.2

	  	
Release of Individual Property

	  	
33

	  
	  	
Section 2.7

	  	
Lockbox Account/Cash Management

	  	
35

	  
	  	
2.7.1

	  	
Lockbox Account

	  	
35

	  
	  	
2.7.2

	  	
Cash Management Account

	  	
36

	  
	  	
2.7.3

	  	
Payments Received under the Cash Management Agreement

	  	
37

	  

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ARTICLE 3 – CONDITIONS PRECEDENT

	  	
37

	  
	  	
Section 3.1

	  	
Conditions Precedent to Closing

	  	
37

	  

	
ARTICLE 4 – REPRESENTATIONS AND WARRANTIES

	  	
37

	  
	  	
Section 4.1

	  	
Borrower Representations

	  	
37

	  
	  	
4.1.1

	  	
Organization

	  	
37

	  
	  	
4.1.2

	  	
Proceedings

	  	
37

	  
	  	
4.1.3

	  	
No Conflicts

	  	
38

	  
	  	
4.1.4

	  	
Litigation

	  	
38

	  
	  	
4.1.5

	  	
Agreements

	  	
38

	  
	  	
4.1.6

	  	
Title

	  	
38

	  
	  	
4.1.7

	  	
Solvency

	  	
39

	  
	  	
4.1.8

	  	
Full and Accurate Disclosure

	  	
39

	  
	  	
4.1.9

	  	
No Plan Assets

	  	
40

	  
	  	
4.1.10

	  	
Compliance

	  	
40

	  
	  	
4.1.11

	  	
Financial Information

	  	
40

	  
	  	
4.1.12

	  	
Condemnation

	  	
40

	  
	  	
4.1.13

	  	
Federal Reserve Regulations

	  	
40

	  
	  	
4.1.14

	  	
Utilities and Public Access

	  	
41

	  
	  	
4.1.15

	  	
Not a Foreign Person

	  	
41

	  
	  	
4.1.16

	  	
Separate Lots

	  	
41

	  
	  	
4.1.17

	  	
Assessments

	  	
41

	  
	  	
4.1.18

	  	
Enforceability

	  	
41

	  
	  	
4.1.19

	  	
No Prior Assignment

	  	
41

	  
	  	
4.1.20

	  	
Insurance

	  	
41

	  
	  	
4.1.21

	  	
Use of Property

	  	
41

	  
	  	
4.1.22

	  	
Certificate of Occupancy; Licenses

	  	
42

	  
	  	
4.1.23

	  	
Flood Zone

	  	
42

	  
	  	
4.1.24

	  	
Physical Condition

	  	
42

	  
	  	
4.1.25

	  	
Boundaries

	  	
42

	  
	  	
4.1.26

	  	
Leases

	  	
42

	  
	  	
4.1.27

	  	
Survey

	  	
43

	  
	  	
4.1.28

	  	
Inventory

	  	
43

	  
	  	
4.1.29

	  	
Filing and Recording Taxes

	  	
43

	  
	  	
4.1.30

	  	
Special Purpose Entity/Separateness

	  	
43

	  
	  	
4.1.31

	  	
Management Agreement

	  	
44

	  
	  	
4.1.32

	  	
Illegal Activity

	  	
44

	  
	  	
4.1.33

	  	
No Change in Facts or Circumstances; Disclosure

	  	
44

	  
	  	
4.1.34

	  	
Investment Company Act

	  	
44

	  

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4.1.35

	  	
Embargoed Person

	  	
45

	  
	  	
4.1.36

	  	
Principal Place of Business; State of Organization

	  	
45

	  
	  	
4.1.37

	  	
Environmental Representations and Warranties

	  	
45

	  
	  	
4.1.38

	  	
Cash Management Account

	  	
46

	  
	  	
Section 4.2

	  	
Survival of Representations

	  	
46

	  

	
ARTICLE 5 – BORROWER COVENANTS

	  	
47

	  
	  	
Section 5.1

	  	
Affirmative Covenants

	  	
47

	  
	  	
5.1.1

	  	
Existence; Compliance with Legal Requirements

	  	
47

	  
	  	
5.1.2

	  	
Taxes and Other Charges

	  	
48

	  
	  	
5.1.3

	  	
Litigation

	  	
49

	  
	  	
5.1.4

	  	
Access to Property

	  	
49

	  
	  	
5.1.5

	  	
Notice of Default

	  	
49

	  
	  	
5.1.6

	  	
Cooperate in Legal Proceedings

	  	
49

	  
	  	
5.1.7

	  	
Perform Loan Documents

	  	
49

	  
	  	
5.1.8

	  	
Award and Insurance Benefits

	  	
49

	  
	  	
5.1.9

	  	
Further Assurances

	  	
49

	  
	  	
5.1.10

	  	
Principal Place of Business, State of Organization

	  	
50

	  
	  	
5.1.11

	  	
Financial Reporting

	  	
50

	  
	  	
5.1.12

	  	
Business and Operations

	  	
52

	  
	  	
5.1.13

	  	
Title to the Property

	  	
52

	  
	  	
5.1.14

	  	
Costs of Enforcement

	  	
52

	  
	  	
5.1.15

	  	
Estoppel Statement

	  	
53

	  
	  	
5.1.16

	  	
Loan Proceeds

	  	
53

	  
	  	
5.1.17

	  	
Performance by Borrower

	  	
53

	  
	  	
5.1.18

	  	
Confirmation of Representations

	  	
53

	  
	  	
5.1.19

	  	
Environmental Covenants

	  	
53

	  
	  	
5.1.20

	  	
Leasing Matters

	  	
55

	  
	  	
5.1.21

	  	
Alterations

	  	
56

	  
	  	
5.1.22

	  	
Operation of Property

	  	
57

	  
	  	
5.1.23

	  	
Embargoed Person

	  	
59

	  
	  	
5.1.24

	  	
Supplemental Mortgage Affidavits

	  	
59

	  
	  	
Section 5.2

	  	
Negative Covenants

	  	
59

	  
	  	
5.2.1

	  	
Operation of Property

	  	
59

	  
	  	
5.2.2

	  	
Liens

	  	
60

	  
	  	
5.2.3

	  	
Dissolution

	  	
60

	  
	  	
5.2.4

	  	
Change in Business

	  	
60

	  
	  	
5.2.5

	  	
Debt Cancellation

	  	
60

	  
	  	
5.2.6

	  	
Zoning

	  	
61

	  

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5.2.7

	  	
No Joint Assessment

	  	
61

	  
	  	
5.2.8

	  	
Intentionally Omitted

	  	
61

	  
	  	
5.2.9

	  	
ERISA

	  	
61

	  
	  	
5.2.10

	  	
Transfers

	  	
61

	  

	
ARTICLE 6 – INSURANCE; CASULATY; CONDEMNATION;

	  	
66

	  
	  	
Section 6.1

	  	
Insurance

	  	
66

	  
	  	
Section 6.2

	  	
Casualty

	  	
71

	  
	  	
Section 6.3

	  	
Condemnation

	  	
71

	  
	  	
Section 6.4

	  	
Restoration

	  	
72

	  

	
ARTICLE 7 – RESERVE FUNDS

	  	
76

	  
	  	
Section 7.1

	  	
Required Repairs

	  	
76

	  
	  	
7.1.1

	  	
Deposits

	  	
76

	  
	  	
7.1.2

	  	
Release of Required Repair Funds

	  	
77

	  
	  	
Section 7.2

	  	
Tax and Insurance Escrow Fund

	  	
77

	  
	  	
Section 7.3

	  	
Intentionally Omitted

	  	
78

	  
	  	
Section 7.4

	  	
Intentionally Omitted

	  	
78

	  
	  	
Section 7.5

	  	
Excess Cash Flow Reserve Fund

	  	
78

	  
	  	
7.5.1

	  	
Deposits to Excess Cash Flow Reserve Fund

	  	
78

	  
	  	
7.5.2

	  	
Release of Excess Cash Flow Reserve Funds

	  	
79

	  
	  	
Section 7.6

	  	
Reserve Funds, Generally

	  	
79

	  

	
ARTICLE 8 - DEFAULTS

	  	
80

	  
	  	
Section 8.1

	  	
Event of Default

	  	
80

	  
	  	
Section 8.2

	  	
Remedies

	  	
83

	  
	  	
Section 8.3

	  	
Remedies Cumulative; Waivers

	  	
84

	  

	
ARTICLE 9 – SPECIAL PROVISIONS

	  	
84

	  
	  	
Section 9.1

	  	
Securitization

	  	
84

	  
	  	
9.1.1

	  	
Sale of Notes and Securitization

	  	
84

	  
	  	
9.1.2

	  	
Securitization Costs

	  	
86

	  
	  	
Section 9.2

	  	
Uncross of Properties

	  	
86

	  
	  	
Section 9.3

	  	
Exculpation

	  	
87

	  
	  	
Section 9.4

	  	
Matters Concerning Manager

	  	
89

	  
	  	
Section 9.5

	  	
Servicer

	  	
90

	  

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ARTICLE 10 - MISCELLANEOUS

	  	
90

	  
	  	
Section 10.1

	  	
Survival

	  	
90

	  
	  	
Section 10.2

	  	
Lender’s Discretion

	  	
90

	  
	  	
Section 10.3

	  	
Governing Law

	  	
90

	  
	  	
Section 10.4

	  	
Modification, Waiver in Writing

	  	
92

	  
	  	
Section 10.5

	  	
Delay Not a Waiver

	  	
92

	  
	  	
Section 10.6

	  	
Notices

	  	
92

	  
	  	
Section 10.7

	  	
Trial by Jury

	  	
93

	  
	  	
Section 10.8

	  	
Headings

	  	
94

	  
	  	
Section 10.9

	  	
Severability

	  	
94

	  
	  	
Section 10.10

	  	
Preferences

	  	
94

	  
	  	
Section 10.11

	  	
Waiver of Notice

	  	
94

	  
	  	
Section 10.12

	  	
Remedies of Borrower

	  	
94

	  
	  	
Section 10.13

	  	
Expenses; Indemnity

	  	
94

	  
	  	
Section 10.14

	  	
Schedules Incorporated

	  	
96

	  
	  	
Section 10.15

	  	
Offsets, Counterclaims and Defenses

	  	
96

	  
	  	
Section 10.16

	  	
No Joint Venture or Partnership; No Third Party Beneficiaries

	  	
96

	  
	  	
Section 10.17

	  	
Publicity

	  	
97

	  
	  	
Section 10.18

	  	
Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets

	  	
97

	  
	  	
Section 10.19

	  	
Waiver of Counterclaim

	  	
97

	  
	  	
Section 10.20

	  	
Conflict; Construction of Documents; Reliance

	  	
98

	  
	  	
Section 10.21

	  	
Brokers and Financial Advisors

	  	
98

	  
	  	
Section 10.22

	  	
Prior Agreements

	  	
98

	  
	  	
Section 10.23

	  	
Joint and Several Liability

	  	
98

	  
	  	
Section 10.24

	  	
Certain Additional Rights of Lender (VCOC)

	  	
99

	  

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SCHEDULES

 

Schedule I                      –           List of Borrowers and Organizational Identification Nos.

 

Schedule II                      –           Rent Roll

 

Schedule III                      –           Required Repairs - Deadlines for Completion

 

Schedule IV                      –           Organizational Chart of Borrower

 

Schedule V                      –           Release Amounts

 

Schedule VI                      –           Intentionally omitted

 

Schedule VII                      –           Rights of First Refusal

 

Schedule VIII                                –           Ground Leased Individual Properties

 

Schedule IX                      –           Request for Disbursement from the Expansion Space Completion Escrow

 

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LOAN AGREEMENT

 

THIS LOAN AGREEMENT, dated as of May 19, 2010 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”), between JPMORGAN CHASE BANK, N.A., a banking association chartered under the laws of the United States of America, having an address at 383 Madison Avenue, New York, New York 10179 (“Lender”) and THE ENTITIES SET FORTH ON SCHEDULE I ATTACHED HERETO, each having an address at 2555 East Camelback Road, Ste. 400, Phoenix, Arizona 85016 (each, an “Individual Borrower” and, collectively, “Borrower”).

 

W I T N E S S E T H:

 

WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from Lender; and

 

WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined).

 

NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows:

 

ARTICLE 1 - DEFINITIONS; PRINCIPLES OF CONSTRUCTION.

 

Section 1.1 Definitions.

 

  For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent:

 

“Accrual Period” shall mean the period commencing on and including the first (1st) day of each calendar month during the term of the Loan and ending on and including the final calendar date of such calendar month; however, the initial Accrual Period shall commence on and include the Closing Date and shall end on and include the final calendar date of the calendar month in which the Closing Date occurs.

 

“actual knowledge” shall mean, with respect to Borrower, the conscious awareness of facts or other information by Borrower after inquiry reasonable for an institutional owner of properties similar to the Properties.

 

“Additional Insolvency Opinion” shall mean any subsequent Insolvency Opinion.

 

“Adjusted Release Amount” shall mean, for each Individual Property, the sum of (a) the Release Amount for such Individual Property and (b)  fifteen percent (15%) of the Release Amount for such Individual Property.

 

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1

  

“Affected Property” shall have the meaning set forth in Section 9.2 hereof.

 

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, is in Control of, is Controlled by or is under common Control with such Person or is a director or officer of such Person or of an Affiliate of such Person.

 

“Affiliated Manager” shall mean any Manager that is an Affiliate of Borrower or Guarantor.

 

“Agent” shall mean Wells Fargo Bank, N.A., or any successor Eligible Institution acting as Agent under the Cash Management Agreement.

 

“Allocated Loan Amount” shall have the meaning set forth in Section 9.2 hereof.

 

“Amortizing Period” shall mean any Accrual Period for which Borrower is obligated to pay the Monthly Debt Service Payment Amount pursuant to Section 2.3.1 hereof.

 

“Assignment of Management Agreement” shall mean that certain Assignment of Management Agreement and Subordination of Management Fees, dated as of the date hereof, among Lender, Borrower and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Award” shall mean any compensation paid or payable to Borrower by any Governmental Authority in connection with a Condemnation in respect of all or any part of any Individual Property.

 

“Bankruptcy Action” shall mean with respect to any Person (a) such Person filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (c) such Person filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (d) such Person consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for such Person or any portion of the any Individual Property; (e) such Person making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due.

 

“Bankruptcy Code” shall mean Title 11 of the United States Code, 11 U.S.C. §101, et seq., as the same may be amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors’ rights or any other Federal or state bankruptcy or insolvency law.

 

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2

  

“Basic Carrying Costs” shall mean, with respect to an Individual Property, the sum of the following costs associated with such Individual Property for the relevant Fiscal Year or payment period:  (a) Taxes, (b) Other Charges and (c) Insurance Premiums.

 

“Borrower” shall have the meaning set forth in the introductory paragraph hereto, together with its successors and permitted assigns.

 

“Business Day” shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, New York, or the place of business of the trustee under a Securitization (or, if no Securitization has occurred, Lender), or any Servicer or the financial institution that maintains any collection account for or on behalf of any Servicer or any Reserve Funds or the New York Stock Exchange or the Federal Reserve Bank of New York is not open for business.

 

“Capital Expenditures” shall mean, for any period, the amount expended for items capitalized under GAAP (or another basis of accounting acceptable to Lender and consistently applied) (including expenditures for building improvements or major repairs, leasing commissions and tenant improvements).

 

“Cash Management Account” shall have the meaning set forth in Section 2.7.2 hereof.

 

“Cash Management Agreement” shall mean that certain Cash Management Agreement, dated as of the date hereof, by and among Borrower, Lender, Manager and Agent, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Cash Sweep Event” shall mean the occurrence of: (a) an Event of Default (a “Default Trigger”); (b) any Bankruptcy Action of Borrower (a “Borrower Trigger”); (c) any Bankruptcy Action of Manager (a “Property Manager Trigger”); or (d) a DSCR Trigger.

 

“Cash Sweep Event Cure” shall mean (a) if the Cash Sweep Event is caused solely by the occurrence of a DSCR Trigger, the achievement of a DSCR Trigger Cure, (b) if the Cash Sweep Event is caused by a Default Trigger, the acceptance by Lender of a cure of such Event of Default (which cure Lender is not obligated to accept and may reject or accept in its sole and absolute discretion, unless required by law) provided Lender has not accelerated the Loan, moved for the appointment of a receiver or commenced foreclosure proceedings, or (c) if the Cash Sweep Event is caused by a Property Manager Trigger, if Borrower replaces the Manager with a Qualified Manager under a Replacement Management Agreement or the applicable Bankruptcy Action has been dismissed without adverse consequence to the Loan or the Properties as determined by Lender in its reasonable discretion; provided, however, that, such Cash Sweep Event Cure set forth in this definition shall be subject to the following conditions, (i) no Event of Default (other than the Event of Default that has been cured pursuant to clause (b) above) shall have occurred and be continuing under this Agreement or any of the other Loan Documents, (ii) a Cash Sweep Event Cure may occur no more than a total of three (3) times in the aggregate during the term of the Loan, and (iii) Borrower shall have paid all of Lender’s reasonable expenses incurred in connection with such Cash Sweep Event Cure including, reasonable attorney’s fees and expenses.  In no event shall Borrower have a right to cure a Cash Sweep Event that is caused by the occurrence of a Borrower Trigger.

 

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3

  

“Cash Sweep Period” shall mean each period commencing on the occurrence of a Cash Sweep Event and continuing until the earlier of (a) the Payment Date next occurring following the related Cash Sweep Event Cure (or, if such day is not a Business Day, the immediately preceding Business Day), or (b)  payment in full of all principal and interest on the Loan and all other amounts payable under the Loan Documents in accordance with the terms and provisions of the Loan Documents.

 

“Casualty” shall have the meaning set forth in Section 6.2 hereof.

 

“Casualty Consultant” shall have the meaning set forth in Section 6.4(b)(iii) hereof.

 

“Casualty Retainage” shall have the meaning set forth in Section 6.4(b)(iv) hereof.

 

“Closing Date” shall mean the date of the funding of the Loan.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

 

“Collective Group” shall have the meaning set forth in Section 10.23 hereof.

 

“Condemnation” shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of any Individual Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting such Individual Property or any part thereof.

 

“Condemnation Proceeds” shall have the meaning set forth in Section 6.4(b).

 

“Contribution Agreement” shall mean that certain Contribution Agreement, dated as of the date hereof, by and among each Individual Borrower, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise.  “Controlled” and “Controlling” shall have correlative meanings.

 

“Debt” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums (including any Yield Maintenance Premium and any Yield Maintenance Default Premium) due to Lender in respect of the Loan under the Note, this Agreement, the Mortgage or any other Loan Document.

 

“Debt Service” shall mean, with respect to any particular period of time, the scheduled principal and interest payments due under this Agreement and the Note.

 

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4

  

“Debt Service Coverage Ratio” shall mean a ratio for the applicable period in which:

 

(a)           the numerator is the Net Operating Income (excluding interest on credit accounts and using annualized operating expenses for any recurring expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth in the statements required hereunder, without deduction for (i) actual property management fees incurred in connection with the operation of the applicable Individual Property, or (ii) amounts paid to the Reserve Funds, less (A) property management fees equal to the greater of (1) assumed property management fees of 3.0% of Gross Income from Operations and (2) the actual property management fees incurred, and (B) underwritten annual Replacement Reserve Fund contributions equal to $0.14 per square foot of gross leasable area at the Property, and (C) underwritten annual Rollover Reserve Fund contributions equal to $0.26 per square foot of gross leasable area at the Property; and

 

(b)           the denominator is the aggregate amount of Debt Service for such period.

 

“Default” shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default.

 

“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the Maximum Legal Rate or (b) four percent (4%) above the Interest Rate.

 

“Disclosure Documents” shall have the meaning set forth in Section 9.1.1(b) hereof.

 

“DSCR Trigger” shall mean, during the Interest Only Period, that as of the date of determination, the Debt Service Coverage Ratio based on the trailing three (3) calendar month period immediately preceding the date of such determination is less than 1.95 to 1.00, and during the Amortizing Period, that as of the date of determination, the Debt Service Coverage Ratio based on the trailing three (3) calendar month period immediately preceding the date of such determination is less than 1.60 to 1.00.  If as of an applicable determination date, the trailing three (3) month period includes Accrual Periods in both the Interest Only Period and the Amortizing Period, Lender shall assume for purposes of such calculation that the entire trailing three (3) month period occurred in the Amortizing Period, and in such event, the applicable Debt Service Coverage Ratio for purposes of this provision shall assume the Amortizing Period is in effect.

 

“DSCR Trigger Cure” shall mean, that for two consecutive calendar quarters, with the applicable determination date being the first day of a calendar quarter (i.e., January 1, April 1, July 1, or October 1), Borrower shall have satisfied the following: during the Interest Only Period, as of each date of determination, the Debt Service Coverage Ratio based on the trailing three (3) month period immediately preceding the date of such determination is not less than 2.05 to 1.00, and during the Amortizing Period, as of each date of determination, the Debt Service Coverage Ratio based on the trailing three (3) month period immediately preceding the date of such determination is not less than 1.70 to 1.00.  If as of an applicable determination date, the

 

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trailing three (3) month period includes Accrual Periods in both the Interest Only Period and the Amortizing Period, Lender shall assume for purposes of such calculation that the entire trailing three (3) month period occurred in the Amortizing Period, and in such event, the applicable Debt Service Coverage Ratio for purposes of this provision shall assume the Amortizing Period is in effect.

 

“Effingham FedEx Lease” shall mean that certain Lease Agreement dated January 30, 2008 between Effingham Individual Borrower (as successor to Jones Effingham, L.L.C.), as Landlord, and FedEx (as successor to Fedex Freight East, Inc.), as Tenant, as amended from time to time.

 

“Effingham Individual Borrower” shall  mean COLE FE EFFINGHAM IL, LLC, a Delaware limited liability company.

 

“Effingham Individual Property” shall  mean that certain portion of the Property owned by Effingham Individual Borrower.

 

“Eligible Account” shall mean a separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000.00 and subject to supervision or examination by federal and state authority.  An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

 

“Eligible Institution” shall mean JPMorgan Chase Bank, N.A., or a depository institution or trust company insured by the Federal Deposit Insurance Corporation, the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of accounts in which funds are held for more than thirty (30) days, the long-term unsecured debt obligations of which are rated at least “AA-” by Fitch and S&P and “Aa3” by Moody’s).

 

“Embargoed Person” shall mean any person, entity or government subject to trade restrictions under U.S. law, including, but not limited to, The USA PATRIOT Act (including the anti-terrorism provisions thereof), the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701, et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder including those related to Specially Designated Nationals and Specially Designated Global Terrorists, with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly) by such person, entity or government, is prohibited by law or the Loan made by the Lender is in violation of law.

 

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“Environmental Indemnity” shall mean that certain Environmental Indemnity Agreement, dated as of the date hereof, executed by Borrower and Guarantor in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Environmental Law” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to protection of human health or the environment, relating to Hazardous Substances, relating to liability for or costs of Remediation or prevention of Releases of Hazardous Substances or relating to liability for or costs of other actual or threatened danger to human health or the environment.  Environmental Law includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues:  the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act.  Environmental Law also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law:  conditioning transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of the Properties; requiring notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Properties to any governmental authority or other Person, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements in connection with permits or other authorization for lawful activity; relating to nuisance, trespass or other causes of action related to the Properties; or relating to wrongful death, personal injury, or property or other damage in connection with any physical condition or use of the Properties.

 

“Environmental Liens” shall have the meaning set forth in Section 5.1.19 hereof.

 

“Environmental Report” shall have the meaning set forth in Section 4.1.37 hereof.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder.

 

“Estimated Cost” shall have the meaning set forth in Section 5.1.21 hereof .

 

“Event of Default” shall have the meaning set forth in Section 8.1(a) hereof.

 

“Excess Cash Flow” shall have the meaning set forth in the Cash Management Agreement.

 

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“Excess Cash Flow Reserve Account” shall have the meaning set forth in Section 7.5.1 hereof.

 

“Excess Cash Flow Reserve Fund” shall have the meaning set forth in Section 7.5.1 hereof.

 

“Expansion Space” shall have the meaning set forth in Section 5.1.21 hereof .

 

“Expansion Space Completion Escrow” shall have the meaning set forth in Section 5.1.21 hereof .

 

“FedEx” shall mean FedEx Freight, Inc., an Arkansas corporation, which is the Tenant under the Effingham FedEx Lease.

 

“Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Loan.

 

“Fitch” shall mean Fitch, Inc.

 

“GAAP” shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report.

 

“Governmental Authority” shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (foreign, federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence.

 

“Gross Income from Operations” shall mean, during any period, all recurring income as reported on the financial statements delivered by Borrower in accordance with this Agreement, computed in accordance with GAAP (or another basis of accounting acceptable to Lender and consistently applied), derived from the ownership and operation of any Individual Property from whatever source during such period, including, but not limited to, (i) Rents from Tenants that are in occupancy, open for business and paying full contractual rent without right of offset or credit, (ii) utility charges, (iii) escalations, (iv) forfeited security deposits, (v) interest on credit accounts, (vi) service fees or charges, (vii) license fees, (viii) parking fees, (ix) rent concessions or credits, (x) income from vending machines, (xi) business interruption or other loss of income or rental insurance proceeds, (xii) other required pass-throughs or reimbursements, (xiii) easement proceeds, and (xiv) interest on Reserve Accounts, if any, but excluding (i) Rents from month-to-month Tenants, Tenants during a free-rent period, or Tenants that are included in any Bankruptcy Action, (ii) sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, (iii) refunds and uncollectible accounts, (iv) sales of furniture, fixtures and equipment, (v) Insurance Proceeds (other than business interruption or other loss of income or rental insurance), (vi) Awards, (vii) unforfeited security deposits, (viii) utility and other similar deposits and (ix) any disbursements to Borrower from the Reserve Funds, if any.  Gross income shall not be diminished as a result of the Mortgage or the creation of any intervening estate or interest in such Individual Property or any part thereof.

 

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“Ground Leased Individual Properties” shall mean the Individual Properties listed on Schedule VIII hereto.

 

“Guarantor” shall mean Cole REIT III Operating Partnership, LP.

 

“Guaranty” shall mean that certain Guaranty Agreement, dated as of the date hereof, executed and delivered by Guarantor in connection with the Loan to and for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Hazardous Substances” include but are not limited to any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the environment, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables, explosives, mold, mycotoxins, microbial matter and airborne pathogens (naturally occurring or otherwise), but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purpose of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Laws.

 

“Identified Affiliate” shall mean each of the following:

 

Cole Capital Partners, LLC, an Arizona limited liability company;

Cole Capital Advisors, Inc., an Arizona Corporation;

Series C, LLC, an Arizona limited liability company;

Series D, LLC, an Arizona limited liability company;

Cole Credit Property Trust, Inc., a Maryland corporation;

Cole Credit Property Trust II, Inc., a Maryland corporation;

Cole Holdings Corporation, an Arizona corporation; and

Any entity wholly-owned, either directly or indirectly, by one or more of the foregoing.

 

“Improvements” shall have the meaning set forth in the granting clause of the Mortgage with respect to the applicable Individual Property.

 

“Indebtedness” of a Person, at a particular date, shall mean the sum (without duplication) at such date of (a) all indebtedness or liability of such Person (including, without limitation, amounts for borrowed money and indebtedness in the form of mezzanine debt or preferred equity); (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for collection or deposit in the ordinary

 

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course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations secured by any Liens, whether or not the obligations have been assumed (other than the Permitted Encumbrances).

 

“Indemnified Liabilities” shall have the meaning set forth in Section 10.13(b) hereof.

 

“Indemnified Parties” shall mean Lender and any Affiliate of Lender that has filed any registration statement relating to the Securitization or has acted as the sponsor or depositor in connection with the Securitization, any Affiliate of Lender that acts as an underwriter, placement agent or initial purchaser of Securities issued in the Securitization, any other co underwriters, co placement agents or co initial purchasers of Securities issued in the Securitization, and each of their respective officers, directors, partners, employees, representatives, agents and Affiliates and each Person or entity who Controls any such Person within the meaning of Section 15 of the Securities Act of 1933 as amended or Section 20 of the Security Exchange Act of 1934 as amended, any Person who is or will have been involved in the origination of the Loan, any Person who is or will have been involved in the servicing of the Loan secured hereby, any Person in whose name the encumbrance created by the Mortgage is or will have been recorded, any Person who may hold or acquire or will have held a full or partial interest in the Loan secured hereby (including, but not limited to, investors or prospective investors in the Securities, as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan secured hereby for the benefit of third parties) as well as the respective directors, officers, shareholders, partners, employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including, but not limited to, any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loan, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to any successors by merger, consolidation or acquisition of all or a substantial portion of Lender’s assets and business).

 

“Independent Director” shall mean a natural Person who (a) is not at the time of initial appointment, or at any time while serving in such capacity, and is not, and has never been, and will not while serving as Independent Director be: (i) a stockholder, director (with the exception of serving as the Independent Director of an Individual Borrower), officer, employee, partner, member (other than a “special member” or “springing member”), manager, attorney or counsel of an Individual Borrower, equity owners of an Individual Borrower or Guarantor or any Affiliate of an Individual Borrower or Guarantor; (ii) a customer, supplier or other person who derives any of its purchases or revenues from its activities with an Individual Borrower or Guarantor, equity owners of an Individual Borrower or Guarantor or any Affiliate of an Individual Borrower or Guarantor; (iii) a Person Controlling or under common Control with any such stockholder, director, officer, employee, partner, member, manager, attorney, counsel, equity owner, customer, supplier or other Person; or (iv) a member of the immediate family of any such stockholder, director, officer, employee, partner, member, manager, attorney, counsel, equity owner, customer, supplier or other Person and (b) has (i) prior experience as an independent director or independent manager for a corporation, a trust or limited liability

 

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company whose charter documents required the unanimous consent of all independent directors or independent managers thereof before such corporation, trust or limited liability company could consent to the institution of bankruptcy or insolvency proceedings against it or could file a petition seeking relief under any applicable federal or state law relating to bankruptcy and (ii) at least three years of employment experience with one or more nationally-recognized companies that provides, inter alia, professional independent directors or independent managers in the ordinary course of their respective business to issuers of securitization or structured finance instruments, agreements or securities or lenders originating commercial real estate loans for inclusion in securitization or structured finance instruments, agreements or securities (a “Professional Independent Director”) and is at all times during his or her service as an Independent Director of an Individual Borrower an employee of such a company or companies.  A natural Person who satisfies the foregoing definition except for being (or having been) the independent director or independent manager of a “special purpose entity” affiliated with an Individual Borrower (provided such affiliate does not or did not own a direct or indirect equity interest in an Individual Borrower) shall not be disqualified from serving as an Independent Director, provided that such natural Person satisfies all other criteria set forth above and that the fees such individual earns from serving as independent director or independent manager of affiliates of an Individual Borrower or in any given year constitute in the aggregate less than five percent (5%) of such individual’s annual income for that year.  A natural Person who satisfies the foregoing definition other than subparagraph (a)(ii) shall not be disqualified from serving as an Independent Director of an Individual Borrower if such individual is a Professional Independent Director and such individual complies with the requirements of the previous sentence.  A person serving as a manager (and not as a director) of a limited liability company, but otherwise satisfying this definition shall be deemed an Independent Director for purposes of this Agreement.

 

“Individual Borrower” shall have the meaning set forth in the introductory paragraph hereto, together with its successors and permitted assigns.

 

“Individual Property” shall mean shall mean each parcel of real property, the Improvements thereon and all personal property owned by an Individual Borrower and encumbered by a Mortgage, together with all of such Individual Borrower’s rights pertaining to such property and Improvements, as more particularly described in the granting clauses of the related Mortgage and referred to therein as the “Property”.

 

“Insolvency Opinion” shall mean that certain non-consolidation opinion letter dated the date hereof delivered by Kutak Rock LLP in connection with the Loan.

 

“Insurance Premiums” shall have the meaning set forth in Section 6.1(b) hereof.

 

“Insurance Proceeds” shall have the meaning set forth in Section 6.4(b) hereof.

 

“Interest Only Period” shall mean any Accrual Period for which Borrower is obligated to make a payment of interest only pursuant to Section 2.3.1 hereof.

 

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“Interest Rate” shall mean a rate of five and seven hundred eleven thousandths percent (5.711%) per annum.

 

“Lease” shall mean any lease, sublease or subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) entered into by any Individual Borrower (or a predecessor-in-interest to any Individual Borrower) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in any Individual Property, and every modification, amendment or other agreement relating to such lease, sublease, subsublease, or other agreement entered into in connection with such lease, sublease, subsublease, or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto.

 

“Legal Requirements” shall mean, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting any Individual Property 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 Borrower, at any time in force affecting any Individual Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to any Individual Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.

 

“Lender” shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns.

 

“Lien” shall mean, any mortgage, deed of trust, deed to secure debt, indemnity deed of trust, lien, pledge, hypothecation, assignment for security, security interest, or any other encumbrance, charge or transfer of, on or affecting Borrower, any Individual Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.

 

“Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement.

 

“Loan Documents” shall mean, collectively, this Agreement, the Note, the Mortgage,  the Environmental Indemnity, the Assignment of Management Agreement, the Guaranty, the Lockbox Agreement, the Cash Management Agreement, the Contribution Agreement and all other documents executed and/or delivered by any Individual Borrower or Guarantor in connection with the Loan.

 

“Lockbox Account” shall have the meaning set forth in Section 2.7.1 hereof.

 

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“Lockbox Agreement” shall mean that certain Blocked Account Control Agreement dated the date hereof among Cole TS Kenedy TX, LLC, Lender and Lockbox Bank (and joined by each Borrower and Manager), as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Lockbox Account.

 

“Lockbox Bank” shall mean JPMorgan Chase Bank, N.A., or the clearing bank which establishes, maintains and holds the Lockbox Account, which shall be an Eligible Institution.

 

“Management Agreement” shall mean the management agreement entered into among  Manager, Cole REIT III Operating Partnership, LP, and Cole Credit Property Trust III, Inc. pursuant to which Manager is to provide management and other services with respect to each Individual Property and certain other properties, or, if the context requires, the Replacement Management Agreement.

 

“Manager” shall mean Cole Realty Advisors, Inc. (f/k/a Fund Realty Advisors, Inc.) an Arizona corporation, or, if the context requires, a Qualified Manager who is managing the Properties in accordance with the terms and provisions of this Agreement pursuant to a Replacement Management Agreement.

 

“Manager DSCR Trigger” shall mean, during the Interest Only Period, that as of the date of determination, the Debt Service Coverage Ratio based on the trailing three (3) calendar month period immediately preceding the date of such determination is less than 1.85 to 1.00, and during the Amortizing Period, that as of the date of determination, the Debt Service Coverage Ratio based on the trailing three (3) calendar month period immediately preceding the date of such determination is less than 1.50 to 1.00.  If as of an applicable determination date, the trailing three (3) month period includes Accrual Periods in both the Interest Only Period and the Amortizing Period, Lender shall assume for purposes of such calculation that the entire trailing three (3) month period occurred in the Amortizing Period, and in such event, the applicable Debt Service Coverage Ratio for purposes of this provision shall assume the Amortizing Period is in effect.

 

“Material Action” means to file any insolvency, or reorganization case or proceeding, to institute proceedings to have any Individual Borrower be adjudicated bankrupt or insolvent, to institute proceedings under any applicable insolvency law, to seek any relief under any law relating to relief from debts or the protection of debtors, to consent to the filing or institution of bankruptcy or insolvency proceedings against any Individual Borrower, to file a petition seeking, or consent to, reorganization or relief with respect to any Individual Borrower under any applicable federal or state law relating to bankruptcy or insolvency, to seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official of or for any Individual Borrower or a substantial part of its property, to make any assignment for the benefit of creditors of any Individual Borrower, to admit in writing such Individual Borrower’s inability to pay its debts generally as they become due, or to take action in furtherance of any of the foregoing.

 

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“Maturity Date” shall mean June 1, 2020, or such other date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise.

 

“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.

 

“Monthly Debt Service Payment Amount” shall mean a constant monthly payment of $241,794.75.

 

“Moody’s” shall mean Moody’s Investors Service, Inc.

 

“Mortgage” shall mean, with respect to each Individual Property, that certain first priority Mortgage and Security Agreement, Deed of Trust, Fixture Filing and Security Agreement, Deed of Trust and Security Agreement or Deed to Secure Debt and Security Agreement, dated the date hereof, executed and delivered by Borrower to Lender as security for the Loan and encumbering the applicable Individual Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Net Cash Flow” shall mean, with respect to the Properties for any period, the amount obtained by subtracting Operating Expenses and Capital Expenditures for such period from Gross Income from Operations for such period.

 

“Net Operating Income” shall mean, for any period, the amount obtained by subtracting Operating Expenses for such period from Gross Income from Operations for such period.

 

“Net Proceeds” shall have the meaning set forth in Section 6.4(b) hereof.

 

“Net Proceeds Deficiency” shall have the meaning set forth in Section 6.4(b)(vi) hereof.

 

“New Note” shall have the meaning set forth in Section 9.2 hereof.

 

“Note” shall mean that certain Promissory Note, dated the date hereof, in the principal amount of $41,610,000.00, made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed by an authorized officer of Borrower or the general partner, managing member, sole member or manager of Borrower, as applicable.

 

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“Operating Expenses” shall mean, with respect to each Individual Property, the total of all expenditures incurred by or on behalf of Borrower (other than expenditures by a Tenant pursuant to its Lease), computed in accordance with GAAP (or another basis of accounting acceptable to Lender and consistently applied), of whatever kind relating to the operation, maintenance and management of such Individual Property that are incurred on a regular monthly or other periodic basis, including without limitation, bad debt, utilities, ordinary repairs and maintenance, insurance, license fees, property taxes and assessments, advertising expenses, property management fees, payroll and related taxes, computer processing charges, operational equipment or other lease payments as approved by Lender, and other similar costs, but excluding depreciation and amortization, acquisition costs, impairment charges, Debt Service pre-payments of principal (to the extent permitted by this Agreement), Capital Expenditures and contributions to the Reserve Funds.

 

“Other Charges” shall mean, with respect to each Individual Property, all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining such Individual Property, now or hereafter levied or assessed or imposed against such Individual Property or any part thereof.

 

“Other Obligations” shall have the meaning as set forth in the Mortgage.

 

“Payment Date” shall mean the first (1st) day of each calendar month during the term of the Loan.

 

“Permitted Encumbrances” shall mean, with respect to an Individual Property, collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy, (c) Liens, if any, for Taxes and Other Charges imposed by any Governmental Authority not yet due or delinquent, (d) the Leases existing as of the date hereof and any Leases entered into after the date hereof in accordance with Section 5.1.20, and (e) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s sole discretion, which Permitted Encumbrances in the aggregate do not materially adversely affect the value or use of such Individual Property (as currently used) or Borrower ’s ability to repay the Loan.

 

“Permitted Investments” shall mean any one or more of the following obligations or securities acquired at a purchase price of not greater than par, including those issued by Servicer, the trustee under any Securitization or any of their respective Affiliates, payable on demand or having a maturity date not later than the Business Day immediately prior to the first Payment Date following the date of acquiring such investment and meeting one of the appropriate standards set forth below:

 

(i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America including, without limitation, obligations of:  the U.S. Treasury (all direct or fully

 

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guaranteed obligations), the Farmers Home Administration (certificates of beneficial ownership), the General Services Administration (participation certificates), the U.S. Maritime Administration (guaranteed Title XI financing), the Small Business Administration (guaranteed participation certificates and guaranteed pool certificates), the U.S. Department of Housing and Urban Development (local authority bonds) and the Washington Metropolitan Area Transit Authority (guaranteed transit bonds); provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(ii) Federal Housing Administration debentures;

 

(iii) obligations of the following United States government sponsored agencies:  Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt obligations); provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(iv) federal funds, unsecured certificates of deposit, time deposits, bankers’ acceptances and repurchase agreements with maturities of not more than 365 days of any bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

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(v) fully Federal Deposit Insurance Corporation-insured demand and time deposits in, or certificates of deposit of, or bankers’ acceptances issued by, any bank or trust company, savings and loan association or savings bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(vi) debt obligations with maturities of not more than 365 days and at all times rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) in its highest long-term unsecured rating category; provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

(vii) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) with maturities of not more than 365 days and that at all times is rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) in its highest short-term unsecured debt rating; provided, however, that the investments described in this clause must (A) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an “r” highlighter affixed to their rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity;

 

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(viii) units of taxable money market funds, which funds are regulated investment companies, seek to maintain a constant net asset value per share and invest solely in obligations backed by the full faith and credit of the United States, which funds have the highest rating available from each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) for money market funds; and

 

(ix) any other security, obligation or investment which has been approved as a Permitted Investment in writing by (a) Lender and (b) each Rating Agency, as evidenced by a written confirmation that the designation of such security, obligation or investment as a Permitted Investment will not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities by such Rating Agency;

 

provided, however, that no obligation or security shall be a Permitted Investment if (A) such obligation or security evidences a right to receive only interest payments or (B) the right to receive principal and interest payments on such obligation or security are derived from an underlying investment that provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment.

 

“Permitted Par Prepayment Date” shall mean the Payment Date which is three (3) months prior to the Maturity Date (or, if such Payment Date is not a Business Day, the immediately preceding Business Day).

 

“Permitted Prepayment Date” shall mean the second (2nd) anniversary of the first Payment Date (or, if such day is not a Business Day, the immediately succeeding Business Day).

 

“Permitted Transfer” shall mean any of the following:  (a) any transfer, directly as a result of the death of a natural person, of stock, membership interests, partnership interests or other ownership interests previously held by the decedent in question to the Person or Persons lawfully entitled thereto, or (b) any transfer, directly as a result of the legal incapacity of a natural person, of stock, membership interests, partnership interests or other ownership interests previously held by such natural person to the Person or Persons lawfully entitled thereto.

 

“Person” shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

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“Personal Property” shall have the meaning set forth in the granting clause of the Mortgage with respect to the applicable Individual Property.

 

“Physical Conditions Report” shall mean, with respect to each Individual Property, a structural engineering report prepared by a company satisfactory to Lender regarding the physical condition of such Individual Property, satisfactory in form and substance to Lender in its sole discretion, which report shall, among other things, (a) confirm that such Individual Property and its use complies, in all material respects, with all applicable Legal Requirements (including, without limitation, zoning, subdivision and building laws) and (b) include a copy of a final certificate of occupancy with respect to all Improvements on such Individual Property.

 

“Policies” shall have the meaning specified in Section 6.1(b) hereof.

 

“Policy” shall have the meaning specified in Section 6.1(b) hereof.

 

“Prepayment Rate” shall mean the bond equivalent yield (in the secondary market) on the United States Treasury Security that as of the Prepayment Rate Determination Date has a remaining term to maturity closest to, but not exceeding, the remaining term to the Permitted Par Prepayment Date as most recently published in “Statistical Release H.15 (519), Selected Interest Rates,” or any successor publication, published by the Board of Governors of the Federal Reserve System, or on the basis of such other publication or statistical guide as Lender may reasonably select.

 

“Prepayment Rate Determination Date” shall mean the date which is five (5) Business Days prior to the date that such prepayment shall be applied in accordance with the terms and provisions of Section 2.4.1 hereof.

 

“Principal” shall mean the Special Purpose Entity that is (i) the general partner of an Individual Borrower, if such Individual Borrower is a limited partnership, (ii) the managing member of an Individual Borrower, if such Individual Borrower is a multi-member limited liability company, or (iii) the beneficiary of an Individual Borrower, if such Individual Borrower is a Delaware statutory trust.

 

“Property” or “Properties” shall mean, collectively, each Individual Property.

 

“Provided Information” shall mean any and all financial and other information provided at any time prepared by, or on behalf of, Borrower, Principal, Guarantor and/or Manager.

 

“Qualified Manager” shall mean either (a) Manager; or (b)  in the reasonable judgment of Lender, a reputable and experienced management organization (which may be an Affiliate of Borrower) possessing experience in managing properties similar in size, scope, use and value as the Properties, provided, that in the case of this clause (b), if required by Lender, Borrower shall have obtained (i) prior written confirmation from the applicable Rating Agencies that management of the Properties by such entity will not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof and (ii) if such entity is an Affiliate of Borrower, an Additional Insolvency Opinion.

 

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“Rating Agencies” shall mean each of S&P, Moody’s, Fitch, and Realpoint or any other nationally recognized statistical rating agency which has been approved by Lender and designated by Lender to assign a rating to the Securities.

 

“Realpoint” shall mean Realpoint, LLC, a Pennsylvania limited liability company.

 

“Related Entities” shall have the meaning set forth in Section 5.2.10(e) hereof.

 

“Release” of any Hazardous Substance includes but is not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances.

 

“Release Amount” shall mean for an Individual Property the amount set forth on Schedule V hereto, as the same may be reduced pursuant to Section 2.4.2 hereof.

 

“Release Debt Service Coverage Ratio” shall mean, during the Interest Only Period, the product of 2.58 multiplied by a fraction of which (a) the numerator is the sum of the Release Amounts of all Properties subject to the Liens of the Mortgages (including the Individual Property to be released), and (b) the denominator is the sum of the then-current outstanding principal amount of the Loan; and during the Amortizing Period, the product of 2.14 multiplied by a fraction of which (a) the numerator is the sum of the Release Amounts of all Properties subject to the Liens of the Mortgages (including the Individual Property to be released), and (b) the denominator is the sum of the then-current outstanding principal amount of the Loan.

 

“Release Premium” shall mean, with respect to the related Individual Property released in accordance with Section 2.6.2 hereof, the difference between the Adjusted Release Amount and the Release Amount for such Individual Property.

 

“Remediation” includes but is not limited to any response, remedial, removal, or corrective action, any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance, any actions to prevent, cure or mitigate any Release of any Hazardous Substance, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances.

 

“REMIC Trust” shall mean a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code that holds the Note.

 

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“Rents” shall mean, with respect to an Individual Property, all rents (including percentage rents), rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, all other amounts payable as rent under any Lease or other agreement relating to the Individual Property, including, without limitation, charges for electricity, oil, gas, water, steam, heat, ventilation, air-conditioning and any other energy, telecommunication, telephone, utility or similar items or time use charges, HVAC equipment charges, sprinkler charges, escalation charges, license fees, maintenance fees, charges for Taxes, operating expenses or other reimbursables payable to Borrower (or to the Manager for the account of Borrower) under any Lease, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower or its agents or employees from any and all sources arising from or attributable to such Individual Property.

 

“Replacement Management Agreement” shall mean, collectively, (a) either (i) a management agreement for the Properties with a Qualified Manager substantially in the same form and substance as the Management Agreement, or (ii) a management agreement for the Properties with a Qualified Manager, which management agreement shall be reasonably acceptable to Lender in form and substance, provided, that in either case, Lender, at its option, may require that Borrower shall have obtained prior written confirmation from the applicable Rating Agencies that such management agreement will not cause a downgrade, withdrawal or qualification of the then current rating of the Securities or any class thereof and (b) an assignment of management agreement and subordination of management fees substantially in the form then used by Lender (or of such other form and substance reasonably acceptable to Lender), executed and delivered to Lender by Borrower and such Qualified Manager at Borrower’s expense.

 

“Required Repairs” shall have the meaning set forth in Section 7.1.1 hereof.

 

“Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow Fund, the Excess Cash Flow Reserve Fund and any other escrow fund established by the Loan Documents.

 

“Restoration” shall mean the repair and restoration of an Individual Property after a Casualty or Condemnation as nearly as possible to the condition such Individual Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender.

 

“Restricted Party” shall mean collectively, (a) Borrower, Principal and any Guarantor, and (b) any general partner, managing member, or non-member manager of, Borrower, Principal, or any Guarantor.

 

“S&P” shall mean Standard & Poor’s Ratings Group, a division of the McGraw-Hill Companies.

 

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“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance, pledge, grant of option or other transfer or disposal of a legal or beneficial interest, whether direct or indirect.

 

“Securities” shall have the meaning set forth in Section 9.1 hereof.

 

“Securitization” shall have the meaning set forth in Section 9.1 hereof.

 

“Servicer” shall have the meaning set forth in Section 9.5 hereof.

 

“Severed Loan Documents” shall have the meaning set forth in Section 8.2(c) hereof.

 

“Special Purpose Entity” shall mean a corporation, limited partnership or limited liability company that, since the date of its formation and at all times on and after the date thereof, has complied with and shall at all times comply with the following requirements unless it has received either prior consent to do otherwise from Lender or a permitted administrative agent thereof, or, while the Loan is securitized, confirmation from each of the applicable Rating Agencies that such noncompliance would not result in the qualification, withdrawal, or downgrade of the ratings of any Securities or any class thereof:

 

(i) is and shall be organized solely for the purpose of (A) in the case of an Individual Borrower, acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing and operating the applicable Individual Property, entering into and performing its obligations under the Loan Documents with Lender, refinancing the applicable Individual Property in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; or (B) in the case of a Principal, acting as a general partner of the limited partnership that owns the applicable Individual Property or as member of the limited liability company that owns the applicable Individual Property and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing;

 

(ii) has not engaged and shall not engage in any business unrelated to (A) the acquisition, development, ownership, management or operation of the applicable Individual Property, or (B) in the case of a Principal, acting as general partner of the limited partnership that owns the applicable Individual Property or acting as a member of the limited liability company that owns the applicable Individual Property, as applicable;

 

(iii) has not owned and shall not own any real property other than, in the case of an Individual Borrower, the applicable Individual Property;

 

(iv) does not have, shall not have and at no time had any assets other than (A) in the case of an Individual Borrower, the applicable Individual Property, personal property necessary or incidental to its ownership and operation of the applicable Individual Property and cash or (B) in the case of a Principal, its partnership interest in the limited partnership or its membership interest in the limited liability company that owns the applicable Individual Property and personal property necessary or incidental to its ownership of such interests;

 

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(v) has not engaged in, sought, consented or permitted to and shall not engage in, seek, consent to or permit (A) any dissolution, winding up, liquidation, consolidation or merger unless required by applicable law (and in such case, after fifteen (15) days prior written notice to Lender), (B) any sale or other transfer of all or substantially all of its assets or any sale of assets outside the ordinary course of its business, except as permitted by the Loan Documents, or (C) in the case of a Principal, any transfer of its partnership or membership interests unless required by applicable law (and in such case, after fifteen (15) days prior written notice to Lender);

 

(vi) except as permitted under the Loan Documents or unless required by law, shall not cause, consent to or permit any amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation, operating agreement or other formation document or organizational document (as applicable) with respect to the matters set forth in this definition;

 

(vii) if such entity is a limited partnership, has and shall have at least one general partner and has and shall have, as its only general partners, Special Purpose Entities each of which (A) is a corporation or single-member Delaware limited liability company, (B) has two (2) Independent Directors, and (C) holds a direct interest as general partner in the limited partnership of not less than 0.5% (or 0.1%, if the limited partnership is a Delaware entity);

 

(viii) if such entity is a corporation, has and shall have at least two (2) Independent Directors, and shall not cause or permit the board of directors of such entity to take any Material Action either with respect to itself or, if the corporation is a Principal, with respect to the applicable Individual Borrower or any action requiring the unanimous affirmative vote of one hundred percent (100%) of the members of its board of directors unless two (2) Independent Directors shall have participated in such vote and shall have voted in favor of such action;

 

(ix) if such entity is a limited liability company (other than a limited liability company meeting all of the requirements applicable to a single-member limited liability company set forth in this definition of “Special Purpose Entity”), has and shall have at least one (1) member that is a Special Purpose Entity, that is a corporation, that has at least two (2) Independent Directors and that directly owns at least one-half-of-one percent (0.5%) of the equity of the limited liability company (or 0.1% if the limited liability company is a Delaware entity);

 

(x) if such entity is a single-member limited liability company, (A) is and shall be a Delaware limited liability company, (B) has and shall have at least two (2) Independent Directors serving as managers of such company, (C) shall not take any Material Action and shall not cause or permit the members or managers of such entity to

 

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 take any Material Action, either with respect to itself or, if the company is a Principal, with respect to the applicable Individual Borrower, in each case unless two (2) Independent Directors then serving as managers of the company shall have consented in writing to such action, and (D) has and shall have either (1) a member which owns no economic interest in the company, has signed the company’s limited liability company agreement and has no obligation to make capital contributions to the company, or (2) two natural persons or one entity that is not a member of the company, that has signed its limited liability company agreement and that, under the terms of such limited liability company agreement becomes a member of the company immediately prior to the withdrawal or dissolution of the last remaining member of the company;

 

(xi) has not and shall not (and, if such entity is (a) a limited liability company, has and shall have a limited liability company agreement or an operating agreement, as applicable, (b) a limited partnership, has a limited partnership agreement, or (c) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity shall not) (1) dissolve, merge, liquidate, consolidate; (2) except as permitted under the Loan Documents, sell all or substantially all of its assets; (3) unless required by applicable law, amend its organizational documents with respect to the matters set forth in this definition without the consent of Lender; or (4) without the affirmative vote of two (2) Independent Directors of itself or the consent of a Principal that is a member or general partner in it: (A) file or consent to the filing of any bankruptcy, insolvency or reorganization case or proceeding, institute any proceedings under any applicable insolvency law or otherwise seek relief under any laws relating to the relief from debts or the protection of debtors generally, file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings; (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for the entity or a substantial portion of its property; (C) make an assignment for the benefit of the creditors of the entity; or (D) take any action in furtherance of any of the foregoing;

 

(xii) has at all times been and shall at all times remain solvent and has paid and shall pay its debts and liabilities (including, a fairly-allocated portion of any personnel and overhead expenses that it shares with any Affiliate) from its assets as the same shall become due, and has maintained and shall maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations, provided, however, that the foregoing shall not require any member, partner or beneficiary to make additional capital contributions;

 

(xiii) has not failed and shall not fail to correct any known misunderstanding regarding the separate identity of such entity and has not identified and shall not identify itself as a division of any other Person;

 

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(xiv) except with respect to the other Individual Borrowers as contemplated by this Agreement or the other Loan Documents, has maintained and shall maintain its bank accounts, books of account, books, records, resolutions and agreements separate from those of any other Person and, to the extent that it is required to file tax returns under applicable law, has filed and shall file its own tax returns, except to the extent that it is required by law to file consolidated tax returns and, if it is a corporation, has not filed and shall not file a consolidated federal income tax return with any other corporation, except to the extent that it is required by law to file consolidated tax returns, or to the extent that an Individual Borrower or its Principal is treated as a “disregarded entity” for tax purposes and is not required to file tax returns under applicable law;

 

(xv) Intentionally omitted.

 

(xvi) except with respect to the other Individual Borrowers as contemplated by this Agreement, the Lockbox Agreement, the Cash Management Agreement or the other Loan Documents, has not commingled and shall not commingle its funds or assets with those of any other Person and has not participated and shall not participate in any cash management system with any other Person;

 

(xvii) has held and shall hold its assets in its own name;

 

(xviii) has held itself out and identified itself and shall hold itself out and identify itself, and has conducted and shall conduct its business in its name or in a name franchised or licensed to it by an entity other than an Affiliate of itself or of an Individual Borrower not as a division or part of any other Person, except (A) with respect to the other Individual Borrowers, as contemplated by this Agreement, the Lockbox Agreement, the Cash Management Agreement or the other Loan Documents, and (B) for business conducted on behalf of itself by another Person under a business management services agreement that is on commercially-reasonable terms, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of an Individual Borrower;

 

(xix)  except with respect to the other Individual Borrowers as contemplated by this Agreement or the other Loan Documents, (A) has maintained and shall maintain its financial statements, accounting records and other entity documents separate from those of any other Person; (B) has shown and shall show, in its financial statements, its assets and liabilities separate and apart from those of any other Person; and (C) has not permitted and shall not permit its assets to be listed as assets on the financial statement of any of its Affiliates except as required by GAAP (or another basis of accounting acceptable to Lender and consistently applied); provided, however, that any such consolidated financial statement contains a note indicating that the Special Purpose Entity’s separate assets and credit are not available to pay the debts of such Affiliate and that the Special Purpose Entity’s liabilities do not  constitute obligations of the consolidated entity;

 

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(xx) except with respect to the other Individual Borrowers as contemplated by this Agreement, the Lockbox Agreement, the Cash Management Agreement or the other Loan Documents, has paid and shall pay its own liabilities and expenses, including the salaries of its own employees, out of its own funds and assets, and has maintained and shall maintain a sufficient number of employees in light of its contemplated business operations;

 

(xxi) has observed and shall observe all partnership, corporate or limited liability company formalities, as applicable;

 

(xxii) has not incurred any Indebtedness other than (i) acquisition financing with respect to the applicable Individual Property; construction financing with respect to the Improvements and certain off-site improvements required by municipal and other authorities as conditions to the construction of the Improvements; and first mortgage financings secured by the applicable Individual Property; and Indebtedness pursuant to letters of credit, guaranties, interest rate protection agreements and other similar instruments executed and delivered in connection with such financings, (ii) unsecured trade payables and operational debt not evidenced by a note, and (iii) Indebtedness incurred in the financing of equipment and other personal property used on the applicable Individual Property;

 

(xxiii) shall have no Indebtedness other than (i) the Loan, (ii) liabilities incurred in the ordinary course of business relating to the ownership and operation of the Property and the routine administration of Borrower, in amounts not to exceed 2% of the outstanding principal balance of the Loan which liabilities are not more than sixty (60) days past the date incurred, are not evidenced by a note and are paid when due, and which amounts are normal and reasonable under the circumstances, and (iii) such other liabilities that are permitted pursuant to this Agreement;

 

(xxiv) has not assumed, guaranteed or become obligated and shall not assume or guarantee or become obligated for the debts of any other Person, has not held out and shall not hold out its credit as being available to satisfy the obligations of any other Person or has not pledged and shall not pledge its assets for the benefit of any other Person, in each case, except (i) as permitted pursuant to this Agreement, (ii) in the case of an Individual Borrower, in connection with the Loan, or (iii) with respect to the general partner of any Individual Borrower that is a limited partnership, as such general partner may be liable under applicable law for the obligations of such Individual Borrower as the general partner thereof;

 

(xxv) has not acquired and shall not acquire obligations or securities of its partners, members or shareholders or any other owner or Affiliate except for a Principal with respect to the obligations of, or interests in, a Borrower;

 

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(xxvi) has allocated and shall allocate fairly and reasonably any overhead expenses that are shared with any of its Affiliates, constituents, or owners, or any guarantors of any of their respective obligations, or any Affiliate of any of the foregoing, including, but not limited to, paying for shared office space and for services performed by any employee of an Affiliate;

 

(xxvii) has maintained and used and shall maintain and use separate stationery, invoices and checks bearing its name and not bearing the name of any other entity unless such entity is clearly designated as being the Special Purpose Entity’s agent;

 

(xxviii)  Intentionally omitted.

 

(xxix) has held itself out and identified itself and shall hold itself out and identify itself as a separate and distinct entity under its own name or in a name franchised or licensed to it by an entity other than an Affiliate of an Individual Borrower and not as a division or part of any other Person,

 

(xxx) except with respect to the other Individual Borrowers as contemplated by this Agreement, the Lockbox Agreement, the Cash Management Agreement or the other Loan Documents, has maintained and shall maintain its assets in such a manner that it shall not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

 

(xxxi) has not made and shall not make loans to any Person and has not held and shall not hold evidence of indebtedness issued by any other Person or entity (other than cash and investment-grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity);

 

(xxxii) has not identified and shall not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it, and has not identified itself and shall not identify itself as a division of any other Person;

 

(xxxiii) other than (A) the Loan, and (B) capital contributions and distributions permitted under the terms of its organizational documents, has not entered into or been a party to, and shall not enter into or be a party to, any transaction with any of its partners, members, shareholders or Affiliates except in the ordinary course of its business and on terms which are commercially reasonable terms comparable to those of an arm’s-length transaction with an unrelated third party;

 

(xxxiv) has not had and shall not have any obligation to, and has not indemnified and shall not indemnify its partners, officers, directors or members, as the case may be, in each case unless such an obligation or indemnification is fully subordinated to the Debt and shall not constitute a claim against it in the event that its cash flow is insufficient to pay the Debt;

 

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(xxxv) if such entity is a corporation, has considered and shall consider the interests of its creditors in connection with all corporate actions;

 

(xxxvi) has not had and shall not have any of its obligations guaranteed by any Affiliate except as provided by the Loan Documents;

 

(xxxvii) has not formed, acquired or held and shall not form, acquire or hold any subsidiary, except that a Principal may acquire and hold its interest in an Individual Borrower;

 

(xxxviii) has complied and shall comply with all of the terms and provisions contained in its organizational documents;

 

(xxxix)   has conducted and shall conduct its business so that each of the assumptions made about it and each of the facts stated about it in the Insolvency Opinion are true;

 

(xl) has not permitted and shall not permit any Affiliate or constituent party independent access to its bank accounts, other than the Manager;

 

(xli) is, has always been and shall continue to be duly formed, validly existing, and in good standing in the state of its incorporation or formation and in all other jurisdictions where it is qualified to do business;

 

(xlii) has paid all taxes which it owes and is not currently involved in any dispute with any taxing authority;

 

(xliii) is not now, nor has ever been, party to any lawsuit, arbitration, summons, or legal proceeding that resulted in a judgment against it that has not been paid in full;

 

(xliv) has no judgments or Liens of any nature against it except for tax liens not yet due and the Permitted Encumbrances;

 

(xlv) has provided Lender with complete financial statements that reflect a fair and accurate view of the entity’s financial condition; and

 

(xlvi) has no material contingent or actual obligations not related to the applicable Individual Property.

 

“State” shall mean, the State or Commonwealth in which the applicable Individual Property or any part thereof is located.

 

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“Survey” shall mean a survey of an Individual Property prepared by a surveyor licensed in the State and satisfactory to Lender and the company or companies issuing the Title Insurance Policy, and containing a certification of such surveyor satisfactory to Lender.

 

“Tax and Insurance Escrow Fund” shall have the meaning set forth in Section 7.2 hereof.

 

“Taxes” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against any Individual Property or part thereof.

 

“Tenant” shall mean any person or entity with a possessory right to all or any part of an Individual Property pursuant to a Lease or other written agreement.

 

“Tenant Direction Letter” shall have the meaning set forth in the Cash Management Agreement.

 

“Tenant Insurance Conditions” shall have the meaning set forth in Section 6.1(g) hereof.

 

“Threshold Amount” shall have the meaning set forth in Section 5.1.21 hereof.

 

“Title Insurance Policy” shall mean, with respect to an Individual Property, an ALTA mortgagee title insurance policy in the form acceptable to Lender (or, if an Individual Property is in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with respect to the Individual Property and insuring the lien of the Mortgage encumbering the Individual Property.

 

“Transfer” shall have the meaning set forth in Section 5.2.10(b) hereof.

 

“Transferee” shall have the meaning set forth in Section 5.2.10(e)(iii) hereof.

 

“Transferee’s Principals” shall mean collectively, (A) Transferee’s managing members, general partners or principal shareholders and (B) such other members, partners or shareholders which directly or indirectly shall own a fifty-one percent (51%) or greater economic and voting interest in Transferee.

 

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the State in which the applicable Individual Property is located.

 

“U.S. Obligations” shall mean non-redeemable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are (a) direct obligations of the United States of America for the payment of which its full faith and credit is pledged, or (b) to the extent acceptable to the Rating Agencies, other “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended.

 

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“Yield Maintenance Default Premium” shall mean an amount equal to the greater of (a) three percent (3%) of the outstanding principal balance of the Loan to be prepaid or satisfied and (b) the excess, if any, of (i) the sum of the present values of all then-scheduled payments of principal and interest under the Note assuming that all scheduled payments are made timely and that the remaining outstanding principal and interest on the Loan is paid on the Permitted Par Prepayment Date (with each such payment and assumed payment discounted to its present value at the date of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when compounded semi-annually and deducting from the sum of such present values any short-term interest paid from the date of prepayment to the next succeeding Payment Date in the event such payment is not made on a Payment Date), over (ii) the principal amount being prepaid.

 

“Yield Maintenance Premium” shall mean an amount equal to the greater of (a) one percent (1%) of the outstanding principal of the Loan to be prepaid or satisfied and (b) the excess, if any, of (i) the sum of the present values of all then-scheduled payments of principal and interest under the Note assuming that all scheduled payments are made timely and that the remaining outstanding principal and interest on the Loan is paid on the Permitted Par Prepayment Date (with each such payment and assumed payment discounted to its present value at the date of prepayment at the rate which, when compounded monthly, is equivalent to the Prepayment Rate when compounded semi-annually and deducting from the sum of such present values any short-term interest paid from the date of prepayment to the next succeeding Payment Date in the event such payment is not made on a Payment Date), over (ii) the principal amount being prepaid.

 

Section 1.2 Principles of Construction.

 

  All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified.  All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise.  Unless otherwise specified, 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.  Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

 

ARTICLE 2 - GENERAL TERMS

 

Section 2.1 Loan Commitment; Disbursement to Borrower.

 

2.1.1 Agreement to Lend and Borrow.

 

  Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date.

 

2.1.2 Single Disbursement to Borrower.

 

  Borrower may request and receive only one (1) borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed.  Borrower acknowledges and agrees that the Loan has been fully funded as of the Closing Date.

 

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2.1.3 The Note, Mortgage and Loan Documents.

 

  The Loan shall be evidenced by the Note and secured by the Mortgage and the other Loan Documents.

 

2.1.4 Use of Proceeds.

 

  Borrower shall use the proceeds of the Loan to (a) acquire the Properties or repay and discharge any existing loans relating to the Properties, (b) pay all past due Basic Carrying Costs, if any, with respect to the Properties, (c) make deposits into the Reserve Funds on the Closing Date in the amounts provided herein, (d) pay costs and expenses incurred in connection with the closing of the Loan and the acquisition of the Properties, as approved by Lender, (e) fund any working capital requirements of the Properties and (f) distribute the balance, if any, to Borrower.

 

Section 2.2 Interest Rate.

 

2.2.1 Interest Rate.

 

  Interest on the outstanding principal balance of the Loan shall accrue at the Interest Rate or as otherwise set forth in this Agreement from (and including) the Closing Date to but excluding the Maturity Date.

 

2.2.2 Interest Calculation.

 

  Interest on the outstanding principal balance of the Loan shall be calculated by multiplying (a) the actual number of days elapsed in the relevant Accrual Period by (b) a daily rate based on the Interest Rate and a three hundred sixty (360) day year by (c) the outstanding principal balance of the Loan.

 

2.2.3 Default Rate.

 

  In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal balance of the Loan and, to the extent permitted by law, all accrued and unpaid interest in respect of the Loan and any other amounts due pursuant to the Loan Documents, shall accrue interest at the Default Rate, calculated from the date such payment was due without regard to any grace or cure periods contained herein.

 

2.2.4 Usury Savings.

 

  This Agreement, the Note and the other Loan Documents are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate.  If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal (without any Yield Maintenance Premium or other prepayment consideration) and not on account of the interest due hereunder.  All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

 

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With respect to the foregoing provisions, the following shall apply with respect to the State of Texas:

 

(a)           It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply strictly with the applicable Texas law governing the maximum rate or amount of interest payable on the Note, this Agreement or the Debt (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law).  If the applicable law is ever judicially interpreted so as to render usurious any amount (i) contracted for, charged, taken, reserved or received pursuant to the Note, this Agreement or any of the other Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, (ii) contracted for, charged or received by reason of Lender’s exercise of the option to accelerate the maturity of the Note, this Agreement and/or the Debt, or (iii) Borrower will have paid or Lender will have received by reason of any voluntary prepayment by Borrower of the Note and/or the Debt, then it is Borrower’s and Lender’s express intent that all amounts charged in excess of the Maximum Lawful Rate (hereinafter defined) shall be automatically cancelled, ab initio, and all amounts in excess of the Maximum Lawful Rate theretofore collected by Lender shall be credited on the principal balance of the Note and/or the Debt (or, if the Note and all Debt have been or would thereby be paid in full, refunded to Borrower), and the provisions of the Note, this Agreement and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if the Note has been paid in full before the end of the stated term of the Note, then Borrower and Lender agree that Lender shall, with reasonable promptness after Lender discovers or is advised by Borrower that interest was received in an amount in excess of the Maximum Lawful Rate, either refund such excess interest to Borrower and/or credit such excess interest against the Note and/or any Debt then owing by Borrower to Lender. Borrower hereby agrees that as a condition precedent to any claim seeking usury penalties against Lender, Borrower will provide written notice to Lender, advising Lender in reasonable detail of the nature and amount of the violation, and Lender shall have sixty (60) days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Borrower or crediting such excess interest against the Note and/or the Debt then owing by Borrower to Lender.  All sums contracted for, charged or received by Lender for the use, forbearance or detention of any debt evidenced by the Note, this Agreement and/or the Debt shall, to the extent permitted by applicable law, be amortized or spread, using the actuarial method, throughout the stated term of the Note, this Agreement and/or the Debt (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of the Note, this Agreement and/or the Debt does not exceed the Maximum Lawful Rate from time to time in effect and applicable to the Note and/or the Debt for so long as debt is outstanding. In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving triparty accounts) apply to the Note, this Agreement and/or the Debt. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

 

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(b)           As used herein, the term “Maximum Lawful Rate” shall mean the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved by Lender in accordance with the applicable laws of the State of Texas (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all Charges (as herein defined) made in connection with the transaction evidenced by the Note, this Agreement and the other Loan Documents. As used herein, the term “Charges” shall mean all fees, charges and/or any other things of value, if any, contracted for, charged, received, taken or reserved by Lender in connection with the transactions relating to the Note, this Agreement and the other Loan Documents, which are treated as interest under applicable law. As used in this Section 2.2.4, the term “Debt” shall mean any and all debt paid or payable by Borrower to Lender pursuant to the Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of this Agreement and the Loan Documents, except such debt which has been paid or is payable by Borrower to Lender under the Note.

 

(c)           To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to determine the Maximum Lawful Rate payable on the Note and/or the Debt, Lender will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303, as amended. To the extent United States federal law permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law, Lender will rely on United States federal law instead of such Chapter 303 for the purpose of determining the Maximum Lawful Rate. Additionally, to the extent permitted by applicable law now or hereafter in effect, Lender may, at its option and from time to time, utilize any other method of establishing the Maximum Lawful Rate under such Chapter 303 or under other applicable law by giving notice, if required, to Borrower as provided by applicable law now or hereafter in effect.

 

Section 2.3 Loan Payment.

 

2.3.1 Monthly Debt Service Payments.

 

  Borrower shall pay to Lender (a) on the Closing Date, an amount equal to interest only on the outstanding principal balance of the Loan for the initial Accrual Period, (b) on July 1, 2010 and on each Payment Date thereafter up to and including the Payment Date on June 1, 2015, an amount equal to interest only on the outstanding principal balance of the Loan for the related Accrual Period, and (c) on July 1, 2015 and on each Payment Date thereafter up to and including the Maturity Date, the Monthly Debt Service Payment Amount, which payments shall be applied first to accrued and unpaid interest and the balance to principal.

 

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2.3.2 Payments Generally.

 

  For purposes of making payments hereunder, but not for purposes of calculating Accrual Periods, if the day on which such payment is due is not a Business Day, then amounts due on such date shall be due on the immediately preceding Business Day and with respect to payments of principal due on the Maturity Date, interest shall be payable at the Interest Rate or the Default Rate, as the case may be, through and including the day immediately preceding such Maturity Date.  All amounts due under this Agreement and the other Loan Documents shall be payable without setoff, counterclaim, defense or any other deduction whatsoever.

 

2.3.3 Payment on Maturity Date.

 

  Borrower shall pay to Lender on the Maturity Date the outstanding principal balance of the Loan, all accrued and unpaid interest and all other amounts due hereunder and under the Note, the Mortgage and the other Loan Documents.

 

2.3.4 Late Payment Charge.

 

  If any principal, interest or any other sums due under the Loan Documents (including the amounts due on the Maturity Date) are not paid by Borrower on or prior to the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum and the Maximum Legal Rate in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment.  Any such amount shall be secured by the Mortgage and the other Loan Documents to the extent permitted by applicable law.

 

2.3.5 Method and Place of Payment.

 

  Except as otherwise specifically provided herein and subject to the provisions of Section 2.7.3, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 2:00 P.M., New York City time, on the date when due and shall be made in lawful money of the United States of America in immediately available funds at Lender’s office or as otherwise directed by Lender, and 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.

 

Section 2.4 Prepayments.

 

2.4.1 Voluntary Prepayments. 

 

(a) Except as otherwise expressly provided in this Section 2.4, Borrower shall not have the right to prepay the Loan in whole or in part prior to the Maturity Date.

 

(b) On any Business Day after the Permitted Prepayment Date through the Maturity Date, Borrower may, at its option, prepay the Debt in full (but not in part), provided that (i) Borrower submits a notice to Lender setting forth the projected date of prepayment, which date shall be no less than thirty (30) days from the date of such notice, and (ii) Borrower pays to Lender (A) the unpaid principal amount of the Note, (B) all interest accrued and unpaid on the principal balance of the Note to and including the date of prepayment, (C) all other sums due under the Note, this Agreement and the other Loan Documents, (D) if such prepayment occurs

 

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prior to the Permitted Par Prepayment Date, the Yield Maintenance Premium, and (E) if such prepayment is not paid on a regularly scheduled Payment Date (or, if such day is not a Business Day, the immediately preceding Business Day), interest for the full Accrual Period during which the prepayment occurs.

 

(c) Notwithstanding anything contained in Section 2.4.1(a) above to the contrary, Borrower may prepay a portion of the Loan in accordance with Section 2.6.2 hereof.

 

2.4.2 Mandatory Prepayments.

 

  On the next occurring Payment Date following the date on which Lender actually receives any Net Proceeds, if Lender is not obligated to make such Net Proceeds available to Borrower for the Restoration of the applicable Individual Property or otherwise remit such Net Proceeds to Borrower pursuant to Section 6.4 hereof, Borrower authorizes Lender, at Lender’s option, to apply Net Proceeds as a prepayment of all or a portion of the outstanding principal balance of the Loan together with accrued interest and any other sums due hereunder in an amount equal to one hundred percent (100%) of such Net Proceeds; provided, however, if an Event of Default has occurred and is continuing, Lender may apply such Net Proceeds to the Debt (until paid in full) in any order or priority in its sole discretion.  No Yield Maintenance Premium or other prepayment consideration or premium shall be due in connection with any prepayment made pursuant to this Section 2.4.2.  Any Net Proceeds applied as a prepayment of a portion of the outstanding principal balance of the Loan shall reduce the Release Amount  for the applicable Individual Property by an equivalent amount.

 

2.4.3 Prepayments After Default.

 

  If during the continuance of an Event of Default, payment of all or any part of the Debt is tendered by Borrower or otherwise recovered by Lender, such tender or recovery shall be (a) deemed made on the next occurring Payment Date together with the Monthly Debt Service Payment and (b) deemed a voluntary prepayment by Borrower in violation of the prohibition against prepayment set forth in Section 2.4.1 hereof, and Borrower shall pay, in addition to the Debt, an amount equal to the Yield Maintenance Default Premium which can be applied by Lender in such order and priority as Lender shall determine in is sole and absolute discretion.

 

Section 2.5 Intentionally omitted.

 

Section 2.6 Release of Property.

 

  Except as set forth in this Section 2.6, no repayment or prepayment of all or any portion of the Loan shall cause, give rise to a right to require, or otherwise result in, the release of the Lien of the Mortgage on any Individual Property.

 

2.6.1 Release of Property. 

 

(a) If Borrower has elected to prepay the entire Loan and the requirements of Section 2.4.1 and this Section 2.6.1 have been satisfied, all of the Properties shall be released from the Liens of their respective Mortgages.

 

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(b) In connection with the release of the Mortgages, Borrower shall submit to Lender, not less than fifteen (15) days prior to the date of prepayment, a release of Lien (and related Loan Documents) for each Individual Property for execution by Lender.  Each such release shall be in a form appropriate in the jurisdiction in which the applicable Individual Property is located and that would be satisfactory to a prudent lender and contains standard provisions, if any, protecting the rights of the releasing lender.  In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release.  Borrower shall reimburse Lender and Servicer for any costs and expenses Lender and Servicer incur arising from such release (including reasonable attorneys’ fees and expenses) and Borrower shall pay, in connection with such release, (i) all recording charges, filing fees, taxes or other expenses payable in connection therewith, and (ii)  to any Servicer, the current fee being assessed by such Servicer to effect such release, which fee shall not exceed $500 per Individual Property being released (exclusive of costs incurred).

 

 

2.6.2 Release of Individual Property

 

.  On any Business Day after the Permitted Prepayment Date through the Maturity Date, an Individual Borrower may, at its option, prepay a portion of the Loan, provided the requirements of Section 2.4.1 and this Section 2.6.2 have been satisfied, and such Individual Borrower may obtain the release of its Individual Property from the Lien of the related Mortgage thereon (and related Loan Documents) and the release of the related Individual Borrower’s obligations under the Loan Documents (other than those expressly stated to survive).  In connection with such partial prepayment and release, the following conditions must be satisfied:

 

(a) The amount of the outstanding principal balance of the Loan to be prepaid shall equal or exceed the Adjusted Release Amount for the applicable Individual Property, and such prepayment shall be deemed a voluntary prepayment for all purposes hereunder and shall include the applicable Yield Maintenance Premium (if such prepayment is made prior to the Permitted Par Prepayment Date) and any other sums then due to Lender;

 

(b) No Event of Default has occurred and is continuing (and no event which, with notice, the passage or time, or both would constitute an Event of Default shall have occurred);

 

(c) Subsequent to such release, each remaining Individual Borrower shall continue to be a Special Purpose Entity pursuant to, and in accordance with, Section 4.1.30 hereof;

 

(d) If required by the Rating Agencies (as determined by Lender), Borrower shall deliver to Lender and the Rating Agencies an Additional Insolvency Opinion or an update of the Insolvency Opinion indicating that the release does not affect the opinions set forth therein;

 

(e) Borrower shall deliver (or cause to be delivered) to Lender and each Rating Agency, an opinion of counsel that such release would not cause a “significant modification” of the Loan, as such term is defined in Treasury Regulations Section 1.860G-2(b);

 

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(f) After giving effect to the release of the applicable Individual Property, the Debt Service Coverage Ratio for the Properties then remaining subject to the Liens of the Mortgages based on the trailing (twelve) (12) month period immediately preceding the release of the applicable Individual Property shall be equal to or greater than the greater of (i) the Release Debt Service Coverage Ratio, and (ii) the Debt Service Coverage Ratio for all of the Properties then subject to the Liens of the Mortgages (including the Individual Property requested to be released) immediately preceding the release of the applicable Individual Property based on the trailing twelve (12) month period.  In calculating a Debt Service Coverage Ratio based on a trailing twelve (12) month period that includes Accrual Periods in both the Interest Only Period and the Amortizing Period, Lender shall assume for purposes of such calculation that the entire trailing twelve (12) month period occurred in the Amortizing Period, and in such event, the Release Debt Service Coverage Ratio for purposes of clause (i) above shall assume the Amortizing Period is in effect;

 

(g) In connection with the release of a Mortgage, Borrower shall submit to Lender, not less than fifteen (15) days prior to the date of prepayment, a release of Lien (and related Loan Documents) for the applicable Individual Property for execution by Lender.  Such release shall be in a form appropriate in the jurisdiction in which the applicable Individual Property is located and that would be satisfactory to a prudent lender and contains standard provisions, if any, protecting the rights of the releasing lender.  In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release.  Borrower shall reimburse Lender and Servicer for any costs and expenses Lender and Servicer incur arising from such release (including reasonable attorneys’ fees and expenses) and Borrower shall have paid, in connection with such release, (i) all recording charges, filing fees, taxes or other expenses payable in connection therewith, (ii)  all costs and expenses (if any) of the Rating Agencies incurred with respect to such release, and (iii) to any Servicer, the current fee being assessed by such Servicer to effect such release, provided, however, such fee shall not exceed $15,000 per release (exclusive of costs incurred); and

 

(h) Borrower shall comply with Lender’s or Servicer’s reasonable requirements in connection with such release (subject to the fee cap in clause (g) above).

 

Upon the release of any Individual Property and Individual Borrower pursuant to this Section 2.6.2, all references herein or in any of the other Loan Documents to the term “Properties” shall be deemed to exclude such Individual Property and all references in the Note, this Agreement or any other Loan Document to the term “Borrower” or “Borrowers” shall be deemed to exclude such Individual Borrower.

 

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Section 2.7 Lockbox Account/Cash Management.

 

2.7.1 Lockbox Account. 

 

(a) During the term of the Loan, Borrower shall establish and maintain an account (the “Lockbox Account”) with Lockbox Bank in trust for the benefit of Lender, which Lockbox Account shall be under the sole dominion and control of Lender.  The Lockbox Account shall be entitled “Cole TS Kenedy TX, LLC as Borrower and JPMorgan Chase Bank, N.A., as Lender, pursuant to Loan Agreement dated as of May 19, 2010 – Lockbox Account”.  Borrower hereby grants to Lender a first-priority security interest in the Lockbox Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Lockbox Account, including, without limitation, filing UCC-1 Financing Statements and continuations thereof.  Lender and Servicer shall have the sole right to make withdrawals from the Lockbox Account and all costs and expenses for establishing and maintaining the Lockbox Account shall be paid by Borrower.  All monies now or hereafter deposited into the Lockbox Account shall be deemed additional security for the Debt.  The Lockbox Agreement and Lockbox Account shall remain in effect until the Loan has been repaid in full.

 

(b) Borrower shall, or shall cause Manager to, on or prior to the Closing Date, deliver Tenant Direction Letters to all Tenants under Leases to deliver all Rents payable thereunder directly to the Lockbox Account.  Borrower shall, and shall cause Manager to, deposit all amounts received by Borrower or Manager constituting Rents into the Lockbox Account within one (1) Business Day after receipt thereof.

 

(c) Pursuant to the Lockbox Agreement, the Lockbox Bank will agree to transfer to the Cash Management Account in immediately available funds by federal wire transfer all amounts on deposit in the Lockbox Account (except for any required minimum balances and/or fees of the Lockbox Bank, as specified in the Lockbox Agreement) once every Business Day throughout the term of the Loan.

 

(d) Upon the occurrence and during the continuance of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in the Lockbox Account to the payment of the Debt in any order in its sole discretion.

 

(e) The Lockbox Account shall not be commingled with other monies held by Borrower, Manager or Lockbox Bank.

 

(f) Borrower shall not further pledge, assign or grant any security interest in the Lockbox Account or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto.

 

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(g) Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs and reasonable attorneys’ fees and expenses) arising from or in any way connected with the Lockbox Account and/or the Lockbox Agreement (unless arising from the gross negligence or willful misconduct of Lender) or the performance of the obligations for which the Lockbox Account was established.

 

2.7.2 Cash Management Account.

 

 

 

 

(a) During the term of the Loan, Borrower shall establish and maintain a segregated Eligible Account (the “Cash Management Account”) to be held by Agent in trust and for the benefit of Lender, which Cash Management Account shall be under the sole dominion and control of Lender.  The Cash Management Account shall be entitled “Cole TS Kenedy TX, LLC as Borrower and JPMorgan Chase Bank, N.A., as Lender, pursuant to Loan Agreement dated as of May 19, 2010 - Cash Management Account.”  Borrower hereby grants to Lender a first priority security interest in the Cash Management Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Cash Management Account, including, without limitation, filing UCC-1 Financing Statements and continuations thereof.  Borrower will not in any way alter or modify the Cash Management Account and will notify Lender of the account number thereof.  Lender and Servicer shall have the sole right to make withdrawals from the Cash Management Account and all costs and expenses for establishing and maintaining the Cash Management Account shall be paid by Borrower pursuant to the Fee Agreement (as defined in the Cash Management Agreement).

 

(b) The insufficiency of funds on deposit in the Cash Management Account shall not relieve Borrower from the obligation to make any payments, as and when due pursuant to this Agreement and the other Loan Documents, and such obligations shall be separate and independent, and not conditioned on any event or circumstance whatsoever.

 

(c) All funds on deposit in the Cash Management Account following the occurrence and during the continuance of an Event of Default may be applied by Lender in such order and priority as Lender shall determine.

 

(d) Borrower hereby agrees that Lender may modify the Cash Management Agreement for the purpose of establishing additional sub-accounts in connection with any payments otherwise required under this Agreement and the other Loan Documents and Lender shall provide notice thereof to Borrower.

 

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2.7.3 Payments Received under the Cash Management Agreement.

 

  Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, and provided no Event of Default has occurred and is continuing, Borrower’s obligations with respect to the payment of the Monthly Debt Service Payment Amount and amounts required to be deposited into the Reserve Funds, if any, shall be deemed satisfied to the extent sufficient amounts are deposited in the Cash Management Account to satisfy such obligations pursuant to this Agreement on the dates each such payment is required, regardless of whether any of such amounts are so applied by Lender.

 

ARTICLE 3 - CONDITIONS PRECEDENT

 

Section 3.1 Conditions Precedent to Closing.

 

  The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrower or waiver by Lender of all of the conditions precedent to closing set forth in the application or term sheet for the Loan between Borrower and Lender and the commitment or commitment rider, if any, to the application or term sheet for the Loan issued by Lender.

 

ARTICLE 4 - REPRESENTATIONS AND WARRANTIES

 

Section 4.1 Borrower Representations.

 

  Borrower represents and warrants as of the date hereof that:

 

4.1.1 Organization.

 

  Borrower has been duly organized and is validly existing and in good standing with requisite power and authority to own the Properties and to transact the businesses in which it is now engaged.  Borrower is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its businesses and operations.  Borrower possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own the Properties and to transact the businesses in which it is now engaged, and the sole business of Borrower is the ownership, management and operation of the Properties.  The ownership interests in Borrower are as set forth on the organizational chart attached hereto as Schedule IV.

 

4.1.2 Proceedings.

 

  Borrower has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents.  This Agreement and such other Loan Documents have been duly executed and delivered by or on behalf of Borrower and constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms, subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

 

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4.1.3 No Conflicts.

 

  The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement or other agreement or instrument to which Borrower is a party or by which any of the Properties or Borrower’s assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower or any of Borrower’s properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any court or any such Governmental Authority required for the execution, delivery and performance by Borrower of this Agreement or any other Loan Documents has been obtained and is in full force and effect.

 

4.1.4 Litigation.

 

  There are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or, to Borrower’s actual knowledge, threatened against or affecting any Individual Borrower, Guarantor, Principal or, to the extent an Individual Borrower, Guarantor or Principal is a party, any Individual Property, which actions, suits or proceedings, if determined against such Individual Borrower, Guarantor, Principal or any Individual Property, might materially adversely affect the condition (financial or otherwise) or business of such Individual Borrower, Guarantor, Principal or the condition or ownership of any Individual Property.  In addition, no Individual Borrower has any knowledge of any actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or threatened against or affecting any Individual Property to which an Individual Borrower, Guarantor or Principal is not a party, which actions, suits or proceedings, if determined against such Individual Property might materially adversely affect the condition or ownership of such Individual Property.

 

4.1.5 Agreements.

 

  Borrower is not a party to any agreement or instrument or subject to any restriction which might materially and adversely affect Borrower or any Individual Property, or Borrower’s business, properties or assets, operations or condition, financial or otherwise.  Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or any Individual Property is bound.  Borrower has no material financial obligation under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower is a party or by which Borrower or any Individual Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of any Individual Property as permitted pursuant to clause (xxiii) of the definition of “Special Purpose Entity” set forth in Section 1.1 hereof and (b) obligations under the Loan Documents.

 

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4.1.6 Title.

 

  Each Individual Borrower has good and marketable fee simple title to the real property comprising part of its Individual Property and good title to the balance of the Individual Property, free and clear of all Liens whatsoever except the Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents.  To Borrower’s actual knowledge, the Permitted Encumbrances in the aggregate do not materially and adversely affect the value, operation or use of the Properties (as currently used) or Borrower’s ability to repay the Loan.  To Borrower’s actual knowledge, each Mortgage, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first priority lien on the corresponding Individual Property, subject only to Permitted Encumbrances and the Liens created by the Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty owned by Borrower (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents.  To Borrower’s actual knowledge and except as set forth in the Title Insurance Policy, there are no claims for payment for work, labor or materials affecting the Properties which are or may become a Lien prior to, or of equal priority with, the Liens created by the Loan Documents.

 

4.1.7 Solvency.

 

  Borrower has (a) not entered into this transaction or executed the Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under such Loan Documents.  Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds and will, immediately following the making of the Loan, exceed Borrower’s total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities.  The fair saleable value of Borrower’s assets is and will, immediately following the making of the Loan, be greater than Borrower’s probable liabilities, including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured.  Borrower’s assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted.  Borrower does not intend to, and does not believe that it will, incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower).  No petition in bankruptcy has been filed against Borrower or any constituent Person in the last seven (7) years, and neither Borrower nor any constituent Person in the last seven (7) years has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors.  Neither Borrower nor any of its constituent Persons are contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of Borrower’s assets or property, and Borrower has no actual knowledge of any Person contemplating the filing of any such petition against it or such constituent Persons.

 

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4.1.8 Full and Accurate Disclosure.

 

  No statement of fact made by Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading.  There is no material fact presently known to Borrower which has not been disclosed to Lender which adversely affects, nor as far as Borrower can foresee, might adversely affect, any Individual Property or the business, operations or condition (financial or otherwise) of Borrower.

 

4.1.9 No Plan Assets.

 

  Borrower does not sponsor, is not obligated to contribute to, and is not itself an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA or Section 4975 of the Code, and none of the assets of Borrower constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101.  In addition, (a) Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower are not subject to any state or other statute , regulation or other restriction regulating investments of, or fiduciary obligations with respect to, governmental plans within the meaning of Section 3(32) of ERISA which is similar to the provisions of Section 406 of ERISA or Section 4975 of the Code and which prohibit or otherwise restrict the transactions contemplated by this Agreement, including but not limited to the exercise by Lender of any of its rights under the Loan Documents.

 

4.1.10 Compliance.

 

  To Borrower’s actual knowledge, Borrower and the Properties and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, building and zoning ordinances and codes.  Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority.  There has not been committed by Borrower or, to Borrower’s actual knowledge, any other Person in occupancy of or involved with the operation or use of the Properties, any act or omission affording the federal government or any other Governmental Authority the right of forfeiture as against any Individual Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.

 

4.1.11 Financial Information.

 

  All financial data, including, without limitation, the statements of cash flow and income and operating expense, that have been delivered to Lender in connection with the Loan (i) are true, complete and correct in all material respects, (ii) accurately represent the financial condition of Borrower and such Individual Property, as applicable, as of the date of such reports, and (iii) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP (or another basis of accounting acceptable to Lender and consistently applied) , throughout the periods covered, except as disclosed therein.  Except for Permitted Encumbrances, Borrower does not have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and reasonably likely to have a materially adverse effect on any Individual Property or the current operation thereof, except as referred to or reflected in said financial statements.  Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower from that set forth in said financial statements.

 

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4.1.12 Condemnation.

 

  No Condemnation or other proceeding has been commenced or, to Borrower’s actual knowledge, is threatened or contemplated with respect to all or any portion of any Individual Property or for the relocation of roadways providing access to any Individual Property.

 

4.1.13 Federal Reserve Regulations.

 

  No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents.

 

4.1.14 Utilities and Public Access.

 

  The applicable Individual Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service such Individual Property for its intended uses.  All public utilities necessary or convenient to the full use and enjoyment of such Individual Property are located either in the public right of way abutting the Individual Property (which are connected so as to serve the Individual Property without passing over other property) or in recorded easements serving such Individual Property and such easements are set forth in the Title Insurance Policy.  All roads necessary for the use of the Individual Property for its current purposes have been completed and dedicated to public use and accepted by all Governmental Authorities.

 

4.1.15 Not a Foreign Person.

 

  Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code.

 

4.1.16 Separate Lots.

 

  To Borrower’s actual knowledge, each Individual Property is comprised of one (1) or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of such Individual Property.

 

4.1.17 Assessments.

 

  To Borrower’s actual knowledge and except as set forth in the Title Insurance Policy, there are no pending or proposed special or other assessments for public improvements or otherwise affecting any Individual Property nor are there any contemplated improvements to any Individual Property that may result in such special or other assessments.

 

4.1.18 Enforceability.

 

  To Borrower’s actual knowledge, the Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower or Guarantor, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable (subject to principles of equity and bankruptcy, insolvency and other laws generally affecting creditors’ rights and the enforcement of debtors’ obligations), and neither Borrower nor Guarantor has asserted any right of rescission, set-off, counterclaim or defense with respect thereto.

 

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4.1.19 No Prior Assignment.

 

  There are no prior collateral assignments of the Leases or any portion of the Rents due and payable or to become due and payable which are presently outstanding.

 

4.1.20 Insurance.

 

  Borrower has obtained and has delivered to Lender certified copies of the Policies, or insurance certificates in form reasonably acceptable to Lender, reflecting the insurance coverages, amounts and other requirements set forth in this Agreement.  To Borrower’s actual knowledge, no claims have been made or are currently pending, outstanding or otherwise remain unsatisfied under any of the Policies and neither Borrower nor any other Person, has done, by act or omission, anything which would impair the coverage of any such Policy.

 

4.1.21 Use of Property.

 

  Each Individual Property is used exclusively for retail or commercial purposes and other appurtenant and related uses.

 

4.1.22 Certificate of Occupancy; Licenses.

 

  To Borrower’s actual knowledge, all certifications, permits, licenses and approvals, including without limitation, certificates of completion and occupancy permits, required for the legal use, occupancy and operation of each Individual Property have been obtained and are in full force and effect.  The use being made of each Individual Property is in conformity with the certificate of occupancy issued for such Individual Property.

 

4.1.23 Flood Zone.

 

  Except as may be set forth in any flood certificate delivered to Lender in connection with the Loan, none of the Improvements on any Individual Property are located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards or, if so located, the flood insurance required pursuant to Section 6.1(a)(i) is in full force and effect with respect to such Individual Property.

 

4.1.24 Physical Condition.

 

  To Borrower’s actual knowledge and except as set forth in the Physical Conditions Report, each Individual Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects; To Borrower’s actual knowledge, there exists no structural or other material defects or damages in any Individual Property, whether latent or otherwise, and Borrower has not received notice from any insurance company or bonding company of any defects or inadequacies in any Individual Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.

 

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4.1.25 Boundaries.

 

  To Borrower’s actual knowledge and except as set forth on the Survey, all of the improvements which were included in determining the appraised value of each Individual Property lie wholly within the boundaries and building restriction lines of such Individual Property, and no improvements on adjoining properties encroach upon the Individual Property, and no easements or other encumbrances upon the Individual Property encroach upon any of the Improvements, so as to affect the value or marketability of the Individual Property except those which are insured against by the Title Insurance Policy.

 

4.1.26 Leases.

 

  The Properties are not subject to any leases other than the Leases described in the rent roll attached hereto as Schedule II and made a part hereof, which rent roll is true, complete and accurate in all respects as of the date hereof.  Borrower is the owner and lessor of landlord’s interest in the Leases.  No Person has any possessory interest in any Individual Property or right to occupy the same except under and pursuant to the provisions of the Leases.  The current Leases are in full force and effect and, to Borrower’s actual knowledge and except as may be disclosed in any tenant estoppel certificates delivered to Lender, there are no defaults thereunder by either party and there are no conditions that, with the passage of time or the giving of notice, or both, would constitute defaults thereunder.  No Rent (including security deposits) has been paid more than one (1) month in advance of its due date.  All security deposits are held by Borrower in accordance with applicable law. To Borrower’s actual knowledge and except as may be disclosed in any tenant estoppel certificates delivered to Lender, all work to be performed by Borrower under each Lease has been performed as required and has been accepted by the applicable Tenant , and any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by Borrower to any Tenant  has already been received by such Tenant.  There has been no prior sale, transfer or assignment (other than to Borrower), hypothecation or pledge of any Lease or of the Rents received therein (other than sales, transfers, assignments, hypothecations or pledges which may have been made by the Tenants under the Leases).  To Borrower’s actual knowledge and except as indicated on Schedule II, no Tenant  listed on Schedule II has assigned its Lease or sublet all or any portion of the premises demised thereby, no such Tenant holds its leased premises under assignment or sublease, nor does anyone except such Tenant and its employees occupy such leased premises.  Except as listed on Schedule VII hereof, no Tenant  under any Lease has a right or option pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the building of which the leased premises are a part.  No Tenant  under any Lease has any right or option for additional space in the Improvements.

 

4.1.27 Survey.

 

  To Borrower’s actual knowledge, the Survey for each Individual Property delivered to Lender in connection with this Agreement does not fail to reflect any material matter affecting such Individual Property or the title thereto.

 

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4.1.28 Inventory.

 

  Borrower is the owner of all of the Equipment, Fixtures and Personal Property (as such terms are defined in the Mortgage) located on or at each Individual Property, other than Equipment, Fixtures and Personal Property owned by the Tenants under the Leases and shall not lease any Equipment, Fixtures or Personal Property other than pursuant to the Leases.  All of the Equipment, Fixtures and Personal Property are sufficient to operate the Properties in the manner required hereunder and in the manner in which it is currently operated.

 

4.1.29 Filing and Recording Taxes.

 

  All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements applicable to the transfer of each Individual Property to Borrower have been paid.  All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Mortgage, have been paid, and, under current Legal Requirements, such Mortgage is enforceable in accordance with its terms by Lender (or any subsequent holder thereof), subject to principles of equity and bankruptcy, insolvency and other laws generally applicable to creditors’ rights and the enforcement of debtors’ obligations.

 

4.1.30 Special Purpose Entity/Separateness.

 

 

 

 

(a) Until the Debt has been paid in full, Borrower hereby represents, warrants and covenants that (i) each Borrower is, shall be and shall continue to be a Special Purpose Entity and (ii) Principal is, shall be and shall continue to be a Special Purpose Entity.

 

(b) The representations, warranties and covenants set forth in Section 4.1.30(a) shall survive for so long as any amount remains payable to Lender under this Agreement or any other Loan Document.

 

(c) Any and all of the stated facts and factual assumptions relating to the conduct of Borrower or Guarantor or any Affiliate of either such party made in any Insolvency Opinion, including, but not limited to, any exhibits attached thereto, will have been and shall be true and correct in all respects, and Borrower and Principal will have complied and will comply with all of such stated facts and assumptions made with respect to it in any Insolvency Opinion.  Each entity other than Borrower, Principal and Lender with respect to which a factual assumption is made relating to its conduct or a fact stated in any Insolvency Opinion will have complied and will comply with all of such assumptions made and facts stated with respect to it in any such Insolvency Opinion.  Borrower covenants that in connection with any Additional Insolvency Opinion delivered in connection with this Agreement it shall provide an updated certification regarding compliance with the facts and the factual assumptions relating to the conduct of Borrower or Guarantor or any Affiliate of either such party made therein.

 

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(d) Borrower covenants and agrees that Borrower shall provide Lender with not less than thirty (30) days’ prior written notice prior to the removal of an Independent Director of any of Borrower and/or Principal.

 

4.1.31 Management Agreement.

 

  The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder.  The Management Agreement was entered into on commercially reasonable terms.

 

4.1.32 Illegal Activity.

 

  No portion of any Individual Property has been or will be purchased by Borrower with proceeds of any illegal activity.

 

4.1.33 No Change in Facts or Circumstances; Disclosure.

 

  All information submitted by and on behalf of Borrower to Lender and in all financial statements, rent rolls (including the rent roll attached hereto as Schedule II), reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by Borrower in this Agreement or in any other Loan Document, are accurate, complete and correct in all material respects.  There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or might materially and adversely affect the use, operation or value of the Properties or the business operations or the financial condition of Borrower.  Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any Provided Information or representation or warranty made herein to be materially misleading.

 

4.1.34 Investment Company Act.

 

  Borrower is not (a) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; (b) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (c) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

 

4.1.35 Embargoed Person.

 

  As of the date hereof and at all times throughout the term of the Loan, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower and Cole Credit Property Trust III, Inc. constitute property of, or are beneficially owned, directly or indirectly, by any Embargoed Person; (b) no Embargoed Person has any interest of any nature whatsoever in Borrower or Cole Credit Property Trust III, Inc., as applicable, with the result that the investment in Borrower or Cole Credit Property Trust III, Inc., as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower or Cole Credit Property Trust III, Inc., as applicable, have been derived from any unlawful activity with the result that the investment in Borrower or Cole Credit Property Trust III, Inc., as applicable

 

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(whether directly or indirectly), is prohibited by law or the Loan is in violation of law.  Notwithstanding the foregoing, to the extent that an Embargoed Person acquires a non-controlling interest in Cole Credit Property Trust III, Inc., without the knowledge of Borrower or Cole Credit Property Trust III, Inc., through a transaction brokered by a FINRA licensed broker dealer not affiliated with Cole Credit Property Trust III, Inc., provided such broker dealer has executed a dealer agreement or selling agreement with Cole Credit Property Trust III, Inc. or an affiliate of Cole Credit Property Trust III, Inc. in which it covenants to, among other things,  comply with The USA PATRIOT Act (or any successor legislation), the resulting breach of the foregoing representations shall be deemed to be unintentional and not grossly negligent for purposes of Section 9.3 hereof.

 

4.1.36 Principal Place of Business; State of Organization.

 

  Borrower’s principal place of business as of the date hereof is the address set forth in the introductory paragraph of this Agreement.  Each Individual Borrower is organized under the laws of the State of Delaware.  Each Individual Borrower’s organizational identification number assigned by the state of incorporation or organization is correctly set forth in Schedule I to this Agreement.

 

4.1.37 Environmental Representations and Warranties.

 

  To Borrower’s knowledge and except as otherwise disclosed by that certain Phase I environmental reports (or Phase II environmental reports, if required) delivered to Lender by Borrower in connection with the origination of the Loan (such reports are collectively referred to below as the “Environmental Report”), (a) there are no Hazardous Substances or underground storage tanks in, on, or under the Properties, except those that are (i) in compliance with Environmental Laws and with permits issued pursuant thereto (to the extent such permits are required under Environmental Law), (ii) de-minimis amounts necessary to operate the Properties for the purposes set forth in the Loan Agreement which will not result in an environmental condition in, on or under the Properties and which are otherwise permitted under and used in compliance with Environmental Law and (iii) fully disclosed to Lender in writing pursuant the Environmental Report; (b) there are no past, present or threatened Releases of Hazardous Substances in, on, under or from the Properties which has not been fully remediated in accordance with Environmental Law; (c) there is no threat of any Release of Hazardous Substances migrating to the Properties in violation of any Environmental Law; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Properties which has not been fully remediated in accordance with Environmental Law; (e) Borrower does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a Governmental Authority) relating to Hazardous Substances or Remediation thereof, of possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Properties, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (f) Borrower has truthfully and fully disclosed provided to Lender, in writing, any and all information relating to environmental conditions in, on, under or from the Properties that is known to Borrower and has provided to Lender all information that is contained in Borrower’s files and records, including, but not limited to, any reports relating to Hazardous Substances in, on, under or from the Properties and/or to the environmental condition of the Properties.

 

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4.1.38 Cash Management Account.

 

  Borrower hereby represents and warrants to Lender that:

 

(a) This Agreement, together with the other Loan Documents, create a valid and continuing security interest (as defined in the Uniform Commercial Code of the State of New York) in the Lockbox Account and Cash Management Account in favor of Lender or Agent, which security interest is prior to all other Liens, other than Permitted Encumbrances, and is enforceable as such against creditors of and purchasers from Borrower.  Other than in connection with the Loan Documents and except for Permitted Encumbrances, Borrower has not sold, pledged, transferred or otherwise conveyed the Lockbox Account and Cash Management Account ;

 

(b) Each of the Lockbox Account and Cash Management Account constitutes “deposit accounts” and/or “securities accounts” within the meaning of the Uniform Commercial Code of the State of New York;

 

(c) Pursuant and subject to the terms hereof and the other applicable Loan Documents, the Lockbox Bank and Agent have agreed to comply with all instructions originated by Lender, without further consent by Borrower, directing disposition of the Lockbox Account and Cash Management Account and all sums at any time held, deposited or invested therein, together with any interest or other earnings thereon;

 

(d) The Lockbox Account and Cash Management Account are not in the name of any Person other than Borrower, as pledgor, or Lender, as pledgee. Borrower has not consented to the Lockbox Bank and Agent complying with instructions with respect to the Lockbox Account and Cash Management Account from any Person other than Lender; and

 

(e) The Properties are not subject to any cash management system (other than pursuant to the Loan Documents), and any and all existing tenant instruction letters issued in connection with any previous financing have been duly terminated prior to the date hereof.

 

Section 4.2 Survival of Representations.

 

  Borrower agrees that all of the representations and warranties of Borrower set forth in Section 4.1 hereof and elsewhere in this Agreement and in the other Loan Documents shall survive for so long as any amount remains owing to Lender under this Agreement or any of the other Loan Documents by Borrower.  All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.

 

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ARTICLE 5 - BORROWER COVENANTS

 

Section 5.1 Affirmative Covenants.

 

  From the date hereof until payment and performance in full of all obligations of Borrower under the Loan Documents or, solely with respect to any Individual Borrower that obtains the earlier release of the Lien of the Mortgage affecting such Individual Borrower’s Individual Property (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, then exclusive of any such Individual Borrower and such Individual Property so released, Borrower hereby covenants and agrees with Lender that:

 

5.1.1 Existence; Compliance with Legal Requirements.

 

  Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply with all Legal Requirements applicable to it and the Properties, including, without limitation, building, or causing to be built, a secondary access driveway at the Effingham Individual Property as required by the City of Effingham pursuant to its letter to Lender dated May 6, 2010.  There shall never be committed by Borrower, and Borrower shall never permit any other Person in occupancy of or involved with the operation or use of an Individual Property to commit any act or omission affording the federal government or any state or local government the right of forfeiture against any Individual Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.  Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording such right of forfeiture.  Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of the Properties used or useful in the conduct of its business and shall keep the Properties in good working order and repair, and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto, all as more fully provided in the applicable Mortgage.  Borrower shall cause the Properties to be insured at all times by financially sound and reputable insurers, to such extent and against such risks, and cause to be maintained liability and such other insurance, as is more fully provided in this Agreement.  After prior written notice to Lender, Borrower, at Borrower’s expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Borrower or an Individual Property or any alleged violation of any Legal Requirement, provided that (i) no Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) no Individual Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly upon final determination thereof comply with any such Legal Requirement determined to be valid or applicable or cure any violation of any Legal Requirement; (v) such proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or any Individual Property; and (vi) Borrower shall furnish such

 

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security as may be required in the proceeding, or as may be requested by Lender, to insure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith.  Lender may apply any such security, as necessary to cause compliance with such Legal Requirement at any time when, in the reasonable judgment of Lender, the validity, applicability or violation of such Legal Requirement is finally established or any Individual Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost.

 

5.1.2 Taxes and Other Charges.

 

  Borrower shall pay or cause to be paid all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Properties or any part thereof as the same become due and payable; provided, however, Borrower’s obligation to directly pay (or cause to be paid) Taxes shall be suspended for so long as Borrower complies with the terms and provisions of Section 7.2 hereof.  Borrower will deliver to Lender receipts for payment or other evidence satisfactory to Lender that the Taxes and Other Charges have been so paid or are not then delinquent no later than ten (10) days prior to the date on which the Taxes and/or Other Charges would otherwise be delinquent if not paid, provided, however, (i) Borrower is not required to furnish such receipts for payment of Taxes and Other Charges in the event Taxes and Other Charges have been paid by Lender pursuant to Section 7.2 hereof, and (ii) if the Tenant under a Lease pays such Taxes or Other Charges directly to the applicable authority and Borrower timely requests and diligently pursues evidence of payment, and further provided that no enforcement action has been commenced by the applicable authority resulting from such Tenant’s failure to pay Taxes or Other Charges, Borrower shall have an additional thirty (30) day period to provide such evidence to Lender.  Borrower shall not suffer and shall promptly cause to be paid and discharged any Lien or charge whatsoever which may be or become a Lien or charge against the Properties (other than Permitted Encumbrances), and shall promptly pay for or cause to be paid all utility services provided to the Properties.  After prior written notice to Lender, Borrower, at Borrower’s expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (i) no Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) no Individual Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (v) such proceeding shall suspend the collection of such contested Taxes or Other Charges from any Individual Property; and (vi) Borrower shall furnish such security as may be required in the proceeding, or as may be requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon.  Notwithstanding the foregoing, a Tenant, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (i) such contest is permitted under such Tenant’s Lease, (ii) such proceeding shall be conducted in

 

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accordance with all applicable statutes, laws and ordinances; (iii) either no Individual Property nor any part thereof or interest therein will be in danger of being sold, forfeited or lost, or Borrower or Tenant shall furnish such security as may be required in the proceeding, or as may be requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon; and (iv) Tenant shall be required to promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith.  Lender may pay over any such cash deposit or part thereof held by Lender to the claimant entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is established or any Individual Property (or part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost or there shall be any danger of the Lien of the Mortgage being primed by any related Lien (other than Permitted Encumbrances).

 

5.1.3 Litigation.

 

  Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened against Borrower and/or Guarantor which might materially adversely affect Borrower’s or Guarantor’s condition (financial or otherwise) or business or any Individual Property.

 

5.1.4 Access to Property.

 

  Subject to the rights of Tenants under the Leases, Borrower shall permit agents, representatives and employees of Lender to inspect the Properties or any part thereof at reasonable hours upon reasonable advance notice.

 

5.1.5 Notice of Default.

 

  Borrower shall promptly advise Lender of any material adverse change in Borrower’s or Guarantor’s condition, financial or otherwise, or of the occurrence of any Default or Event of Default of which Borrower has knowledge.

 

5.1.6 Cooperate in Legal Proceedings.

 

  Borrower shall cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings.

 

5.1.7 Perform Loan Documents.

 

  Borrower shall observe, perform and satisfy all the terms, provisions, covenants and conditions of, and shall pay when due all costs, fees and expenses to the extent required under the Loan Documents executed and delivered by, or applicable to, Borrower.

 

5.1.8 Award and Insurance Benefits.

 

  Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with any Individual Property, and Lender shall be reimbursed for any reasonable expenses incurred in connection therewith (including reasonable attorneys’ fees and disbursements, and the payment by Borrower of the actual expense of an appraisal on behalf of Lender in case of Casualty or Condemnation affecting any Individual Property or any part thereof) out of such Insurance Proceeds.

 

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5.1.9 Further Assurances.

 

  Borrower shall, at Borrower’s sole cost and expense:

 

(a) furnish to Lender all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Borrower pursuant to the terms of the Loan Documents or which are reasonably requested by Lender in connection therewith;

 

(b) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts necessary or desirable, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the obligations of Borrower under the Loan Documents, as Lender may reasonably require; and

 

(c) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time.

 

5.1.10 Principal Place of Business, State of Organization.

 

  Borrower will not cause or permit any change to be made in its name, identity (including its trade name or names), place of organization or formation (as set forth in Section 4.1.36 hereof) or, except for Transfers permitted under the Loan Documents, Borrower’s corporate or partnership structure unless Borrower shall have first notified Lender in writing of such change at least thirty (30) days prior to the effective date of such change, and shall have first taken all action required by Lender for the purpose of perfecting or protecting the lien and security interests of Lender pursuant to this Agreement, and the other Loan Documents and, in the case of a change in Borrower’s structure, which is not permitted under the Loan Documents, without first obtaining the prior written consent of Lender, which consent may given or denied in Lender’s sole discretion.  Upon Lender’s request, Borrower shall, at Borrower’s sole cost and expense, execute and deliver additional financing statements, security agreements and other instruments which may be necessary to effectively evidence or perfect Lender’s security interest in the Properties as a result of such change of principal place of business or place of organization.  Borrower’s principal place of business and chief executive office, and the place where Borrower keeps its books and records, including recorded data of any kind or nature, regardless of the medium or recording, including software, writings, plans, specifications and schematics, has been for the preceding four months (or, if less, the entire period of the existence of Borrower) and will continue to be the address of Borrower set forth at the introductory paragraph of this Agreement (unless Borrower notifies Lender in writing at least thirty (30) days prior to the date of such change).  Borrower shall promptly notify Lender of any change in its organizational identification number.  If Borrower does not now have an organizational identification number and later obtains one, Borrower promptly shall notify Lender of such organizational identification number.

 

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5.1.11 Financial Reporting. 

 

(a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with the requirements for a Special Purpose Entity set forth herein and GAAP (or another basis of accounting acceptable to Lender and consistently applied), proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower and all items of income and expense in connection with the operation of the Properties.  Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, records and accounts at the office of Borrower or any other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire.  After the occurrence of an Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine Borrower’s accounting records with respect to the Property, as Lender shall determine to be necessary or appropriate in the protection of Lender’s interest.

 

(b) Borrower will furnish to Lender annually, within ninety (90) days following the end of each Fiscal Year of Borrower, a complete copy of Borrower’s combined annual financial statements audited by an independent certified public accountant acceptable to Lender in accordance with GAAP (or another basis of accounting acceptable to Lender and consistently applied), together with related combined statements of operations, income, members’ capital and cash flows.  Such statements shall set forth the financial condition and the results of operations for the Properties for such Fiscal Year, and shall include, but not be limited to, amounts representing annual net operating income, net cash flow, gross income, and operating expenses.

 

(c) Borrower will furnish, or cause to be furnished, to Lender on or before forty-five (45) days after the end of each calendar quarter the following items, accompanied by an Officer’s Certificate stating that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and the Properties:  (i) a rent roll for the subject quarter; and (ii) quarterly and year-to-date operating statements (including Capital Expenditures, if any) prepared for each calendar quarter, noting net operating income, gross income, and operating expenses and other information necessary and sufficient to fairly represent the financial position and results of operation of the Properties during such calendar quarter, and containing a comparison of budgeted income and expenses and the actual income and expenses.  In addition, such certificate shall also be accompanied by an Officer’s Certificate stating that the representations and warranties of Borrower set forth in Section 4.1.30 are true and correct as of the date of such certificate. 

 

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(d) Until the occurrence of a Securitization, and after (i) an Event of Default, or (ii) a Cash Sweep Event other than a Cash Sweep Event caused by an Event of Default (but in the case of (ii), only until a Cash Sweep Event Cure), Borrower will furnish, or cause to be furnished, to Lender on or before thirty (30) days after the end of each calendar month (other than January and the last month of each calendar quarter) the following items, accompanied by an Officer’s Certificate stating that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and the Properties:  (i) a rent roll for the subject month; and (ii) monthly and year-to-date operating statements (including Capital Expenditures, if any) prepared for each calendar month, noting net operating income, gross income, and operating expenses, and other information necessary and sufficient to fairly represent the financial position and results of operation of the Properties during such calendar month, and containing a comparison of budgeted income and expenses and the actual income and expenses.

 

(e) Borrower shall furnish to Lender prompt notice (containing reasonable detail) of any material changes in the financial or physical condition of any Individual Property, as reasonably determined by Borrower, including, but not limited to, any termination or cancellation of terrorism or other insurance required by this Agreement.

 

(f) Borrower shall furnish to Lender, within ten (10) Business Days after request (or as soon thereafter as may be reasonably possible), such further detailed information with respect to the operation of the Properties and the financial affairs of Borrower as may be reasonably requested by Lender, and financial and sales information from any Tenant designated by Lender (to the extent such financial and sales information is required to be provided under the applicable Lease and same is received by Borrower after request therefor), including, without limitation, in connection with a Securitization and in connection with Regulation AB under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

 

(g) Borrower will cause Cole Credit Property Trust III, Inc. (the general partner of Guarantor) to furnish to Lender annually, within one hundred twenty (120) days following the end of its Fiscal Year, financial statements audited by an independent certified public accountant, which shall include an annual balance sheet and profit and loss statement, in the form previously provided to Lender or in another form reasonably approved by Lender.

 

(h) Any reports, statements or other information required to be delivered under this Agreement shall be delivered electronically in a manner acceptable to Lender and prepared using a spreadsheet program, or, if requested by Lender, (i) delivered in paper form and/or on a diskette and/or (ii) prepared using Microsoft Word for Windows files (which files may be prepared using a spreadsheet program and saved as word processing files).  Borrower agrees that Lender may disclose information regarding the Properties and Borrower that is provided to Lender pursuant to this Section 5.1.11 in connection with the Securitization to such parties requesting such information in connection with such Securitization.

 

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5.1.12 Business and Operations.

 

  Borrower will continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of the Properties.  Borrower will qualify to do business and will remain in good standing under the laws of the jurisdiction of its formation as and to the extent the same are required for the ownership, maintenance, management and operation of the Properties.  Borrower shall at all times during the term of the Loan, continue to own all of Equipment, Fixtures and Personal Property which are necessary to operate the Properties in the manner required hereunder and in the manner in which it is currently operated, other than Equipment, Fixtures and Personal Property owned by the Tenants under the Leases.

 

5.1.13 Title to the Property.

 

  Borrower will warrant and defend (a) the title to each Individual Property and every part thereof, subject only to Liens permitted hereunder (including Permitted Encumbrances) and (b) the validity and priority of the Lien of each Mortgage on the applicable Individual Property, subject only to Liens permitted hereunder (including Permitted Encumbrances), in each case against the claims of all Persons whomsoever.  Borrower shall reimburse Lender for any losses, costs, damages or expenses (including reasonable attorneys’ fees and expenses) incurred by Lender if an interest in any Individual Property, other than as permitted hereunder, is claimed by another Person.

 

5.1.14 Costs of Enforcement.

 

  In the event (a) that the Mortgage encumbering any Individual Property is foreclosed in whole or in part or that the Mortgage is put into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any mortgage encumbering an Individual Property prior to or subsequent to the Mortgage in which proceeding Lender is made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or any of its constituent Persons or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors, Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including reasonable attorneys’ fees and expenses, incurred by Lender or Borrower in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, together with all required service or use taxes.

 

5.1.15 Estoppel Statement. 

 

(a) After request by Lender, Borrower shall within ten (10) days furnish Lender with a statement, duly acknowledged and certified, setting forth (i)  the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the Interest Rate of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any offsets or defenses to the payment of the Debt, if any, claimed by Borrower, and (vi) that the Note, this Agreement, the Mortgage and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification.

 

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(b) Borrower shall use commercially reasonable efforts to deliver to Lender upon request, tenant estoppel certificates from each commercial Tenant leasing space at the Properties in form and substance reasonably satisfactory to Lender provided that Borrower shall not be required to deliver such certificates more frequently than two (2) times in any calendar year.

 

5.1.16 Loan Proceeds.

 

  Borrower shall use the proceeds of the Loan received by it on the Closing Date only for the purposes set forth in Section 2.1.4 hereof.

 

5.1.17 Performance by Borrower.

 

  Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term and provision of each Loan Document executed and delivered by, or applicable to, Borrower, and shall not enter into or otherwise suffer or permit any amendment, waiver, supplement, termination or other modification of any Loan Document executed and delivered by, or applicable to, Borrower without the prior written consent of Lender.

 

5.1.18 Confirmation of Representations.

 

  Borrower shall deliver, in connection with any Securitization, (a) one (1) or more Officer’s Certificates certifying as to the accuracy of all representations made by Borrower in the Loan Documents as of the date of the closing of such Securitization in all relevant jurisdictions, and (b) certificates of the relevant Governmental Authorities in all relevant jurisdictions indicating the good standing and qualification of Borrower, Principal and Guarantor as of the date of the Securitization.

 

5.1.19 Environmental Covenants. 

 

(a) Borrower covenants and agrees that:  (i) all uses and operations on or of the Property, whether by Borrower or any other Person, shall be in compliance with all Environmental Laws and permits issued pursuant thereto; (ii) there shall be no Releases of Hazardous Substances in, on, under or from the Property except those that are in compliance with all Environmental Laws and with permits issued pursuant thereto (to the extent such permits are required by Environmental Law); (iii) there shall be no Hazardous Substances in, on, or under the Property, except those that are (A) in compliance with all Environmental Laws and with permits issued pursuant thereto (to the extent such permits are required by Environmental Law), or (B) de-minimis amounts necessary to operate the Property for the purposes set forth in the Loan Agreement which will not result in an environmental condition in, on or under the Property and which are otherwise permitted under and used in compliance with Environmental Law; (iv) Borrower shall keep the Properties free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Borrower or any other Person (the “Environmental Liens”), subject to a right to contest such liens under applicable environmental law, provided (A) any such contest stays any enforcement proceeding by the applicable authority, (B) neither the applicable Individual Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost, and (C) Borrower shall furnish such security as may be required in the proceeding, or as may be

 

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requested by Lender; (v) Borrower shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to subsection (b) below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (vi) Borrower shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Properties, pursuant to any reasonable written request of Lender made in the event that Lender has a good faith reason to believe based on credible evidence or information that an environmental hazard exists on the Properties (including but not limited to sampling, testing and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas), and share with Lender the reports and other results thereof, and Lender and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; (vii) Borrower shall, at its sole cost and expense, comply with all reasonable written requests of Lender made in the event that Lender has a good faith reason to believe based on credible evidence or information that an environmental hazard exists on the Properties to (A) reasonably effectuate Remediation of any condition (including but not limited to a Release of a Hazardous Substance) in, on, under or from the Properties; (B) comply with any Environmental Law; (C) comply with any directive from any Governmental Authority; and (D) take any other reasonable action necessary or appropriate for protection of human health or the environment; (viii) Borrower shall not do or allow any Tenant or other user of the Properties to do any act that materially increases the dangers to human health or the environment, involves Hazardous Substances or an environmental condition and poses an unreasonable risk of harm to any Person (whether on or off the Property), involves Hazardous Substances or an environmental condition and impairs or may impair the value of the Properties, is contrary to any requirement of any insurer, involves Hazardous Substances or an environmental condition and constitutes a public or private nuisance, involves Hazardous Substances or an environmental condition and constitutes waste, or involves Hazardous Substances or an environmental condition and violates any covenant, condition, agreement or easement applicable to the Properties; and (ix) Borrower shall immediately notify Lender in writing upon learning of (A) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating towards the Properties; (B) any non-compliance with any Environmental Laws related in any way to the Properties; (C) any actual or potential Environmental Lien; (D) any required or proposed Remediation of environmental conditions relating to the Properties; and (E) any written or oral notice or other communication of which Borrower becomes aware from any source whatsoever (including but not limited to a governmental entity) relating in any way to the release or potential release of Hazardous Substances or Remediation thereof, likely to result in liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Section.

 

(b) In the event that Lender has a good faith reason to believe based on credible evidence or information that an environmental hazard exists on the Properties that may, in Lender’s sole discretion, endanger any Tenants or other occupants of the Properties or their guests or the general public or may materially and adversely affect the value of the Properties, upon reasonable notice from Lender, Borrower shall, at Borrower’s expense, promptly cause an

 

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engineer or consultant satisfactory to Lender to conduct an environmental assessment or audit (the scope of which shall be determined in Lender’s sole and absolute discretion) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Lender and promptly deliver the results of any such assessment, audit, sampling or other testing; provided, however, if such results are not delivered to Lender within a reasonable period or if Lender has a good faith reason to believe based on credible evidence or information that an environmental hazard exists on the Property that, in Lender’s sole judgment, endangers any Tenant or other occupant of the Property or their guests or the general public or may materially and adversely affect the value of the Property, upon reasonable notice to Borrower, Lender and any other Person designated by Lender, including but not limited to any receiver, any representative of a governmental entity, and any environmental consultant, shall have the right, but not the obligation, and subject to the rights of Tenants, to enter upon the Properties at all reasonable times to assess any and all aspects of the environmental condition of the Properties and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Lender’s sole and absolute discretion) and taking samples of soil, groundwater or other water, air, or building materials, and reasonably conducting other invasive testing.  Borrower shall cooperate with and provide Lender and any such Person designated by Lender with access to the Properties subject to the rights of Tenants.

 

5.1.20 Leasing Matters.

 

  Any Leases written after the date hereof shall be subject to the prior written approval of Lender, which approval shall not be unreasonably withheld, conditioned or delayed.  Upon request, Borrower shall furnish Lender with executed copies of all Leases.  All renewals of Leases and all proposed Leases shall provide for rental rates comparable to existing local market rates.  All proposed Leases shall be on commercially reasonable terms and shall not contain any terms which would materially affect Lender’s rights under the Loan Documents.  All Leases executed after the date hereof shall provide that they are subordinate to the applicable Mortgage and that the lessee agrees to attorn to Lender or any purchaser at a sale by foreclosure or power of sale.  Borrower (i) shall observe and perform the obligations imposed upon the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce and may amend or terminate the terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed in a commercially reasonable manner and in a manner not to impair the value of the Individual Property involved except that no termination by Borrower or acceptance of surrender by a Tenant of any Leases shall be permitted unless by reason of a tenant default and then only in a commercially reasonable manner to preserve and protect the Individual Property; provided, however, that no such termination or surrender of any Lease covering more than 6,000 square feet will be permitted without the prior written consent of Lender; (iii) shall not collect any of the rents more than one (1) month in advance (other than security deposits); (iv) shall not execute any other assignment of lessor’s interest in the Leases or the Rents (except as contemplated by the Loan Documents); (v) shall not alter, modify or change the terms of the Leases in a manner inconsistent with the provisions of the Loan Documents; and (vi) shall execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Leases as Lender shall from time to time reasonably require.  Notwithstanding anything to the contrary contained herein, all new Leases and all amendments, modifications, extensions, and renewals of existing Leases with Tenants that are Affiliates of Borrower shall be subject to the prior written consent of Lender.

 

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To the extent Lender’s approval is required pursuant to this Section 5.1.20 to any Lease or modification, Borrower’s written request therefor shall be delivered together with such materials reasonably requested by Lender in order to evaluate such request (it being acknowledged and agreed that no request for consent shall be effective unless and until such materials have been delivered to Lender).  Each such request shall conspicuously state, in large bold type on the top of the first page of such request, that “PURSUANT TO SECTION 5.1.20 OF THE LOAN AGREEMENT, THIS IS A REQUEST FOR LENDER’S CONSENT.  LENDER’S RESPONSE IS REQUESTED WITHIN FIFTEEN (15) BUSINESS DAYS.  LENDER’S FAILURE TO RESPOND WITHIN SUCH TIME PERIOD WILL ENABLE BORROWER TO DELIVER A SECOND NOTICE REQUESTING LENDER’S CONSENT”.  In the event Lender fails to approve or disapprove to such initial request within fifteen (15) Business Days’ of the effective date of such initial request, Borrower may deliver to Lender a second written request for approval, which second written request for approval shall conspicuously state, in large bold type on the top of the first page of such request, that “THIS IS A REQUEST FOR LENDER’S CONSENT.  LENDER’S CONSENT IS REQUESTED WITHIN FIVE (5) BUSINESS DAYS.  THE LEASE SHALL BE DEEMED APPROVED IF LENDER DOES NOT RESPOND TO THE CONTRARY WITHIN FIVE (5) BUSINESS DAYS’ OF LENDER’S RECEIPT OF THIS WRITTEN NOTICE”.  In the event that Lender fails to approve or disapprove the second written request within such five (5) Business Day period, then Lender’s consent shall be deemed to have been granted.  Notwithstanding the foregoing, if four (4) or more Leases have been deemed approved pursuant to this Section 5.1.20, then Borrower shall not be entitled to receive deemed approval with respect to any additional Leases.

 

5.1.21 Alterations.

 

  Borrower shall obtain Lender’s prior written consent to any alterations to any Improvements, which consent shall not be unreasonably withheld, conditioned or delayed.  Notwithstanding the foregoing, Lender’s consent shall not be required in connection with any non-structural alterations, or in the case of a Ground Leased Individual Property or the portion of an Individual Property leased to Walgreens, structural alterations, that will not have a material adverse effect on Borrower’s financial condition, the value of the Individual Property or the Individual Property’s Net Operating Income, and (a) that are performed pursuant to the terms and provisions of any Lease executed on or before the date hereof, (b) that are performed pursuant to the terms and provisions of any Lease executed after the date hereof, provided that such Lease shall satisfy the requirements of Section 5.1.20, or (c) that are performed in connection with the Restoration of any Individual Property after the occurrence of a Casualty or Condemnation in accordance with the terms and provisions of this Agreement.  If the total unpaid amounts due and payable with respect to alterations to the Improvements at an Individual Property (other than such amounts to be paid or reimbursed by Tenants under the Leases) shall at any time exceed $100,000.00 (the “Threshold Amount”), Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrower’s obligations under the Loan Documents any of the following:  (A) cash, (B) U.S. Obligations, (C) other securities having a rating acceptable to Lender and that, at Lender’s option, the applicable

 

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Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned to any Securities or any class thereof in connection with any Securitization or (D) a completion and performance bond or an irrevocable letter of credit (payable on sight draft only) issued by a financial institution having a rating by S&P of not less than “A-1+” if the term of such bond or letter of credit is no longer than three (3) months or, if such term is in excess of three (3) months, issued by a financial institution having a rating that is acceptable to Lender and that, at Lender’s option, the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned to any Securities or class thereof in connection with any Securitization.  Such security shall be in an amount equal to the excess of the total unpaid amounts with respect to alterations to the Improvements on the Individual Property (other than such amounts to be paid or reimbursed by Tenants under the Leases) over the Threshold Amount and Lender may apply such security from time to time at the option of Lender to pay for such alterations.

 

Borrower acknowledges and agrees that under the Effingham FedEx Lease, FedEx may request that the Effingham Individual Borrower build an expansion of the Improvements on the Effingham Individual Property (the “Expansion Space”).  Notwithstanding anything in this Section 5.1.21 to the contrary, Lender’s consent shall not be required to the construction by Effingham Individual Borrower of such Expansion Space and any lease amendment entered into in connection therewith provided the following conditions are satisfied:

 

	
1.  

	
Prior to the commencement of construction of the Expansion Space, Effingham Individual Borrower shall provide written notice to Lender that it has agreed with FedEx to undertake the construction of the Expansion Space in connection with FedEx’s exercise of the expansion option set forth in the Effingham FedEx Lease, together with a copy of the executed amendment to the Effingham FedEx Lease, within ten (10) days after execution of such amendment;

 

	
2.  

	
Prior to the commencement of construction of the Expansion Space, Effingham Individual Borrower shall provide to Lender copies of the plans and specifications for the Expansion Space, as well as a copy of the construction contract related to the construction of the Expansion Space;

 

	
3.  

	
Prior to the commencement of construction of the Expansion Space, Effingham Individual Borrower shall have delivered to Lender a sum equal to not less than 100% of the Estimated Cost (as hereinafter defined) (the “Expansion Space Completion Escrow”), which shall be held in escrow and disbursed to Effingham Individual Borrower pursuant to Schedule IX hereof.  “Estimated Cost” shall mean the estimate of the cost to construct the Expansion Space as determined by Effingham Individual Borrower and FedEx.  Guarantor shall contribute the amount of the Expansion Space Completion Escrow as equity to Effingham Individual Borrower, and Effingham Individual Borrower shall not incur debt to fund the Estimated Cost or to construct the

 

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Expansion Space.  Notwithstanding anything to the contrary contained in this Agreement, the Expansion Space Completion Escrow shall be held in an Eligible Account in Permitted Investments as directed by Lender or Lender’s Servicer and all interest and earnings on the Expansion Space Completion Escrow shall be added to and become a part of the Expansion Space Completion Escrow;

 

	
4.  

	
Effingham Individual Borrower shall promptly commence construction and shall diligently prosecute construction to completion in accordance with Legal Requirements;

 

	
5.  

	
Upon completion of the Expansion Space by Effingham Individual Borrower, Effingham Individual Borrower shall provide to Lender the following:

 

(a)           Evidence of completion in accordance with applicable law, including, without limitation, a copy of the certificate of occupancy for the Expansion Space;

 

(b)           A date down endorsement to the Title Policy demonstrating that no liens or other encumbrances affect the Effingham Individual Property other than Permitted Encumbrances;

 

(c)           An updated, as-built survey, certified to Lender, reflecting the Improvements including the Expansion Space; and

 

(d)           An estoppel letter from FedEx indicating that it has accepted the Expansion Space and commenced payment of additional Rent as a result thereof, and indicating the new Rent under the Effingham FedEx Lease.

 

Upon satisfaction of the foregoing, provided no Event of Default shall then exist, Lender shall release to Effingham Individual Borrower the Expansion Space Completion Escrow.

 

5.1.22 Operation of Property. 

 

(a) Borrower shall cause the Properties to be operated, in all material respects, in accordance with the Leases and Management Agreement (or Replacement Management Agreement) as applicable.  In the event that the Management Agreement expires or an Individual Property is removed from the application of the Management Agreement (without limiting any obligation of Borrower to obtain Lender’s consent to any removal of an Individual Property from the application of the Management Agreement or modification of the Management Agreement as it relates to the Individual Property if required in accordance with the terms and provisions of this Agreement), Borrower shall promptly enter into a Replacement Management Agreement with Manager or another Qualified Manager, as applicable.  Borrower shall comply, and shall cause its Affiliates to comply, with any exclusive use provisions and radius restrictions granted in favor of Tenants in the Leases.

 

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(b) Borrower shall:  (i) promptly perform and/or observe, in all material respects, all of the covenants and agreements required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any material default under the Management Agreement of which it is aware; (iii) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice, report and estimate received by it with respect to the Individual Property under the Management Agreement; and (iv) enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by Manager under the Management Agreement, in a commercially reasonable manner.

 

5.1.23 Embargoed Person.

 

  Borrower has performed (or caused to be performed) and shall perform (or cause to be performed) reasonable due diligence to insure that at all times throughout the term of the Loan, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower, Principal and Cole Credit Property Trust III, Inc. constitute property of, or are beneficially owned, directly or indirectly, by any Embargoed Person; (b) no Embargoed Person has any interest of any nature whatsoever in Borrower, Principal or Cole Credit Property Trust III, Inc., as applicable, with the result that the investment in Borrower, Principal or Cole Credit Property Trust III, Inc., as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower, Principal or Cole Credit Property Trust III, Inc., as applicable, have been derived from, or are the proceeds of, any unlawful activity, including money laundering, terrorism or terrorism activities, with the result that the investment in Borrower, Principal or Cole Credit Property Trust III, Inc., as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law, or may cause any Individual Property to be subject to forfeiture or seizure.  Notwithstanding the foregoing, to the extent that an Embargoed Person acquires a non-controlling interest in Cole Credit Property Trust III, Inc., without the knowledge of Borrower or Cole Credit Property Trust III, Inc., through a transaction brokered by a FINRA licensed broker dealer not affiliated with Cole Credit Property Trust III, Inc., provided such broker dealer has executed a dealer agreement or selling agreement with Cole Credit Property Trust III, Inc. or an affiliate of Cole Credit Property Trust III, Inc. in which it covenants to, among other things,  comply with The USA PATRIOT Act (or any successor legislation), the resulting breach of the foregoing representations shall be deemed to be unintentional and not grossly negligent for purposes of Section 9.3 hereof.

 

5.1.24 Supplemental Mortgage Affidavits. 

 

  As of the date hereof, each Individual Borrower represents that it has paid all state, county and municipal recording and all other taxes imposed upon the execution and recordation of the Mortgages.  If at any time Lender determines (i) based on applicable law, that Lender is not being afforded the maximum amount of security available from any one or more of the Properties as a direct or indirect result of applicable taxes not having been paid with respect to any Individual Property or (ii) Lender and/or the Rating Agencies, in connection with a Securitization, require the amount secured by any Mortgage be

 

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increased, Borrower agrees that it will execute, acknowledge and deliver to Lender, immediately upon Lender’s request, supplemental affidavits and/or Mortgages increasing the amount of the Debt attributable to any such Individual Property (as set forth as the Release Amount on Schedule V annexed hereto) for which all applicable taxes have been paid to an amount determined by Lender, and Borrower shall, on demand, pay any additional taxes.

 

Section 5.2 Negative Covenants.

 

  From the date hereof until payment and performance in full of all obligations of Borrower under the Loan Documents or, solely with respect to any Individual Borrower that obtains the earlier release of the Lien of the Mortgage affecting such Individual Borrower’s Individual Property (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, then exclusive of such Individual Borrower and such Individual Property so released, Borrower covenants and agrees with Lender that it will not do, directly or indirectly, any of the following:

 

5.2.1 Operation of Property. 

 

(a) Borrower shall not, without Lender’s prior written consent (which consent shall not be unreasonably withheld): (i) surrender, terminate, cancel, amend or modify the Management Agreement as it relates to the Properties; provided, that Borrower may, without Lender’s consent, replace the Manager so long as the replacement manager is a Qualified Manager pursuant to a Replacement Management Agreement and remove an Individual Property from the application of the Management Agreement in connection with such replacement; (ii) reduce or consent to the reduction of the term of the Management Agreement as it relates to an Individual Property; (iii) increase or consent to the increase of the amount of any charges under the Management Agreement as it relates to the Individual Property; or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement as it relates to the Individual Property in any material respect.

 

(b) Following the occurrence and during the continuance of an Event of Default, Borrower shall not exercise any rights, make any decisions, grant any approvals or otherwise take any action under the Management Agreement as it relates to the Properties without the prior written consent of Lender, which consent may be granted, conditioned or withheld in Lender’s sole discretion.

 

5.2.2 Liens.

 

  Borrower shall not create, incur, assume or suffer to exist any Lien on any portion of any Individual Property or permit any such action to be taken, except for Permitted Encumbrances.

 

5.2.3 Dissolution.

 

  Borrower shall not, without obtaining the prior written consent of Lender (a) engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (b) engage in any business activity not related to the ownership and operation of the Properties, (c) transfer, lease or sell, in one transaction or any combination of transactions, the assets or all or substantially all of the properties or assets of Borrower except to the extent permitted by the Loan Documents, (d) unless required by applicable law (and in such

 

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case, following fifteen (15) days prior written notice to Lender), modify, amend, waive or terminate its organizational documents or its qualification and good standing in any jurisdiction or (e) cause the Principal to (i) dissolve, wind up or liquidate or take any action, or omit to take an action, as a result of which the Principal would be dissolved, wound up or liquidated in whole or in part, or (ii) unless required by applicable law (and in such case, following fifteen (15) days prior written notice to Lender) amend, modify, waive or terminate the organizational documents of the Principal.

 

5.2.4 Change In Business.

 

  Borrower shall not enter into any line of business other than the ownership and operation of the Properties, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business.  Nothing contained in this Section 5.2.4 is intended to expand the rights of Borrower contained in Section 5.2.10(d) hereof.

 

5.2.5 Debt Cancellation.

 

  Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower’s business.

 

5.2.6 Zoning.

 

  Borrower shall not initiate or consent to any zoning reclassification of any portion of any Individual Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of such Individual Property in any manner that could result in such use becoming a non conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Lender.

 

5.2.7 No Joint Assessment.

 

  Borrower shall not suffer, permit or initiate the joint assessment of any Individual Property (a) with any other real property constituting a tax lot separate from any Individual Property, and (b) which constitutes real property with any portion of any Individual Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such real property portion of any Individual Property.

 

5.2.8 Intentionally Omitted.

 

5.2.9 ERISA. 

 

(a) Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA.

 

(b) Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of the Loan, as requested by Lender in its sole discretion, that (A) Borrower is not and does not maintain an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA; (B) Borrower is not subject to any state statute regulating investment of, or fiduciary obligations with respect to governmental plans and (C) one or more of the following circumstances is true:

 

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(i) Equity interests in Borrower 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 Borrower are held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

 

(iii) Borrower 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).

 

5.2.10 Transfers. 

 

(a) Borrower acknowledges that Lender has examined and relied on the experience of Borrower and its stockholders, general partners, members, principals and (if Borrower is a trust) beneficial owners in owning and operating properties such as the Properties in agreeing to make the Loan, and will continue to rely on Borrower’s ownership of the Properties as a means of maintaining the value of the Properties as security for repayment of the Debt and the performance of the Other Obligations.  Borrower acknowledges that Lender has a valid interest in maintaining the value of the Properties so as to ensure that, should Borrower default in the repayment of the Debt or the performance of the Other Obligations, Lender can recover the Debt by a sale of the Properties.

 

(b) Without the prior written consent of Lender, and except to the extent otherwise set forth in this Section 5.2.10, Borrower shall not, and shall not permit any Restricted Party do any of the following (collectively, a “Transfer”): (i) sell, convey, mortgage, grant, bargain, encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) the Properties or any part thereof or any legal or beneficial interest therein or (ii) permit a Sale or Pledge of an interest in any Restricted Party, other than (A) pursuant to Leases of space in the Improvements to Tenants in accordance with the provisions of Section 5.1.20, (B) Permitted Transfers, and (C) subject to Section 5.1.23 above, any issuance, sale, pledge or transfer of non-controlling interests in Cole Credit Property Trust III, Inc.

 

(c) Subject to the exclusions in Section 5.2.10(b), a Transfer shall include, but not be limited to, (i) an installment sales agreement wherein Borrower agrees to sell the Properties or any part thereof for a price to be paid in installments; (ii) an agreement by Borrower leasing all or a substantial part of an Individual Property for other than actual occupancy by a space Tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge of such corporation’s stock or the creation or issuance of new stock; (iv) if a Restricted Party is a limited or general partnership or

 

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joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership interest of any general partner or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interest or the creation or issuance of new limited partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the Sale or Pledge of non-managing membership interests or the creation or issuance of new non-managing membership interests; or (vi) if a Restricted Party is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests.

 

(d) Notwithstanding the provisions of this Section 5.2.10, Lender’s consent shall not be required in connection with one or a series of Transfers, of not more than forty-nine percent (49%) of the stock, the limited partnership interests or non-managing membership interests (as the case may be) in a Restricted Party; provided, however, no such Transfer shall result in the change of Control in a Restricted Party, and as a condition to each such Transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed Transfer, and provided, further, all outstanding partnership interests in Guarantor shall at all times be owned, directly or indirectly, by Cole Credit Property Trust III, Inc.  If after giving effect to any such Transfer, more than forty-nine percent (49%) in the aggregate of direct or indirect interests in a Restricted Party are owned by any Person and its Affiliates that owned less than forty-nine percent (49%) direct or indirect interest in such Restricted Party as of the Closing Date, Borrower shall, no less than thirty (30) days prior to the effective date of any such Transfer, deliver to Lender an Additional Insolvency Opinion acceptable to Lender and the Rating Agencies.  In addition, at all times, Cole Credit Property Trust III, Inc. must continue to Control Borrower, Guarantor and Manager and own, directly or indirectly, at least a 51% legal and beneficial interest in Borrower, Guarantor and Manager.

 

(e) No Transfer of the Properties and assumption of the Loan, or Transfer of any direct interest in any Individual Borrower shall occur during the period that is sixty (60) days prior to and sixty (60) days after a Securitization.  Otherwise, Lender’s consent to a Transfer of the Properties and assumption of the Loan or Transfer of one hundred percent (100%) of the outstanding membership or partnership interests in Borrower shall not be unreasonably withheld provided that Lender receives not less than sixty (60) days prior written notice of such Transfer and no Event of Default has occurred and is continuing, and further provided that the following additional requirements are satisfied:

 

(i) Borrower shall pay or cause to be paid to Lender a transfer fee equal to one percent (1%) of the outstanding principal balance of the Loan at the time of such Transfer, unless the applicable Transfer is a Transfer to an Identified Affiliate that is a Cole sponsored entity, in which case no transfer fee shall be required;

 

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(ii) Borrower shall pay or cause to be paid any and all reasonable out-of-pocket costs incurred in connection with such Transfer (including, without limitation, Lender’s reasonable counsel fees and disbursements and all recording fees, title insurance premiums and mortgage and intangible taxes and the fees and expenses of the Rating Agencies pursuant to clause (x) below);

 

(iii) The proposed transferee (the “Transferee”) or Transferee’s Principals must have demonstrated expertise in owning and operating properties similar in location, size, class and operation to the Properties, which expertise shall be reasonably determined by Lender;

 

(iv) Transferee and Transferee’s Principals shall, as of the date of such transfer, have an aggregate net worth and liquidity reasonably acceptable to Lender;

 

(v) Transferee, Transferee’s Principals and all other entities which may be owned or Controlled directly or indirectly by Transferee’s Principals (“Related Entities”) must not have been party to any bankruptcy proceedings, voluntary or involuntary, made an assignment for the benefit of creditors or taken advantage of any insolvency act, or any act for the benefit of debtors within seven (7) years prior to the date of the proposed Transfer;

 

(vi) Transferee shall ratify or assume (subject to Section 9.3 hereof) all of the obligations of Borrower under the Loan Documents in a manner satisfactory to Lender in all respects, including, without limitation, by entering into an assumption agreement in form and substance satisfactory to Lender;

 

(vii) There shall be no material litigation or regulatory action pending or threatened against Transferee, Transferee’s Principals or Related Entities which is not reasonably acceptable to Lender;

 

(viii) Transferee, Transferee’s Principals and Related Entities shall not have defaulted under its or their obligations with respect to any other Indebtedness in a manner which is not reasonably acceptable to Lender;

 

(ix) Transferee and Transferee’s Principals must be able to satisfy all the representations and covenants set forth in Sections 4.1.30, 4.1.35, 5.1.23 and 5.2.9 of this Agreement, no Default or Event of Default shall otherwise occur as a result of such Transfer, and Transferee and Transferee’s Principals shall deliver (A) all organizational documentation reasonably requested by Lender, which shall be reasonably satisfactory to Lender and (B) all certificates, agreements, covenants and legal opinions reasonably required by Lender, provided that such certificates, agreements and covenants shall not materially increase the obligations of Borrower under the Loan Documents or materially decrease the rights of Borrower under the Loan Documents;

 

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(x) If required by Lender, Transferee shall be approved by the Rating Agencies selected by Lender, which approval, if required by Lender, shall take the form of a confirmation in writing from such Rating Agencies to the effect that such Transfer will not result in a qualification, reduction, downgrade or withdrawal of the ratings in effect immediately prior to such assumption or transfer for the Securities or any class thereof issued in connection with a Securitization which are then outstanding;

 

(xi) Prior to any release of Guarantor, one (1) or more substitute guarantors reasonably acceptable to Lender shall have assumed all of the liabilities and obligations of Guarantor under the Guaranty and Environmental Indemnity executed by Guarantor or execute a replacement guaranty and environmental indemnity reasonably satisfactory to Lender;

 

(xii) Borrower shall deliver, at its sole cost and expense, an endorsement to the Title Insurance Policies, as modified by the assumption agreement, as valid first liens on the Properties and naming the Transferee as owner of the Properties, which endorsement shall insure that, as of the date of the recording of the assumption agreement, the Properties shall not be subject to any additional exceptions or liens other than those contained in the Title Insurance Policies issued on the date hereof and the Permitted Encumbrances;

 

(xiii) The Properties shall be managed by a Qualified Manager pursuant to a Replacement Management Agreement; and

 

(xiv) Borrower or Transferee, at its sole cost and expense, shall deliver to Lender an Additional Insolvency Opinion reflecting such Transfer satisfactory in form and substance to Lender.

 

 

Immediately upon a Transfer to such Transferee and the satisfaction of all of the above requirements, the named Borrower and Guarantor herein shall be released from all liability under this Agreement, the Note, the Mortgages and the other Loan Documents accruing after such Transfer.  The foregoing release shall be effective upon the date of such Transfer, but Lender agrees to provide written evidence thereof reasonably requested by Borrower.

 

(f) No Transfer of any direct interest in a Principal or a manager of an Individual Borrower or of a Principal shall occur during the period that is sixty (60) days prior to and sixty (60) days after a Securitization.  Otherwise, Lender’s consent to a Transfer of one hundred percent (100%) of the outstanding membership interests in a Principal or a manager of an Individual Borrower or of a Principal shall not be unreasonably withheld provided that Lender receives not less than sixty (60) days prior written notice of such Transfer and no Event of Default has occurred and is continuing, and further provided that the following additional requirements are satisfied:

 

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(i) The Transferee shall be, or shall be owned and controlled by, an Identified Affiliate;

 

(ii) Borrower shall pay or cause to be paid any and all reasonable out-of-pocket costs incurred in connection with such Transfer (including, without limitation, Lender’s reasonable counsel fees and disbursements and all recording fees, title insurance premiums and mortgage and intangible taxes and the fees and expenses of the Rating Agencies pursuant to clause (x) below), provided that no transfer fee shall be required;

 

(iii) The Transferee or Transferee’s Principals must have demonstrated expertise in owning and operating properties similar in location, size, class and operation to the Properties, which expertise shall be reasonably determined by Lender;

 

(iv) Transferee and Transferee’s Principals shall, as of the date of such transfer, have an aggregate net worth and liquidity reasonably acceptable to Lender;

 

(v) Transferee, Transferee’s Principals and all other entities which may be owned or Controlled directly or indirectly by Transferee’s Principals (“Related Entities”) must not have been party to any bankruptcy proceedings, voluntary or involuntary, made an assignment for the benefit of creditors or taken advantage of any insolvency act, or any act for the benefit of debtors within seven (7) years prior to the date of the proposed Transfer;

 

(vi) Transferee shall ratify all of the obligations of Borrower under the Loan Documents in a manner satisfactory to Lender in all respects, including, without limitation, by entering into an assumption agreement in form and substance satisfactory to Lender;

 

(vii) There shall be no material litigation or regulatory action pending or threatened against Transferee, Transferee’s Principals or Related Entities which is not reasonably acceptable to Lender;

 

(viii) Transferee, Transferee’s Principals and Related Entities shall not have defaulted under its or their obligations with respect to any other Indebtedness in a manner which is not reasonably acceptable to Lender;

 

(ix) Transferee and Transferee’s Principals must be able to satisfy all the representations and covenants set forth in Sections 4.1.30, 4.1.35, 5.1.23 and 5.2.9 of this Agreement, no Default or Event of Default shall otherwise occur as a result of such Transfer, and Transferee and Transferee’s Principals shall deliver (A) all organizational documentation reasonably requested by Lender, which shall be reasonably satisfactory to Lender and (B) all certificates, agreements, covenants and legal opinions reasonably required by Lender, provided that such certificates, agreements and covenants shall not materially increase the obligations of Borrower under the Loan Documents or materially decrease the rights of Borrower under the Loan Documents;

 

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(x) If required by Lender, Transferee shall be approved by the Rating Agencies selected by Lender, which approval, if required by Lender, shall take the form of a confirmation in writing from such Rating Agencies to the effect that such Transfer will not result in a qualification, reduction, downgrade or withdrawal of the ratings in effect immediately prior to such assumption or transfer for the Securities or any class thereof issued in connection with a Securitization which are then outstanding;

 

(xi) Intentionally omitted;

 

(xii) Intentionally omitted;

 

(xiii) The Properties shall be continue to be managed by a Qualified Manager pursuant to the Management Agreement or a Replacement Management Agreement; and

 

(xiv) Borrower or Transferee, at its sole cost and expense, shall deliver to Lender an Additional Insolvency Opinion reflecting such Transfer satisfactory in form and substance to Lender.

 

(g) Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon Borrower’s Transfer without Lender’s consent.  This provision shall apply to every Transfer regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer.

 

ARTICLE 6 - INSURANCE; CASUALTY; CONDEMNATION; 

 

Section 6.1 Insurance.

 

(a) From the date hereof until payment and performance in full of all obligations of Borrower under the Loan Documents or, solely with respect to any Individual Borrower that obtains the earlier release of the Lien of the Mortgage affecting such Individual Borrower’s Individual Property (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, then exclusive of any such Individual Borrower and such Individual Property so released, Borrower shall obtain and maintain, or cause to be maintained, insurance for Borrower and the Properties providing at least the following coverages:

 

(i) comprehensive all risk “special form” insurance including, but not limited to, loss caused by any type of windstorm or hail on the Improvements and the Personal Property, (A) in an amount equal to one hundred percent (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 a waiver of depreciation; (B) containing an agreed amount endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions or to be

 

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written on a no co-insurance form; (C) subject to clause (D) below, providing for no deductible in excess of $10,000.00 for all such insurance coverage; provided however with respect to windstorm and earthquake coverage, providing for a deductible satisfactory to Lender in its reasonable discretion; and (D) in cases where a Tenant (or the corporate guarantor of such Tenant’s Lease) with a credit rating issued by S&P (or another Rating Agency) of BBB- or better (and no rating of less than BBB- or the equivalent issued by any Rating Agency) is required under the terms and conditions of its Lease to obtain insurance, providing for no deductible that exceeds the amount permitted pursuant to the terms and conditions of such Tenant’s Lease.  In addition, Borrower shall obtain: (y) if any portion of the Improvements is currently or at any time in the future located in a federally designated “special flood hazard area”, flood hazard insurance in an amount equal to the lesser of (1) the outstanding principal balance of the Note or (2) the maximum amount of such insurance available under 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 such greater amount as Lender shall reasonably require, and (z) earthquake insurance in amounts and in form and substance reasonably satisfactory to Lender in the event the Individual Property is located in an area with a high degree of seismic activity; provided that the insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this subsection (i);

 

(ii) business income or rental loss insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; (C) in an amount equal to one hundred percent (100%) of the projected gross revenues from the operation of the Properties (as reduced to reflect expenses not incurred during a period of Restoration) for a period of at least twenty-four (24) months after the date of the Casualty; and (D) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of six (6) months from the date that the Individual Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period.  The amount of such business income or rental loss insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrower’s reasonable estimate of the gross revenues from the Individual Property for the succeeding twelve (12) month period.  All proceeds payable to Lender pursuant to this subsection (ii) shall be deemed Rents and, as long as no Event of Default has occurred and is continuing, shall be applied by Lender in accordance with the Cash Management Agreement, except if Lender has elected, in accordance with its rights under Section 6.3 hereof, to apply Net Proceeds in respect of any Casualty or Condemnation to the payment of the Debt or Other Obligation, in which case Lender shall apply such proceeds in accordance with Section 2.4.2 hereof.  Nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in this Agreement and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance;

 

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(iii) at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the Individual Property coverage form does not otherwise apply, (A) owner’s contingent or protective liability insurance, otherwise known as Owner Contractor’s Protective Liability, covering claims not covered by or under the terms or provisions of the below mentioned commercial general liability insurance policy and (B) the insurance provided for in subsections (i), (ii) and (x) above written in a so-called builder’s risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to subsections (i), (ii) and (x) above, (3) including permission to occupy the Individual Property and (4) with an agreed amount endorsement waiving co-insurance provisions;

 

(iv) comprehensive boiler and machinery insurance, if steam boilers or other pressure-fixed vessels are in operation, in amounts as shall be reasonably required by Lender on terms consistent with the commercial property insurance policy required under subsection (i) above;

 

(v) commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Individual Property, such insurance (A) to be on the so-called “occurrence” form with a combined limit of not less than Two Million and 00/100 Dollars ($2,000,000.00) in the aggregate and One Million and 00/100 Dollars ($1,000,000.00) per occurrence; (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate and (C) to cover at least the following hazards:  (1) premises and operations; (2) products and completed operations on an “if any” basis; (3) independent contractors; (4) blanket contractual liability for all written contracts and (5) contractual liability covering the indemnities contained in Article 9 of the Mortgage to the extent the same is available;

 

(vi) automobile liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of One Million Dollars and 00/100 Dollars ($1,000,000.00);

 

(vii) worker’s compensation and employer’s liability subject to the worker’s compensation laws of the applicable state;

 

(viii) ordinance & law coverage with minimum limits as follows:  Coverage A (value of undamaged portion) to be 'included' in the insured replacement cost limit; Coverage B (demolition/debris removal) to be 25% of the building's replacement cost limit, and Coverage C (increased cost of construction) to be 25% of the building's replacement cost value;

 

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(ix) umbrella and excess liability insurance in an amount not less than $25,000,000.00 per occurrence on terms consistent with the commercial general liability insurance policy required under subsection (v) above, including, but not limited to, supplemental coverage for employer liability and automobile liability, which umbrella liability coverage shall apply in excess of the automobile liability coverage in clause (vi) above;

 

(x) the insurance required under this Section 6.1(a) above shall cover perils of terrorism (both foreign and domestic) and acts of terrorism (both foreign and domestic) and Borrower shall maintain insurance for loss resulting from perils and acts of terrorism (both foreign and domestic) on terms (including amounts) consistent with those required under Sections 6.1(a) above at all times during the term of the Loan; and

 

(xi) upon sixty (60) days written notice, such other reasonable insurance, including, but not limited to, sinkhole or land subsidence insurance, and in such reasonable amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to the Individual Property located in or around the region in which the Individual Property is located.

 

(b) All insurance provided for in Section 6.1(a) hereof, shall be obtained under valid and enforceable policies (collectively, the “Policies” or in the singular, the “Policy”), and shall be subject to the approval of Lender as to insurance companies, amounts, and deductibles, and shall designate Lender as loss payee, mortgagee or additional insured, as applicable.  The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a rating of “A:X” or better in the current Best’s Insurance Reports and a claims paying ability rating of “A-” or better by at least two (2) of the Rating Agencies including, (i) S&P, (ii) Fitch, and (iii) Moody’s, if Moody’s is rating the Securities.  The Policies described in Section 6.1 hereof (other than those strictly limited to liability protection) shall designate Lender as loss payee.  Not later than five (5) Business Days prior to the expiration dates of each Policy theretofore furnished to Lender, Borrower shall deliver to Lender evidence satisfactory to Lender that such Policy has been renewed or replaced by another policy conforming to the provisions of Section 6.1.  Borrower shall provide confirmation that all renewed or replaced premiums (the "Insurance Premiums") have been paid in full, no later than (A) in the case of Borrower provided Policies, the date the premiums on each such Policy shall be delinquent, or (B) in the case of Tenant provided Policies, two (2) Business Days after the date such Tenant is required to provide such proof to Borrower under the applicable Lease.

 

(c) Any blanket insurance Policy shall specifically allocate to the Individual Property the amount of coverage from time to time required hereunder and shall otherwise provide the same protection as would a separate Policy insuring only the Individual Property in compliance with the provisions of Section 6.1(a) hereof.

 

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(d) All Policies provided for or contemplated by Section 6.1(a) hereof, except for the Policy referenced in Section 6.1(a)(vii) of this Agreement, shall name Borrower as the insured and shall designate Lender as loss payee, mortgagee or additional insured, as applicable, as its interests may appear, and in the case of property damage, boiler and machinery, flood and earthquake insurance, shall contain a so-called New York standard non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender.

 

(e) All Policies shall contain clauses or endorsements to the effect that:

 

(i) no act or negligence of Borrower, or anyone acting for Borrower, or of any Tenant or other occupant, or failure to comply with the provisions of any Policy, which 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) the Policy shall not be materially changed (other than to increase the coverage provided thereby) or canceled without at least thirty (30) days written notice to Lender and any other party named therein as an additional insured;

 

(iii) the issuers thereof shall give written notice to Lender if the Policy has not been renewed thirty (30) days prior to its expiration, unless the applicable insurers will not agree to provide such notice; and

 

(iv) Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder.

 

(f) If at any time Lender is not in receipt of written evidence that all insurance required hereunder (including self-insurance provided by a Tenant in accordance with Section 6.1(g) below) is in full force and effect, Lender shall have the right, without notice to Borrower (except as provided below), to take such action as Lender deems necessary to protect its interest in the Properties, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate after three (3) Business Days notice to Borrower if prior to the date upon which any such coverage will lapse or at any time Lender deems necessary (regardless of prior notice to Borrower) to avoid the lapse of any such coverage.  All premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, shall be secured by the Mortgage and shall bear interest at the Default Rate.

 

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(g) Notwithstanding the foregoing, if (i) a Tenant provides insurance satisfying the requirements hereof with respect to its Improvements (including, without limitation, naming Lender as an additional insured or loss payee, as applicable), or (ii) a Tenant (or the corporate guarantor of such Tenant’s Lease) with a credit rating issued by S&P (or another Rating Agency) of BBB- or better (and no rating of less than BBB- or the equivalent issued by any Rating Agency) self-insures in accordance with its Lease (without exclusion for any risk required to be insured hereunder), such insurance or self-insurance shall satisfy Borrower’s obligations hereunder, provided, in the case of this clause (ii), that the Tenant Insurance Conditions are satisfied.  For purposes hereof, “Tenant Insurance Conditions” shall mean that (A) no default shall exist under such Tenant’s Lease beyond the expiration of any applicable notice and cure periods, (B) no Event of Default shall exist, and (C) Borrower provides to Lender evidence of coverage (which coverage shall satisfy the requirements of Section 6.1(b), (c), (d) and (e) above) for losses in the event that the obligor under such self-insurance does not, for any reason, fulfill its self-insurance obligations, in whole or in part.

 

(h) Lender acknowledges that the insurance in place as of the date hereof, as evidenced by the certificates of insurance provided by Borrower and each Tenant in connection with the closing of the Loan, shall be deemed to satisfy the foregoing requirements as in effect on the date hereof.

 

Section 6.2 Casualty.

 

  If any Individual Property shall be damaged or destroyed, in whole or in part (other than damage costing less than $25,000 to repair), by fire or other casualty (a “Casualty”), Borrower shall give prompt notice of such damage to Lender.  Subject to the last sentence of this Section 6.2, the applicable Individual Borrower shall promptly commence and diligently prosecute, or cause to be promptly commenced and diligently prosecuted, the completion of the Restoration of the Individual Property pursuant to Section 6.4 hereof as nearly as possible to the condition the Individual Property was in immediately prior to such Casualty, with such alterations as may be reasonably approved by Lender and otherwise in accordance with Section 6.4 hereof.  Borrower shall pay (or cause to be paid) all costs of such Restoration whether or not such costs are covered by insurance.  Lender may, but shall not be obligated to make proof of loss if not made promptly by Borrower.  In addition, Lender may participate in any settlement discussions with any insurance companies (and shall approve the final settlement, which approval shall not be unreasonably withheld or delayed) with respect to any Casualty in which the Net Proceeds or the costs of completing the Restoration are equal to or greater than five percent (5%) of the Release Amount for the applicable Individual Property, and Borrower shall deliver to Lender all instruments required by Lender to permit such participation.  Notwithstanding the foregoing, Borrower shall not be required to commence and diligently prosecute, or cause to be commenced and diligently prosecuted, the completion of the Restoration of a Ground Leased Individual Property if (a) neither Borrower nor the applicable Tenant pursuant to the terms of the applicable Lease have the obligation to restore the Improvements on the  applicable Ground Leased Individual Property, (b) the election of the

 

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applicable Individual Borrower or Tenant to not restore shall not give rise to any ability of the Tenant to terminate its Lease or abate any payment of Rent thereunder, (c) the applicable Individual Borrower or Tenant promptly commences and diligently prosecutes demolition of the Improvements and such related work as necessary to render the Individual Property in compliance with all Legal Requirements, and (d) the applicable Net Proceeds are delivered to Lender to apply pursuant to Section 2.4.2 hereof.

 

Section 6.3 Condemnation.

 

  Borrower shall promptly give Lender notice of the actual or threatened commencement of any proceeding for the Condemnation of any Individual Property and shall deliver to Lender copies of any and all papers served in connection with such proceedings.  Lender may participate in any such proceedings, and Borrower shall from time to time deliver to Lender all instruments requested by it to permit such participation.  Borrower, at its expense, shall diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings.  Notwithstanding any taking by any public or quasi-public authority through Condemnation or otherwise (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until any Award shall have been actually received and applied by Lender, after the deduction of expenses of collection, to the reduction or discharge of the Debt.  Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note.  If any portion of the Individual Property is taken by a condemning authority, subject to the last sentence of this Section 6.3, the applicable Individual Borrower shall promptly commence and diligently prosecute, or cause to be promptly commenced and diligently prosecuted, the completion of the Restoration of the Individual Property pursuant to Section 6.4 hereof and otherwise comply with the provisions of Section 6.4 hereof.  If the Individual Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt.  Notwithstanding the foregoing, Borrower shall not be required to commence and diligently prosecute, or cause to be commenced and diligently prosecuted, the completion of the Restoration of a Ground Leased Individual Property if (a) neither Borrower nor the applicable Tenant pursuant to the terms of the applicable Lease have the obligation to restore the Improvements on the  applicable Ground Leased Individual Property, (b) the election of the applicable Individual Borrower or Tenant to not restore shall not give rise to any ability of the Tenant to terminate its Lease or abate any payment of Rent thereunder, (c) the applicable Individual Borrower or Tenant promptly commences and diligently prosecutes demolition of the Improvements and such related work as necessary to render the Individual Property in compliance with all Legal Requirements, and (d) the applicable Net Proceeds are delivered to Lender to apply pursuant to Section 2.4.2 hereof.

 

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Section 6.4 Restoration.

 

  The following provisions shall apply in connection with the Restoration of an Individual Property:

 

(a) If the Net Proceeds shall be less than five percent (5%) of the Release Amount for the applicable Individual Property and the costs of completing the Restoration shall be less than five percent (5%) of the Release Amount for the applicable Individual Property, the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided that all of the conditions set forth in Section 6.4(b)(i) hereof are met and Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of this Agreement.

 

(b) If the Net Proceeds are equal to or greater than five percent (5%) of the Release Amount for the applicable Individual Property or the costs of completing the Restoration are equal to or greater than five percent (5%) of the Release Amount for the applicable Individual Property, Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 6.4.  The term “Net Proceeds” for purposes of this Section 6.4 shall mean:  (i) the net amount of all insurance proceeds received by Lender pursuant to Section 6.1 (a)(i), (iv), (ix) and (x) as a result of such damage or destruction, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same (“Insurance Proceeds”), or (ii) the net amount of the Award, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same (“Condemnation Proceeds”), whichever the case may be.

 

(i) The Net Proceeds shall be made available to Borrower for Restoration provided that each of the following conditions are met:

 

(A) no Event of Default shall have occurred and be continuing;

 

(B) (1) in the event the Net Proceeds are Insurance Proceeds, less than forty percent (40%) of the total floor area of the Improvements on the Individual Property has been damaged, destroyed or rendered unusable as a result of such Casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less than twenty five percent (25%) of the land constituting the Individual Property is taken, and such land is located along the perimeter or periphery of the Individual Property, and no material portion of the Improvements is located on such land;

 

(C) Leases demising in the aggregate a percentage amount equal to or greater than the Rentable Space Percentage of the total rentable space in the Individual Property which has been demised under executed and delivered Leases in effect as of the date of the occurrence of such Casualty or Condemnation, whichever the case may be, shall remain in full force and effect during and after the completion of the Restoration, notwithstanding the occurrence of any such

 

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Casualty or Condemnation, whichever the case may be, and Borrower and/or Tenant, as applicable under the respective Lease, will make all necessary repairs and restorations thereto at their sole cost and expense.  The term “Rentable Space Percentage” shall mean (1) in the event the Net Proceeds are Insurance Proceeds, a percentage amount equal to ninety percent (90%) and (2) in the event the Net Proceeds are Condemnation Proceeds, a percentage amount equal to ninety percent (90%);

 

(D) Borrower shall commence or cause to be commenced the Restoration as soon as reasonably practicable (but in no event later than sixty (60) days after such Casualty or Condemnation, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion;

 

(E) Lender shall be satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note, which will be incurred with respect to the Individual Property as a result of the occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Section 6.1(a)(ii) hereof, if applicable, or (3) by other funds of Borrower;

 

(F) 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) the earliest date required for such completion under the terms of any Leases, (3) such time as may be required under all applicable Legal Requirements in order to repair and restore the Individual Property to the condition it was in immediately prior to such Casualty or to as nearly as possible the condition it was in immediately prior to such Condemnation, as applicable, or (4) the expiration of the insurance coverage referred to in Section 6.1(a)(ii) hereof;

 

(G) the Individual Property and the use thereof after the Restoration will be in compliance with and permitted under all applicable Legal Requirements;

 

(H) the Restoration shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable Legal Requirements;

 

(I) such Casualty or Condemnation, as applicable, does not result in the loss of access to the Individual Property or the Improvements;

 

(J) the projected Debt Service Coverage Ratio for the Properties, in the aggregate, for the twelve months after the Restoration, after giving effect to the Restoration at the applicable Individual Property, shall be equal to or greater than 1.9 to 1.0 (assuming the entire twelve month period occurs in the Amortizing Period);

 

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(K) Borrower shall deliver, or cause to be delivered, to Lender a signed detailed budget approved in writing by Borrower’s architect or engineer stating the entire cost of completing the Restoration, which budget shall be subject to Lender’s approval; and

 

(L) the Net Proceeds together with any cash or cash equivalent deposited by Borrower with Lender are sufficient in Lender’s discretion to cover the cost of the Restoration (provided that Borrower shall not be required to deposit any cash or cash equivalent with Lender if the Net Proceeds and the costs of completing the Restoration are each less than One Hundred Thousand and 00/100 Dollars ($100,000.00) and the conditions in the preceding subsections (A) through (K) shall be satisfied).

 

(ii) The Net Proceeds shall be held by Lender in an interest-bearing Eligible Account and, until disbursed in accordance with the provisions of this Section 6.4(b), shall constitute additional security for the Debt and Other Obligations under the Loan Documents.  The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower from time to time during the course of the Restoration, upon receipt of evidence satisfactory to Lender that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (B) there exist no notices of pendency, stop orders, mechanic’s or materialman’s liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Property which have not either been fully bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company issuing the Title Insurance Policy.

 

(iii) All plans and specifications required in connection with the Restoration shall be subject to prior review and acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the “Casualty Consultant”), such acceptance not to be unreasonably withheld, conditioned or delayed.  Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration.  The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to prior review and approval by Lender and the Casualty Consultant, such acceptance not to be unreasonably withheld, conditioned or delayed.  All reasonable costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration including, without limitation, reasonable counsel fees and disbursements and the Casualty Consultant’s reasonable fees, shall be paid by Borrower.

 

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(iv) 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, as certified by the Casualty Consultant, minus the Casualty Retainage.  The term “Casualty Retainage” shall mean an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed.  The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 6.4(b), be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration.  The Casualty Retainage shall not be released until the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b) and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate governmental and quasi-governmental authorities, and Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; provided, however, that Lender will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractor’s, subcontractor’s or materialman’s contract, the contractor, subcontractor or materialman delivers the lien waivers and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title company issuing the Title Insurance Policy, and Lender receives an endorsement to the Title Insurance Policy insuring the continued priority of the lien of the Mortgage and evidence of payment of any premium payable for such endorsement.  If required by Lender, the release of any such portion of the Casualty 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 materialman.

 

(v) Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month.

 

(vi) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the opinion of Lender in consultation with the Casualty Consultant, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency (the “Net Proceeds Deficiency”) with Lender before any further disbursement of the Net Proceeds shall be made.  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 on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 6.4(b) shall constitute additional security for the Debt and Other Obligations under the Loan Documents.

 

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(vii) The excess, if any, of the Net Proceeds (and the remaining balance, if any, of the Net Proceeds Deficiency) deposited with Lender after the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b), and the receipt by Lender of evidence satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full, shall be deposited in the Cash Management Account to be disbursed in accordance with the Cash Management Agreement, provided no Event of Default shall have occurred and shall be continuing under the Note, this Agreement or any of the other Loan Documents.

 

(c) All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section 6.4(b)(vii) hereof may be retained and applied by Lender toward the payment of the Debt in accordance with Section 2.4.2 hereof, whether or not then due and payable in such order, priority and proportions as Lender in its sole discretion shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender shall approve, in its discretion.

 

(d) In the event of foreclosure of the Mortgage with respect to an Individual Property, or other transfer of title to an Individual Property in extinguishment in whole or in part of the Debt all right, title and interest of Borrower in and to the Policies that are not blanket Policies then in force concerning such Individual Property (other than to the extent those Policies provide liability coverage to Borrower) and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other transferee in the event of such other transfer of title.

 

(e) If a Tenant is leasing all or substantially all of a building located on an Individual Property, and the Improvements thereon suffer a Casualty or Condemnation, then provided (i) such Tenant is not in monetary or material non-monetary default under its Lease, (ii) such Tenant’s Lease remains in full force and effect notwithstanding such Casualty or Condemnation, (iii) such Tenant remains liable for the obligations under its Lease (without reduction or abatement unless covered by business interruption/rent loss insurance), and (iv) such Tenant’s Lease requires Restoration of the Improvements, such Tenant's Lease shall govern and control in the event of a conflict between the foregoing provisions of this Section 6.4 and such Lease.

 

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ARTICLE 7 - RESERVE FUNDS

 

Section 7.1 Required Repairs.

 

7.1.1 Deposits.

 

  Borrower shall perform, or cause to be performed, the repairs at the Properties, as more particularly set forth on Schedule III hereto (such repairs hereinafter referred to as “Required Repairs”).  Borrower shall complete, or cause to be completed, the Required Repairs on or before the required deadline for each repair as set forth on Schedule III.  It shall be an Event of Default under this Agreement if Borrower does not complete, or cause to be completed, the Required Repairs at the Property by the required deadline for each repair as set forth on Schedule III.  Notwithstanding the foregoing, if a Tenant under a Lease is responsible for the Required Repairs with respect to an Individual Property and such Tenant fails to complete such Required Repairs by the required deadline for each repair as set forth on Schedule III, then provided (i) Borrower shall have taken commercially reasonable efforts to require such Tenant to perform such Required Repairs pursuant to its Lease prior to the deadline for such repairs as set forth on Schedule III, and has thereafter diligently pursued the same, and (ii) such Tenant’s failure to complete such Require Repairs shall not result in a lien on the applicable Individual Property that is superior to the lien of the applicable Mortgage, such deadline shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to complete, or cause such Tenant to complete, such repairs, provided such additional period not to exceed one hundred eighty (180) days.

 

7.1.2 Evidence of Completion.

 

  Upon completion of the Required Repairs at an Individual Property, Borrower shall deliver to Lender an Officers’ Certificate (i) stating that all Required Repairs for such Individual Property have been completed in good and workmanlike manner and in accordance with all applicable federal, state and local laws, rules and regulations, and (ii) stating that each Person that supplied materials or labor in connection with the Required Repairs has been paid in full, such Officers’ Certificate to be accompanied by lien waivers or other evidence of payment satisfactory to Lender.  At Lender’s option, Borrower shall provide a title search for the Individual Property indicating that the Individual Property is free from all liens, claims and other encumbrances other than Permitted Encumbrances and those previously approved by Lender.

 

Section 7.2 Tax and Insurance Escrow Fund.

 

  Borrower shall pay to Lender (a) on the Closing Date an initial deposit and (b) on each Payment Date thereafter (i) one-twelfth (1/12) of the Taxes and Other Charges that Lender estimates will be payable during the next ensuing twelve (12) months in order to accumulate with Lender sufficient funds to pay all such Taxes and Other Charges at least thirty (30) days prior to their respective due dates, and (ii) one-twelfth (1/12) of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the

 

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expiration of the Policies (said amounts in (a) and (b) above hereinafter called the “Tax and Insurance Escrow Fund”).  Lender will apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to be made by Borrower pursuant to Sections 5.1.2 and 6.1 hereof and under the Mortgage.  In making any payment relating to the Tax and Insurance Escrow Fund, Lender may do so according to any bill, statement or estimate procured from the appropriate public office (with respect to Taxes) or insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof.  If the amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes, Other Charges and Insurance Premiums pursuant to Sections 5.1.2 and 6.1 hereof, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Tax and Insurance Escrow Fund.  If at any time Lender reasonably determines that the Tax and Insurance Escrow Fund is not or will not be sufficient to pay Taxes, Other Charges and Insurance Premiums by the dates set forth in (a) and (b) above, Lender shall notify Borrower of such determination and Borrower shall increase its monthly payments to Lender by the amount that Lender estimates is sufficient to make up the deficiency at least thirty (30) days prior to the due date of the Taxes and Other Charges and/or thirty (30) days prior to expiration of the Policies, as the case may be.

 

Notwithstanding anything to the contrary hereinbefore contained, Lender shall waive the requirement set forth herein for Borrower to make deposits for the payment of Insurance Premiums into the Tax and Insurance Escrow Fund so long as (a) no Event of Default has occurred and is continuing, and (b) Borrower shall have provided Lender with satisfactory evidence (as determined by Lender) that each Individual Property is insured in accordance with Section 6.1 of this Agreement pursuant to a blanket insurance Policy covering substantially all real property owned directly or indirectly by Guarantor, including, without limitation, the Properties.

 

Further notwithstanding the foregoing, if a Tenant occupies an entire single tax parcel and is required pursuant to its Lease to pay Taxes directly to the taxing authority, Lender shall waive the requirement for Borrower to make deposits into the Tax and Insurance Escrow Fund for Taxes with respect to such Tenant’s tax parcel for so long as no Event of Default shall exist, at least 55% of all scheduled Rents from the Properties on an aggregate basis are from Tenants that maintain (or from Tenants whose Lease is guaranteed by a guarantor that maintains) a credit rating issued by S&P (or another Rating Agency) of BBB- or better (and no rating of less than BBB- or the equivalent issued by any Rating Agency), and Borrower timely provides to Lender satisfactory evidence of payment of Taxes as required pursuant to this Agreement.  Further notwithstanding the foregoing, if the applicable Tenant pays the premium for all or a portion of the insurance required hereunder directly to the applicable insurer, Lender shall waive the requirement for Borrower to make deposits into the Tax and Insurance Escrow Fund for the applicable Insurance Premiums relating to such Individual Property and paid by the applicable Tenant for so long as no Event of Default shall exist, at least 55% of all scheduled Rents from

 

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the Properties on an aggregate basis are from Tenants that maintain (or from Tenants whose Lease is guaranteed by a guarantor that maintains) a credit rating issued by S&P (or another Rating Agency) of BBB- or better (and no rating of less than BBB- or the equivalent issued by any Rating Agency), and Borrower timely provides to Lender satisfactory evidence of all required insurance as required pursuant to this Agreement.

 

Section 7.3 Intentionally Omitted.

 

Section 7.4 Intentionally Omitted.

 

Section 7.5 Excess Cash Flow Reserve Fund.

 

7.5.1 Deposits to Excess Cash Flow Reserve Fund.

 

  During a Cash Sweep Period, all Excess Cash Flow in the Cash Management Account shall be deposited with Lender and held by Lender as additional security for the Loan, and amounts so held shall be hereinafter referred to as the “Excess Cash Flow Reserve Fund” and the account to which such amounts are held shall hereinafter be referred to as the “Excess Cash Flow Reserve Account”.  If the applicable Cash Sweep Period was caused solely by a DSCR Trigger, and no Event of Default shall then exist, upon Borrower’s request, Lender may, in its sole and absolute discretion, elect to disburse funds to Borrower to reimburse Borrower for the costs of tenant improvements and leasing commissions for new Leases or renewals of existing Leases executed in accordance with Section 5.1.20 hereof.

 

7.5.2 Release of Excess Cash Flow Reserve Funds.

 

  Upon the occurrence of a Cash Sweep Event Cure, all Excess Cash Flow Reserve Funds shall be deposited into the Cash Management Account as revenue from the Property to be disbursed in accordance with the Cash Management Agreement.  Any Excess Cash Flow Reserve Funds remaining after the Debt has been paid in full shall be paid to Borrower.

 

Section 7.6 Reserve Funds, Generally. 

 

(a) Borrower grants to Lender a first-priority perfected security interest in each of the Reserve Funds and any and all monies now or hereafter deposited in each Reserve Fund as additional security for payment of the Debt.  Until expended or applied in accordance herewith, the Reserve Funds shall constitute additional security for the Debt.

 

(b) Upon the occurrence and during the continuance of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in any or all of the Reserve Funds to the payment of the Debt in any order in its sole discretion.

 

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(c) The Reserve Funds shall not constitute trust funds and may be commingled with other monies held by Lender.  The Reserve Funds shall be held in an Eligible Account in Permitted Investments as directed by Lender or Lender’s Servicer.  Unless expressly provided for in this Article VII, all interest on a Reserve Fund shall not be added to or become a part thereof and shall be the sole property of and shall be paid to Lender.  Borrower shall be responsible for payment of any federal, state or local income or other tax applicable to the interest earned on the Reserve Funds credited or paid to Borrower.

 

(d) Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in any Reserve Fund or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto.

 

(e) As long as Reserve Funds are invested in investments that constitute Permitted Investments at the time such investments are made, Lender and Servicer shall not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds.  Borrower shall indemnify Lender and Servicer and hold Lender and Servicer harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs and reasonable attorneys’ fees and expenses) arising from or in any way connected with the Reserve Funds or the performance of the obligations for which the Reserve Funds were established, unless arising from the gross negligence, willful misconduct or bad faith of the party seeking indemnification.  Borrower shall assign to Lender all rights and claims Borrower may have against all persons or entities supplying labor, materials or other services which are to be paid from or secured by the Reserve Funds; provided, however, that Lender may not pursue any such right or claim unless an Event of Default has occurred and remains uncured.

 

(f) The required monthly deposits into the Reserve Funds and the Monthly Debt Service Payment Amount, shall be added together and shall be paid as an aggregate sum by Borrower to Lender.

 

(g) Any amount remaining in the Reserve Funds after the Debt has been paid in full shall be returned to Borrower.

 

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ARTICLE 8 - DEFAULTS

 

Section 8.1 Event of Default. 

 

(a) Each of the following events shall constitute an event of default hereunder (an “Event of Default”):

 

(i) (x) if the Monthly Debt Service Payment Amount is not paid when due, except to the extent there are sufficient funds in the Cash Management Agreement to pay such Monthly Debt Service Payment Amount when due, (y) the outstanding principal balance of the Loan, all accrued and unpaid interest and all other amounts due hereunder and under the Note, the Mortgage and the other Loan Documents is not paid on the Maturity Date, or (z) any other payment required hereunder or under the other Loan Documents is not paid within five (5) days of the applicable due date;

 

(ii) if any of the Taxes or Other Charges are not paid prior to the date when the same become delinquent, except to the extent that Borrower or Tenant is contesting the same in accordance with the terms of Section 5.1.2 hereof, or there are sufficient funds in the Cash Management Account to pay such Taxes or Other Charges and Lender fails to or refuses to release the same from to the extent required under this Agreement;

 

(iii) if the Policies are not kept in full force and effect, or if certified copies of the Policies (or, if any such Policy is an umbrella Policy covering more than the Property or Tenant is providing any such Policy, certificates or other evidence of such Policy reasonably acceptable to Lender) are not delivered to Lender within fifteen (15) days after request;

 

(iv) if Borrower Transfers or otherwise encumbers any portion of the Properties without Lender’s prior written consent in violation of the provisions of this Agreement and Article 6 of the Mortgage;

 

(v) if any representation or warranty made by Borrower herein or in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender shall have been false or misleading in any material respect as of the date the representation or warranty was made;

 

(vi) if Borrower or Principal shall make an assignment for the benefit of creditors;

 

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(vii) if a receiver, liquidator or trustee shall be appointed for Borrower or Principal or any other guarantor under any guarantee issued in connection with the Loan or if Borrower or Principal shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower or Principal, or if any proceeding for the dissolution or liquidation of Borrower or Principal shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower or Principal upon the same not being discharged, stayed or dismissed within ninety (90) days;

 

(viii) if Borrower attempts to assign its rights under this Agreement or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents;

 

(ix) if Guarantor or any guarantor or indemnitor under any guaranty or indemnity issued in connection with the Loan shall make an assignment for the benefit of creditors or if a receiver, liquidator or trustee shall be appointed for Guarantor or any guarantor or indemnitor under any guarantee or indemnity issued in connection with the Loan or if Guarantor or such other guarantor or indemnitor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Guarantor or such other guarantor or indemnitor, or if any proceeding for the dissolution or liquidation of Guarantor or such other guarantor or indemnitor shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Guarantor or such other guarantor or indemnitor, upon the same not being discharged, stayed or dismissed within ninety (90) days; provided, further, however, it shall be at Lender’s option to determine whether any of the foregoing shall be an Event of Default;

 

(x) if Borrower breaches any covenant contained in Section 4.1.30 hereof or any negative covenant contained in Section 5.2 hereof;

 

(xi) if Borrower breaches any covenant contained in Section 5.1.22 hereof related to any exclusive use provision or radius restriction set forth in any Lease, or any Affiliate of Borrower breaches any exclusive use provision or radius restriction set forth in any Lease;

 

(xii) if Borrower commences construction of the Expansion Space prior to satisfying the conditions precedent set forth in Section 5.1.21 clauses (1), (2) and (3) hereof, and does not thereafter satisfy such conditions within five (5) days after receipt of notice from Lender;

 

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(xiii) with respect to any term, covenant or provision set forth herein which specifically contains a notice requirement and/or grace period, if Borrower shall be in default under such term, covenant or condition after the giving of such notice and/or the expiration of such grace period;

 

(xiv) if any of the factual assumptions relating to the conduct of Borrower or Guarantor or any Affiliate of either such party, prior to the date hereof contained in the Insolvency Opinion delivered to Lender in connection with the Loan, or in any Additional Insolvency Opinion delivered subsequent to the closing of the Loan, is or shall become untrue in any material respect;

 

(xv) if a material default has occurred and continues beyond any applicable cure period under the Management Agreement as it relates to an Individual Property (or any Replacement Management Agreement) and if such default permits the Manager thereunder to remove the Individual Property from the application of the Management Agreement or terminate or cancel the Management Agreement (or any Replacement Management Agreement);

 

(xvi) if Borrower shall continue to be in Default under any of the terms, covenants or conditions of Section 9.1 hereof, or fails to cooperate with Lender in connection with a Securitization pursuant to the provisions of Section 9.1 hereof, for five (5) Business Days after notice to Borrower from Lender, provided, however, if such Default is susceptible of cure but cannot reasonably be cured within such period and provided further that Borrower shall have commenced to cure such Default within such period and thereafter diligently and expeditiously proceeds to cure the same, such five (5) Business Day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed thirty (30) days;

 

(xvii) if Borrower shall continue to be in Default under any of the other terms, covenants or conditions of this Agreement not specified in subsections (i) to (xii) above, for ten (10) days after notice to Borrower from Lender, in the case of any Default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other Default; provided, however, that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such thirty (30) day period and provided further that Borrower shall have commenced to cure such Default within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed one hundred twenty (120) days; or

 

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(xviii) if there shall be default under any of the other Loan Documents beyond any applicable cure periods contained in such documents, whether as to Borrower or the Individual Property, or if any other such event shall occur or condition shall exist, if the effect of such default, event or condition is to accelerate the maturity of any portion of the Debt or to permit Lender to accelerate the maturity of all or any portion of the Debt.

 

(b) Upon the occurrence of an Event of Default (other than an Event of Default described in clauses (vi), (vii) or (viii) above) and at any time thereafter while such Event of Default is continuing, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity but subject to Section 9.3, Lender may take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and the Properties, including, without limitation, declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and in and to all or any Individual Property, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in clauses (vi), (vii) or (viii) above, the Debt and Other Obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding.

 

Section 8.2 Remedies.  

 

(a) Upon the occurrence and during the continuance of an Event of Default, subject to Section 9.3, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any part of any Individual Property.  Subject to Section 9.3, any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singularly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents.  Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing and to the fullest extent permitted by law (i) Lender is not subject to any “one action” or “election of remedies” law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against each Individual Property and each Mortgage has been foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full.

 

(b) With respect to Borrower and the

 

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Properties, nothing contained herein or in any other Loan Document shall be construed as requiring Lender to resort to any Individual Property  for the satisfaction of any of the Debt in any preference or priority, and Lender may seek satisfaction out of all of the Properties, or any part thereof, in its absolute discretion in respect of the Debt.  In addition, to the fullest extent permitted by law, Lender shall have the right from time to time to partially foreclose a Mortgage in any manner and for any amounts secured by such Mortgage then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances:  (i) in the event Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose one or more of the Mortgages to recover such delinquent payments or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose one or more of the Mortgages to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by one or more of the Mortgages as Lender may elect.  Notwithstanding one or more partial foreclosures, the remaining Properties shall remain subject to the Mortgages to secure payment of sums secured by the Mortgages and not previously recovered, to the fullest extent permitted by law.

 

(b) Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents (the “Severed Loan Documents”) in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder.  Borrower shall execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement and such other documents as Lender shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender and provided that such severance agreement and other documents incorporate the provisions of Section 9.3.  Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents necessary or desirable to effect the aforesaid severance, Borrower ratifying all that its said attorney shall do by virtue thereof; provided, however, Lender shall not make or execute any such documents under such power until ten (10) days after notice has been given to Borrower by Lender of Lender’s intent to exercise its rights under such power.  Borrower shall be obligated to pay any costs or expenses incurred in connection with the preparation, execution, recording or filing of the Severed Loan Documents and the Severed Loan Documents shall not contain any representations, warranties or covenants not contained in the Loan Documents and any such representations and warranties contained in the Severed Loan Documents will be given by Borrower only as of the Closing Date.  Notwithstanding the foregoing, such costs and expenses shall be deemed incurred pursuant to Section 9.1 and subject to the cap set forth in Section 9.1.2 hereof.

 

(c) As used in this Section 8.2, a “foreclosure” shall include, without limitation, any sale by power of sale.

 

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Section 8.3 Remedies Cumulative; Waivers.

 

  The rights, powers and remedies of Lender under this Agreement shall be cumulative and, subject to Section 9.3, not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise.  Lender’s rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion.  No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient.  A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon.

 

ARTICLE 9 - SPECIAL PROVISIONS

 

Section 9.1 Securitization.

 

9.1.1 Sale of Notes and Securitization. 

 

(a) Borrower acknowledges and agrees that Lender may sell all or any portion of the Loan and the Loan Documents, or issue one or more participations therein, or consummate one or more private or public securitizations of rated single- or multi-class securities (the “Securities”) secured by or evidencing ownership interests in all or any portion of the Loan and the Loan Documents or a pool of assets that include the Loan and the Loan Documents (such sales, participations and/or securitizations, collectively, a “Securitization”).

 

(b) At the request of Lender, and to the extent not already required to be provided by or on behalf of Borrower under this Agreement, Borrower shall use reasonable efforts to provide information not in the possession of Lender or which may be reasonably required by Lender or take other actions reasonably required by Lender, in each case in order to satisfy the market standards to which Lender customarily adheres or which may be reasonably required by prospective investors and/or the Rating Agencies in connection with any such Securitization.  Lender shall have the right to provide to prospective investors and the Rating Agencies any information in its possession, including, without limitation, financial statements relating to Borrower, Guarantors, if any, the Property and any Tenant of the Improvements.  Borrower acknowledges that certain information regarding the Loan and the parties thereto and the Property may be included in a private placement memorandum, prospectus or other disclosure documents (the “Disclosure Documents”).  Borrower agrees that each of Borrower, Principal, Guarantor and their respective officers and representatives, shall, at Lender’s request, at its sole cost and expense (except as provided below), cooperate with Lender’s efforts to arrange for a Securitization in accordance with the market standards to which Lender customarily adheres and/or which may be required by prospective investors and/or the Rating Agencies in connection

 

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with any such Securitization. Borrower, Principal and Guarantor agree to review, at Lender’s request in connection with the Securitization, the Disclosure Documents as such Disclosure Documents relate to Borrower, Principal, Guarantor, the Properties and the Loan, including without limitation, the sections entitled “Risk Factors,” “Special Considerations,” “Description of the Mortgage,” “Description of the Mortgage Loan and Mortgaged Property,” “The Manager,” “The Borrower,” and “Certain Legal Aspects of the Mortgage Loan,” and shall confirm that the factual statements and representations contained in such sections and such other information in the Disclosure Documents (to the extent such information relates to, or is based on, or includes any information regarding the Properties, Borrower, Guarantor, Manager and/or the Loan) do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.

 

(c) In connection with a Securitization, Borrower agrees to make upon Lender’s written request, without limitation, all structural or other changes to the Loan (including delivery of one or more new component notes to replace the original note or modify the original note to reflect multiple components of the Loan and such new notes or modified note may have different interest rates and amortization schedules), modifications to any documents evidencing or securing the Loan, creation of one or more mezzanine loans (including amending Borrower’s organizational structure to provide for one or more mezzanine borrowers), modification of Borrower’s organizational documents (including, without limitation, in the case of a limited partnership, to increase the general partner’s percentage ownership in the partnership to not less than 0.5%), delivery of opinions of counsel acceptable to the Rating Agencies or potential investors and addressing such matters as the Rating Agencies or potential investors may require; provided, however, that in creating such new notes or modified notes or mezzanine notes Borrower shall not be required to (i) modify the weighted average interest rate payable under the Note (and further provided that any subsequent prepayment of the Loan shall be applied on a pro-rata basis to all promissory notes so that the weighted average interest rate does not change), (ii) modify the stated maturity of the Note, (iii) modify the aggregate amortization of principal of the Note, (iv) modify any other material economic term of the Loan, or (v) decrease the time periods during which Borrower is permitted to perform its obligations under the Loan Documents.  In connection with the foregoing, Borrower covenants and agrees to modify the Cash Management Agreement to reflect the newly created components and/or mezzanine loans.  To the extent that Borrower’s actual out-of-pocket expenses incurred pursuant to this Section 9.1.1(c) exceed $20,000, Lender shall reimburse Borrower for such expenses.

 

9.1.2 Securitization Costs.

 

  All reasonable third party costs and expenses incurred by Borrower and Guarantor in connection with Borrower’s complying with requests made under this Section 9.1 (including, without limitation, the fees and expenses of the Rating Agencies and expenses incurred pursuant to Section 9.1.1(c)) shall be paid by Borrower.  To the extent that such third party costs and expenses incurred pursuant to this Section 9.1 exceed $50,000, Lender shall reimburse Borrower for such costs and expenses.

 

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Section 9.2 Uncross of Properties. 

 

  Each Individual Borrower agrees that Lender shall have the right, at any time and from time to time, to release any Individual Property (the “Affected Property”) or Individual Borrower from the cross-defaulting and/or the cross-collateralization effected pursuant to the grant of the Mortgage from such Individual Borrower and secured by the lien of the applicable Mortgage.   In furtherance thereof, Lender shall have the right to (i) sever or divide the Note and the other Loan Documents in order to allocate to such Affected Property the portion of the Loan allocable to such Individual Property (the “Allocated Loan Amount”) which portion shall be evidenced by a new note and secured by such other loan documents (collectively, the “New Note”) having a principal amount equal to the Allocated Loan Amount applicable to such Affected Property, (ii) segregate the applicable portion of each of the Reserve Funds relating to the Affected Property, (iii) release any cross-default and/or cross-collateralization provisions applicable to such Affected Property and (iv) take such additional action consistent therewith; provided, that such New Note secured by such Affected Property, together with the Loan Documents secured by the remaining Properties, shall not increase in the aggregate (A) any monetary obligation of Borrower under the Loan Documents (provided, however, it being acknowledged and agreed that such New Note shall immediately after the dividing of the Note have the same initial weighted average coupon as the original Note prior to such dividing, notwithstanding that such New Note may, in connection with the application of principal to such New Note, subsequently cause the weighted average coupon of such New Note to change (but not increase, except that the weighted average coupon may subsequently increase due to prepayments or if an Event of Default shall occur)), or (B) any other obligation of Borrower under the Loan Documents in any material respect or decrease the rights of Borrower under the Loan Documents.  In connection with the transfer of any such Affected Property as provided for in this Section 9.2, the Loan shall be reduced by an amount equal to the amount of the New Note applicable to such Affected Property and the new loan secured by such Affected Property and the New Note shall be in an amount equal to such Allocated Loan Amount.  Subsequent to the release of the Affected Property from the lien of the Loan pursuant to this Section 9.2, the balances of the components of the Loan shall be the same as they would have been had a prepayment occurred in an amount equal to the Allocated Loan Amount of the Affected Property.  At the request of Lender, each Individual Borrower shall otherwise cooperate with Lender in its attempt to satisfy all requirements necessary in order for Lender to obtain written confirmation from the Rating Agencies that such transfer of the Affected Property from the Securitization and splitting of the Loan shall not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof, which requirements shall include, without limitation:  (A) delivery of evidence that the single purpose nature and bankruptcy remoteness of each Individual Borrower owning an Individual Property other than the Affected Property following such release have not been adversely affected and are in accordance with the terms and provisions of this Agreement (which evidence may include a “bring-down” of the Insolvency Opinion); and (B) the execution of such documents and instruments and delivery by Lender of such opinions of counsel as are typical for similar transactions, including, an opinion of counsel that the release of the Affected Property will not be a “significant modification” of this Loan within the meaning of Section 1.860G-2(b) of the regulations of the United States Department of the Treasury and that all other requirements applicable, if any, to the REMIC Trust that holds the Note (if applicable), have been satisfied or have not otherwise been violated.

 

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Section 9.3 Exculpation.

 

  Notwithstanding anything to the contrary contained in this Agreement, the Note, the Mortgages or the other Loan Documents but subject to the qualifications below, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Note, this Agreement, the Mortgages or the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Mortgages and the other Loan Documents, or in one or more Properties, the Rents, or any other collateral given to Lender pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Properties, in the Rents and in any other collateral given to Lender, and Lender, by accepting the Note, this Agreement, the Mortgages and the other Loan Documents, agrees that it shall not sue for, seek or demand any deficiency judgment against Borrower in any such action or proceeding under or by reason of or under or in connection with the Note, this Agreement, the Mortgages or the other Loan Documents.  The provisions of this Section shall not, however, (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 Borrower as a party defendant in any action or suit for foreclosure and sale under the Mortgages (as long as Lender shall not sue for, seek or demand any deficiency judgment against Borrower); (c) affect the validity or enforceability of or any guaranty made in connection with the Loan or any of the rights and remedies of Lender thereunder; (d) impair the right of Lender to obtain the appointment of a receiver; (e) impair the enforcement of any assignment of leases contained in the Mortgage; (f) constitute a prohibition against Lender seeking a deficiency judgment against Borrower (but not Guarantor) if necessary in order to fully realize the security granted by the Mortgages or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against any Individual Property; or (g) constitute a waiver of the right of Lender to enforce the liability and obligation of Borrower, by money judgment or otherwise, to the extent of any loss, damage, cost, expense, liability, claim or other obligation incurred by Lender (including attorneys’ fees and expenses reasonably incurred)  arising out of or in connection with the following:

 

(i) fraud or intentional misrepresentation by any Individual Borrower, Principal or Guarantor in connection with the Loan;

 

(ii) the gross negligence or willful misconduct of any Individual Borrower, Principal or Guarantor;

 

(iii) material physical waste of any Individual Property by or knowingly permitted by any Individual Borrower, Principal or Guarantor, or to which an Individual Borrower, Principal or Guarantor has knowledge of and has acquiesced to;

 

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(iv) the removal or disposal by or knowingly permitted by any Individual Borrower, Principal or Guarantor or any Affiliate of the foregoing of any portion of any Individual Property after an Event of Default (unless otherwise permitted under the Loan Documents);

 

(v) the misapplication or conversion by any Individual Borrower, Principal or Guarantor of (A) any Insurance Proceeds paid by reason of any loss, damage or destruction to any Individual Property, (B) any Awards received in connection with a Condemnation of all or a portion of any Individual Property, (C) any Rents following an Event of Default, or (D) any Rents paid more than one month in advance;

 

(vi) failure of any Individual Borrower, Principal or Guarantor or any Affiliate of the foregoing to pay charges for labor or materials incurred or other charges or judgments  that can create Liens on any Individual Borrower’s interest in any portion of any Individual Property to the extent such Liens are not bonded over or discharged in accordance with this Agreement or the other Loan Documents;

 

(vii) failure to appoint a new property manager upon the request of Lender as permitted under this Agreement;

 

(viii) failure of any Individual Borrower or Principal to maintain its status as a Special Purpose Entity or a breach by any such party of any representation, warranty or covenant set forth in Section 4.1.30 hereof;

 

(ix) failure of any Individual Borrower to permit on-site inspections of its Individual Property subject to the rights of Tenants and any applicable cure period set forth in the Loan Documents;

 

(x) failure of any Individual Borrower to provide financial information as required under the Loan Documents subject to any applicable cure period (except for financial information required to be delivered by a Tenant pursuant to the applicable Lease that has not been delivered to Borrower, provided Borrower has requested such financial information from such Tenant);

 

(xi) the breach of any representation, warranty, covenant or indemnification provision in the Environmental Indemnity, in this Agreement or in any Mortgage concerning environmental laws, hazardous substances or asbestos or any indemnification of Lender with respect thereto in either document; and

 

(xii) any security deposits, advance deposits or any other deposits collected with respect to any Individual Property which are not delivered to Lender upon a foreclosure of such Individual Property or action in lieu thereof, except to the extent any such security deposits were applied in accordance with the terms and conditions of any of the Leases prior to the occurrence of the Event of Default that gave rise to such foreclosure or action in lieu thereof.

 

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Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code to file a claim for the full amount of the Debt secured by the Mortgages or to require that all collateral shall continue to secure all of the Debt owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be fully recourse to Borrower (i) in the event of: (a) any Individual Borrower or Principal filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against any Individual Borrower or Principal under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law in which such Individual Borrower, Principal or Guarantor colludes with, or otherwise assists such Person, or solicits or causes to be solicited petitioning creditors for any involuntary petition against such Individual Borrower or Principal from any Person; (c) any Individual Borrower or Principal filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (d) any Individual Borrower or Principal consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for such Individual Borrower or Principal or any portion of any Individual Property (other than a receiver requested by Lender in connection with enforcement of its rights under the Loan Documents); (e) any Individual Borrower or Principal making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due; (ii) if the first full monthly payment of interest on the Note is not paid within five (5) days of notice that such payment is late (provided, however, that such grace period relates only to the recourse trigger described in this paragraph); (iii) if any Individual Borrower fails to obtain Lender’s prior written consent to any Indebtedness or voluntary Lien encumbering the Property as required by the Loan Documents; or (iv) if any Individual Borrower fails to obtain Lender’s prior written consent to any Transfer as required by this Agreement or the Mortgage.

 

Section 9.4 Matters Concerning Manager.

 

  At the option of Lender exercised by written notice to Borrower and Manager, Borrower shall cause any Individual Property to be removed from the application of the Management Agreement (i) upon the occurrence and during the continuance of an Event of Default, (ii) if Manager shall become subject to a Bankruptcy Action, (iii) if Manager is in default under the terms of the Management Agreement with respect to any Individual Property beyond any applicable grace or cure period, or (iv) if a Manager DSCR Trigger occurs; and upon such a removal of such Individual Property from the application of the Management Agreement, Borrower shall replace the Manager with a Qualified Manager pursuant to a Replacement Management Agreement, it being understood and agreed that the property management fee for such Qualified Manager shall not exceed then prevailing market rates.

 

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Section 9.5 Servicer.

 

  At the option of Lender, the Loan may be serviced by a master servicer, primary servicer, special servicer and/or trustee (any such master servicer, primary servicer, special servicer, and trustee, together with its agents, nominees or designees, are collectively referred to as “Servicer”) selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to Servicer pursuant to a pooling and servicing agreement, servicing agreement, special servicing agreement  or other agreement providing for the servicing of one or more mortgage loans (collectively, the “Servicing Agreement”) between Lender and Servicer.  Borrower shall not be responsible for (i) any set up fees or other initial costs relating to or arising under the Servicing Agreement, (ii) the payment of the regular monthly master servicing fee or trustee fee due to Servicer under the Servicing Agreement, or (iii) any fees or expenses required to be borne by, and not reimbursable to, Servicer.  Notwithstanding the foregoing, Borrower shall promptly reimburse Lender on demand for the following costs and expenses payable by Lender to Servicer as a result of the Loan becoming specially serviced: (i) any liquidation fees that are due and payable to Servicer under the Servicing Agreement in connection with the exercise of any or all remedies permitted under this Agreement, (ii) any workout fees and special servicing fees that are due and payable with respect to the Loan to Servicer under the Servicing Agreement, which fees may be due and payable under the Servicing Agreement  on a periodic or continuing basis, and (iii) the costs of all property inspections and/or appraisals of the Properties (or any updates to any existing inspection or appraisal) that Servicer may be required to obtain (other than the cost of regular annual inspections required to be borne by Servicer under the Servicing Agreement).

 

ARTICLE 10 - MISCELLANEOUS

 

Section 10.1 Survival.

 

  This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents.  Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party.  All covenants, promises and agreements in this Agreement, by or on behalf of each party, shall inure to the benefit of the legal representatives, successors and assigns of the other party.

 

Section 10.2 Lender’s Discretion.

 

  Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive.

 

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Section 10.3 Governing Law.

 

 

 

 

(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS (OTHER THAN LIENS AND SECURITY INTERESTS IN THE LOCKBOX ACCOUNT, THE CASH MANAGEMENT ACCOUNT AND THE RESERVE FUNDS) SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER.  TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY AT LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT

 

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MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.  BORROWER DOES HEREBY DESIGNATE AND APPOINT:

 

CT Corporation System

111 Eighth Avenue

New York, NY 10011

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.  BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

 

Section 10.4 Modification, Waiver in Writing.

 

  No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, nor consent to any departure by Borrower or Lender therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given.  Except as otherwise expressly provided in the Loan Documents, no notice to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances (unless such future notice or demand is otherwise required to be given under applicable law).

 

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Section 10.5 Delay Not a Waiver.

 

  Neither any failure nor any delay on the part of any party in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

 

Section 10.6 Notices.

 

  All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, and by telecopier (with answer back acknowledged), addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section):

 

 

	
  

	
If to Lender:

	
JPMorgan Chase Bank, N.A.

 

	
  

	
383 Madison Avenue

 

	
  

	
New York, New York 10179

 

	
  

	
Attention:  Joseph E. Geoghan

 

	
  

	
Facsimile No.: (212) 272-7047

 

	
  

	
with a copy to:

	
JPMorgan Chase Bank, N.A.

 

	
  

	
383 Madison Avenue

New York, New York 10179

Attention:  Nancy Alto

Facsimile No.: (212) 623-4779

 

	
  

	
and

 

	
  

	
Katten Muchin Rosenman LLP

 

	
  

	
550 S. Tryon Street, Suite 2900

 

	
  

	
Charlotte, North Carolina  28202

 

	
  

	
Attention:  Daniel S. Huffenus

 

	
  

	
Facsimile No.: 704-344-3056

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If to Borrower:

	
c/o Cole Real Estate Investments

 

	
  

	
2555 East Camelback Road, Ste. 400

 

	
  

	
Phoenix, Arizona 85016

 

	
  

	
Attention: Legal Department

 

	
  

	
Facsimile No.: (480) 449-7012

	
  

	
with a copy to:

	
Kutak Rock LLP

	
  

	
8601 North Scottsdale Road, Suite 300

	
  

	
Scottsdale, Arizona 85253

	
  

	
Attention: Mitch Padover

	
  

	
Facsimile No.: (480) 429-5001

 

A notice shall be deemed to have been given:  in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day; or in the case of telecopy, upon sender’s receipt of a machine-generated confirmation of successful transmission after advice by telephone to recipient that a telecopy notice is forthcoming.

 

Section 10.7 Trial by Jury.

 

  BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.

 

Section 10.8 Headings.

 

  The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

Section 10.9 Severability.

 

  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

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Section 10.10 Preferences.

 

  Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder, provided such reapplication is consistent with the provisions of this Agreement.  To the extent Borrower makes a payment or payments to Lender, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender.

 

Section 10.11 Waiver of Notice.

 

  Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice.  Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrower.

 

Section 10.12 Remedies of Borrower.

 

  In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary damages, and Borrower’s sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment.  The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment.

 

Section 10.13 Expenses; Indemnity. 

 

(a) Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of written notice from Lender for all reasonable costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Lender in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower (including without limitation any opinions reasonably requested by Lender as to any legal matters arising under this Agreement or the other Loan Documents with respect to the Properties); (ii) Borrower’s ongoing performance of and compliance with Borrower’s respective agreements and covenants contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date, including, without limitation, confirming compliance with environmental and insurance requirements; (iii) Lender’s ongoing performance and compliance with all agreements

 

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and conditions contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date other than regular monthly master servicing fees or trustee fees; (iv) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents or any other documents requested by Borrower or otherwise required hereunder; (v) securing Borrower’s compliance with any requests made pursuant to the provisions of this Agreement; (vi) subject to Section 9.3 hereof, the filing and recording fees and expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all reasonably required legal opinions, and other similar expenses incurred in creating and perfecting the Lien in favor of Lender pursuant to this Agreement and the other Loan Documents; (vii) subject to Section 9.3 hereof, 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 Borrower, this Agreement, the other Loan Documents, the Property, or any other security given for the Loan; and (viii) subject to Section 9.3 hereof, enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to the Properties (including, without limitation, any fees incurred by Servicer in connection with the transfer of the Loan to a special servicer prior to a Default or Event of Default) 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; provided, however, that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender.  Any cost and expenses due and payable to Lender may be paid from any amounts in the Lockbox Account or Cash Management Account, as applicable.

 

(b) Subject to Section 9.3 hereof, Borrower shall indemnify, defend and hold harmless the Indemnified Parties from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not an Indemnified Party shall be designated a party thereto), that may be imposed on, incurred by, or asserted against any Indemnified Party in any manner relating to or arising out of (i) any breach by Borrower of its obligations under, or any material misrepresentation by Borrower contained in, this Agreement or the other Loan Documents, or (ii) the use or intended use of the proceeds of the Loan (collectively, the “Indemnified Liabilities”); provided, however, that Borrower shall not have any obligation to any Indemnified Party hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of such Indemnified Party.  To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by the Indemnified Parties.

 

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(c) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to reimburse Lender for, any fees and expenses incurred by any Rating Agency in connection with any Rating Agency review of the Loan, the Loan Documents or any transaction contemplated thereby or any consent, approval, waiver or confirmation obtained from such Rating Agency pursuant to the terms and conditions of this Agreement or any other Loan Document and Lender shall be entitled to require payment of such fees and expenses as a condition precedent to the obtaining of any such consent, approval, waiver or confirmation.  Any Rating Agency fees in connection with the initial Securitization shall be subject to Section 9.1.2 above.

 

Section 10.14 Schedules Incorporated.

 

  The Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.

 

Section 10.15 Offsets, Counterclaims and Defenses.

 

  Any assignee of Lender’s interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

 

Section 10.16 No Joint Venture or Partnership; No Third Party Beneficiaries. 

 

(a) Borrower and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender.  Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Properties other than that of mortgagee, beneficiary or lender.

 

(b) This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein.  All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable to do so.

 

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Section 10.17 Publicity.

 

  All news releases, publicity or advertising by Borrower or Lender (including Affiliates of either such party) through any media intended to reach the general public which refers to Borrower, Lender, the Loan, the Loan Documents, the financing evidenced thereby, shall be subject to the prior written approval of the other party; provided however, the foregoing shall not apply to information included in Disclosure Documents or regulatory filings of Cole Credit Property Trust III, Inc.

 

Section 10.18 Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets.

 

 

 

 

(a) Each Individual Borrower acknowledges that Lender has made the Loan to Borrower upon the security of its collective interest in the Properties and in reliance upon the aggregate of the Properties taken together being of greater value as collateral security than the sum of each Individual Property taken separately.  Each Individual Borrower agrees that the Mortgages are and will be cross-collateralized and cross-defaulted with each other so that (i) an Event of Default under any of the Mortgages shall constitute an Event of Default under each of the other Mortgages which secure the Note; (ii) an Event of Default under the Note or this Agreement shall constitute an Event of Default under each Mortgage; (iii) each Mortgage shall constitute security for the Note as if a single blanket lien were placed on all of the Properties as security for the Note; and (iv) such cross-collateralization shall in no event be deemed to constitute a fraudulent conveyance.

 

(b) To the fullest extent permitted by law, Borrower, for itself and its successors and assigns, waives all rights to a marshalling of the assets of Borrower, Borrower’s partners and others with interests in Borrower, and of the Properties, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Properties for the collection of the Debt without any prior or different resort for collection or of the right of Lender to the payment of the Debt out of the net proceeds of the Properties in preference to every other claimant whatsoever.  In addition, each Individual Borrower, for itself and its successors and assigns, waives in the event of foreclosure of any or all of the Mortgages, any equitable right otherwise available to an Individual Borrower which would require the separate sale of the Properties or require Lender to exhaust its remedies against any Individual Property or any combination of the Properties before proceeding against any other Individual Property or combination of Properties; and further in the event of such foreclosure each Individual Borrower does hereby expressly consents to and authorizes, at the option of Lender, the foreclosure and sale either separately or together of any combination of the Properties.

 

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Section 10.19 Waiver of Counterclaim.

 

  Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents.

 

Section 10.20 Conflict; Construction of Documents; Reliance.

 

  In the event of any conflict between the provisions of this Agreement and any of the other Loan Documents, the provisions of this Agreement shall control.  The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same.  Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Lender or any parent, subsidiary or Affiliate of Lender.  Lender shall not be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Loan Documents or any other agreements or instruments which govern the Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to Lender’s exercise of any such rights or remedies.  Borrower acknowledges that Lender engages in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of Borrower or its Affiliates.

 

Section 10.21 Brokers and Financial Advisors.

 

  Each party hereby represents to the other that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement.  Each party hereby agrees to indemnify, defend and hold the other harmless from and against any and all claims, liabilities, costs and expenses of any kind (including reasonable attorneys’ fees and expenses) in any way relating to or arising from a claim by any Person that such Person acted on behalf of such party in connection with the transactions contemplated herein.  The provisions of this Section 10.21 shall survive the expiration and termination of this Agreement and the payment of the Debt.

 

Section 10.22 Prior Agreements.

 

  This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written, are superseded by the terms of this Agreement and the other Loan Documents.

 

90523206v16

  

108

  

 

Section 10.23 Joint and Several Liability.

 

  If Borrower consists of more than one (1) Person, the obligations and liabilities of each Person shall be joint and several.  The parties hereto acknowledge that the defined term “Borrower” (as well as the defined term defining each other Collective Group) has been defined to collectively include each Individual Borrower (and in the case of each Collective Group, defined to collectively include each member of the same).  It is the intent of the parties hereto in determining whether (a) a breach of a representation or a covenant has occurred, (b) there has occurred a Default or Event of Default, or (c) an event has occurred which would create recourse obligations under Section 9.3 of this Agreement, that any such breach, occurrence or event with respect to any Individual Borrower (or with respect to any single member of a Collective Group) shall be deemed to be such a breach, occurrence or event with respect to every Individual Borrower (and in the case of each Collective Group, each member of the same) and that every Individual Borrower need not have been involved with such breach, occurrence or event in order for the same to be deemed such a breach, occurrence or event with respect to every Individual Borrower (and likewise that each member of a Collective Group need not have been involved with such breach, occurrence or event in order for the same to be deemed such a breach, occurrence or event with respect to such Collective Group).  The term “Collective Group” as used in this Agreement shall refer to each of the groups of entities represented in this Agreement by the following defined terms:  Borrower and Principal.  The obligations and liabilities of each Individual Borrower shall be joint and several.

 

Section 10.24 Certain Additional Rights of Lender (VCOC).

 

  Notwithstanding anything to the contrary contained in this Agreement, Lender shall have:

 

(a) the right to routinely consult with and advise Borrower’s management regarding the significant business activities and business and financial developments of Borrower; provided, however, that such consultations shall not include discussions of environmental compliance programs or disposal of hazardous substances.  Consultation meetings should occur on a regular basis (no less frequently than quarterly) with Lender having the right to call special meetings at any reasonable times and upon reasonable advance notice;

 

(b) the right, in accordance with the terms of this Agreement, to examine the books and records of Borrower at any reasonable times upon reasonable notice;

 

(c) the right, in accordance with the other terms of this Agreement, including, without limitation, Section 5.1.11 hereof, to receive monthly, quarterly and year end financial reports, including balance sheets, statements of income, shareholder’s equity and cash flow, a management report and schedules of outstanding indebtedness; and

 

90523206v16

  

109

  

 

 

(d) the right, without restricting any other rights of Lender under this Agreement (including any similar right), to approve any acquisition by Borrower of any other significant property (other than personal property required for the day to day operation of the Properties).

 

The rights described above in this Section 10.24 may be exercised by any entity which owns and controls, directly or indirectly, substantially all of the interests in Lender.

 

 

 

 

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90523206v16

  

110

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written.

BORROWER

COLE TS SUMMERDALE AL, LLC, a Delaware limited liability company

 

COLE TS KENEDY TX, LLC, a Delaware limited liability company

 

COLE FE LAFAYETTE IN, LLC, a Delaware limited liability company

 

COLE AS KILLEEN TX, LLC, a Delaware limited liability company

 

COLE FE EFFINGHAM IL, LLC, a Delaware limited liability company

 

COLE WG ST. CHARLES IL, LLC, a Delaware limited liability company

 

COLE WG GREENVILLE NC, LLC, a Delaware limited liability company

 

COLE WG APPLETON WI, LLC, a Delaware limited liability company

 

COLE WG LANCASTER SC, LLC, a Delaware limited liability company

 

COLE WG BAYTOWN TX, LLC, a Delaware limited liability company

 

	
  

	
By:

	
/s/ Todd J. Weiss

	 

 

	
  

	
Name: Todd J. Weiss

 

	
  

	
as Officer of, and on behalf of, each of the 10 entities listed above

 

90523206v16

  

111

  

 

COLE WG OMAHA NE, LLC, a Delaware limited liability company

 

COLE WG BIRMINGHAM AL, LLC, a Delaware limited liability company

 

COLE AA DELAWARE OH, LLC, a Delaware limited liability company

 

COLE AA CANTON OH, LLC, a Delaware limited liability company

 

COLE LA DENTON TX, LLC, a Delaware limited liability company

 

	
  

	
By:

	
/s/ Todd J. Weiss

	 

 

	
  

	
Name: Todd J. Weiss

 

	
  

	
as Officer of, and on behalf of, each of the 5 entities listed above

 

COLE LA HIGHLAND CA, LP, a Delaware limited partnership

 

By:           Cole GP LA Highland CA, LLC, 

a  Delaware limited liability company, its general partner

 

By:           /s/ Todd J. Weiss                                

Name:           Todd J. Weiss

Title:           Officer

90523206v16

  

112

  

JPMORGAN CHASE BANK, N.A., a banking association chartered under the laws of the United States of America

By:           /s/ Steven Hantz                                

Name: Steven Hantz

Title: Executive Director

90523206v16

  

113

  

 

JOINDER AGREEMENT

 

The undersigned (“Joinder Party”) hereby acknowledges and agrees that it has read and reviewed the foregoing Loan Agreement to which this Joinder Agreement has been attached.  Capitalized terms used but not defined herein shall have the meaning set forth in the Loan Agreement.

 

Joinder Party hereby covenants, represents, warrants, acknowledges and agrees as follows:

 

(a)           Joinder Party has read and reviewed the Loan Agreement and is familiar with the terms and provisions thereof.

 

(b)           Joinder Party covenants and agrees to observe and perform all of the covenants and agreements of Joinder Party contained in Section 9.1 of the Loan Agreement.

 

(c)           The obligations of Joinder Party under this Joinder Agreement are enforceable against Joinder Party and are not subject to any defenses, offsets or counterclaims.

 

(d)           The provisions of this Joinder Agreement are for the benefit of Lender.

 

(e)           THIS JOINDER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

 

[remainder of page intentionally left blank]

 

90523206v16

  

114

  

 

IN WITNESS WHEREOF, the undersigned has caused this Joinder Agreement to be duly executed and delivered as of the date first above written.

 

JOINDER PARTY:

 

COLE REIT III OPERATING PARTNERSHIP, LP, a Delaware limited partnership

 

	
  

	
By:

	
Cole Credit Property Trust III, Inc., a Maryland corporation, its General Partner

 

	
  

	
By:

	
/s/ John M. Pons

	 

 

	
  

	
Name: John M. Pons

 

	
  

	
Title: Authorized Officer

 

 

 

 

 

115ex10_89.htm

EXHIBIT 10.89

 

 

 

LOAN AGREEMENT

 

Dated as of June 4, 2010

 

between

 

The entities listed on Schedule L attached hereto,

 

individually and collectively, as Borrower,

 

and

 

GOLDMAN SACHS COMMERCIAL MORTGAGE CAPITAL, L.P.,

 

 

as Lender

 

 

 

 

 

 

 

| NY\1631294.13  mle gs cole Loan Agreement||

  

  

  

TABLE OF CONTENTS

	
  

	
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           Page

	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	  	
DEFINITIONS

	  	  	  	
1

	  

 

ARTICLE I

 

 

GENERAL TERMS

 

	  	
Section 1.1

	  	
The Loan

	  	
27

	  
	  	
Section 1.2

	  	
Interest and Principal

	  	
27

	  
	  	
Section 1.3

	  	
Method and Place of Payment

	  	
29

	  
	  	
Section 1.4

	  	
Taxes; Regulatory Change

	  	
29

	  
	  	
Section 1.5

	  	
Release

	  	
30

	  

ARTICLE II

DEFEASANCE; ASSUMPTION

	  	
Section 2.1

	  	
Defeasance

	  	
31

	  
	  	
Section 2.2

	  	
Assumption

	  	
33

	  
	  	
Section 2.3

	  	
Transfers to Qualified Equityholders

	  	
34

	  

ARTICLE III

ACCOUNTS

	  	
Section 3.1

	  	
Cash Management Account

	  	
34

	  
	  	
Section 3.2

	  	
Distributions from Cash Management Account

	  	
35

	  
	  	
Section 3.3

	  	
Loss Proceeds Account

	  	
36

	  
	  	
Section 3.4

	  	
Basic Carrying Costs Escrow Account

	  	
36

	  
	  	
Section 3.5

	  	
Deferred Maintenance and Environmental Escrow Account

	  	
37

	  
	  	
Section 3.6

	  	
Unfunded Obligations Account

	  	
38

	  
	  	
Section 3.7

	  	
Excess Cash Flow Reserve Account

	  	
39

	  
	  	
Section 3.8

	  	
Account Collateral

	  	
40

	  
	  	
Section 3.9

	  	
Bankruptcy

	  	
40

	  

ARTICLE IV

REPRESENTATIONS

	  	
Section 4.1

	  	
Organization

	  	
41

	  
	  	
Section 4.2

	  	
Authorization

	  	
41

	  
	  	
Section 4.3

	  	
No Conflicts

	  	
41

	  

  

  

  

	  	
Section 4.4

	  	
Consents

	  	
42

	  
	  	
Section 4.5

	  	
Enforceable Obligations

	  	
42

	  
	  	
Section 4.6

	  	
No Default

	  	
42

	  
	  	
Section 4.7

	  	
Payment of Taxes

	  	
42

	  
	  	
Section 4.8

	  	
Compliance with Law

	  	
42

	  
	  	
Section 4.9

	  	
ERISA

	  	
42

	  
	  	
Section 4.10

	  	
Investment Company Act

	  	
43

	  
	  	
Section 4.11

	  	
No Bankruptcy Filing

	  	
43

	  
	  	
Section 4.12

	  	
Other Debt

	  	
43

	  
	  	
Section 4.13

	  	
Litigation

	  	
43

	  
	  	
Section 4.14

	  	
Leases; Material Agreements

	  	
43

	  
	  	
Section 4.15

	  	
Full and Accurate Disclosure

	  	
44

	  
	  	
Section 4.16

	  	
Financial Condition

	  	
44

	  
	  	
Section 4.17

	  	
Single-Purpose Requirements

	  	
45

	  
	  	
Section 4.18

	  	
Use of Loan Proceeds

	  	
45

	  
	  	
Section 4.19

	  	
Not Foreign Person

	  	
45

	  
	  	
Section 4.20

	  	
Labor Matters

	  	
45

	  
	  	
Section 4.21

	  	
Title

	  	
45

	  
	  	
Section 4.22

	  	
No Encroachments

	  	
46

	  
	  	
Section 4.23

	  	
Physical Condition

	  	
46

	  
	  	
Section 4.24

	  	
Fraudulent Conveyance

	  	
46

	  
	  	
Section 4.25

	  	
Management

	  	
46

	  
	  	
Section 4.26

	  	
Condemnation

	  	
46

	  
	  	
Section 4.27

	  	
Utilities and Public Access

	  	
47

	  
	  	
Section 4.28

	  	
Environmental Matters

	  	
47

	  
	  	
Section 4.29

	  	
Assessments

	  	
47

	  
	  	
Section 4.30

	  	
No Joint Assessments

	  	
48

	  
	  	
Section 4.31

	  	
Separate Lots

	  	
48

	  
	  	
Section 4.32

	  	
Permits; Certificate of Occupancy

	  	
48

	  
	  	
Section 4.33

	  	
Flood Zone

	  	
48

	  
	  	
Section 4.34

	  	
Security Deposits

	  	
48

	  
	  	
Section 4.35

	  	
Acquisition Documents

	  	
48

	  
	  	
Section 4.36

	  	
Insurance

	  	
48

	  
	  	
Section 4.37

	  	
No Dealings

	  	
48

	  
	  	
Section 4.38

	  	
Estoppel Certificates

	  	
48

	  
	  	
Section 4.39

	  	
Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws

	  	
48

	  
	  	
Section 4.40

	  	
Survival

	  	
49

	  

  

  

  

ARTICLE V

AFFIRMATIVE COVENANTS

	  	
Section 5.1

	  	
Existence

	  	
49

	  
	  	
Section 5.2

	  	
Maintenance of Properties

	  	
49

	  
	  	
Section 5.3

	  	
Compliance with Legal Requirements

	  	
50

	  
	  	
Section 5.4

	  	
Impositions and Other Claims

	  	
50

	  
	  	
Section 5.5

	  	
Access to Properties

	  	
51

	  
	  	
Section 5.6

	  	
Cooperate in Legal Proceedings

	  	
52

	  
	  	
Section 5.7

	  	
Leases

	  	
52

	  
	  	
Section 5.8

	  	
Plan Assets, etc

	  	
53

	  
	  	
Section 5.9

	  	
Further Assurances

	  	
53

	  
	  	
Section 5.10

	  	
Management of Collateral

	  	
54

	  
	  	
Section 5.11

	  	
Notice of Material Event

	  	
54

	  
	  	
Section 5.12

	  	
Annual Financial Statements

	  	
55

	  
	  	
Section 5.13

	  	
Quarterly Financial Statements

	  	
55

	  
	  	
Section 5.14

	  	
Monthly Financial Statements; Non-Delivery of Financial Statements

	  	
56

	  
	  	
Section 5.15

	  	
Insurance

	  	
56

	  
	  	
Section 5.16

	  	
Casualty and Condemnation

	  	
62

	  
	  	
Section 5.17

	  	
Annual Budget

	  	
65

	  
	  	
Section 5.18

	  	
General Indemnity

	  	
65

	  
	  	
Section 5.19

	  	
Nonbinding Consultation

	  	
66

	  
	  	
Section 5.20

	  	
Compliance with Encumbrances and Material Agreements

	  	
67

	  
	  	
Section 5.21

	  	
Prohibited Persons

	  	
67

	  
	  	
Section 5.22

	  	
Title to the Properties

	  	
68

	  
	  	
Section 5.23

	  	
Single-Purpose Entity

	  	
68

	  
	  	
Section 5.24

	  	
Separate Tax Lots

	  	
68

	  
	  	
Section 5.25

	  	
Implementation of Blocked Account

	  	
68

	  

ARTICLE VI

NEGATIVE COVENANTS

	  	
Section 6.1

	  	
Liens on the Properties

	  	
68

	  
	  	
Section 6.2

	  	
Ownership

	  	
68

	  
	  	
Section 6.3

	  	
Transfer; Change of Control

	  	
68

	  
	  	
Section 6.4

	  	
Debt

	  	
68

	  
	  	
Section 6.5

	  	
Dissolution; Merger or Consolidation

	  	
69

	  
	  	
Section 6.6

	  	
Change in Business

	  	
69

	  

  

  

  

	  	
Section 6.7

	  	
Debt Cancellation

	  	
69

	  
	  	
Section 6.8

	  	
Affiliate Transactions

	  	
69

	  
	  	
Section 6.9

	  	
Misapplication of Funds

	  	
69

	  
	  	
Section 6.10

	  	
Jurisdiction of Formation; Name

	  	
69

	  
	  	
Section 6.11

	  	
Modifications and Waivers

	  	
69

	  
	  	
Section 6.12

	  	
ERISA

	  	
70

	  
	  	
Section 6.13

	  	
Alterations and Expansions

	  	
70

	  
	  	
Section 6.14

	  	
Advances and Investments

	  	
70

	  
	  	
Section 6.15

	  	
Single-Purpose Entity

	  	
71

	  
	  	
Section 6.16

	  	
Zoning and Uses

	  	
71

	  
	  	
Section 6.17

	  	
Waster

	  	
71

	  

ARTICLE VII

DEFAULTS

	  	
Section 7.1

	  	
Event of Default

	  	
71

	  
	  	
Section 7.2

	  	
Remedies

	  	
75

	  
	  	
Section 7.3

	  	
No Waiver

	  	
76

	  
	  	
Section 7.4

	  	
Application of Payments after an Event of Default

	  	
76

	  

ARTICLE VIII

CONDITIONS PRECEDENT

	  	
Section 8.1

	  	
Conditions Precedent to Closing

	  	
76

	  

ARTICLE IX

MISCELLANEOUS

	  	
Section 9.1

	  	
Successors

	  	
79

	  
	  	
Section 9.2

	  	
GOVERNING LAW

	  	
79

	  
	  	
Section 9.3

	  	
Modification, Waiver in Writing

	  	
80

	  
	  	
Section 9.4

	  	
Notices

	  	
80

	  
	  	
Section 9.5

	  	
TRIAL BY JURY

	  	
81

	  
	  	
Section 9.6

	  	
Headings

	  	
81

	  
	  	
Section 9.7

	  	
Assignment and Participation

	  	
82

	  
	  	
Section 9.8

	  	
Severability

	  	
83

	  
	  	
Section 9.9

	  	
Preferences; Waiver of Marshalling of Assets

	  	
83

	  
	  	
Section 9.10

	  	
Remedies of Borrower

	  	
84

	  

  

  

  

	  	
Section 9.11

	  	
Offsets, Counterclaims and Defenses

	  	
84

	  
	  	
Section 9.12

	  	
No Joint Venture

	  	
84

	  
	  	
Section 9.13

	  	
Conflict; Construction of Documents

	  	
84

	  
	  	
Section 9.14

	  	
Brokers and Financial Advisors

	  	
84

	  
	  	
Section 9.15

	  	
Counterparts

	  	
84

	  
	  	
Section 9.16

	  	
Estoppel Certificates

	  	
84

	  
	  	
Section 9.17

	  	
Payment of Expenses; Mortgage Recording Taxes

	  	
85

	  
	  	
Section 9.18

	  	
No Third-Party Beneficiaries

	  	
86

	  
	  	
Section 9.19

	  	
Non-Recourse

	  	
86

	  
	  	
Section 9.20

	  	
Right of Set-Off

	  	
87

	  
	  	
Section 9.21

	  	
Exculpation of Lender

	  	
87

	  
	  	
Section 9.22

	  	
Servicer

	  	
88

	  
	  	
Section 9.23

	  	
No Fiduciary Duty

	  	
88

	  
	  	
Section 9.24

	  	
Borrow Information

	  	
88

	  
	  	
Section 9.25

	  	
PATRIOT Act Records

	  	
89

	  
	  	
Section 9.26

	  	
Prior Agreements

	  	
89

	  
	  	
Section 9.27

	  	
Publicity

	  	
89

	  
	  	
Section 9.28

	  	
Joint and Several Liability

	  	
90

	  
	  	
Section 9.29

	  	
Delay Not a Waiver

	  	
90

	  
	  	
Section 9.30

	  	
Schedule and Exhibits Incorporated

	  	
90

	  

ARTICLE X

CONTRIBUTION AGREEMENT

	  	
Section 10.1

	  	
Contribution Generally

	  	
90

	  
	  	
Section 10.2

	  	
Reimbursement Contribution

	  	
90

	  
	  	
Section 10.3

	  	
Defaulting Borrower

	  	
91

	  
	  	
Section 10.4

	  	
Maximum Liability

	  	
91

	  
	  	
Section 10.5

	  	
Applicable Contributions

	  	
91

	  
	  	
Section 10.6

	  	
Reimbursement Contribution as Asset

	  	
91

	  
	  	
Section 10.7

	  	
Subordination

	  	
91

	  
	  	
Section 10.8

	  	
Waivers

	  	
91

	  

 

| NY\1631294.13  mle gs cole Loan Agreement||

  

  

  

Exhibits

 

A           Organizational Chart

B           Form of Tenant Notice

 

Schedules

 

A           Property

B           Exception Report

C           Deferred Maintenance Conditions

D           Unfunded Obligations

E           Rent Roll

F           Material Agreements

G           Allocated Loan Amounts

H           Lease Exceptions to Representations

I           Properties Requiring Separate Tax Lot Designations

J           Investment Grade Rated Tenants

K           Tenant Improvements and Material Alterations Currently Underway

L           List of Borrowers

 

| NY\1631294.13  mle gs cole Loan Agreement||

  

  

  

LOAN AGREEMENT

 

This Loan Agreement (this “Agreement”) is dated June 4, 2010 and is between GOLDMAN SACHS COMMERCIAL MORTGAGE CAPITAL, L.P., a Delaware limited partnership, as lender (together with its successors and assigns, including, without limitation, any lawful holder of any portion of the Indebtedness, as hereinafter defined, “Lender”), and the entities listed on Schedule L attached hereto, individually and collectively, as the context requires, as borrower (together with their permitted successors and assigns, “Borrower”).

 

RECITALS

 

Borrower desires to obtain from Lender the Loan (as hereinafter defined) in connection with the financing of the Properties (as hereinafter defined).

 

Lender is willing to make the Loan on the terms and conditions set forth in this Agreement if Borrower joins in the execution and delivery of this Agreement, issues the Note and executes and delivers the other Loan Documents.

 

Therefore, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lender and Borrower agree, represent and warrant as follows:

 

DEFINITIONS

 

(a)           When used in this Agreement, the following capitalized terms have the following meanings:

 

“Account Collateral” means, collectively, the Collateral Accounts and all sums at any time held, deposited or invested therein, together with any interest or other earnings thereon, and all securities and investment property credited thereto and all proceeds thereof (including, without limitation, proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities.

 

“actual knowledge” means the conscious awareness of facts or other information.

 

“Affiliate” means as to any Person, any other Person that, directly or indirectly, is in Control of, is Controlled by or is under common Control with such Person.

 

“Affiliated Approved Property Manager” shall mean any Approved Property Manager which is an Affiliate of Borrower or Sponsor.

 

 

| NY\1631294.13  mle gs cole Loan Agreement||

  

1

  

“Agreement” means this Loan Agreement, as the same may from time to time hereafter be amended, restated, replaced, supplemented or otherwise modified.

 

“Allocated Loan Amount” means, with respect to each Property, the portion of the Loan Amount allocated thereto as set forth in Schedule G attached hereto.

 

“ALTA” means the American Land Title Association, or any successor thereto.

 

“Alteration” means any demolition, alteration, installation, improvement  or expansion of or to any of the Properties or any portion thereof.

 

“Alteration Threshold Amount” has the meaning set forth in Section 6.13.

 

“Annual Budget” means a capital and operating expenditure budget for the Properties prepared by Borrower and specifying amounts sufficient to operate and maintain the Properties at a standard at least equal to that maintained on the Closing Date.

 

“Appraisal” means, with respect to each Property, an as-is appraisal of such Property that is prepared by a member of the Appraisal Institute selected by Lender, meets the minimum appraisal standards for national banks promulgated by the Comptroller of the Currency pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (FIRREA) and complies with the Uniform Standards of Professional Appraisal Practice (USPAP).

 

“Approved Annual Budget” has the meaning set forth in Section 5.17.

 

“Approved Management Agreement” means that certain Property Management and Leasing Agreement, dated as of October 8, 2008, among Sponsor, Cole REIT III Operating Partnership, LP, and the initial Approved Property Manager, as the same may from time to time hereafter be amended, restated, replaced, supplemented or otherwise modified to the extent permitted hereunder, and any other management agreement that is approved by Lender and with respect to which the Rating Condition is satisfied as the same may from time to time be amended, restated, replaced, supplemented or otherwise modified to the extent permitted hereunder.

 

“Approved Property Manager” means Cole Realty Advisors, Inc., an Arizona corporation, or any other management company approved by Lender and with respect to which the Rating Condition is satisfied, in each case unless and until Lender requests the termination of that management company pursuant to Section 5.10(d).

 

“Assignment” has the meaning set forth in Section 9.7(b).

 

 

| NY\1631294.13  mle gs cole Loan Agreement||

  

2

  

“Assignment of Rents and Leases” means, with respect to each Property, that certain assignment of leases and rents, executed by Borrower as of the Closing Date, as the same may from time to time hereafter be amended, restated, replaced, supplemented or otherwise modified.

 

“Assumption” has the meaning set forth in Section 2.2.

 

“Bankruptcy Code” has the meaning set forth in Section 7.1(d).

 

“Basic Carrying Costs Escrow Account” has the meaning set forth in Section 3.4(a).

 

“Blocked Account” has the meaning set forth in Section 3.1(b).

 

“Blocked Account Control Agreement” has the meaning set forth in Section 3.1(b).

 

“Borrower” has the meaning set forth in the first paragraph of this Agreement.

 

“Business Day” means any day other than (i) a Saturday and a Sunday and (ii) a day on which federally insured depository institutions in the State of New York or the state in which the offices of Lender, its trustee, its Servicer or its Servicer’s collection account are located are authorized or obligated by law, governmental decree or executive order to be closed.

 

“Capital Expenditure” means hard and soft costs incurred by Borrower with respect to replacements and capital repairs made to the Properties (including, without limitation, repairs to, and replacements of, structural components, roofs, building systems, parking garages and parking lots), in each case to the extent capitalized in accordance with GAAP.

 

“Cash Management Account” has the meaning set forth in Section 3.1(a).

 

“Cash Management Agreement” has the meaning set forth in Section 3.1(a).

 

“Cash Management Bank” means a depository institution selected by Lender in which Eligible Accounts may be maintained.  The initial Cash Management Bank shall be Bank of New York Mellon.

 

“Casualty” means a fire, explosion, flood, collapse, earthquake or other casualty affecting all or any portion of any Property.

 

 

| NY\1631294.13  mle gs cole Loan Agreement||

  

3

  

“Cause” means, with respect to an Independent Director, (i) acts or omissions by such Independent Director that constitute systematic and persistent or willful disregard of such Independent Director’s duties, or (ii) such Independent Director has been indicted or convicted for any crime or crimes of moral turpitude or dishonesty or for any violation of any Legal Requirements.

 

“Certificates” means, collectively, any senior and/or subordinate notes, debentures or pass-through certificates, or other evidence of indebtedness, or debt or equity securities, or any combination of the foregoing, representing a direct or beneficial interest, in whole or in part, in the Loan.

 

“Change of Control” means the failure of Borrower to be Controlled by one or more Qualified Equityholders (individually or collectively), provided that other than in connection with an Assumption pursuant to Section 2.2, the term “Qualified Equityholders” as used in this definition shall exclude those Persons described in clause (iv) of the definition of Qualified Equityholders.

 

“Closing Date” means the date of this Agreement.

 

“Closing Date DSCR” means 2.34x.

 

“Closing Date NOI” means $10,521,515.

 

“Code” means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.

 

“Collateral” means all assets owned from time to time by Borrower including, without limitation, the Properties, the Revenues and all other tangible and intangible property (including, without limitation, any Defeasance Collateral) in respect of which Lender is granted a Lien under the Loan Documents, and all proceeds thereof.

 

“Collateral Accounts” means, collectively, the Cash Management Account, any Blocked Account, the Basic Carrying Costs Escrow Account, the Excess Cash Flow Reserve Account, the Unfunded Obligations Account (if any) and the Deferred Maintenance and Environmental Escrow Account (if any).

 

“Condemnation” means a taking or voluntary conveyance of all or part of any of the Properties or any interest in or right accruing to or use of any of the Properties, as the result of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Authority.

 

 

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“Contingent Obligation” means, with respect to any Person, any obligation of such Person directly or indirectly guaranteeing any Debt of any other Person in any manner and any contingent obligation to purchase, to provide funds for payment, to supply funds to invest in any other Person or otherwise to assure a creditor against loss.

 

“Control” of any entity means the ownership, directly or indirectly, of at least 51% of the equity interests in, and the right to at least 51% of the distributions from, such entity and the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such entity, whether through the ability to exercise voting power, by contract or otherwise (“Controlled” and “Controlling” each have the meanings correlative thereto).

 

“Cooperation Agreement” means that certain Mortgage Loan Cooperation Agreement, dated as of the Closing Date, among Borrower, Lender and Sponsor, as the same may from time to time be amended, restated, replaced, supplemented or otherwise modified.

 

“CVS Properties” means each of the Properties listed under the heading “CVS” on Schedule A attached hereto.

 

“Damages” to a party means any and all liabilities, obligations, losses, demands, damages, penalties, assessments, actions, causes of action, judgments, proceedings, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable attorneys’ fees and other costs of defense and/or enforcement whether or not suit is brought), fines, charges, fees, settlement costs and disbursements imposed on, incurred by or asserted against such party.

 

“Debt” means, with respect to any Person, without duplication:

 

(i)           all indebtedness of such Person to any other party (regardless of whether such indebtedness is evidenced by a written instrument such as a note, bond or debenture), including, without limitation, indebtedness for borrowed money or for the deferred purchase price of property or services;

 

(ii)            all letters of credit issued for the account of such Person and all unreimbursed amounts drawn thereunder;

 

(iii)           all indebtedness secured by a Lien on any property owned by such Person (whether or not such indebtedness has been assumed) except obligations for impositions which are not yet due and payable;

 

(iv)            all Contingent Obligations of such Person;

 

 

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(v)            all payment obligations of such Person under any interest rate protection agreement (including, without limitation, any interest rate swaps, floors, collars or similar agreements) and similar agreements;

 

(vi)            all contractual indemnity obligations of such Person; and

 

(vii)                      any material actual or contingent liability to any Person or Governmental Authority with respect to any employee benefit plan (within the meaning of Section 3(3) of ERISA) subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.

 

“Default” means the occurrence of any event which, but for the giving of notice or the passage of time, or both, would be an Event of Default.

 

“Default Interest” means, upon the occurrence and during the continuance of an Event of Default, the amount by which interest accrued on the Notes at their respective Default Rates exceeds the amount of interest that would have accrued on the Notes at their respective Interest Rates.

 

“Default Rate” means, with respect to any Note, 3% per annum in excess of the interest rate otherwise applicable to such Note hereunder; provided that, if the foregoing would result in an interest rate in excess of the maximum rate permitted by applicable law, the Default Rate shall be limited to the maximum rate permitted by applicable law.

 

“Defeasance Borrower” has the meaning set forth in Section 2.1(c).

 

“Defeasance Collateral” means direct, non-callable obligations of the United States of America or other obligations that are “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended, that, in each case, are guaranteed by the full faith and credit of the United States of America.

 

“Defeasance Pledge Agreement” has the meaning set forth in Section 2.1(a)(iii).

 

“Defease” means to deliver Defeasance Collateral as substitute Collateral for the Loan in accordance with Section 2.1; and the terms “Defeased” and “Defeasance” have meanings correlative to the foregoing.

 

“Defeased Note” has the meaning set forth in Section 2.1(b).

 

“Deferred Maintenance Amount” means $30,349.

 

“Deferred Maintenance Conditions” means those items described in Schedule C attached hereto.

 

 

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“Deferred Maintenance and Environmental Escrow Account” has the meaning set forth in Section 3.5(a).

 

“DSCR” means, with respect to any Test Period, the quotient of (i) Net Operating Income for such Test Period divided by (ii) the product of (x) the outstanding principal balance of the Loan on the last day of such Test Period and (y) 6.98% and (z) a fraction, the numerator of which is the actual number of days in such Test Period and the denominator of which is 360.

 

“DSCR Threshold” means, with respect to any release of a Property, the greater of (x) the Closing Date DSCR and (y) DSCR immediately prior to such release.

 

“Eligible Account” means (i) a segregated account maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution, or (ii) a segregated trust account or accounts maintained with the corporate trust department of a federal depository institution or state-chartered depository institution which has an investment-grade rating and is subject to regulations regarding fiduciary funds on deposit under, or similar to, Title 12 of the Code of Federal Regulations Section 9.10(b) which, in either case, has corporate trust powers, acting in its fiduciary capacity.

 

“Eligible Institution” means an institution (i) whose commercial paper, short-term debt obligations or other short-term deposits are rated at least A–1, Prime-1 and/or F-1, as applicable, by each of the Rating Agencies and whose long-term senior unsecured debt obligations are rated at least A -, A and/or A2, as applicable, by each of the Rating Agencies, and whose deposits are insured by the FDIC or (ii) with respect to which the Rating Condition is satisfied.

 

“Embargoed Person” has the meaning set forth in Section 4.39.

 

“Engineering Report” means a structural and seismic engineering report or reports (including, without limitation, a “probable maximum loss” calculation, if applicable) with respect to each of the Properties prepared by an independent engineer approved by Lender and delivered to Lender in connection with the Loan, and any amendments or supplements thereto delivered to Lender.

 

“Environmental Claim” means any written notice, claim, proceeding, investigation or demand by any Person or Governmental Authority alleging or asserting liability or obligation with respect to Borrower or any of the Properties arising out of, based on or resulting from (i) the actual or alleged presence, Use or Release of any Hazardous Substance, (ii) any actual or alleged violation of any Environmental Law, or (iii) any actual or alleged injury or threat of injury to property, health or safety or to the environment caused by Hazardous Substances.

 

 

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“Environmental Indemnity” means, with respect to each Property, that certain environmental indemnity agreement executed by Borrower and the Sponsor as of the Closing Date, as the same may from time to time be modified or replaced in accordance herewith.

 

“Environmental Laws” means any and all present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, any judicial or administrative orders, decrees or judgments thereunder, and any permits, approvals, licenses, registrations, filings and authorizations, in each case as now or hereafter in effect, relating to pollution, the preservation, protection or cleanup of the environment, the impact of Hazardous Substances on property, health or safety, or the Use or Release of Hazardous Substances, or relating to the liability for or costs of other actual or threatened danger to health or the environment.  The term “Environmental Law” includes, but is not limited to, the following statutes, as amended, any successors thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues:  the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Materials Transportation Act; the Resource Conservation and Recovery Act (including Subtitle I relating to underground storage tanks); the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act.  The term “Environmental Law” also includes, but is not limited to, any present and future federal state and local laws, statutes ordinances, rules, regulations and the like, as well as common law, conditioning transfer of property upon a negative declaration or other approval of a Governmental Authority (or Licensed Site Professional as defined under 310 CMR 40.0006(12) of the Massachusetts Contingency Plan regulations or an equivalent Person under other applicable state law) of the environmental condition of a property; or requiring notification or disclosure of Releases of Hazardous Substances or other environmental conditions of a property to any Governmental Authority or other Person, whether or not in connection with transfer of title to or interest in property.

 

“Environmental Reports” means “Phase I Environmental Site Assessments” as defined in the ASTM Standard Practice for Environmental Site Assessments: Phase I Environmental Site Assessment Process, E 1527-05 (and, if necessary, “Phase II Environmental Site Assessments”), prepared by an independent environmental consultant approved by Lender and delivered to Lender and any amendments or supplements thereto delivered to Lender, and shall also include any other environmental reports delivered to Lender pursuant to this Agreement and the Environmental Indemnity.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.

 

 

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“ERISA Affiliate,” at any time, means each trade or business (whether or not incorporated) that would, at the time, be treated together with Borrower as a single employer under Title IV or Section 302 of ERISA or Section 412 of the Code.

 

“Event of Default” has the meaning set forth in Section 7.1.

 

“Excess Cash Flow Reserve Account” has the meaning set forth in Section 3.7(a).

 

“Exception Report” means the report prepared by Borrower and attached to this Agreement as Schedule B attached hereto, setting forth any exceptions to the representations set forth in Article IV.

 

“Fiscal Quarter” means the three-month period ending on March 31, June 30, September 30 and December 31 of each year, or such other fiscal quarter of Borrower as Borrower may select from time to time with the prior consent of Lender, such consent not to be unreasonably withheld.

 

“Fiscal Year” means the 12-month period ending on December 31 of each year, or such other fiscal year of Borrower as Borrower may select from time to time with the prior consent of Lender, not to be unreasonably withheld.

 

“Fitch” means Fitch, Inc. and its successors.

 

“Force Majeure” means a delay due to acts of God, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes, work stoppage, shortages of labor or materials or similar causes beyond the reasonable control of Borrower; provided that, with respect to any of such circumstances, for the purposes of this Agreement, (1) any period of Force Majeure shall apply only to performance of the obligations necessarily affected by such circumstance and shall continue only so long as Borrower is continuously and diligently using all reasonable efforts to minimize the effect and duration thereof; and (2) Force Majeure shall not include the unavailability or insufficiency of funds.

 

“Form W-8BEN” means Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) of the Department of Treasury of the United States of America, and any successor form.

 

“Form W-8ECI” means Form W-8ECI (Certificate of Foreign Person’s Claim for Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of the Treasury of the United States of America, and any successor form.

 

 

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“GAAP” means generally accepted accounting principles in the United States of America, consistently applied.

 

“Governmental Authority” means any federal, state, county, regional, local or municipal government, any bureau, department, agency or political subdivision thereof and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (including, without limitation, any court) having jurisdiction over the Properties, Collateral, Sponsor and/or Borrower.

 

“Guaranty” means that certain guaranty, dated as of the Closing Date, executed by Sponsor for the benefit of Lender, as the same may from time to time be amended, restated, replaced, supplemented or otherwise modified.

 

“Hazardous Substances” means any and all substances, materials or wastes (whether solid, liquid or gas) defined, listed, or otherwise classified as “hazardous”or  “toxic,”  or as a contaminant or pollutant (or words of similar meaning or regulatory effect) under any present or future Environmental Laws or that may have a negative impact on human health or the environment or the presence of which on, in or under any of the Properties is prohibited or requires investigation or remediation under Environmental Law, including petroleum and petroleum by-products, asbestos and asbestos-containing materials, toxic mold, polychlorinated biphenyls, lead and radon, and compounds containing them (including gasoline, diesel fuel, oil and lead-based paint), pesticides, and radioactive materials, flammables and explosives and compounds containing them.

 

“Increased Costs” has the meaning set forth in Section 1.4(d).

 

“Indebtedness” means the Principal Indebtedness, together with interest and all other obligations and liabilities of Borrower under the Loan Documents, including, without limitation, all transaction costs, Yield Maintenance Premiums and other amounts due or to become due to Lender pursuant to this Agreement, under the Notes or in accordance with any of the other Loan Documents, and all other amounts, sums and expenses reimbursable by Borrower to Lender hereunder or pursuant to the Notes or any of the other Loan Documents.

 

“Indemnified Liabilities” has the meaning set forth in Section 9.19(b).

 

“Indemnified Parties” has the meaning set forth in Section 5.18.

 

 

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“Independent Director” or “Independent Manager” of any corporation or limited liability company means an individual who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional independent directors or independent managers, another nationally-recognized company reasonably approved by Lender, in each case that is not an Affiliate, officer or director of Borrower and that provides professional independent directors or independent managers and other corporate services in the ordinary course of its business, and which individual is duly appointed as a member of the board of directors or board of managers of such corporation or limited liability company and is not, and has never been, and will not while serving as Independent Director be, any of the following:

 

(i)           a member, partner, equityholder, manager, director, officer or employee of Borrower or any of their respective equityholders or Affiliates (other than as an independent director or manager of Borrower or any Affiliate of Borrower that is not in the direct chain of ownership of Borrower and that is required by a creditor to be a single purpose bankruptcy remote entity, provided that such independent director or manager is employed by a company that routinely provides professional independent directors or managers);

 

 (ii)           a creditor, supplier or service provider (including, without limitation, provider of professional services) to Borrower or any of its equityholders or Affiliates (other than a nationally recognized company that routinely provides professional independent managers or directors and which also provides lien search and other similar services to Borrower or any of its equityholders or Affiliates in the ordinary course of business);

 

(iii)           a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or

 

(iv)           a Person that controls (whether directly, indirectly or otherwise) any of (i), (ii) or (iii) above.

 

A natural Person who otherwise satisfies the foregoing definition and satisfies subparagraph (i) by reason of being the Independent Director or Independent Manager of a Single-Purpose Entity affiliated with the corporation or limited liability company shall be qualified to serve as an Independent Director or Independent Manager of the corporation or limited liability company, provided that the fees that such individual earns from serving as Independent Director or Independent Manager of affiliates of the corporation or limited liability company in any given year constitute in the aggregate less than five percent (5%) of such individual’s annual income for that year.  The same persons may not serve as Independent Directors or Independent Managers of the corporation or limited liability company and Independent Directors or Independent Managers of a member of the corporation or limited liability company.

 

 

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“Initial Interest Rate” means 5.731% per annum.

 

“Initial Principal Payment Date” means the Payment Date in July, 2015.

 

“Insurance Requirements” means, collectively, (i) all material terms of any insurance policy required pursuant to this Agreement and (ii) all material regulations and then-current standards applicable to or affecting any of the Properties or any portion thereof or any use or condition thereof, which may, at any time, be recommended by the board of fire underwriters, if any, having jurisdiction over any of the Properties, or any other body exercising similar functions.

 

“Interest Accrual Period” means each period from and including, without limitation, the sixth day of a calendar month through and including, without limitation, the fifth day of the immediately succeeding calendar month; provided that, prior to a Securitization, Lender shall have the right, in connection with a change in the Payment Date in accordance with the definition thereof, to make a corresponding change to the Interest Accrual Period.  Notwithstanding the foregoing, the first Interest Accrual Period shall commence on and include the Closing Date.

 

“Interest Rate” means (i) with respect to the initial Note, the Initial Interest Rate, and (ii) with respect to each Note resulting from the bifurcation of the initial Note into multiple Notes pursuant to Section 1.1(c), the per annum interest rate of such Note as determined by Lender in accordance with such Section.

 

“Lease” means any lease, license, letting, concession, occupancy agreement, sublease to which Borrower is a party or has a consent right, or other agreement (whether written or oral and whether now or hereafter in effect) under which Borrower is a lessor, sublessor, licensor or other grantor existing as of the Closing Date or hereafter entered into by Borrower, in each case pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in any of the Properties, and every modification or amendment thereof, and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto.

 

“Leasing Commissions” means leasing commissions required to be paid by Borrower in connection with the leasing of space to Tenants at any of the Properties pursuant to Leases entered into by Borrower in accordance herewith and payable in accordance with third-party/arm’s-length brokerage agreements, provided that the commissions payable pursuant thereto are commercially reasonable based upon the then current brokerage market for property of a similar type and quality to such Property in the geographic market in which such Property is located.

 

 

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“Legal Requirements” means                                                      all governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities (including, without limitation, Environmental Laws) affecting either Borrower or any of the Properties or other Collateral or the construction, ownership, use, alteration or operation of, or any portion of any Property or other Collateral (whether now or hereafter enacted and in force), and all permits, licenses and authorizations and regulations relating thereto.

 

“Lender” has the meaning set forth in the first paragraph of this Agreement and in Section 9.7.

 

“Letter of Credit” means an irrevocable, unconditional (other than ministerial conditions), transferable, clean sight draft letter of credit, as the same may be replaced, split, substituted, modified, amended, supplemented, assigned or otherwise restated from time to time, (either an evergreen letter of credit or a letter of credit which does not expire until at least two (2) Business Days after the Maturity Date or such earlier date as such Letter of Credit is no longer required pursuant to the terms of this Agreement) in favor of Lender and entitling Lender to draw thereon based solely on a statement purportedly executed by an officer of Lender stating that it has the right to draw thereon, and issued by a domestic Eligible Institution or the U.S. agency or branch of a foreign Eligible Institution.

 

“Lien” means any mortgage, lien (statutory or other), pledge, hypothecation, assignment for security, security interest, or any other encumbrance or charge on or affecting any Collateral or any portion thereof, or any interest therein (including, without limitation, any conditional sale or other title retention agreement, any sale-leaseback, any financing lease or similar transaction having substantially the same economic effect as any of the foregoing, the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any other jurisdiction, domestic or foreign, and mechanics’, materialmen’s and other similar liens and encumbrances, as well as any option to purchase, right of first refusal, right of first offer or similar right).

 

“Loan” has the meaning set forth in Section 1.1(a).

 

“Loan Amount” means $63,600,000.

 

“Loan Documents” means this Agreement, each of the Notes, each of the Mortgages (and related financing statements), each of the Assignments of Rents and Leases, the Environmental Indemnity, the Subordination of Property Management Agreement, the Cash Management Agreement, any Blocked Account Control Agreement, the Cooperation Agreement, the Guaranty, any Defeasance Pledge Agreement, and all other agreements, instruments, certificates and documents executed by Borrower or Sponsor that are necessary to effectuate the granting to Lender of first-priority Liens on the Collateral or otherwise in satisfaction of the requirements of this Agreement or the other documents listed above, as all of the aforesaid may be modified or replaced from time to time in accordance herewith.

 

 

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“Lockout Period” means the period from the Closing Date to but excluding the first Payment Date following the earlier to occur of (i) the third anniversary of the Closing Date and (ii) the second anniversary of the date on which the entire Loan (including, without limitation, any subordinated interest therein) has been securitized pursuant to a Securitization or series of Securitizations.

 

“Loss Proceeds” means amounts, awards or payments payable to Borrower or Lender in respect of all or any portion of any of the Properties in connection with a Casualty or Condemnation thereof (after the deduction therefrom and payment to Borrower and Lender, respectively, of any and all reasonable expenses incurred by Borrower and Lender in the recovery thereof, including, without limitation, all attorneys’ fees and disbursements, the fees of insurance experts and adjusters and the costs incurred in any litigation or arbitration with respect to such Casualty or Condemnation).

 

“Loss Proceeds Account” has the meaning set forth in Section 3.3(a).

 

“Loss Proceeds Threshold Amount” means the lesser of $200,000 or ten percent (10%) of the applicable Allocated Loan Amount.

 

“Major Lease” means any Lease which (i) when aggregated with all other Leases at the applicable Property with the same Tenant (or Tenant Affiliates), and assuming the exercise of all expansion rights and all preferential rights to lease additional space contained in each such Lease, is expected to contribute more than ten percent (10%) of the base contractual rental revenue of such Property during any 12-month period, after adjustment to eliminate the effect of free rent periods, (ii) contains an option or preferential right to purchase all or any portion of such Property, (iii) is with an Affiliate of Borrower as Tenant, or (iv) is entered into upon the occurrence and during the continuance of an Event of Default.

 

“Material Action” shall mean any action to consolidate or merge the applicable Single-Purpose Entity with or into any Person, or sell all or substantially all of the assets of such Single-Purpose Entity except as expressly permitted by the Loan Documents, or to institute proceedings to have the Single-Purpose Entity be adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency proceedings against the Single-Purpose Entity or file a petition seeking, or consent to, reorganization or relief with respect to the Single-Purpose Entity under any applicable federal or state law relating to bankruptcy, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Single-Purpose Entity or a substantial part of its property, or make any assignment for the benefit of creditors of the Single-Purpose Entity, or admit in writing the Single-Purpose Entity’s inability to pay its debts generally as they become due, or declare or effectuate a moratorium on the payment of any obligation, or take action in furtherance of any such action, or, to the fullest extent permitted by law, dissolve or liquidate the Single-Purpose Entity.

 

 

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“Material Adverse Effect” means the occurrence and continuance of a Trigger Period or a material adverse effect upon (i) the ability of Borrower or Sponsor to perform, or of Lender to enforce, any material provision of any Loan Document, (ii) the enforceability of any material provision of any Loan Document, or (iii) the value, use, enjoyment, operation or occupancy of any of the Properties, individually or in the aggregate.

 

“Material Agreements” means (x) each contract and agreement (other than Leases and the Approved Management Agreement) relating to a Property, or otherwise imposing obligations on Borrower, under which Borrower would have the obligation to pay more than $50,000 per annum or which cannot be terminated by Borrower without cause upon 60 days’ notice or less without payment of a termination fee, or which is between Borrower and an Affiliate of Borrower, and (y) any reciprocal easement agreement, declaration of covenants, condominium documents, ground lease, parking agreement or other material Permitted Encumbrance relating to a Property.

 

“Material Alteration” means any Alteration to be performed by or on behalf of Borrower at any of the Properties which (a) is reasonably likely to have a Material Adverse Effect with respect to the applicable Property, (b) is reasonably expected to cost in excess of 5% of the Allocated Loan Amount of the applicable Property, as determined by an independent architect, or (c) is reasonably expected to permit (or is reasonably likely to induce) any Tenant to terminate its Lease or abate rent; provided that the term “Material Alteration” shall not include alterations (i) performed pursuant to the terms and provisions of any Lease executed on or before the date hereof, (ii) performed pursuant to the terms of any Lease executed after the date hereof, provided that such Lease shall satisfy the requirements of Section 5.7, or (iii) in connection with the restoration of any Property after the occurrence of a Casualty or Condemnation in accordance with the terms and provisions of this Agreement.

 

“Maturity Date” means the Payment Date in June, 2020, or such earlier date as may result from acceleration of the Loan in accordance with this Agreement.

 

“Minimum Balance” has the meaning set forth in Section 3.2(a).

 

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

 

“Mortgage” means, with respect to each Property, that certain mortgage, deed of trust or deed to secure debt, as the case may be, assignment of rents and leases, security agreement and fixture filing encumbering such Property, executed by Borrower as of the Closing Date, as the same may from time to time hereafter be amended, restated, replaced, supplemented or otherwise modified.

 

 

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“Net Operating Income” means, with respect to any Test Period, the excess of (i) Operating Income for the last two Fiscal Quarters contained in such Test Period, times two, minus (ii) Operating Expenses for such Test Period.

 

“Nonconsolidation Opinion” means the opinion letter, dated the Closing Date, delivered by Borrower’s counsel to Lender and addressing issues relating to substantive consolidation in bankruptcy.

 

“Note(s)” means that certain promissory note, dated as of the Closing Date, made by Borrower to the order of Lender to evidence the Loan, as such note may be replaced by multiple Notes in accordance with Section 1.1(c) and as otherwise modified, assigned (in whole or in part) and/or replaced from time to time in accordance herewith.

 

“OFAC List” means the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and any other similar list maintained by the U.S. Treasury Department, Office of Foreign Assets Control pursuant to any applicable governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities, including, without limitation, trade embargo, economic sanctions, or other prohibitions imposed by Executive Order of the President of the United States.  The OFAC List currently is accessible through the internet website at www.treas.gov/ofac/t11sdn.pdf.

 

“Officer’s Certificate” means a certificate delivered to Lender which is signed by an authorized officer of Borrower’s manager and certifies to the information therein.

 

“Operating Expenses” means, for any period, all operating, renting, administrative, property management, legal and other ordinary expenses of Borrower during such period, determined in accordance with GAAP (or another basis of accounting acceptable to Lender and consistently applied), and as reasonably adjusted by Lender to normalize such expenses; provided, however, that such expenses shall not include (i) depreciation, amortization or other noncash items (other than expenses that are due and payable but not yet paid), (ii) interest, principal or any other sums due and owing with respect to the Loan (including any permitted prepayments thereof), (iii) income taxes or other taxes in the nature of income taxes, (iv) Capital Expenditures, (v) equity distributions, (vi) non-recurring costs of acquisition, (vii) impairment charges in accordance with GAAP (or another basis of accounting acceptable to Lender and consistently applied), (viii) contributions to any reserve accounts, (ix) any expenses attributable to a Lease that is not a Qualifying Lease, or (x) any other extraordinary or non-recurring items.

 

 

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“Operating Income” means, for any period, all operating income of Borrower from each of the Properties during such period, determined in accordance with GAAP (or another basis of accounting acceptable to Lender and consistently applied) (but without straight-lining of rents), and as reasonably adjusted by Lender to normalize such income, other than (i) Loss Proceeds (but Operating Income will include rental loss insurance proceeds to the extent allocable to such period), (ii) any revenue attributable to a Lease that is not a Qualifying Lease, (iii) any revenue attributable to a Lease to the extent it is paid more than 30 days prior to the due date, (iv) any interest income from any source, (v) any repayments received from any third party of principal loaned or advanced to such third party by Borrower, (vi) any proceeds resulting from the Transfer of all or any portion of such Property, (vii) sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any government or governmental agency, and (viii) any other extraordinary or non-recurring items.

 

“Participation” has the meaning set forth in Section 9.7(b).

 

“Payment Date” means, with respect to each Interest Accrual Period, the sixth day of the calendar month in which such Interest Accrual Period ends (or, if such day is not a Business Day, the first succeeding Business Day); provided, that prior to a Securitization, Lender shall have the right to change the Payment Date so long as a corresponding change to the Interest Accrual Period is also made.  Notwithstanding the foregoing, the Maturity Date shall be the second to last Business Day of the Interest Accrual Period in which the Maturity Date falls.

 

“Permits” means all licenses, permits, variances and certificates used in connection with the ownership, operation, use or occupancy of each of the Properties (including, without limitation, certificates of occupancy, business licenses, state health department licenses, licenses to conduct business and all such other permits, licenses and rights, obtained from any Governmental Authority concerning ownership, operation, use or occupancy of such Property).

 

“Permitted Debt” means:

 

(i)           the Indebtedness;

 

(ii)           Trade Payables not represented by a note, customarily paid by Borrower within 60 days of incurrence and in fact not more than 60 days outstanding, which are incurred in the ordinary course of Borrower’s ownership and operation of the Properties, in amounts reasonable and customary for similar properties and not exceeding 2.0% of the Loan Amount in the aggregate;

 

(iii)           real estate Taxes that are not yet delinquent; and

 

(iv)           tenant allowances and Capital Expenditure costs otherwise permitted to be incurred under the Loan Documents that are paid on or prior to the date when due.

 

 

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“Permitted Encumbrances” means:

 

(i)           the Liens created by the Loan Documents;

 

(ii)           all Liens and other matters specifically disclosed on Schedule B of the Qualified Title Insurance Policy;

 

(iii)           Liens, if any, for Taxes not yet delinquent;

 

(iv)           the Liens created by any reciprocal easement or similar agreement required to be executed by Borrower pursuant to any Major Lease that Lender has approved in writing to the extent required in accordance with this Agreement;

 

(v)           mechanics’, materialmen’s or similar Liens, if any, and Liens for delinquent taxes or impositions, in each case only if being diligently contested in good faith and by appropriate proceedings, provided that no such Lien is in imminent danger of foreclosure and provided further that either (a) each such Lien is released or discharged of record or fully insured over by the title insurance company issuing the Qualified Title Insurance Policy within 30 days of its creation, (b) Borrower deposits with Lender, by the expiration of such 30-day period, an amount equal to 150% of the dollar amount of such Lien or a bond in the aforementioned amount from such surety, and upon such terms and conditions, as is reasonably satisfactory to Lender, as security for the payment or release of such Lien, or (c) each such Lien is being contested by a Tenant in accordance with its Lease and either (i) any security for the payment or release of such Lien provided by such Tenant pursuant to such Lease is assigned to Lender or (ii) if no such security is provided by Tenant and such Tenant is non-investment grade rated, then either of clauses (a) or (b) above also apply to such Lien;

 

(vi)           rights of existing and future Tenants as tenants only pursuant to written Leases entered into in conformity with the provisions of this Agreement; and

 

(vii)           such other matters as Lender has approved or may approve in writing in Lender’s sole discretion.

 

“Permitted Investments” means the following, subject to the qualifications hereinafter set forth:

 

 

(i)           direct obligations of, or obligations fully and unconditionally guaranteed as to principal and interest by, the U.S. government or any agency or instrumentality thereof,  when such obligations are backed by the full faith and credit of the United States of America and have maturities not in excess of one year;

 

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(ii)           federal funds, unsecured certificates of deposit, time deposits, banker’s acceptances, and repurchase agreements, each having maturities of not more than 90 days, of any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia, the short-term debt obligations of which are rated A-1+ by S&P, F1+ by Fitch and P-1 by Moody’s (and if the term is between one and three months A1 by Moody’s) and, if it has a term in excess of three months, the long-term debt obligations of which are rated AAA (or the equivalent) by each of the Rating Agencies, and that (a) is at least “adequately capitalized” (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $1,000,000,000;

 

(iii)           deposits that are fully insured by the Federal Deposit Insurance Corp. (FDIC);

 

(iv)           commercial paper rated A–1+ by S&P, F1+ by Fitch and P-1 Moody’s (and if the term is between one and three months A1 by Moody’s) and having a maturity of not more than 90 days;

 

(v)           any money market funds that (a) has substantially all of its assets invested continuously in the types of investments referred to in clause (i) above, (b) has net assets of not less than $5,000,000,000, and (c) has a rating of AAAm or AAAm-G from S&P, Aaa by Moody’s and the highest rating obtainable from Fitch; and

 

(vi)           such other investments as to which the Rating Condition has been satisfied.

 

Notwithstanding the foregoing, “Permitted Investments” (i) shall exclude any security with the Standard & Poor’s “r” symbol (or any other Rating Agency’s corresponding symbol) attached to the rating (indicating high volatility or dramatic fluctuations in their expected returns because of market risk), as well as any mortgage-backed securities and any security of the type commonly known as “strips”; (ii) shall not have maturities in excess of one year; (iii) shall be limited to those instruments that have a predetermined fixed dollar of principal due at maturity that cannot vary or change; and (iv) shall exclude any investment where the right to receive principal and interest derived from the underlying investment provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment.  Interest may either be fixed or variable, and any variable interest must be tied to a single interest rate index plus a single fixed spread (if any), and move proportionately with that index.  No investment shall be made which requires a payment above par for an obligation if the obligation may be prepaid at the option of the issuer thereof prior to its maturity.  All investments shall mature or be redeemable upon the option of the holder thereof on or prior to the earlier of (x) three months from the date of their purchase or (y) the Business Day preceding the day before the date such amounts are required to be applied hereunder.

 

 

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“Person” means any natural person, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association or Governmental Authority and any fiduciary acting in such capacity on behalf of any of the foregoing.

 

“Plan Assets” means assets of any (i) employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, (ii) plan (as defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the Code, or (iii) governmental plan (as defined in Section 3(32) of ERISA) subject to federal, state or local laws, rules or regulations substantially similar to Title I of ERISA or Section 4975 of the Code.

 

“Policies” has the meaning set forth in Section 5.15(b).

 

“Prepayment Period” means the final three Interest Accrual Periods prior to the Maturity Date.

 

“Prime Rate” means the “prime rate” published in the “Money Rates” section of The Wall Street Journal.  If The Wall Street Journal ceases to publish the “prime rate,” then Lender shall select an equivalent publication that publishes such “prime rate,” and if such “prime rate” is no longer generally published or is limited, regulated or administered by a governmental or quasi-governmental body, then Lender shall reasonably select a comparable interest rate index.

 

“Principal Indebtedness” means the principal balance of the Loan outstanding from time to time.

 

“Property” or “Properties”, individually or collectively, as the context may require, means the real property assets set forth on Schedule A attached hereto, together with all buildings and other improvements thereon and all personal property owned by Borrower and encumbered by the Mortgages, together with all of Borrower’s rights pertaining to such property, as more particularly described on Exhibit A to each Mortgage.

 

“Publicly Traded Company” means any Person with a class of securities traded on a national or international securities exchange and/or registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended.

 

 

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“Qualified Equityholder” means (i) Sponsor, (ii) Cole Credit Property Trust, Inc., (iii) a fund sponsored by Christopher H. Cole or Cole Holdings Corporation, or (iv) only in the event and from and after the time of an assumption of the Loan and Collateral in accordance with Section 2.2 by a Qualified Successor Borrower, then a bank, savings and loan association, investment bank, insurance company, trust company, commercial credit corporation, pension plan, pension fund or pension advisory firm, mutual fund, government entity or plan, real estate company, investment fund or an institution substantially similar to any of the foregoing, provided (x) in each case under clauses (i), (iii) and (iv) that such Person has total assets (in name or under management) in excess of $650,000,000 and capital/statutory surplus or shareholder’s equity in excess of $250,000,000 (in both cases, exclusive of the Properties) and (y) in each case under clause (iv) that such Person is regularly engaged in the business of owning and operating comparable properties in major metropolitan areas.

 

“Qualified Successor Borrower” means a Single-Purpose Entity that is Controlled by one or more (i) Qualified Equityholders or (ii) Persons acceptable to Lender in its sole discretion.

 

“Qualified Survey” means, with respect to each of the Properties, current ALTA land title surveys of such Property, certified to Borrower, the title company issuing the Qualified Title Insurance Policy and Lender and their respective successors and assigns, in form and substance reasonably satisfactory to Lender.

 

 “Qualified Title Insurance Policy” means, with respect to each of the Properties, an ALTA extended coverage mortgagee’s title insurance policy in form and substance reasonably satisfactory to Lender, together with any endorsements thereto.

 

“Qualifying Lease” means all Leases other than (a) Leases to a non-investment grade rated Tenant that is also not in occupancy or open for business (it being understood and agreed that the investment grade rated Tenants as of the date hereof are set forth on Schedule J attached hereto), or (b) Leases to a Tenant that is in monetary default under its Lease or is the subject of bankruptcy or similar insolvency proceedings.

 

“Rating Agency” shall mean, prior to the final Securitization of the Loan, each of S&P, Moody’s and Fitch, or any other nationally-recognized statistical rating agency which has been designated by Lender and, after the final Securitization of the Loan, shall mean any of the foregoing that have rated and continue to rate any of the Certificates.

 

 

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 “Rating Condition” means, with respect to any proposed action, the receipt by Lender of confirmation in writing from each of the Rating Agencies that such action shall not result, in and of itself, in a downgrade, withdrawal, or qualification of any rating then assigned to any outstanding Certificates; except that if no portion of the Loan has been securitized pursuant to a Securitization rated by the Rating Agencies, then “Rating Condition” shall instead mean the receipt of prior written approval of both (x) the applicable Rating Agencies (if and to the extent that any portion of the Loan has been securitized pursuant to a Securitization or series of Securitizations rated by such Rating Agencies), and (y) Lender in its sole discretion.  No Rating Condition shall be regarded as having been satisfied unless and until any conditions imposed on the effectiveness of any confirmation from any Rating Agency shall have been satisfied.

 

“Regulatory Change” means any change after the Closing Date in federal, state or foreign laws or regulations or the adoption or the making, after such date, of any interpretations, directives or requests applying to a class of banks or companies controlling banks, including, without limitation, Lender, of or under any federal, state or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.

 

“Release” with respect to any Hazardous Substance means any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, or disposing of Hazardous Substances into the indoor or outdoor environment (including the ambient air, soil, surface water, ground water, wetlands, land or subsurface strata).

 

“Release Price” means, (i) with respect to Sunset Valley, each Walgreens Property, and each CVS Property, 125% of such Property’s Allocated Loan Amount, and (ii) with respect to each other single-tenant Property, 120% of such Property’s Allocated Loan Amount.

 

“Rent Roll” has the meaning set forth in Section 4.14(a).

 

“Revenues” means all rents  (including, without limitation, percentage rent), rent equivalents, moneys payable as damages pursuant to a Lease or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower from any and all sources including, without limitation, any obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower and proceeds, if any, from business interruption or other loss of income insurance.

 

 

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“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors.

 

“Sale or Pledge” means a voluntary or involuntary sale, conveyance, assignment, transfer, encumbrance or pledge of, or a grant of option with respect to, a legal or beneficial interest.

 

“Securitization” means a transaction in which all or any portion of the Loan is deposited into one or more trusts which issue Certificates to investors, or a similar transaction.

 

“Securitization Vehicle” means the issuer of Certificates in a Securitization of the Loan.

 

“Service” means the Internal Revenue Service or any successor agency thereto.

 

“Servicer” means the entity or entities appointed by Lender from time to time to serve as servicer and/or special servicer of the Loan.  If at any time no entity is so appointed, the term “Servicer” shall be deemed to refer to Lender.

 

“Single Member LLC” means a limited liability company which has only one member.

 

“Single-Purpose Entity” means a Person which (a) was formed under the laws of the State of Delaware solely for the purpose of acquiring and holding an ownership interest in such Property (or, if applicable, Defeasance Collateral), (b) does not engage in any business unrelated to such Property (or, if applicable, Defeasance Collateral), (c) does not have any assets other than those related to its interest in such Property (or, if applicable, Defeasance Collateral),  (d) does not have any Debt other than, in the case of Borrower, Permitted Debt, (e) has filed and will file its own tax returns, except to the extent that it has been or is (A) required to file consolidated tax returns by law; or (B) treated as a “disregarded entity” for tax purposes and is not required to file tax returns under applicable law and maintains books, accounts, records, financial statements, invoices and checks which are separate and apart from those of any other Person (other than any other Borrower) and that the financial statements of such Person shall disclose that the assets of such Person are not available to pay creditors of any other Person except that such Person’s financial position, assets, results of operations and cash flows may be included in the consolidated financial statements of an Affiliate of such Person in accordance with GAAP, provided that any such consolidated financial statements shall contain a note indicating that (i) the assets and credit of such Person will not be available to creditors of any other Person and (ii) the liabilities of such Person do not constitute the liabilities of any other Person, (f) is subject to and complies with all of the limitations on powers and separateness requirements set forth in the organizational documentation of such Person as of the Closing Date,

 

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(g) holds itself out as being a Person separate and apart from each other Person and not as a division or part of another Person, (h) conducts its business in its own name (except for services rendered under a management agreement with an Affiliate, so long as the manager, or equivalent thereof, under such management agreement holds itself out as an agent of such Person), (i) exercises reasonable efforts to correct any known misunderstanding actually known to it regarding its separate identity, and maintains an arm’s-length relationship with its Affiliates, (j) except with respect to any other Borrower as contemplated by the Loan Documents, pays its own liabilities out of its own funds (including, without limitation, the salaries of its own employees) and reasonably allocates any overhead that is shared with an Affiliate, including, without limitation, paying for shared office space and services performed by any officer or employee of an Affiliate, (k) maintains a sufficient number of employees in light of its contemplated business operations, (l) except with respect to any other Borrower as contemplated by the Loan Documents, conducts its business so that the assumptions made with respect to it which are contained in the Nonconsolidation Opinion shall at all times be true, correct and complete in all material respects, (m) maintains its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person, (n) observes all applicable entity-level formalities in all material respects and has observed and will observe all Delaware partnership or limited liability company formalities, (o) except with respect to any other Borrower as contemplated by the Loan Documents, does not commingle its assets with those of any other Person and holds such assets in its own name, (p) except with respect to any other Borrower as contemplated by the Loan Documents, does not assume, guarantee or become obligated for the debts of any other Person, and does not hold out its credit as being available to satisfy the obligations or securities of others, (q) does not acquire obligations or securities of its shareholders, members or partners, (r) except with respect to any other Borrower as contemplated by the Loan Documents, does not pledge its assets for the benefit of any other Person and does not make any loans or advances to any Person, (s) maintains adequate capital in light of its contemplated business operations, (t) if such entity is a limited partnership, has had, now has, and will have, as its only general partners, Single-Purpose Entities that are limited liability companies, (u) if such entity is a limited liability company with more than one member, has had, now has and will have at least one member that is a Single-Purpose Entity that is a corporation that has at least two (2) Independent Directors or Independent Managers that will not cause or allow the taking of any Material Action with respect to the limited liability company or its subsidiary(ies) without the unanimous consent of each Independent Director or Independent Manager or a limited liability company that has at least two (2) Independent Directors or Independent Managers that will not cause or allow the taking of any Material Action with respect to the limited liability company or its subsidiary(ies) without the unanimous consent of each Independent Director or Independent Manager and that, in either instance, owns at least one-tenth of one percent (.10%) of the equity of the limited liability company, (v) if such entity is a limited liability company with only one member, has been, now is, and will be, a limited liability company organized in the State of Delaware that (i) has as its only member a non-managing member; (ii) has at least two (2) Independent Directors or Independent Managers and has not

 

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caused or allowed and will not cause or allow the taking of any Material Action without the unanimous affirmative vote of one hundred percent (100%) of the member and such entity’s two (2) Independent Directors or Independent Managers; and (iii) at least one (1) springing member (or two (2) springing members if such springing members are natural persons who will replace a member of such entity seriatim not simultaneously) that will become a member of such entity upon the occurrence of an event causing the member to cease to be a member of such limited liability company, (w) except with respect to any indemnity provided to the Independent Directors or Independent Managers, has not had and will not have any obligation to indemnify, and has not indemnified and will not indemnify, its partners, officers, directors or members, as the case may be, unless such an obligation was and is fully subordinated to the Loan and will not constitute a claim against it in the event that cash flow in excess of the amount required to pay the Indebtedness is insufficient to pay such obligation, (x) does not and will not have any of its obligations guaranteed by any Affiliate except for the Sponsor pursuant to the Guaranty and the Environmental Indemnity, and (y) has by-laws or an operating agreement which provides that, for so long as the Loan is outstanding, such Person shall not take or consent to any of the following actions except to the extent expressly permitted in this Agreement and the other Loan Documents:

(i)           transfer of partnership or membership interests (if such entity is a general partner in a limited partnership or a managing member in a limited liability company);

 

(ii)           the engagement by such Person in any business other than the acquisition, development, management, leasing, ownership, maintenance, financing and operation of the Properties, and activities incidental thereto;

 

(iv)           the taking of any Material Action except as permitted in the by-laws or the operating agreement; and

 

(v)           any amendment or modification of any provision of its organizational documents relating to qualification as a “Single-Purpose Entity”.

 

“Sponsor” means Cole Credit Property Trust III, Inc., a Maryland corporation.

 

“Subordination of Property Management Agreement” means that certain consent and agreement of manager and subordination of management agreement executed by Borrower and the Approved Property Manager as of the Closing Date, as the same may from time to time hereafter be amended, restated, replaced, supplemented or otherwise modified.

 

“Sunset Valley” means the multi-tenant Property commonly known as the Sunset Valley Homestead located in Austin, TX, more particularly described under the heading “Sunset Valley Homestead” on Schedule A attached hereto.

 

 

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“Taxes” means all real estate and personal property taxes, assessments, fees, taxes on rents or rentals, water rates or sewer rents, facilities and other governmental, municipal and utility district charges or other similar taxes or assessments now or hereafter levied or assessed or imposed against the Properties or Borrower with respect to the Properties or rents therefrom or which may become Liens upon any of the Properties, without deduction for any amounts reimbursable to Borrower by third parties.

 

“Tenant” means any Person liable by contract or otherwise to pay monies (including, without limitation, a percentage of gross income, revenue or profits) pursuant to a Lease.

 

“Tenant Improvements” means, collectively, (i) tenant improvements to be undertaken for any Tenant which are required to be completed by or on behalf of Borrower pursuant to the terms of such Tenant’s Lease, and (ii) tenant improvements paid or reimbursed through  allowances to a Tenant pursuant to such Tenant’s Lease.

 

“Tenant Notice” has the meaning set forth in Section 3.1(b).

 

“Test Period” means each 12-month period ending on the last day of a Fiscal Quarter.

 

“Trade Payables” means unsecured amounts payable by or on behalf of Borrower for or in respect of the operation of the Properties in the ordinary course and which would under GAAP be regarded as ordinary expenses, including, without limitation, amounts payable to suppliers, vendors, contractors, mechanics, materialmen or other Persons providing property or services to the Properties or Borrower and the capitalized amount of any ordinary-course financing leases.

 

“Transaction” means, collectively, the transactions contemplated and/or financed by the Loan Documents.

 

“Transfer” means one or more of the following: (i) the sale, mortgaging, grant, bargain, encumbrance, pledge, assignment, license, or other whole or partial conveyance or other transfer or disposal of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any of the Properties or any direct or indirect interest therein to a third party, including, without limitation, granting of any purchase options, rights of first refusal, rights of first offer or similar rights in respect of any portion of such Property or the subjecting of any portion of such Property to restrictions on transfer; (ii) a Sale or Pledge of any interest in Sponsor or any Qualified Equityholder; (iii) an installment sales agreement wherein any Borrower agrees to sell a Property or any part thereof for a price to be paid in installments; (iv) an agreement by any Borrower leasing all or a substantial part of a Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, any

 

 

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Borrower’s right, title and interest in and to any Leases or any rents, other than in accordance with the Loan Documents; (v) if a Borrower is a corporation, any merger, consolidation or Sale or Pledge of such corporation’s stock or the creation or issuance of new stock; (vi) if a Borrower is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation, admission or addition of a general partner or the Sale or Pledge of the general partnership interest of any general partner or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interest or the creation or issuance of new limited partnership interests; (vii) if a Borrower is a limited liability company, any merger or consolidation or the change, removal, resignation, admission or addition of a managing member (or if no managing member, any member) or the Sale or Pledge of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the Sale or Pledge of non-managing or managing membership interests or the creation or issuance of new non-managing or managing membership interests; or (viii) if a Borrower is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Borrower or the creation or issuance of new legal or beneficial interests.

 

Notwithstanding anything herein to the contrary, the following shall not constitute a Transfer: (i) the conveyance of a space lease at such Property in accordance herewith; (ii) any Permitted Encumbrances; (iii) the transfer of indirect ownership interests in any Borrower(s) in order to create one or more mezzanine borrowers for any New Mezzanine Loan (as defined in the Cooperation Agreement); (iv) the issuance of new stock in, the merger or consolidation of, and/or the Sale or Pledge of the stock in, any Publicly Traded Company who owns a direct or indirect ownership interest in a Qualified Equityholder or Sponsor; (v) a transfer by devise or descent or by operation of law upon the death of a member, partner, or shareholder of a Borrower, Qualified Equityholder, or Sponsor, or a Borrower, Qualified Equityholder, or Sponsor itself; (vi) the Sale or Pledge, in one or a series of transactions, of not more than forty-nine percent (49%) of the stock in a Borrower, Qualified Equityholder, or Sponsor; provided, however, no such transfers shall result in a Change of Control or the change of voting control in the Qualified Equityholder or Sponsor, and as a condition to each such transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed transfer, (vii) the Sale or Pledge, in one or a series of transactions, of not more than forty-nine percent (49%) of the limited partnership interests or non-managing membership interests (as the case may be) in a Borrower, Qualified Equityholder, or Sponsor; provided, however, no such transfers shall result in the change of voting control in the Borrower, Qualified Equityholder, or Sponsor, and as a condition to each such transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed transfer; (viii) transfers or pledges of shares in Cole Credit Property Trust, Inc., Cole Credit Property Trust II, Inc., Cole Credit Property Trust III, Inc. or any other Cole-sponsored entity whose ownership interests are bought, sold and redeemed through U.S. broker-dealers; (ix) the issuance of new stock in Cole Credit Property Trust, Inc.,

 

 

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Cole Credit Property Trust II, Inc., Cole Credit Property Trust III, Inc. or any other Cole-sponsored entity whose ownership interests are bought, sold and redeemed through U.S. broker-dealers; and (x) transfers of ownership interests in any Borrower and ownership interests in any member, partner or shareholder of any Borrower to any Affiliate or subsidiary of Borrower or Sponsor or any other Cole-sponsored entity whose ownership interests are bought, sold and redeemed through U.S. broker-dealers, provided that at all times, Borrower is Controlled by a Person described in clauses (i)-(iii) of the definition of Qualified Equityholder, and provided further that if the Loan has been securitized, the Rating Condition with respect to such transfer shall have been satisfied.  Lender agrees that, in connection with any transfer contemplated by the foregoing clause (x), Borrower shall have the right to substitute a replacement guarantor for Sponsor under the Loan Documents, provided that such substitution shall be subject to Lender’s reasonable consent.  Upon the execution and delivery of any documents necessary to consummate such substitution, the original Sponsor shall be released from all liability and obligations under the Guaranty, the Environmental Indemnity and the other Loan Documents that arise from and after the date of such substitution.

 

“Treasury Constant Yield” means the arithmetic mean of the rates published as “Treasury Constant Maturities” as of 5:00 p.m., New York time, for the five Business Days preceding the date on which acceleration has been declared, or, as applicable, the date on which the Casualty or Condemnation occurred, as shown on the USD screen of Reuters (or such other page as may replace that page on that service, or such other page or replacement therefor on any successor service), or if such service is not available, the Bloomberg Service (or any successor service), or if neither Reuters nor the Bloomberg Service is available, under Section 504 in the weekly statistical release designated H.15(519) (or any successor publication) published by the Board of Governors of the Federal Reserve System, for “On the Run” U.S. Treasury obligations corresponding to the third Payment Date prior to the scheduled Maturity Date.  If no such maturity shall so exactly correspond, yields for the two most closely corresponding published maturities shall be calculated pursuant to the foregoing sentence and the Treasury Constant Yield shall be interpolated or extrapolated (as applicable) from such yields on a straight-line basis (rounding, in the case of relevant periods, to the nearest month).

 

“Trigger Period” means any period from (a) (i) any Test Period for which Net Operating Income is less than or equal to 85% of Closing Date NOI, or (ii) when the corporate credit rating of Walgreen Co. as determined by Moody’s, Fitch, or S&P is below investment grade, to (b) (i) the next Test Period for which Net Operating Income is greater than 85% of Closing Date NOI or (ii) when the corporate credit rating of Walgreen Co. as determined by Moody’s, Fitch, or S&P is upgraded to BBB- or higher.

 

“Undefeased Note” has the meaning set forth in Section 2.1(b).

 

“Unfunded Obligations” means the items described in Schedule D attached hereto.

 

 

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“Unfunded Obligations Account” has the meaning set forth in Section 3.6(a).

 

“Unfunded Obligations Amount” means $62,456.

 

“Use” means, with respect to any Hazardous Substance, the generation, manufacture, processing, distribution, handling, use, treatment, recycling or storage of such Hazardous Substance or transportation of such Hazardous Substance.

 

“U.S. Person” means a United States person within the meaning of Section 7701(a)(30) of the Code.

 

“U.S. Tax” means any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof.

 

“Walgreens Property” means each of the Properties listed under the heading “Walgreens” on Schedule A attached hereto.

 

“Waste” means any material abuse or destructive use (whether by action or inaction) of any Property.

 

“Yield Maintenance Premium” shall mean, with respect to any payment of principal (or any portion thereof) after the occurrence and during the continuance of an Event of Default, the product of:

 

(A)         a fraction whose numerator is the amount so paid and whose denominator is the outstanding principal balance of the Loan before giving effect to such payment, times

 

(B)         the excess of (1) the sum of the respective present values, computed as of the date of such prepayment, of the remaining scheduled payments of principal and interest with respect to the Loan (assuming no prepayments or acceleration of the Loan), determined by discounting such payments to the date on which such payments are made at the Treasury Constant Yield, over (2) the outstanding principal balance of the Loan on such date immediately prior to such payment;

 

provided that, if all or a portion of the Loan is prepaid during the Lockout Period after the occurrence and during the continuance of an Event of Default (except in the case of a prepayment of principal (or any portion thereof) pursuant to Section 5.16(f)), the Yield Maintenance Premium shall be not less than 3% of the amount prepaid.

 

The calculation of the Yield Maintenance Premium shall be made by Lender and shall, absent manifest error, be final, conclusive and binding upon all parties.

 

 

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(b)           Rules of Construction.  All references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified.  Unless otherwise specified: (i) all meanings attributed to defined terms in this Agreement shall be equally applicable to both the singular and plural forms of the terms so defined, (ii) “including” means “including, without limitation”, and (iii) “mortgage” means a mortgage, deed of trust, deed to secure debt or similar instrument, as applicable, and “mortgagee” means the secured party under a mortgage, deed of trust, deed to secure debt or similar instrument.  All accounting terms not specifically defined in this Agreement shall be construed in accordance with GAAP, as the same may be modified in this Agreement.

 

 

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ARTICLE I                      

 

GENERAL TERMS

 

Section 1.1 The Loan

 

.

 

(a) On the Closing Date, subject to the terms and conditions of this Agreement, Lender shall make a loan to Borrower (the “Loan”) in an amount equal to the Loan Amount.  The Loan shall initially be represented by a single Note which shall bear interest as described in this Agreement at a per annum rate equal to the Initial Interest Rate.

 

(b) The Loan shall be secured by the Collateral.

 

(c) Lender shall have the right at any time, at Lender’s sole discretion, to replace the initial Note with two or more replacement Notes, and the holder of each replacement Note shall similarly have the right at any time, at such holder’s sole discretion, to replace its Note with two or more replacement Notes.  Each replacement Note shall be in the form of the Note so replaced, but for its principal amount and Interest Rate.  The principal amount of each Note shall be determined by the applicable holder in its sole discretion, provided that the initial sum of the principal amounts of the replacement Notes shall equal the then-outstanding principal balance of the Notes that are so replaced.  The Interest Rate of each replacement Note shall be determined by the applicable holder in its sole discretion, provided that the initial weighted average of such Interest Rates, weighted on the basis of the principal balances of the respective Notes, shall initially equal the Interest Rate of the Note so replaced.  Borrower shall execute and return to Lender each such Note within five Business Days after Borrower’s receipt of an execution copy thereof, and Borrower’s failure to do so within such time period shall, at Lender’s election, constitute an immediate Event of Default hereunder.  Borrower authorizes and appoints Lender as its attorney-in-fact to execute such replacement Notes on Borrower’s behalf should Borrower fail to do so within such five Business Day period (which failure is an immediate Event of Default pursuant to the immediately preceding sentence).  The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement.  Borrower hereby ratifies all actions that such attorney shall lawfully take or cause to be taken in accordance with this Section 1.1(c).  If requested by Lender, Borrower shall deliver to Lender, together with such replacement Notes, an opinion of counsel with respect to the due authorization and enforceability of such replacement Notes and confirming that the delivery of such replacement Notes does not alter the conclusions reached in the legal opinions delivered to Lender at Closing; provided that, Borrower shall not be required to incur out-of-pocket expenses pursuant to this Section 1.1(c), Section 9.7(b) and the Cooperation Agreement (other than Borrower’s or Sponsor’s legal expenses and any expenses in connection with any of Borrower’s, Sponsor’s, or any of their respective Affiliates’ regulatory filings) in excess of $20,000 in the aggregate.

 

 

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Section 1.2 Interest and Principal

 

.

 

(a) On each Payment Date prior to the Initial Principal Payment Date, Borrower shall pay to Lender interest on each Note for the applicable Interest Accrual Period at the applicable Interest Rate (except that in each case, interest shall be payable on the Indebtedness, including, without limitation, due but unpaid interest, at the Default Rate with respect to any portion of such Interest Accrual Period falling upon the occurrence and during the continuance of an Event of Default, in which case the monthly payment shall be increased by the amount of Default Interest accrued on the Notes during the applicable Interest Accrual Period).  On the Closing Date, Borrower shall pay interest from and including, without limitation, the Closing Date through the end of the first Interest Accrual Period.  Interest payable hereunder shall be computed on the basis of a 360-day year and the actual number of days elapsed in the related Interest Accrual Period.

 

Commencing with the Initial Principal Payment Date, and on each and every Payment Date thereafter, Borrower shall pay to Lender a constant monthly payment of $370,385.04, which amount shall be applied first toward the payment of interest on each Note for the applicable Interest Accrual Period at the applicable Interest Rate (except that in each case, interest shall be payable at the Default Rate with respect to any portion of such Interest Accrual Period falling during the continuance of an Event of Default), and the balance shall be applied toward the reduction of the outstanding principal balances of the Notes pro rata in accordance with their then outstanding principal balances.

 

(b) No prepayments of the Loan shall be permitted except for (i) prepayments resulting from Casualty or Condemnation as described in Section 5.16(f), and (ii) a prepayment of the Loan in whole (but not in part) during the Prepayment Period on not less than 30 days prior written notice; provided that any prepayment hereunder shall be accompanied by all interest accrued on the amount prepaid, plus the amount of interest that would have accrued thereon if the Loan had remained outstanding through the end of the Interest Accrual Period in which such prepayment occurs, plus all other amounts then due under the Loan Documents.  Borrower’s notice of prepayment shall create an obligation of Borrower to prepay the Loan as set forth therein, but may be rescinded with five days’ written notice to Lender (subject to payment of any out-of-pocket costs and expenses resulting from such rescission).  In addition, Defeasance shall be permitted after the expiration of the Lockout Period as described in Section 2.1.  The entire outstanding principal balance of the Loan, together with interest through the end of the applicable Interest Accrual Period and all other amounts then due under the Loan Documents, shall be due and payable by Borrower to Lender on the Maturity Date.

 

 

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(c) If all or any portion of the Principal Indebtedness is paid to Lender prior to the Prepayment Period following acceleration of the Loan (other than as a result of a Casualty or Condemnation), Borrower shall pay to Lender an amount equal to the applicable Yield Maintenance Premium.  Amounts received in respect of the Indebtedness upon the occurrence and during the continuance of an Event of Default shall be applied toward interest, principal and other components of the Indebtedness (in such order as Lender shall determine) before any such amounts are applied toward payment of Yield Maintenance Premiums, with the result that Yield Maintenance Premiums shall accrue as the Principal Indebtedness is repaid but no amount received from Borrower shall constitute payment of a Yield Maintenance Premium until the remainder of the Indebtedness shall have been paid in full.  Borrower acknowledges that (i) a prepayment will cause damage to Lender; (ii) the Yield Maintenance Premium is intended to compensate Lender for the loss of its investment and the expense incurred and time and effort associated with making the Loan, which will not be fully repaid if the Loan is prepaid; (iii) it will be extremely difficult and impractical to ascertain the extent of Lender’s damages caused by a prepayment after an acceleration or any other prepayment not permitted by the Loan Documents; and (iv) the Yield Maintenance Premium represents Lender’s and Borrower’s reasonable estimate of Lender’s damages from the prepayment and is not a penalty.

 

(d) Any payments of interest and/or principal not paid when due hereunder shall bear interest at the applicable Default Rate and, in the case of all payments due other than the payment of the Principal Indebtedness or any portion thereof on the Maturity Date or on any other earlier date as a result of an acceleration of the Loan, when paid, shall be accompanied by a late fee in an amount equal to the lesser of three percent (3%) of such unpaid sum and the maximum amount permitted by applicable law in order to defray a portion of the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment.

 

Section 1.3 Method and Place of Payment

 

.  Except as otherwise specifically provided in this Agreement and subject to the provisions of Section 3.2(d), all payments and prepayments under this Agreement and the Notes (including, without limitation, any deposit into the Cash Management Account pursuant to Section 3.2(c)) shall be made to Lender not later than 2:00 p.m., New York City 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 the account specified from time to time by Lender.  Any funds received by Lender after such time shall be deemed to have been paid on the next succeeding Business Day.  Lender shall notify Borrower in writing of any changes in the account to which payments are to be made.  If the amount received from Borrower (or from the Cash Management Account pursuant to Section 3.2(b)) is less than the sum of all amounts then due and payable hereunder, such amount shall be applied, at Lender’s sole discretion, either toward the components of the Indebtedness (e.g., interest, principal and other amounts payable hereunder) and the Notes, in such sequence as Lender shall elect in its sole discretion, or toward the payment of Property expenses.

 

 

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Section 1.4 Taxes; Regulatory Change

 

.

 

(a) Borrower agrees to indemnify Lender against any present or future stamp, documentary or other similar or related taxes or other similar or related charges now or hereafter imposed, levied, collected, withheld or assessed by any United States Governmental Authority by reason of the execution and delivery of the Loan Documents and any consents, waivers, amendments and enforcement of rights under the Loan Documents.

 

(b) If Borrower is required by law to withhold or deduct any amount from any payment hereunder in respect of any U.S. Tax, Borrower shall withhold or deduct the appropriate amount, remit such amount to the appropriate Governmental Authority and pay to each Person to whom there has been an Assignment or Participation of a Loan and who is not a U.S. Person such additional amounts as are necessary in order that the net payment of any amount due to such non-U.S. Person hereunder after deduction for or withholding in respect of any U.S. Tax imposed with respect to such payment (or in lieu thereof, payment of such U.S. Tax by such non-U.S. Person), will not be less than the amount stated in this Agreement to be then due and payable; except that the foregoing obligation to pay such additional amounts shall not apply (i) to any assignee that has not complied with the obligations contained in Section 9.7(c), (ii) to any U.S. Taxes imposed solely by reason of the failure by such Person (or, if such Person is not the beneficial owner of the relevant Loan, such beneficial owner) to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections with the United States of America of such Person (or beneficial owner, as the case may be) if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such U.S. Taxes; or (iii) with respect to any Person who is a fiduciary or partnership or other than the sole beneficial owner of such payment, to any U.S. Tax imposed with respect to payments made under any Note to a fiduciary or partnership to the extent that the beneficial owner or member of the partnership would not have been entitled to the additional amounts if such beneficial owner or member of the partnership had been the holder of the Note.

 

(c) Within 30 days after paying any amount from which it is required by law to make any deduction or withholding, and within 30 days after it is required by law to remit such deduction or withholding to any relevant taxing or other authority, Borrower shall deliver to such non-U.S. Person satisfactory evidence of such deduction, withholding or payment (as the case may be).

 

 

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(d) If, as a result of any Regulatory Change, any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with, Lender or any holder of all or a portion of the Loan is imposed, modified or deemed applicable and the result is to increase the cost to such Lender or such holder of making or holding the Loan, or to reduce the amount receivable by Lender or such holder hereunder in respect of any portion of the Loan by an amount reasonably deemed by Lender or such holder to be material (such increases in cost and reductions in amounts receivable, “Increased Costs”), then Borrower agrees that it will pay to Lender or such holder upon Lender’s or such holder’s request such additional amount or amounts as will compensate Lender and/or such holder for such Increased Costs to the extent that such Increased Costs are reasonably allocable to the Loan.  Lender will notify Borrower in writing of any event occurring after the Closing Date which will entitle Lender of any holder of the Loan to compensation pursuant to this Section 1.4(d) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.  If such Lender shall fail to notify Borrower of any such event within 90 days following the end of the month during which such event occurred, then Borrower’s liability for any amounts described in this Section incurred by such Lender as a result of such event shall be limited to those attributable to the period occurring subsequent to the 90th day prior to the date upon which such Lender actually notified Borrower of the occurrence of such event.  Notwithstanding the foregoing, in no event shall Borrower be required to compensate Lender or any holder of the Loan for any portion of the income or franchise taxes of Lender or such holder, whether or not attributable to payments made by Borrower.  If a Lender requests compensation under this Section 1.4(d), Borrower may, by notice to Lender, require that such Lender furnish to Borrower a statement setting forth in reasonable detail the basis for requesting such compensation and the method for determining the amount thereof.

 

Section 1.5 Release

 

.  Upon payment of the Indebtedness in full when permitted or required hereunder, Lender shall execute instruments prepared by Borrower and reasonably satisfactory to Lender, which, at Borrower’s election and at Borrower’s sole cost and expense: (a) release and discharge all Liens on all Collateral securing payment of the Indebtedness (subject to Borrower’s obligation to pay any associated fees and expenses), including, without limitation, all balances in the Collateral Accounts; or (b) assign such Liens (and the Loan Documents) to a new lender designated by Borrower.  Any release or assignment provided by Lender pursuant to this Section 1.5 shall be without recourse, representation or warranty of any kind.

 

 

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ARTICLE II                      

 

DEFEASANCE; ASSUMPTION

 

Section 2.1 Defeasance

 

.

 

(a) On any date after the expiration of the Lockout Period, provided no Event of Default has occurred and is then continuing and subject to the notice requirement described in Section 2.1(d), Borrower may from time to time obtain the release of one or more of the Properties from the Liens of the Loan Documents by Defeasing either the entire Loan, or a portion of the Loan equal to the sum of the Release Prices of the Properties so released, provided that after giving effect thereto, unless the Loan is Defeased in full, the DSCR for the Test Period then most recently ended, recalculated to include only income and expense attributable to the Properties remaining after the contemplated release and to exclude the interest expense on the aggregate amount Defeased, shall be no less than the DSCR Threshold; and provided further that all sums then due to Lender under the Loan Documents are paid and the following are delivered to Lender:

 

(i) Defeasance Collateral sufficient to provide payments on or prior to, and in any event as close as possible to, all successive Payment Dates in an amount sufficient (x) to pay the interest due on such Payment Dates in respect of a portion of the Loan equal to the amount Defeased and (y) to repay the outstanding principal balance of such portion of the Loan on the first Payment Date in the Prepayment Period;

 

(ii) written confirmation from an independent certified public accounting firm reasonably satisfactory to Lender that such Defeasance Collateral is sufficient to provide the payments described in clause (i) above;

 

(iii) a security agreement, in form and substance reasonably satisfactory to Lender, creating in favor of Lender a first priority perfected security interest in such Defeasance Collateral (a “Defeasance Pledge Agreement”);

 

(iv) an opinion of counsel for Borrower, in form and substance reasonably satisfactory to Lender and delivered by counsel reasonably satisfactory to Lender, opining (1) that the Defeasance Pledge Agreement has been duly authorized and is enforceable against Borrower in accordance with its terms and that Lender has a perfected first priority security interest in such Defeasance Collateral; and (2) that the Defeasance does not constitute a “significant modification” of the Loan under Section 1001 of the Code or cause a tax to be imposed on the Securitization Vehicle;

 

(v) if the Loan has been securitized, the Rating Condition with respect to such Defeasance shall have been satisfied;

 

 

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(vi) instruments reasonably satisfactory to Lender releasing and discharging or assigning to a third party Lender’s Liens on the Collateral so released (other than the Defeasance Collateral);

 

(vii) such other customary certificates, opinions, documents or instruments as Lender and the Rating Agencies may reasonably request; and

 

(viii) reimbursement for any costs and expenses incurred by Lender in connection with this Section 2.1 (including, without limitation, Rating Agency and Servicer fees and expenses, reasonable fees and expenses of legal counsel and any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection herewith), provided, however, that Borrower shall only be obligated to pay Servicer fees up to (i) $30,000 if the Loan is Defeased in full (without any prior partial Defeasance), (ii) $10,000 if the Loan is Defeased in part for each partial Defeasance, or (iii) if the Loan is Defeased in full after one or more previous partial Defeasances, the greater of (x) $30,000 in the aggregate for all partial and full Defeasances, or (y) the sum of $10,000 multiplied by the total number of partial and full defeasances.

 

Lender shall reasonably cooperate with Borrower to avoid the incurrence of mortgage recording taxes in connection with a Defeasance at Borrower’s sole cost and expense.

 

(b) If the Loan is not Defeased in full, Borrower shall execute and deliver all documents necessary to amend and restate the Note with two substitute Notes (which shall be cross-defaulted with each other): one note having a principal balance equal to the Defeased portion of the original Note (the “Defeased Note”) and one note having a principal balance equal to the undefeased portion of the original Note (the “Undefeased Note”).  The Undefeased Notes may be the subject of a further Defeasance in accordance with the terms of this Section 2.1 (the term “Note”, as used in this Section 2.1, being deemed to refer to the Undefeased Note that is the subject of further Defeasance).

 

(c) Borrower shall cause the Defeased Note to be assumed by a bankruptcy-remote entity established or designated by Borrower in accordance with Lender’s reasonable requirements and subject to Lender’s reasonable approval, to which Borrower shall transfer all of the Defeasance Collateral (a “Defeasance Borrower”).  Such Defeasance Borrower shall have executed and delivered to Lender an assumption agreement in form and substance reasonably satisfactory to Lender, such Uniform Commercial Code financing statements as may be reasonably requested by Lender and legal opinions of counsel reasonably acceptable to Lender that are substantially equivalent to the opinions delivered to Lender on the Closing Date, including, without limitation, new nonconsolidation opinions reasonably satisfactory to Lender and satisfactory to the Rating Agencies; and Borrower and the Defeasance Borrower shall have delivered such other documents, certificates and legal opinions as Lender shall reasonably request.

 

 

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(d) Borrower must give Lender and each Rating Agency at least 30 days’ (and not more than 60 days’) prior written notice of any Defeasance under this Section 2.1, specifying the date on which the Defeasance is to occur.  If such Defeasance is not made within seven days after such date (x) Borrower’s notice of Defeasance will be deemed rescinded, and (y) Borrower shall on such date pay to Lender all reasonable losses, costs and expenses suffered by Lender as a consequence of such rescission.

 

(e) Upon satisfaction of the requirements contained in this Section 2.1, Lender will execute and deliver to Borrower such instruments, prepared by Borrower and approved by Lender, as shall be necessary to release the applicable Property or Properties from the Liens of the Loan Documents or to assign the applicable portion of such Liens and the Defeased portions of the Note to a third party to the extent necessary to avoid the incurrence of mortgage recording taxes.

 

Section 2.2 Assumption

 

.  The initial Borrower shall have the right, at Borrower’s sole cost and expense, to contemporaneously Transfer all of the Collateral to a Qualified Successor Borrower that will assume all of the obligations of Borrower hereunder (an “Assumption”), provided no Event of Default or material monetary Default has occurred and is then continuing or would result therefrom and the following conditions are met to the reasonable satisfaction of Lender:

 

(a) such Qualified Successor Borrower shall have executed and delivered to Lender an assumption agreement (including, without limitation, an assumption in recordable form of each Mortgage and Assignment of Rents and Leases, to the extent requested by Lender), in form and substance reasonably acceptable to Lender, evidencing its agreement to abide and be bound by the terms of the Loan Documents and containing representations substantially equivalent to those contained in Article IV, and such other representations (and evidence of the accuracy of such representations) as the Servicer shall reasonably request;

 

(b) such Uniform Commercial Code financing statements as may be reasonably requested by Lender shall be filed;

 

(c) a party satisfactory to Lender in its sole discretion assumes all obligations, liabilities, guarantees and indemnities of Sponsor and any other guarantor under the Loan Documents pursuant to documentation satisfactory to Lender;

 

(d) such Qualified Successor Borrower shall have delivered to Lender legal opinions of counsel reasonably acceptable to Lender which are equivalent to the opinions delivered to Lender on the Closing Date, including, without limitation, new nonconsolidation opinions which are reasonably satisfactory to Lender and satisfactory to each of the Rating Agencies; and Borrower and the Qualified Successor Borrower shall have delivered such other documents, certificates and legal opinions as Lender shall reasonably request;

 

 

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(e) such Qualified Successor Borrower shall have delivered to Lender all documents reasonably requested by it relating to the existence of such Qualified Successor Borrower and the due authorization of the Qualified Successor Borrower to assume the Loan and to execute and deliver the documents described in this Section 2.2, each in form and substance reasonably satisfactory to Lender, including, without limitation, a certified copy of the applicable resolutions from all appropriate persons, certified copies of the organizational documents of the Qualified Successor Borrower, together with all amendments thereto, and certificates of good standing or existence for the Qualified Successor Borrower issued as of a recent date by its state of organization and each other state where such entity, by the nature of its business, is required to qualify or register;

 

(f) the Qualified Title Insurance Policy shall have been properly endorsed to reflect the Transfer of the Properties to the Qualified Successor Borrower; and

 

(g) the Rating Condition shall have been satisfied with respect to the legal structure of the successor borrower, the documentation of the Assumption and the related legal opinions.

 

Upon the completion of any Assumption in accordance with the provisions of this Section 2.2, Borrower and Sponsor shall, pursuant to mutually satisfactory documentation, be released from all obligations and liabilities under the Loan Documents that arise from and after the date of such completion.

 

Section 2.3 Transfers to Qualified Equityholders

 

.  Any transfer permitted hereunder that results in Borrower ceasing to be Controlled by a Person specified in clauses (i), (ii) or (iii) of the definition of Qualified Equityholder, and each subsequent transfer that again changes the identity of the Qualified Equityholder that Controls Borrower, shall be conditioned upon payment to Lender of a transfer fee in an amount equal to 1.0% of the Principal Indebtedness at the time of such transfer.

 

 

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ARTICLE III                                

 

ACCOUNTS

 

Section 3.1 Cash Management Account

 

.

 

(a) On or prior to the Closing Date, Borrower shall establish and thereafter maintain with the Cash Management Bank a cash management account into which income from the Property will be deposited (the “Cash Management Account”), which account shall be owned by Borrower but exclusively controlled by Lender.  As a condition precedent to the closing of the Loan, Borrower shall cause the Cash Management Bank to execute and deliver an agreement (as the same may from time to time hereafter be amended, restated, replaced, supplemented or otherwise modified, a “Cash Management Agreement”) which provides, inter alia, that no party other than Lender and Servicer shall have the right to withdraw funds from the Cash Management Account and that the Cash Management Bank shall comply with all instructions and entitlement orders of Lender relating to the Cash Management Account and the other Collateral Accounts excluding the Blocked Account, in each case without further consent by Borrower or any other Person.  The fees and expenses of the Cash Management Bank shall be paid by Borrower.

 

(b) Within five Business Days following the Closing Date, Borrower shall deliver to each Tenant in the Properties a written notice (a “Tenant Notice”) in the form of Exhibit B instructing that (i) all payments under the Leases shall thereafter be transmitted by them directly to, and deposited directly into, the Cash Management Account or a Blocked Account and (ii) such instruction may not be rescinded unless and until such Tenant receives from Borrower or Lender a copy of Lender’s written consent to such rescission.  Borrower shall send a copy of each such written notice to Lender and shall redeliver such notices to each Tenant until such time as such Tenant complies therewith.  Borrower shall cause all cash Revenues relating to the Properties and all other money received by Borrower or the Approved Property Manager with respect to the Properties (other than tenant security deposits required to be held in escrow accounts) to be deposited in the Cash Management Account or a Blocked Account by the end of the second Business Day following Borrower’s or the Approved Property Manager’s receipt thereof.  “Blocked Account” means an Eligible Account maintained with a financial institution satisfactory to Lender that enters into a blocked account control agreement (as may from time to time be amended, restated, replaced, supplemented or otherwise modified, the “Blocked Account Control Agreement”) satisfactory to Lender pursuant to which such financial institution will remit, at the end of each Business Day, all amounts contained therein as of the close of the immediately preceding Business Day to an account specified by Lender (Lender hereby agreeing to specify the Cash Management Account so long as no Event of Default has occurred and is then continuing).  Each Borrower joins in, and assumes direct primary liability, and not liability as a guarantor or surety, for all the obligations of the Borrower party to the Blocked Account Control Agreement (whether now existing or established in the future) under the Blocked Account Control Agreement.  Each Borrower hereby assumes and agrees to all

 

 

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liabilities and obligations of the Borrower party to the Blocked Account Control Agreement whether now existing or hereafter arising under the Blocked Account Control Agreement, and all the terms, conditions, covenants, restrictions, representations, warranties, and confirmations contained therein as if each Borrower had executed and delivered the Blocked Account Control Agreement (including any future amendments or modifications thereof) directly in such Borrower’s own name.

 

(c) Lender shall have the right at any time, upon not less than 30 days’ prior written notice to Borrower, to replace the Cash Management Bank with any Eligible Institution at which Eligible Accounts may be maintained that will promptly execute and deliver to Lender a Cash Management Agreement substantially identical to the Cash Management Agreement executed at Closing.  In addition, upon the occurrence and during the continuance of an Event of Default or if the Blocked Account Bank fails to comply with the Blocked Account Control Agreement or ceases to be an Eligible Institution, Lender shall have the right at any time, upon not less than 30 days’ prior written notice to Borrower, to replace the Blocked Account Bank with any Eligible Institution at which Eligible Accounts may be maintained that will promptly execute and deliver to Lender a Blocked Account Control Agreement satisfactory to Lender.

 

Section 3.2 Distributions from Cash Management Account

 

.

 

(a) The Cash Management Agreement shall provide that the Cash Management Bank shall remit to an account specified by Borrower, at the end of each Business Day (or, at Borrower’s election, on a less frequent basis), the amount, if any, by which amounts then contained in the Cash Management Account exceed the aggregate amount required to be paid to or reserved with Lender on the next Payment Date pursuant hereto (the “Minimum Balance”); provided, however, that Lender shall terminate such remittances upon the occurrence and during the continuance of an Event of Default or Trigger Period upon notice to the Cash Management Bank.  Lender may notify the Cash Management Bank at any time of any change in the Minimum Balance in accordance with the provisions of this Agreement.

 

(b) On each Payment Date, Lender shall transfer amounts from the Cash Management Account, to the extent available therein, to make the following payments in the following order of priority:

 

(i) provided no Event of Default has occurred and is continuing, to the Basic Carrying Costs Escrow Account, the amounts then required to be deposited therein pursuant to Section 3.4;

 

(ii) provided no Event of Default has occurred and is continuing, to Lender, the amount of all scheduled or delinquent interest and principal on the Loan and all other amounts then due and payable under the Loan Documents (with any amounts in respect of principal paid last);

 

 

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(iii) upon the occurrence and during the continuance of an Event of Default or a Trigger Period, all remaining amounts to the Excess Cash Flow Reserve Account;

 

(iv) if no Event of Default or Trigger Period has occurred and is continuing, all remaining amounts to such accounts as Borrower may direct.

 

(c) If on any Payment Date the amount in the Cash Management Account shall be insufficient to make all of the transfers described in Section 3.2(b)(i) and (ii), Borrower shall deposit into the Cash Management Account on such Payment Date the amount of such deficiency.  If Borrower shall fail to make such deposit, the same shall constitute an Event of Default and, in addition to all other rights and remedies provided for under the Loan Documents, Lender may disburse and apply the amounts in the Collateral Accounts in accordance with Section 3.8(c).

 

(d) Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, and provided no Event of Default has occurred and is continuing, Borrower’s obligations with respect to the payment of the amounts required to be paid under clauses (i) and (ii) of Section 3.2(b) shall be deemed satisfied to the extent sufficient amounts are deposited in the Cash Management Account to satisfy such obligations pursuant to this Agreement on the dates each such payment is required, regardless of whether any of such amounts are so applied by Lender.

 

Section 3.3 Loss Proceeds Account.

 

(a)           On or prior to the Closing Date, Borrower shall establish and thereafter maintain with the Cash Management Bank an account for the purpose of depositing any Loss Proceeds with respect to any Casualty or Condemnation where the Loss Proceeds exceeds the Loss Proceeds Threshold Amount (the “Loss Proceeds Account”).

 

(b)           Provided no Event of Default has occurred and is continuing, funds in the Loss Proceeds Account shall be applied in accordance with Section 5.16.

 

Section 3.4 Basic Carrying Costs Escrow Account

 

.

 

(a) On or prior to the Closing Date, Borrower shall establish and thereafter maintain with the Cash Management Bank an account for the purpose of reserving amounts payable by Borrower in respect of Taxes and insurance premiums (the “Basic Carrying Costs Escrow Account”) which Basic Carrying Costs Escrow Account shall be subject to the Cash Management Agreement.

 

 

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(b) Borrower shall provide to Lender evidence that all Taxes and insurance premiums have been paid, in each case five Business Days prior to the date that such amounts become delinquent.  If Borrower fails to deliver such evidence of payment to Lender at such time, then Borrower shall deliver such evidence within five Business Days after the date that such amounts become delinquent, and if Borrower fails to deliver such evidence by the end of such period, then, upon Lender’s request, the Basic Carrying Costs Escrow Account shall be funded on each Payment Date in an amount equal to the sum of (i) an amount sufficient to pay all Taxes by the 30th day prior to the date they become delinquent, assuming subsequent monthly fundings on Payment Dates of 1/12 of projected annual Taxes, plus (ii) an amount sufficient to pay all insurance premiums by the 30th day prior to the date they become delinquent, assuming subsequent monthly fundings on Payment Dates of 1/12 of projected annual insurance premiums; provided, however, that if after the first funding of the Basic Carrying Costs Escrow Account, Borrower pays (or causes to be paid) the amount of the next installment of Taxes and insurance premiums prior to the date such amounts become delinquent, then no subsequent monthly fundings shall be required unless and until Borrower subsequently fails to deliver the evidence as required by this Section 3.4(b) within five Business Days after the date the applicable amounts become delinquent, from and after which time the Basic Carrying Costs Escrow Account shall be funded as described above for the remainder of the term of the Loan.

 

(c) Borrower shall provide Lender with copies of all tax and insurance bills relating to each Property promptly after Borrower’s receipt thereof.  Lender will apply the amounts in the Basic Carrying Costs Escrow Account toward the purposes for which such amounts are deposited therein, provided that if Borrower can provide to Lender evidence that the applicable tax and insurance bills have been paid by Borrower (or on Borrower’s behalf), then Lender shall release the funds applicable to such paid amounts on deposit in the Basic Carrying Costs Escrow Account to Borrower.  In connection with the making of any payment from the Basic Carrying Costs Escrow Account, subject to the immediately preceding sentence, Lender may cause such payment to be made according to any bill, statement or estimate procured from the appropriate public office or insurance carrier, without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof unless given written advance notice by Borrower of such inaccuracy, invalidity or other contest.

 

Section 3.5 Deferred Maintenance and Environmental Escrow Account

 

.

 

(a) On or prior to the Closing Date, if the Deferred Maintenance Amount is greater than zero, Borrower shall establish and thereafter maintain with the Cash Management Bank an account for the purpose of reserving amounts anticipated to be required to correct Deferred Maintenance Conditions (the “Deferred Maintenance and Environmental Escrow Account”) which Deferred Maintenance and Environmental Escrow Account shall be subject to the Cash Management Agreement.

 

 

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(b) On the Closing Date, Borrower shall deposit into the Deferred Maintenance and Environmental Escrow Account, from the proceeds of the Loan, an amount equal to the Deferred Maintenance Amount.

 

(c) Upon the request of Borrower at any time that no Event of Default has occurred and is continuing (but not more often than twice per calendar month), Lender shall cause disbursements to Borrower from the Deferred Maintenance and Environmental Escrow Account to reimburse Borrower for reasonable costs and expenses incurred in order to correct Deferred Maintenance Conditions, provided that

 

(i) Borrower shall deliver to Lender invoices evidencing that the costs for which such disbursements are requested are due and payable;

 

(ii) Borrower shall deliver to Lender an Officer’s Certificate confirming that all such costs have been previously paid by Borrower or will be paid from the proceeds of the requested disbursement and that all conditions precedent to such disbursement required by the Loan Documents have been satisfied; and

 

(iii) Lender may condition the making of a requested disbursement on (1) reasonable evidence establishing that Borrower has applied any amounts previously received by it in accordance with this Section for the expenses to which specific draws made hereunder relate, (2) reasonably satisfactory site inspections, (3) receipt of lien  releases and waivers from any contractors, subcontractors and others with respect to such amounts, and (4) such other evidence as Lender shall reasonably request to demonstrate that the Deferred Maintenance Conditions to be funded by the requested disbursement have been or will be completed with such disbursed funds.

 

(d) Upon substantial completion (as reasonably determined by Lender) of the portion of the Deferred Maintenance Conditions identified on any line on Schedule C attached hereto, and provided no Event of Default that has occurred is then continuing, the remainder of the portion of the Deferred Maintenance and Environmental Escrow Account held for such line item (as shown adjacent to such line item on Schedule C attached hereto) shall promptly be remitted to Borrower.  Upon the correcting of all Deferred Maintenance Conditions, provided no Event of Default or Trigger Period that has occurred is then continuing, any amounts then remaining in the Deferred Maintenance and Environmental Escrow Account shall promptly be remitted to Borrower and the Deferred Maintenance and Environmental Escrow Account will no longer be maintained.

 

 

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Section 3.6 Unfunded Obligations Account

 

.

 

(a) On or prior to the Closing Date, if the Unfunded Obligations Amount is greater than zero, Borrower shall establish and thereafter maintain with the Cash Management Bank an account for the purpose of reserving for Unfunded Obligations required to be funded by Borrower (the “Unfunded Obligations Account”) which Unfunded Obligations Account shall be subject to the Cash Management Agreement.

 

(b) On the Closing Date, Borrower shall deposit into the Unfunded Obligations Account, from the proceeds of the Loan, an amount equal to the Unfunded Obligations Amount.

 

(c) Borrower shall perform its obligations in respect of the Unfunded Obligations when and as due under the respective Leases or other applicable agreements.  Upon the request of Borrower at any time that no Event of Default that has occurred and is continuing (but not more often than twice per calendar month), Lender shall cause disbursements to Borrower from the Unfunded Obligations Account to reimburse Borrower for reasonable costs and expenses incurred in the performance of Unfunded Obligations, provided that

 

(i) Borrower shall deliver to Lender invoices evidencing that the costs for which such disbursements are requested are due and payable;

 

(ii) Borrower shall deliver to Lender an Officer’s Certificate confirming that all such costs have been previously paid by Borrower or will be paid from the proceeds of the requested disbursement and that all conditions precedent to such disbursement required by the Loan Documents have been satisfied; and

 

(iii) Lender may condition the making of a requested disbursement on (1) reasonable evidence establishing that Borrower has applied any amounts previously received by it in accordance with this Section for the expenses to which specific draws made hereunder relate, (2) reasonably satisfactory site inspections, and (3) receipt of lien releases and waivers from any contractors, subcontractors and others with respect to such amounts.

 

(d) Upon payment or performance, as applicable, of the Unfunded Obligations identified on any line on Schedule D attached hereto, and provided no Event of Default that has occurred is then continuing, the remainder of the portion of the Unfunded Obligations Account held for such line item (as shown adjacent to such line item on Schedule D attached hereto) shall promptly be remitted to Borrower, except that any amounts in respect of free rent shall be remitted to the Cash Management Account.  Upon the payment or performance in full of all Unfunded Obligations, provided no Event of Default or Trigger Period that has occurred is then continuing, any amounts then remaining in the Unfunded Obligations Account shall promptly be remitted to Borrower and the Unfunded Obligations Account will no longer be maintained.

 

 

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Section 3.7 Excess Cash Flow Reserve Account

 

.

 

(a) On or prior to the Closing Date, Borrower shall establish and thereafter maintain with the Cash Management Bank an account for the deposit of amounts required to be deposited therein in accordance with Section 3.2(b)(iii) (the “Excess Cash Flow Reserve Account”) which Excess Cash Flow Reserve Account shall be subject to the Cash Management Agreement.

 

(b) Provided that no Event of Default that has occurred is then continuing, Lender shall release to the Cash Management Account all amounts then contained in the Excess Cash Flow Reserve Account on the first Payment Date after Borrower delivers to Lender evidence reasonably satisfactory to Lender establishing that no Trigger Period that has occurred is then continuing.  Such a release shall not preclude the subsequent commencement of a Trigger Period and the deposit of amounts into the Excess Cash Flow Reserve Account as set forth in Section 3.2(b)(iii).

 

Section 3.8 Account Collateral

 

.

 

(a) Borrower hereby grants a perfected first-priority security interest in favor of Lender in and to the Account Collateral as security for the Indebtedness, together with all rights of a secured party with respect thereto.  Each Collateral Account shall be an Eligible Account under the sole dominion and control of Lender and shall be in the name of Borrower, as pledgor, and Lender, as pledgee.  Borrower shall have no right to make withdrawals from any of the Collateral Accounts.  Funds in the Collateral Accounts shall not be commingled with any other monies at any time.  Borrower shall execute any additional documents that Lender in its reasonable discretion may require and shall provide all other evidence reasonably requested by Lender to evidence or perfect its first-priority security interest in the Account Collateral.  Funds in the Collateral Account shall be invested at Lender’s discretion only in Permitted Investments which Permitted Investments shall be credited to the related Collateral Account.  All income and gains from the investment of funds in the Collateral Accounts other than the Basic Carrying Costs Escrow Account shall be retained in the Collateral Accounts from which they were derived.  Unless otherwise required by applicable law, all income and gains from the investment of funds in the Basic Carrying Costs Escrow Account shall be for the account of Lender in consideration of its administration of such Collateral Account, and Lender shall have the right at any time to cause the Cash Management Bank to remit such amounts to Lender. After the Loan and all other Indebtedness have been paid in full, the Collateral Accounts shall be closed and the balances therein, if any, shall be paid to Borrower.

 

(b) The insufficiency of amounts contained in the Collateral Accounts shall not relieve Borrower from its obligation to fulfill all covenants contained in the Loan Documents.

 

 

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(c) Upon the occurrence and during the continuance of an Event of Default, Lender may, in its sole discretion, apply funds in the Collateral Accounts, and funds resulting from the liquidation of Permitted Investments contained in the Collateral Accounts, either toward the components of the Indebtedness (e.g., interest, principal and other amounts payable hereunder), the Loan and the Notes, in such sequence as Lender shall elect in its sole discretion, and/or toward the payment of Property expenses.

 

Section 3.9 Bankruptcy

 

.  Borrower and Lender acknowledge and agree that upon the filing of a bankruptcy petition by or against Borrower under the Bankruptcy Code, the Account Collateral and the Revenues (whether then already in the Collateral Accounts, or then due or becoming due thereafter) shall be deemed not to be property of Borrower’s bankruptcy estate within the meaning of Section 541 of the Bankruptcy Code.  If, however, a court of competent jurisdiction determines that, notwithstanding the foregoing characterization of the Account Collateral and the Revenues by Borrower and Lender, the Account Collateral and/or the Revenues do constitute property of Borrower’s bankruptcy estate, then Borrower and Lender further acknowledge and agree that all such Revenues, whether due and payable before or after the filing of the petition, are and shall be cash collateral of Lender.  Borrower acknowledges that Lender does not consent to Borrower’s use of such cash collateral and that, in the event Lender elects (in its sole discretion) to give such consent, such consent shall only be effective if given in writing signed by Lender.  Except as provided in the immediately preceding sentence, Borrower shall not have the right to use or apply or require the use or application of such cash collateral (i) unless Borrower shall have received a court order authorizing the use of the same, and (ii) Borrower shall have provided such adequate protection to Lender as shall be required by the bankruptcy court in accordance with the Bankruptcy Code.

 

ARTICLE IV                                

 

REPRESENTATIONS

 

Borrower represents to Lender that, as of the Closing Date, except as set forth in the Exception Report:

 

Section 4.1 Organization

 

.

 

(a) Borrower is duly organized, validly existing and in good standing under the laws of the State of Delaware, and is in good standing in each other jurisdiction where ownership of its properties or the conduct of its business requires it to be so, and Borrower has all power and authority under such laws and its organizational documents and all governmental licenses, authorizations, consents and approvals necessary to carry on its business as now conducted.

 

 

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Borrower’s sole member, Cole REIT III Operating Partnership, LP, is duly organized, validly existing and in good standing under the laws of the State of Delaware, and is in good standing in each other jurisdiction where ownership of its assets or the conduct of its business requires it to be so, and has all power and authority under such laws and its organizational documents and all governmental licenses, authorizations, consents and approvals necessary to carry on its business as now conducted.

 

(b) Borrower has no subsidiaries and does not own any equity interest in any other Person.

 

(c) The organizational chart contained in Exhibit A is true, correct and complete as of the date hereof.

 

Section 4.2 Authorization

 

.  Borrower has the power and authority to enter into this Agreement and the other Loan Documents, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated by the Loan Documents and has by proper action duly authorized the execution and delivery of the Loan Documents.

 

Section 4.3 No Conflicts

 

.  Neither the execution and delivery of the Loan Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof will (i) violate or conflict with any provision of its formation and governance documents, (ii) violate any Legal Requirement (including, without limitation, Regulation U, Regulation X or Regulation T), order, writ, judgment, injunction, decree or permit applicable to it, (iii) violate or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, contract or other Material Agreement to which Borrower is a party or by which Borrower may be bound, or (iv) result in or require the creation of any Lien or other charge or encumbrance upon or with respect to the Collateral in favor of any party other than Lender.

 

Section 4.4 Consents

 

.  No consent, approval, authorization or order of, or qualification with, any court or Governmental Authority is required in connection with the execution, delivery or performance by Borrower of this Agreement or the other Loan Documents, except for any of the foregoing which have already been obtained.

 

Section 4.5 Enforceable Obligations

 

.  This Agreement and the other Loan Documents have been duly executed and delivered by Borrower and constitute Borrower’s legal, valid and binding obligations, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.  The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower, including, without limitation, the defense of usury.

 

Section 4.6 No Default

 

.  No Default or Event of Default shall have occurred or be continuing or will exist immediately following the making of the Loan.

 

 

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Section 4.7 Payment of Taxes

 

.  Borrower has filed, or caused to be filed, all tax returns (federal, state, local and foreign) required to be filed and paid all amounts of taxes due (including, without limitation, interest and penalties) except for taxes which are not yet delinquent and has paid all other taxes, fees, assessments and other governmental charges (including, without limitation, mortgage recording taxes, documentary stamp taxes and intangible taxes) owing by it necessary to preserve the Liens in favor of Lender.

 

Section 4.8 Compliance with Law

 

.  Borrower, each Property and the uses thereof comply in all material respects with all applicable Insurance Requirements and Legal Requirements, including, without limitation, building and zoning ordinances and codes.  Each Property conforms to current zoning requirements (including, without limitation, requirements relating to parking) and is neither an illegal nor, except as set forth in the zoning reports delivered to Lender with respect to each Property and prepared by Faulk & Foster as required pursuant to Section 8.1(o), a legal nonconforming use.  Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority the violation of which could adversely affect any Property or the condition (financial or otherwise) or business of Borrower.  There has not been committed by or on behalf of Borrower or, to Borrower’s actual knowledge, any other Person in occupancy of or involved with the operation or use of any Property, any act or omission affording any federal Governmental Authority or any state or local Governmental Authority the right of forfeiture as against any Property or any portion thereof or any monies paid in performance of its obligations under any of the Loan Documents.  Neither Borrower nor Sponsor has purchased any portion of the Properties with proceeds of any illegal activity.

 

Section 4.9 ERISA

 

.  Neither Borrower nor any ERISA Affiliate of Borrower has incurred or could be subjected to any liability under Title IV or Section 302 of ERISA or Section 412 of the Code or maintains or contributes to, or is or has been required to maintain or contribute to, any employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title IV or Section 302 of ERISA or Section 412 of the Code.  The consummation of the transactions contemplated by this Agreement will not constitute or result in any non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or substantially similar provisions under federal, state or local laws, rules or regulations.

 

Section 4.10 Investment Company Act

 

.  Borrower is not an “investment company”, or a company “controlled” by an “investment company”, registered or required to be registered under the Investment Company Act of 1940, as amended.

 

Section 4.11 No Bankruptcy Filing

 

.  Borrower is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of its assets or property.  Borrower does not have knowledge of any Person contemplating the filing of any such petition against it.  During the ten year period preceding the Closing Date, no petition in bankruptcy has been filed by or against Borrower, Sponsor, or any Affiliate of Borrower or Sponsor.  Further, Borrower does not have knowledge of any Tenant under any Major Lease contemplating or having filed any of the foregoing actions.

 

 

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Section 4.12 Other Debt

 

.  Borrower does not have outstanding any Debt other than Permitted Debt.

 

Section 4.13 Litigation

 

.  There are no actions, suits, proceedings, arbitrations or governmental investigations by or before any Governmental Authority or other court or agency now pending against Borrower or, to Borrower’s actual knowledge, affecting any Property, in each case, except as listed in the Exception Report (and none of the matters listed in the Exception Report, even if determined against Borrower or such Property, could reasonably be expected to result in a Material Adverse Effect).  To Borrower’s actual knowledge, there are no actions, suits, proceedings, arbitrations or governmental investigations threatened against Borrower or any Property, in each case, except as listed in the Exception Report (and none of the matters listed in the Exception Report, even if determined against Borrower or such Property, could reasonably be expected to result in a Material Adverse Effect).

 

Section 4.14 Leases; Material Agreements

 

.

 

(a) Borrower has delivered to Lender true, correct and complete copies of all Leases.  No person has any possessory interest in any of the Properties or right to occupy the same except under and pursuant to the provisions of the Leases and subleases or license agreements for which notice to Borrower or Borrower’s consent was not required.  The rent roll attached to this Agreement as Schedule E attached hereto (the “Rent Roll”) is true, correct and complete as of the Closing Date.  Except as (i) indicated on the Rent Roll or (ii) set forth on Schedule H attached hereto, no security deposits are being held by Borrower, no Tenant has any extension, renewal or termination options (other than rights to terminate as a result of landlord default, casualty, condemnation, or landlord’s construction obligations), no Tenant or other party has any option, right of first refusal or similar preferential right to purchase or lease all or any portion of any Property, no fixed rent has been paid more than 30 days in advance of its due date and no payments of rent are more than 30 days delinquent.  Except as (i) indicated on the Rent Roll or (ii) set forth in the Leases, no Tenant has any termination options as a result of landlord default, casualty, condemnation, or landlord’s construction obligations.

 

(b) (i) Borrower is the sole owner of the entire lessor’s interest in the Leases, (ii) the Leases are valid and enforceable and in full force and effect, (iii) all of the Leases are arm’s-length agreements with bona fide, independent third parties, (iv) all base and percentage rent due under Leases have been paid in full as of the date of the Rent Roll, (v) the terms of all alterations, modifications and amendments to the Leases are reflected in the written documents delivered to Lender prior to the Closing Date, (vi) none of the Revenues reserved in the Leases have been assigned or otherwise pledged or hypothecated (except such pledge or hypothecation that will be fully terminated and released in connection with the filing and recordation of the Mortgages and except for the Liens contemplated pursuant to the Loan Documents).

 

 

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(c) Except as indicated in Schedule D attached hereto or in any estoppel certificates delivered to Lender in connection with the Loan, (i) no party under any Lease is in default in any material respect, there is no event of default, and to Borrower’s actual knowledge, there are no events that have occurred that, with the passage of time and/or the giving of notice would constitute a default under any Lease, (ii) to Borrower’s actual knowledge, there exist no offsets or defenses to the payment of any portion of the Revenues, (iii) all work to be performed by the landlord under the Leases has been substantially performed, all Tenants have accepted possession of their respective premises under the Leases, all contributions to be made by the landlord to the Tenants thereunder have been made, all other conditions to each Tenant’s obligations thereunder have been satisfied, no Tenant has the right to require Borrower to perform or finance Tenant Improvements or Material Alterations (except as set forth on Schedule K with respect to Tenant Improvements or Material Alterations currently underway but not yet completed and except as set forth in the Leases with respect to future Tenant Improvements or Material Alterations with respect to which the Tenant has a right to request of Landlord but have not yet been requested or commenced) and no Leasing Commissions are owed or would be owed upon the exercise of any Tenant’s existing renewal or expansion options, and Borrower has no other monetary obligation to any Tenant under any Lease, and (iv) Borrower has received no notice from any Tenant challenging the validity or enforceability of any Lease.

 

(d) There are no Material Agreements except as described in Schedule F and attached hereto and except as listed on “Schedule B” of the Qualified Title Insurance Policies.  Borrower has made available to Lender true, correct and complete copies of all Material Agreements.  Each Material Agreement has been entered into at arm’s length in the ordinary course of business by or on behalf of Borrower.

 

(e) The Leases and the Material Agreements are in full force and effect.  Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Permitted Encumbrance, Material Agreement or any other agreement or instrument to which it is a party or by which it or any of the Properties are bound.

 

Section 4.15 Full and Accurate Disclosure

 

.  No statement of fact heretofore delivered by Sponsor or Borrower to Lender in writing in respect of the Properties or the Borrower contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein not misleading unless subsequently corrected.  There is no fact presently actually known to Borrower which has not been disclosed to Lender which is reasonably likely to result in a Material Adverse Effect.

 

 

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Section 4.16 Financial Condition

 

.  All financial data concerning Borrower and the Properties heretofore provided to Lender fairly presents in accordance with GAAP (or another basis of accounting acceptable to Lender and consistently applied) the financial position of Borrower in all material respects, as of the date on which it was made, and does not omit to state any fact necessary to make statements contained herein or therein not misleading.  Since the delivery of such data, except as otherwise disclosed in writing to Lender, there have occurred no changes or circumstances which have had or are reasonably likely to result in a Material Adverse Effect.

 

Section 4.17 Single-Purpose Requirements

 

.

 

(a) Borrower is now a Single-Purpose Entity and has conducted its business in substantial compliance with the provisions of its organizational documents, and has always been since its formation a single-purpose entity formed solely for the purpose of acquiring, owning, holding, leasing, operating, managing, maintaining, developing and improving the Property owned by it.  Borrower has never (i) owned any property other than the Properties and related personal property, (ii) engaged in any business, except the ownership and operation of the Properties or (iii) had any material contingent or actual obligations or liabilities unrelated to the Properties.

 

(b) Borrower has provided Lender with true, correct and complete copies of (i) Borrower’s current financial statements; and (ii) Borrower’s current operating agreement or partnership agreement, as applicable, together with all amendments and modifications thereto.

 

Section 4.18 Use of Loan Proceeds

 

.  No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulations T, U or X or any other Regulations of such Board of Governors, or for any purpose prohibited by Legal Requirements or by the terms and conditions of the Loan Documents.  The Loan is solely for the business purpose of Borrower or for distribution to Borrower’s equity holders in accordance with applicable law.

 

Section 4.19 Not Foreign Person

 

.  Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Code.

 

Section 4.20 Labor Matters

 

.  Borrower is not a party to any collective bargaining agreements.

 

 

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Section 4.21 Title

 

.  Borrower owns good, marketable and insurable title to the Properties and good and marketable title to any related personal property owned by Borrower (if any), to the Collateral Accounts and to any other Collateral, in each case free and clear of all Liens whatsoever except the Permitted Encumbrances.  The Mortgages, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i) valid, perfected first priority Liens on the Properties and the rents therefrom, enforceable as such against creditors of and purchasers from Borrower and subject only to Permitted Encumbrances, and (ii) perfected Liens (pursuant to the Uniform Commercial Code of the State of Delaware) in and to all personalty owned by Borrower, all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances.  The Permitted Encumbrances do not and will not materially and adversely affect or interfere with the value, or current or contemplated use or operation, of the Properties, or the security intended to be provided by the Mortgage or Borrower’s ability to repay the Indebtedness in accordance with the terms of the Loan Documents.  Except as insured over by a Qualified Title Insurance Policy, there are no claims for payment for work, labor or materials affecting the Properties which are or may become a Lien prior to, or of equal priority with, the Liens created by the Loan Documents.  No creditor of Borrower other than Lender has in its possession any goods that constitute or evidence the Collateral.

 

Section 4.22 No Encroachments

 

.  Except as shown on the applicable Qualified Survey, all of the improvements on each Property lie wholly within the boundaries and building restriction lines of the such Property, and no improvements on adjoining property encroach upon any Property, and no easements or other encumbrances upon any Property encroach upon any of the improvements, so as, in either case, to adversely affect the value or marketability of the applicable Property, except those which are insured against by a Qualified Title Insurance Policy.

 

Section 4.23 Physical Condition

 

.

 

(a) Except for matters set forth in the Engineering Reports, each Property (including, without limitation, sidewalks, storm drainage system, roof, plumbing system, HVAC system, fire protection system, electrical system, equipment, elevators, exterior sidings and doors, irrigation system and all structural components) is in good condition, order and repair in all respects material to its use, operation or value.

 

(b) Borrower is not aware of any material structural or other material defect or damages in any of the Properties, whether latent or otherwise.

 

(c) Borrower has not received and is not aware of any other party’s receipt of notice from any insurance company or bonding company of any defects or inadequacies in any of the Properties which would, alone or in the aggregate, adversely affect in any material respect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.

 

 

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Section 4.24 Fraudulent Conveyance

 

.  Borrower has not entered into the Transaction or any of the Loan Documents with the actual intent to hinder, delay or defraud any creditor.  Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. On the Closing Date, the fair salable value of Borrower’s aggregate assets is and will, immediately following the making of the Loan and the use and disbursement of the proceeds thereof, be greater than Borrower’s probable aggregate liabilities (including, without limitation, subordinated, unliquidated, disputed and Contingent Obligations).  Borrower’s aggregate assets do not and, immediately following the making of the Loan and the use and disbursement of the proceeds thereof will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted.  Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including, without limitation, Contingent Obligations and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).

 

Section 4.25 Management

 

.  Except for any Approved Management Agreement and for Sunset Valley, no property or asset management agreements are in effect with respect to the Properties.  The Approved Management Agreement is in full force and effect and there is no event of default thereunder by any party thereto and no event has occurred that, with the passage of time and/or the giving of notice would constitute an event of default thereunder.

 

Section 4.26 Condemnation

 

.  No Condemnation has been commenced or, to Borrower’s knowledge, is contemplated with respect to all or any portion of any of the Properties or for the relocation of roadways providing access to any of the Properties.

 

Section 4.27 Utilities and Public Access

 

.  Each Property has adequate rights of access to dedicated public ways (and makes no material use of any means of access or egress that is not pursuant to such dedicated public ways or recorded, irrevocable rights-of-way or easements) and is adequately served by all public utilities necessary to the continued use and enjoyment of such Property as presently used and enjoyed.

 

Section 4.28 Environmental Matters

 

.  Except as disclosed in the Environmental Reports:

 

(a) Each Property is in compliance in all material respects with all Environmental Laws applicable to such Property (which compliance includes, but is not limited to, the possession of, and compliance with, all permits, approvals, licenses, registrations and other governmental authorizations required under applicable Environmental Laws in connection with the ownership, operation, use or occupation of such Property).

 

(b) No Environmental Claim is pending with respect to any of the Properties, nor, to Borrower’s actual knowledge, is any threatened, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to Borrower or any of the Properties.

 

 

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(c) There are no Hazardous Substances, PCB-containing equipment, asbestos or asbestos containing materials, underground storage tanks or surface impoundments, lead in drinking water, or lead-based paint present at, on, in or under any Property except, in each case, for such quantities and concentrations as are reasonably required for the conduct of the business and as are Used in material compliance with all Environmental Laws.

 

(d) There have not been and are no past, present or threatened Releases of any Hazardous Substances from or at any of the Properties that are reasonably likely to form the basis of any Environmental Claim, and, to Borrower’s actual knowledge, there is no threat of any Release of any Hazardous Substance migrating to any of the Properties.

 

(e) No Liens are presently recorded with the appropriate land records under or pursuant to any Environmental Law with respect to any of the Properties and, to Borrower’s actual knowledge, no action by any Governmental Authority is pending that seeks to make any of the Properties subject to Liens under any Environmental Law.

 

(f) There have been no material environmental investigations, studies, audits, reviews or other analyses conducted by or that are in the possession, custody or control of Borrower in relation to any of the Properties which have not been made available to Lender.

 

Section 4.29 Assessments

 

.  Except as may be referenced in any Qualified Title Insurance Policy, there are no pending or, to Borrower’s actual knowledge, proposed special or other assessments for public improvements or otherwise affecting any of the Properties, nor are there any contemplated improvements to any of the Properties that may result in such special or other assessments.  No extension of time for assessment or payment by Borrower of any federal, state or local tax is in effect.

 

Section 4.30 No Joint Assessment

 

.  Borrower has not suffered, permitted or initiated the joint assessment of any of the Properties (i) with any other real property constituting a separate tax lot, or (ii) with any personal property, or any other procedure whereby the Lien of any Taxes which may be levied against such other real property or personal property shall be assessed or levied or charged to any of the Properties as a single Lien.

 

Section 4.31 Separate Lots

 

.  Except as set forth on Schedule I attached hereto, no portion of any of the Properties is part of a tax lot that also includes any real property that is not Collateral.

 

Section 4.32 Permits; Certificate of Occupancy

 

.  Borrower or the Tenants, as applicable in accordance with the terms of the applicable Lease, have obtained all Permits necessary for the present use and operation of each Property.  The uses being made of each Property are in conformity in all material respects with the certificate of occupancy and/or, to Borrower’s actual knowledge, Permits for such Property and any other restrictions, covenants or conditions affecting such Property.

 

 

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Section 4.33 Flood Zone

 

.  None of the Improvements on any of the Properties is located in an area identified by the Federal Emergency Management Agency or the Federal Insurance Administration as a “100 year flood plain” or as having special flood hazards (including, without limitation, Zones A, B, C, V and X and Shaded X areas), or, to the extent that any portion of any of the Properties is located in such an area, such Property is covered by flood insurance meeting the requirements set forth in Section 5.15(a)(ii).

 

Section 4.34 Security Deposits

 

.  Borrower is in compliance in all material respects with all Legal Requirements relating to security deposits.

 

Section 4.35 Acquisition Documents

 

.  Borrower has delivered to Lender true, correct  and complete copies of all material agreements and instruments under which Borrower or any of its Affiliates or the seller of any of the Properties have remaining rights or obligations in respect of Borrower’s acquisition of the Properties.

 

Section 4.36 Insurance

 

.  Borrower or the Tenants, as applicable in accordance with the terms of the applicable Lease, have obtained insurance policies reflecting the insurance coverages, amounts and other requirements set forth in this Agreement.  All premiums on such insurance policies required to be paid as of the Closing Date have been paid for the current policy period.  Borrower has not and to Borrower’s actual knowledge, no Person has done, by act or omission, anything that would impair the coverage of any such policy.

 

Section 4.37 No Dealings

 

.  Neither Borrower nor the Sponsor is aware of any unlawful influence on the assessed value of any of the Properties.

 

Section 4.38 Estoppel Certificates

 

.  Borrower has delivered to Lender true, correct and complete copies of (a) the form(s) of estoppel certificate heretofore sent by Borrower or an Affiliate to every Tenant at the Properties, and (b) each estoppel certificate received back from any such Tenant prior to the Closing Date.

 

Section 4.39 Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws

 

.  (a) None of the funds or other assets of Borrower or Sponsor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under federal law, including, without limitation, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any executive orders or regulations promulgated thereunder, with the result that (i) the investment in Borrower or Sponsor, as applicable (whether directly or indirectly), is prohibited by law or (ii) the Loan is in violation of law (any such person, entity or government, an “Embargoed Person”); (b) no Embargoed Person has any interest of any nature whatsoever in Borrower or Sponsor, as applicable (whether directly or indirectly), with the result that (i) the investment in Borrower or Sponsor, as applicable (whether directly or indirectly) is prohibited by law or (ii) the Loan is in violation of law, (c) none of the funds of Borrower or Sponsor, as applicable, have been derived from any unlawful activity with the result that (i) the investment in Borrower or Sponsor, as applicable (whether directly or indirectly) is prohibited by law or (ii) the Loan is in violation of law and (d) to Borrower’s actual knowledge, no Tenant at

 

 

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any Property is identified on the OFAC List.  Borrower has implemented procedures, and will consistently apply those procedures throughout the term of the Loan, to ensure the foregoing representations and warranties remain true, correct and complete during the term of the Loan.  Notwithstanding Section 4.40 to the contrary, the representations and warranties contained in this Section 4.39 shall survive in perpetuity.  With respect to direct or indirect interests in Sponsor, Lender acknowledges that Borrower has relied exclusively on its U.S. broker-dealer network to implement the normal and customary investor screening practices mandated by applicable law and FINRA regulations in making the foregoing representation.

 

Section 4.40 Survival

 

.  Borrower agrees that all of the representations of Borrower set forth in this Agreement and in the other Loan Documents shall survive for so long as any portion of the Indebtedness is outstanding.  All representations, covenants and agreements made by Borrower in this Agreement or in the other Loan Documents shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.  On the date of any Securitization, on not less than five Business Days’ prior written notice, Borrower shall deliver to Lender a certification (x) confirming that all of the representations contained in this Agreement are true, correct and complete as of the date of such Securitization, or (y) otherwise specifying any changes in or qualifications to such representations as of such date as may be necessary to make such representations consistent with the facts as they exist on such date.

 

ARTICLE V                      

 

AFFIRMATIVE COVENANTS

 

Section 5.1 Existence

 

. Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence and all rights, licenses, Permits, franchises and other agreements necessary for the continued use and operation of its business.  Borrower shall deliver to Lender a copy of each amendment or other modification to any of its organizational documents promptly after the execution thereof.

 

Section 5.2 Maintenance of Properties

 

.

 

(a) Borrower shall cause each Property to be maintained in good and safe working order and repair, reasonable wear and tear excepted, and in keeping with the condition and repair of properties of a similar use, value, age, nature and construction.  Borrower shall not use, maintain or operate any Property in any manner that constitutes a public or private nuisance or that makes void, voidable, or cancelable, or increases the premium of, any insurance then in force with respect thereto.  Subject to Section 6.13, without the prior written consent of Lender, no improvements or equipment located at or on any Property shall be removed or demolished (except for replacement of equipment in the ordinary course of Borrower’s business with items of the same utility and of equal or greater value and sales of obsolete equipment no longer needed for the operation of the applicable Property).  Subject to Section 6.13, Borrower shall from time to time make, or cause to be made, all reasonably necessary repairs and replacements to the Properties.  Borrower shall not make any change in the use of any Property that would materially increase the risk of fire or other hazard arising out of the operation of any Property, or

 

 

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do or permit to be done thereon anything that may in any way cause a Material Adverse Effect.  Borrower shall not install or permit to be installed on any Property any underground storage tank.  Borrower shall not, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Property, regardless of the depth thereof or the method of mining or extraction thereof.

 

(b) Borrower shall remediate the Deferred Maintenance Conditions within 12 months following the Closing Date, subject to Force Majeure, and upon request from Lender after the expiration of such period shall deliver to Lender an Officer’s Certificate confirming that such remediation has been completed and that all associated expenses have been paid.

 

Section 5.3 Compliance with Legal Requirements

 

.  Borrower shall comply with, and shall cause each Property to comply with and be operated, maintained, repaired and improved in compliance with, all Legal Requirements, Insurance Requirements and all material contractual obligations by which Borrower is legally bound (including, without limitation, obligations under Major Leases). After prior written notice to Lender, Borrower, at Borrower’s expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Borrower or a Property or any alleged violation of any Legal Requirement, provided that (i) no Event of Default has occurred and is continuing; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) no Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly upon final determination thereof comply with any such Legal Requirement determined to be valid or applicable or cure any violation of any Legal Requirement; (v) such proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or any Property; and (vi) Borrower shall furnish such security as may be required in the proceeding, or as may be requested by Lender, to insure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith.  Notwithstanding the foregoing, to the extent the Lease with a Tenant remains in effect and such Tenant remains liable for the obligations under its Lease, such Tenant shall have the right to exercise any contest rights set forth in such Lease in accordance with the terms thereof and, that to the extent such rights conflict or are inconsistent with the provisions of this Section 5.3, the provisions set forth in such Lease shall govern and control.

 

Section 5.4 Impositions and Other Claims

 

.  (a)  Borrower shall pay and discharge (or cause to be paid and discharged) all taxes, assessments and governmental charges levied upon it, its income and its assets as and when such taxes, assessments and charges are due and payable, as well as all lawful claims for labor, materials and supplies or otherwise, subject to any rights to contest contained in the definition of Permitted Encumbrances.  After prior written notice to Lender, Borrower, at Borrower’s expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes, provided that (i) no Event of Default has occurred

 

 

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and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iii) no Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes, together with all costs, interest and penalties which may be payable in connection therewith; (v) such proceeding shall suspend the collection of such contested Taxes from any Property; and (vi) Borrower shall furnish such security as may be required in the proceeding, or as may be requested by Lender, to insure the payment of any such Taxes, together with all interest and penalties thereon.  Notwithstanding the foregoing, to the extent the Lease with a Tenant remains in effect and such Tenant remains liable for the obligations under its Lease, such Tenant shall have the right to exercise any contest rights set forth in such Lease in accordance with the terms thereof and, to the extent such rights conflict or are inconsistent with the provisions of this Section 5.4, the provisions set forth in such Lease shall govern and control.

 

(b) Borrower shall file all federal, state and local tax returns and other reports that it is required by law to file.  If any law or regulation applicable to Lender, any Note, any of the Properties or any of the Mortgages is enacted that deducts from the value of property for the purpose of taxation any Lien thereon, or imposes upon Lender the payment of the whole or any portion of the taxes or assessments or charges or Liens required by this Agreement to be paid by Borrower, or changes in any way the laws or regulations relating to the taxation of mortgages or security agreements or debts secured by mortgages or security agreements or the interest of the mortgagee or secured party in the property covered thereby, or the manner of collection of such taxes, so as to affect any of the Mortgages, the Indebtedness or Lender, then Borrower, upon demand by Lender, shall pay such taxes, assessments, charges or Liens, or reimburse Lender for any amounts paid by Lender.  If in the opinion of Lender’s counsel it might be unlawful to require Borrower to make such payment or the making of such payment might result in the imposition of interest beyond the maximum amount permitted by applicable Law, Lender may elect to declare all of the Indebtedness to be due and payable 90 days from the giving of written notice by Lender to Borrower.

 

Section 5.5 Access to Properties

 

.  Subject to the rights of Tenants, Borrower shall permit agents, representatives and employees of Lender and the Servicer to enter and inspect the Properties or any portion thereof, and/or inspect, examine, audit and copy the books and records of Borrower (including, without limitation, all recorded data of any kind or nature, regardless of the medium of recording), at such reasonable times as may be requested by Lender upon reasonable advance notice.  If Lender shall determine that an Event of Default exists, the cost of such inspections, examinations, copying or audits shall be borne by Borrower, including, without limitation, the cost of all follow up or additional investigations, audits or inquiries deemed reasonably necessary by Lender.  The cost of such inspections, examinations, audits and copying, if not paid for by Borrower (to the extent required above) following demand, may be added to the Indebtedness and shall bear interest thereafter until paid at the Default Rate.

 

 

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Section 5.6 Cooperate in Legal Proceedings

 

.  Except with respect to any claim by Borrower against Lender, Borrower shall cooperate fully with Lender with respect to any proceedings before any Governmental Authority which may in any way affect the rights of Lender hereunder or under any of the Loan Documents and, in connection therewith, Lender may, at its election, participate or designate a representative to participate in any such proceedings.

 

Section 5.7 Leases

 

.

 

(a) Borrower shall furnish Lender with executed copies of all Leases, together with a detailed breakdown of income and cost associated therewith.  All new Leases and renewals or amendments of Leases must (i) be entered into on an arms-length basis with Tenants that are not Affiliates of Borrower and whose identity and creditworthiness is appropriate for tenancy in property of comparable quality, (ii) provide for rental rates and other economic terms which, taken as a whole, are at least equivalent to then-existing market rates, based on the applicable market, and otherwise contain terms and conditions that are commercially reasonable, (iii) have an initial term of not more than 10 years, (iv) not have a Material Adverse Effect, (v) be expressly subject and subordinate to the Mortgages and contain provisions for the agreement by the Tenant thereunder to attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the applicable Property by any purchaser at a foreclosure sale and (vi) require the Tenant thereunder to execute and deliver to Borrower an estoppel certificate addressing the issues set forth in Section 9.16(b) of this Agreement (in each case, unless Lender consents to such Lease in its sole discretion).

 

(b) All new Leases that are Major Leases, and all terminations, renewals and amendments of Major Leases, and any surrender of rights under any Major Lease, shall be subject to the prior written consent of Lender, such consent not to be unreasonably withheld.

 

(c) Borrower shall (i) observe and punctually perform all the obligations imposed upon the lessor under the Leases; (ii) enforce all of the terms, covenants and conditions contained in the Leases on the part of the lessee thereunder to be observed or performed, short of termination thereof, except that Borrower may terminate any Lease following a material default thereunder by the respective Tenant; (iii) not collect any of the rents thereunder more than one month in advance; (iv) not execute any assignment of lessor’s interest in the Leases or associated rents other than the assignments of rents and leases under the Mortgages and Assignments of Rents and Leases; (v) not cancel or terminate any guarantee of any of the Major Leases without the prior written consent of Lender and (vi) not permit any subletting of any space covered by a Lease or an assignment of the Tenant’s rights under a Lease, except in strict accordance with the terms of such Lease.  Borrower shall deliver to each new Tenant a Tenant Notice upon execution of such Tenant’s Lease, and promptly thereafter deliver to Lender a copy thereof and evidence of such Tenant’s receipt thereof.

 

 

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(d) Security deposits of Tenants under all Leases, whether held in cash or any other form, shall not be commingled with any other funds of Borrower and, if cash and exceeding $100,000, shall be deposited by Borrower in an account at such commercial or savings bank as may be reasonably satisfactory to Lender, which account is hereby pledged to Lender.  Borrower shall maintain books and records of sufficient detail to identify all security deposits of Tenants separate and apart from any other payments received from Tenants.  Any bond or other instrument which Borrower is permitted to hold in lieu of cash security deposits under any applicable Legal Requirements shall be maintained in full force and effect unless replaced by cash deposits as described above, shall be issued by an institution reasonably satisfactory to Lender, shall (if not prohibited by any Legal Requirements) name Lender as payee or mortgagee thereunder (or at Lender’s option, be fully assignable to Lender) or may name Borrower as payee thereunder so long as such bond or other instrument is pledged to Lender as security for the Indebtedness and shall, in all respects, comply with any applicable Legal Requirements and otherwise be reasonably satisfactory to Lender.  Borrower shall, upon Lender’s request, provide Lender with evidence reasonably satisfactory to Lender of Borrower’s compliance with the foregoing.  Upon the occurrence and during the continuance of any Trigger Period or Event of Default, Borrower shall, upon Lender’s request, deposit with Lender in an Eligible Account pledged to Lender an amount equal to the aggregate security deposits of the Tenants (and any interest theretofore earned on such security deposits and actually received by Borrower and to which the Tenants may be entitled under the terms of their Leases) which Borrower had not returned to the applicable Tenants or applied in accordance with the terms of the applicable Lease.

 

(e) Borrower shall promptly deliver to Lender a copy of each written notice from a Tenant under any Major Lease claiming that Borrower is in default in the performance or observance of any of the terms, covenants or conditions thereof to be performed or observed by Borrower.  Borrower shall use commercially reasonable efforts to provide in each Major Lease executed after the Closing Date to which Borrower is a party that any Tenant delivering any such notice shall send a copy of such notice directly to Lender.

 

Section 5.8 Plan Assets, etc

 

.  Borrower will do, or cause to be done, all things necessary to ensure that it will not be deemed to hold Plan Assets at any time.

 

Section 5.9 Further Assurances

 

.  Borrower shall, at Borrower’s sole cost and expense (except as otherwise expressly provided in this Agreement or in the Cooperation Agreement), from time to time as reasonably requested by Lender, execute, acknowledge, record, register, file and/or deliver to Lender such other instruments, agreements, certificates and documents (including, without limitation, Uniform Commercial Code financing statements and amended or replacement mortgages) as Lender may reasonably request to evidence, confirm, perfect and maintain the Liens securing or intended to secure the obligations of Borrower and the rights of Lender under the Loan Documents or to facilitate a replacement of the Cash Management Bank pursuant to Section 3.1(c) or a bifurcation of the Note pursuant to Section 1.1(c) and/or 9.7(b) or a loan restructuring pursuant to the Cooperation Agreement, in each case if requested by Lender,

 

 

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and do and execute all such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents as Lender shall reasonably request from time to time.  Upon foreclosure, the appointment of a receiver or any other relevant action, Borrower shall, at its sole cost and expense, cooperate fully and completely to effect the assignment or transfer of any license, permit, agreement or any other right necessary or useful to the operation of the Collateral.  Provided that an Event of Default shall have occurred and be continuing, Borrower authorizes and appoints Lender as its attorney-in-fact to execute, acknowledge, record, register and/or file such instruments, agreements, certificates and documents, and to do and execute such acts, conveyances and assurances, should Borrower fail to do so itself in violation of this Agreement or the other Loan Documents following written request from Lender, in each case without the signature of Borrower.  The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement.  Borrower hereby ratifies all actions that such attorney shall lawfully take or cause to be taken in accordance with this Section 5.9.

 

Section 5.10 Management of Collateral

 

.

 

(a) Each Property shall be managed at all times by an Approved Property Manager pursuant to an Approved Management Agreement.  Pursuant to the Subordination of Property Management Agreement or Agreements, each Approved Property Manager shall agree that its Approved Management Agreement and all fees thereunder (including, without limitation, any incentive fees) relating to the Properties are subject and subordinate to the Indebtedness.  Borrower may from time to time appoint a new Approved Property Manager to manage the applicable Property pursuant to a new Approved Management Agreement, and such successor manager shall execute for Lender’s benefit a Subordination of Property Management Agreement in form and substance reasonably satisfactory to Lender.  The per annum management fees of the Approved Property Manager (including, without limitation, any incentive fees) shall not, at any time, exceed (i) in the case of all Properties other than Sunset Valley, 2% of the gross revenues of the relevant Property and (ii) in the case of Sunset Valley, 4% of the gross revenues of the relevant Property, in each of cases (i) and (ii), for the then most recently concluded Test Period.

 

(b) Borrower shall cause each Approved Property Manager (including, without limitation, any successor Approved Property Manager) to maintain at all times worker’s compensation insurance as required by Governmental Authorities.

 

(c) Borrower shall notify Lender in writing of any default of Borrower or an Approved Property Manager under any of the Approved Management Agreements, after the expiration of any applicable cure periods, of which Borrower has actual knowledge.  Lender shall have the right, after reasonable notice to Borrower and in accordance with such Subordination of Management Agreement, to cure defaults of Borrower under such Approved Management Agreement.  Any out-of-pocket expenses incurred by Lender to cure any such default shall constitute a part of the Indebtedness and shall be due from Borrower upon demand by Lender.

 

 

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(d) Upon the occurrence and during the continuance of an Event of Default, or a material default relating to any of the Properties by an Approved Property Manager under an Approved Management Agreement after the expiration of any applicable cure period or upon the filing of a bankruptcy petition or the occurrence of a similar event with respect to an Approved Property Manager, Lender may, in its sole discretion, require Borrower to remove the Properties from the application of the Approved Management Agreement and engage an Approved Property Manager selected by Lender to serve as replacement Approved Property Manager pursuant to an Approved Management Agreement.  If Lender does not select a replacement Approved Property Manager, Lender shall have the right to request that the existing Approved Property Manager enter into a new Approved Management Agreement that relates only to the Properties.

 

Section 5.11 Notice of Material Event

 

.  Borrower shall give Lender prompt notice (containing reasonable detail) upon learning of (x) any material change in the financial or physical condition of any of the Properties, as reasonably determined by Borrower, including, without limitation, the termination or cancellation of any Major Lease and the termination or cancellation of terrorism or other insurance required by this Agreement, (y) any litigation or governmental proceedings pending or threatened in writing against Borrower which is reasonably likely to have a Material Adverse Effect, or (z) any other circumstance or event reasonably likely to cause a Material Adverse Effect.

 

Section 5.12 Annual Financial Statements

 

.  As soon as available, and in any event within 90 days after the close of each Fiscal Year, Borrower shall furnish to Lender, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format, a combined balance sheet of Borrower as of the end of such year, together with related statements of income and equityholders’ capital for such Fiscal Year, audited by a “Big Four” accounting firm whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP applied on a consistent basis (or another basis of accounting acceptable to Lender and consistently applied) and shall not be qualified as to the scope of the audit or as to the status of Borrower as a going concern.  Together with Borrower’s combined annual financial statements, Borrower shall furnish to Lender, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format:

 

(a) a combined statement of cash flows (provided that a separate schedule shall be provided showing the breakdown of cash flows for each individual Property);

 

(b) then current rent roll and occupancy reports;

 

(c) to the extent not shown in the combined statement of cash flows delivered pursuant to clause (a) above, an annual report for the most recently completed fiscal year, describing Capital Expenditures (stated separately with respect to any project costing in excess of $100,000), Tenant Improvements and Leasing Commissions; and

 

 

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(d) such other information as Lender shall reasonably request.

 

Section 5.13 Quarterly Financial Statements

 

.  As soon as available, and in any event within 45 days after the end of each Fiscal Quarter (including, without limitation, year-end), Borrower shall furnish to Lender, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format, quarterly and year-to-date unaudited financial statements prepared for such fiscal quarter with respect to Borrower on a combined basis, including, without limitation, a balance sheet and operating statement as of the end of such Fiscal Quarter, together with related statements of income for such Fiscal Quarter and for the portion of the Fiscal Year ending with such Fiscal Quarter, which statements shall be accompanied by an Officer’s Certificate certifying that the same are true, correct and complete and were prepared in accordance with GAAP applied on a consistent basis (or another basis of accounting acceptable to Lender and consistently applied), subject to changes resulting from audit and normal year-end audit adjustments.  Each such quarterly report shall be accompanied by the following, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format:

 

(a) a statement in reasonable detail which calculates Net Operating Income for each of the Fiscal Quarters in the Test Period ending in such Fiscal Quarter;

 

(b) copies of each of the Leases signed during such quarter, together with a summary thereof which shall include the Tenant’s name, lease term, base rent, Tenant Improvements, leasing commissions paid, free rent and other material tenant concessions;

 

(c) then current rent roll and occupancy reports; and

 

(d) such other information as Lender shall reasonably request.

 

Section 5.14 Monthly Financial Statements; Non-Delivery of Financial Statements

 

.

 

(a) Until the occurrence of a Securitization and upon the occurrence and  during the continuance of a Trigger Period or an Event of Default (or, in the case of item (iii) below, at all times), Borrower shall furnish within 30 days after the end of each calendar month (other than the final calendar month of any Fiscal Year or Fiscal Quarter), in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format, monthly and year-to-date unaudited financial statements prepared for the applicable month with respect to Borrower on a combined basis, including, without limitation, a balance sheet and operating statement as of the end of such month, together with related statements of income for such month and for the portion of the Fiscal Year ending with such month, which statements shall be accompanied by an Officer’s Certificate certifying that the same are true, correct and complete

 

 

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and were prepared in accordance with GAAP applied on a consistent basis (or another basis of accounting acceptable to Lender and consistently applied), subject to changes resulting from audit and normal year-end audit adjustments.  Each such monthly report shall be accompanied by the following:

 

(i) a summary of Leases signed during such month, which summary shall include the Tenant’s name, lease term, base rent, escalations, Tenant Improvements, leasing commissions paid, free rent and other concessions;

 

(ii) then current rent roll and occupancy reports; and

 

(iii) such other information as Lender shall reasonably request.

 

(b) If Borrower fails to provide to Lender the financial statements and other information specified in Sections 5.12, 5.13 and this Section 5.14 within the respective time period specified in such Sections, then (i) such failure shall, at Lender’s election, constitute an Event of Default if such failure is not cured within fifteen Business Days after written notice from Lender, and (ii) to the extent such failure is not cured within such fifteen Business Day period, Borrower shall pay to Lender a fee in the amount of $1,500 immediately upon the occurrence of such failure and again upon the expiration of each 10-day period thereafter until compliance is achieved, which amounts shall constitute a portion of the Indebtedness and, if unpaid, shall accrue interest at the Default Rate.

 

Section 5.15 Insurance

 

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(a) Borrower shall obtain and maintain (or cause to be obtained and maintained) with respect to the Properties, for the mutual benefit of Borrower and Lender at all times, the following policies of insurance:

 

(i) insurance against loss or damage by standard perils included within the classification “All Risks Special Form Cause of Loss” (including, without limitation, coverage for damage caused by windstorm and hail).  Such insurance shall (A) be in an amount equal to the full replacement cost of the Properties and fixtures (without deduction for physical depreciation); (B) have deductibles not in excess of the amounts permitted by this Section 5.15; (C) be paid in full when due; (D) contain a “Replacement Cost Endorsement” with a waiver of depreciation and an “Agreed Upon Amount Endorsement” waiving all coinsurance provisions; (E) include an ordinance or law coverage endorsement containing Coverage A: “Loss Due to Operation of Law” (with a limit equal to replacement cost), Coverage B: “Demolition Cost” and Coverage C: “Increased Cost of Construction” coverages each with limits of no less than 10% of replacement cost or such lesser amounts as Lender may require in its sole discretion; (F) permit that the improvements and other property covered by such insurance be rebuilt at another location in the event that such improvements and other property cannot be rebuilt at the location on which they are situated as of the date hereof.   If such insurance excludes mold, then the Borrowers shall implement a mold prevention program satisfactory to Lender;

 

 

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(ii) flood insurance if the Property is located in a "100 Year Flood Plain", "special hazard area" (including, without limitation, Zones A and V) or other area with a high degree of flood risk in an amount equal to the maximum limit of coverage available from FEMA/FIA, plus such excess limits reasonably requested by Lender, with a deductible not in excess of $50,000;

 

(iii) commercial general liability insurance, including, without limitation, broad form coverage of property damage, blanket contractual liability and personal injury (including, without limitation, death resulting therefrom), to be on the so-called “occurrence” form containing minimum limits per occurrence of not less than $1,000,000 with not less than a $2,000,000 general aggregate for any policy year (with a per location aggregate if the Properties are on a blanket policy).  In addition, at least $50,000,000 excess and/or umbrella liability insurance shall be obtained and maintained for any and all claims, including, without limitation, all legal liability imposed upon Borrower and all related court costs and attorneys’ fees and disbursements;

 

(iv) rental loss and/or business interruption insurance covering all risks required to be covered by the insurance provided for in clauses (i), (ii), (v), (vii), (viii), (ix) and (xi) of this Section 5.15(a), and covering the 18 month period commencing on the date of any Casualty or Condemnation, and containing an extended period of indemnity endorsement covering the 12 month period commencing on the date on which the applicable Property has been restored, as reasonably determined by the applicable insurer (even if the policy will expire prior to the end of such period).  The amount of such insurance shall be increased from time to time as and when the gross revenues from such Property increase;

 

(v) insurance against loss or damage from (A) leakage of sprinkler systems, if not provided by the policy required by Section 5.15(a)(i) and (B) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in any of the Improvements (without exclusion for explosions) and insurance against loss of occupancy or use arising from any breakdown, in such amounts as are generally available and are generally required by institutional lenders for properties comparable to the Properties;

 

(vi) worker’s compensation insurance with respect to all employees of Borrower as and to the extent required by any Governmental Authority or Legal Requirement and employer’s liability coverage of at least $1,000,000 (if applicable);

 

 

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(vii) during any period of repair or restoration, and only if the property and liability coverage forms do not otherwise apply, owner’s contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the insurance provided for in Section 5.15(a)(iii).  The insurance provided for in Section 5.15(a) shall (1) be written in a so-called builder’s risk completed value form or equivalent coverage, including, without limitation, coverage for 100% of the total costs of construction on a non-reporting basis and against all risks insured against pursuant to clauses (i), (ii), (iv), (v), (viii) and (ix) of Section 5.15(a), (2) shall include permission to occupy the Property, and (3) shall contain an agreed amount endorsement waiving co-insurance provisions;

 

(viii) if required by Lender, earthquake insurance (A) with minimum coverage equivalent to the greater of  1.0x SUL (scenario upper loss) and 1.5x SEL (scenario expected loss) multiplied by the full replacement cost of the building plus business income, (B) having a deductible approved by Lender (but in any event not be in excess of 5% of the total insurable value of such Property), and (C) if the Property is legally nonconforming under applicable zoning ordinances and codes, containing ordinance of law coverage in such amounts required under Section 5.15(a)(i)(E);

 

(ix) so long as the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”) or a similar or subsequent statute is in effect, terrorism insurance for Certified and Non-Certified acts (as such terms are defined in TRIPRA or similar or subsequent statute) in an amount equal to the full replacement cost of the Properties (plus twelve months of business interruption coverage).  If TRIPRA or a similar or subsequent statute is not in effect, then provided that terrorism insurance is commercially available, Borrower shall be required to carry terrorism insurance throughout the term of the Loan as required by the preceding sentence, but in such event Borrower shall not be required to spend on terrorism insurance coverage more than two times the amount of the insurance premium that is payable at such time in respect of the casualty and business interruption/rental loss insurance required hereunder (without giving effect to the cost of terrorism components of such casualty and business interruption/rental loss insurance), and if the cost of terrorism insurance exceeds such amount, Borrower shall purchase the maximum amount of terrorism insurance available with funds equal to such amount;

 

(x) motor vehicle liability coverage for all owned and non owned vehicles, including, without limitation, rented and leased vehicles containing minimum limits per occurrence of $1,000,000.00 (if applicable); and

 

(xi) such other insurance as may from time to time be reasonably requested by Lender.

 

 

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(b) All policies of insurance (the “Policies”) required pursuant to this Section 5.15 shall be issued by one or more primary insurers having a claims-paying ability of at least “A” or “A2” by each of the Rating Agencies, or by a syndicate of insurers through which at least 75% of the coverage (if there are 4 or fewer members of the syndicate) or at least 60% of the coverage (if there are 5 or more members of the syndicate) is with carriers having such claims-paying ability ratings (provided that the first layers of coverage are from carriers rated at least “A” or “A2” and all such carriers shall have claims-paying ability ratings of not less than “BBB+”  or “Baa1”).  Notwithstanding anything to the contrary herein, for purposes of determining whether the insurer ratings requirements set forth above have been satisfied, (1) any insurer that is not rated by Fitch will be regarded as having a Fitch rating that is the equivalent of the rating given to such insurer by any of Moody’s and S&P that does rate such insurer (or, if both such rating agencies rate such insurer, the lower of the two ratings), and (2) any insurer that is not rated by Moody’s will be regarded as having a Moody’s rating of “Baa1” or better if it is rated “A-” or better by S&P and will be regarded as having a Moody’s rating of  “A2” or better if it is rated “A+” or better by S&P.  Notwithstanding the foregoing, the existing Policy issued by Liberty Mutual shall be acceptable until renewal on July 1, 2010, at which time the Policies shall be issued in accordance with this paragraph (b).

 

(c) All Policies required pursuant to this Section 5.15:

 

(i) shall be maintained throughout the term of the Loan without cost to Lender  and shall name Borrower as the named insured or, in the case of Tenant Policies, an additional insured;

 

(ii) with respect to casualty policies, shall contain a standard noncontributory mortgagee clause naming Lender and its successors and assigns as their interests may appear as first mortgagee and loss payee;

 

(iii) with respect to liability policies, shall name Lender and its successors and assigns as their interests may appear as additional insureds;

 

(iv) with respect to rental or business interruption insurance policies, shall name Lender and its successors and/or assigns as their interests may appear as loss payee;

 

(v) shall contain an endorsement providing that neither Borrower nor Lender nor any other party shall be a co-insurer under said Policies;

 

(vi) shall contain an endorsement providing that Lender shall receive at least 30 days’ prior written notice of any modification, reduction or cancellation thereof;

 

 

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(vii) shall contain an endorsement providing that no act or negligence of Borrower or of a Tenant or other occupant or any foreclosure or other proceeding or notice of sale relating to the Property shall affect the validity or enforceability of the insurance insofar as a mortgagee is concerned;

 

(viii) shall not make Lender liable for any insurance premiums thereon or subject to any assessments thereunder;

 

(ix) shall contain a waiver of subrogation against Lender;

 

(x) shall contain deductibles which, in addition to complying with any other requirements expressly set forth in Section 5.15(a), are acceptable to Lender and are no larger than is customary for similar policies covering similar properties in the geographic market in which the applicable Property is located and in any event no larger than $50,000, except for wind and earthquake insurance which may be no greater than the greater of (i) $50,000 and (ii) five percent (5%) of the total insurable value at the time of loss;

 

(xi) may be in the form of a blanket policy, provided that Borrower shall provide evidence satisfactory to Lender that the insurance premiums for the Properties are separately allocated under such Policy to the Properties and that (i) payment of such allocated amount shall maintain the effectiveness of such Policy as to the Properties notwithstanding the failure of payment of any other portion of premiums, and (ii) overall insurance limits will under no circumstance limit the amount that will be paid in respect of the Properties, and provided further that any such blanket policy shall specifically allocate to each Property the amount of coverage from time to time required hereunder or shall otherwise provide the same protection as would a separate Policy in Lender’s discretion, subject to review and approval by Lender based on the schedule of locations and values; and

 

(xii) shall otherwise be reasonably satisfactory in form and substance to Lender and shall contain such other provisions as Lender deems reasonably necessary or desirable to protect its interests.

 

 

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(d) Borrower shall pay the premiums for all Policies as the same become due and payable.  Copies of such Policies, certified as true, correct and complete by Borrower, shall be delivered to Lender promptly upon request.  Not later than 15 days prior to the expiration date of each Policy, Borrower shall deliver to Lender evidence, reasonably satisfactory to Lender, of its renewal.   Borrower shall promptly forward to Lender a copy of each written notice received by Borrower of any modification, reduction or cancellation of any of the Policies or of any of the coverages afforded under any of the Policies.  Within 30 days after request by Lender, Borrower shall obtain such increases in the amounts of coverage required hereunder as may be reasonably requested by Lender, taking into consideration changes in the value of money over time, changes in liability laws, changes in prudent customs and practices, and the like.

 

(e) Borrower shall not procure any other insurance coverage that would be on the same level of payment as the Policies or would adversely impact in any way the ability of Lender or Borrower to collect any proceeds under any of the Policies.  If at any time Lender is not in receipt of written evidence that all Policies are in full force and effect when and as required hereunder, Lender shall have the right, after notice to Borrower, to take such action as Lender deems necessary to protect its interest in the Properties, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate (but limited to the coverages and amounts required hereunder).  All premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, and shall bear interest at the Default Rate.

 

(f) In the event of foreclosure of one or more of the Mortgages or other transfer of title to one or more of the Properties in extinguishment in whole or in part of the Indebtedness, all right, title and interest of Borrower in and to the Policies then in force with respect to such Properties (other than those Policies that are blanket policies) and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or in Lender or other transferee in the event of such other transfer of title.

 

(g) Notwithstanding the foregoing, to the extent: (i) a Lease is in full force and effect, (ii) no default beyond any applicable notice and cure period has occurred and is continuing under such Lease, (iii) the Tenant under such Lease (or the guarantor (if any) of such Tenant’s obligations under such Lease) maintains a rating from S&P of BBB or better, (iv) either (X) such Tenant is obligated per the terms of such Lease to rebuild and/or repair its leased premises at the corresponding Property at such Tenant’s sole expense or (Y) if such Tenant is not so obligated to rebuild and/or repair, such Lease entitles the landlord thereunder to receive the applicable insurance proceeds or self-insurance proceeds, and (v) such Tenant maintains the insurance required to be maintained by it under such Lease (or self-insures to the extent permitted under such Lease), subject to Section 5.15(h) below, Borrower will not be required to maintain coverage under Section 5.15(a)(i), (ii), (v), (vii), (viii) and (ix) above with respect to the corresponding Property (or, in the case of Sunset Valley, the corresponding portion of such

 

 

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Property). In addition, to the extent: (i) a Lease is in full force and effect, (ii) no default beyond any applicable notice and cure period has occurred and is continuing under such Lease, (iii) either (X) such Tenant is obligated per the terms of such Lease to rebuild and/or repair its leased premises at the corresponding Property at such Tenant’s sole expense or (Y) if such Tenant is not so obligated to rebuild and/or repair, such Lease entitles the landlord thereunder to receive the applicable insurance proceeds, and (iv) such Tenant maintains the insurance required to be maintained by Borrower under Section 5.15(a)(i), (ii), (v), (vii), (viii), (ix) and (xi) above with respect to the corresponding Property (or, in the case of Sunset Valley, the corresponding portion of such Property), Borrower will not be required to maintain coverage under Section 5.15(a)(i), (ii), (v), (vii), (viii), (ix) and (xi) with respect to the corresponding Property (or, in the case of Sunset Valley, the corresponding portion of such Property).

 

(h)           Notwithstanding that in accordance with Section 5.15(g), the applicable Tenant is permitted to and may be providing property insurance that Borrower is required to provide under this Section 5.15(a)(i), (ii), (v), (vii), (viii), (ix) and (xi), Borrower acknowledges that Borrower is responsible for maintaining (or causing tenant to maintain) the insurance required under this Section 5.15 with respect to the Property, except as provided in Section 5.15(g) above (it being specifically agreed and understood that Borrower must at all times maintain such insurance to the extent not maintained by the Tenant, except as provided in Section 5.15(g) above).  Notwithstanding anything to the contrary contained in this Section 5.15, except as provided in Section 5.15(g) above, if, at any time and from time to time during the term of this Agreement, the insurance policies maintained by the Tenant do not fully comply with the requirements set forth in this Section 5.15, then Borrower shall, upon obtaining knowledge thereof, promptly notify Lender in writing and Borrower shall, except as provided in  Section 5.15(g) above, at its sole cost and expense, promptly procure and maintain either (x) “primary” insurance coverage in the event that the Tenant does not provide the applicable insurance coverage required in this Section 5.15 or (y) “excess and contingent” insurance coverage in the event that the Tenant does not have the sufficient insurance coverage required under this Section 5.15 over and above any other valid and collectible coverage then in existence, as shall be necessary to bring the insurance coverage for the Property into full compliance with all of the terms and conditions of this Section 5.15.

 

(i)           Lender acknowledges that the insurance in place as of the date hereof, as evidenced by certificates of insurance provided by Borrowers and each tenant in connection with the closing of the Loan, shall be deemed to satisfy the foregoing requirements of this Section 5.15 as in effect on the date hereof.

 

 

Section 5.16 Casualty and Condemnation

 

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(a) Borrower shall give prompt notice to Lender of any Casualty (if the estimated costs of completing restoration are greater than $50,000) or Condemnation or of the actual or threatened commencement of proceedings that would result in a Condemnation.

 

 

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(b) Lender may participate in any proceedings for any taking by any public or quasi-public authority accomplished through a Condemnation or any transfer made in lieu of or in anticipation of a Condemnation, to the extent permitted by law.  Upon Lender’s request, Borrower shall deliver to Lender all instruments reasonably requested by it to permit such participation.  Borrower shall, at its sole cost and expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings.  Borrower shall not consent or agree to a Condemnation or action in lieu thereof without the prior written consent of Lender in each instance, which consent shall not be unreasonably withheld in the case of a taking of an immaterial portion of any Property.

 

(c) Lender may (x) jointly with Borrower settle and adjust any claims, (y) upon the occurrence and during the continuance of an Event of Default, settle and adjust any claims without the consent or cooperation of Borrower, or (z) allow Borrower to settle and adjust any claims; except that if no Event of Default has occurred and is continuing, Borrower may settle and adjust claims aggregating not in excess of $500,000 if such settlement or adjustment is carried out in a competent and timely manner, but Lender shall be entitled to collect and receive (as set forth below) any and all Loss Proceeds with respect to any Casualty or Condemnation where the Loss Proceeds exceeds the Loss Proceeds Threshold Amount.  All Loss Proceeds with respect to any Casualty or Condemnation where the Loss Proceeds do not exceed the Loss Proceeds Threshold Amount shall be disbursed to Borrower (or at Borrower’s direction) to be applied to the costs of restoration, with Borrower having the right to retain any Loss Proceeds in excess of such restoration costs.  The reasonable expenses incurred by Lender in the adjustment and collection of Loss Proceeds shall become part of the Indebtedness and shall be reimbursed by Borrower to Lender upon demand therefor.

 

(d) All Loss Proceeds with respect to any Casualty or Condemnation where the Loss Proceeds exceeds the Loss Proceeds Threshold Amount shall be deposited into the Loss Proceeds Account (monthly rental loss/business interruption proceeds to be initially deposited into the Loss Proceeds Account and subsequently deposited into the Cash Management Account in installments as and when the lost rental income covered by such proceeds would have been payable).  Following the occurrence of a Casualty, Borrower, regardless of whether proceeds are available, shall in a reasonably prompt manner proceed to restore, repair, replace or rebuild the applicable Property to be of at least equal value and of substantially the same character as prior to the Casualty (or cause same to be done), all in accordance with the terms hereof applicable to Alterations.  If, at any Property, a Condemnation or Casualty occurs as to which, in the reasonable judgment of Lender:

 

(i) in the case of a Casualty, the Casualty does not render the Property untenantable or result in the cancellation of Leases covering more than 15% of the base contractual rental revenue of such Property;

 

 

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(ii) in the case of a Condemnation, the Condemnation does not render the Property untenantable or result in the cancellation of Leases covering more than 15% of the base contractual rental revenue of such Property;

 

(iii) restoration of such Property is reasonably expected to be completed prior to the expiration of rental interruption insurance and at least three months prior to the Maturity Date;

 

(iv) after such restoration, the fair market value of the Property is reasonably expected to equal at least the fair market value of such Property immediately prior to such Condemnation or Casualty (assuming the affected portion of such Property is relet); and

 

(v) all necessary approvals and consents from Governmental Authorities will be obtained to allow the rebuilding and re-occupancy of the Property;

 

or if Lender otherwise elects to allow Borrower to restore such Property, then, provided no Event of Default has occurred and is continuing, the Loss Proceeds after receipt thereof by Lender and reimbursement of any reasonable expenses incurred by Lender in connection therewith shall be applied to the cost of restoring, repairing, replacing or rebuilding such Property or part thereof subject to the Casualty or Condemnation, in the manner set forth below (and Borrower shall commence, as promptly and diligently as practicable, to prosecute (or cause to prosecute) such restoring, repairing, replacing or rebuilding of such Properties in a workmanlike fashion and in accordance with applicable law to a status at least equivalent to the quality and character of such Properties immediately prior to the Condemnation or Casualty).  Provided that no Event of Default shall have occurred and be then continuing,  Lender shall disburse such Loss Proceeds to Borrower upon Lender’s being furnished with (i) evidence reasonably satisfactory to it of the estimated cost of completion of the restoration, (ii) funds, or assurances reasonably satisfactory to Lender that such funds are available and sufficient in addition to any remaining Loss Proceeds, to complete the proposed restoration (including, without limitation, for any reasonable costs and expenses of Lender to be incurred in administering such restoration) and for payment of the Indebtedness as it becomes due and payable during the restoration, and (iii) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds, plats of survey and such other evidences of cost, payment and performance as Lender may reasonably request; and Lender may, in any event, require that all plans and specifications for restoration reasonably estimated by Lender to exceed $500,000 be submitted to and approved by Lender prior to commencement of work (which approval shall not be unreasonably withheld).  If Lender reasonably estimates that the cost to restore will exceed $500,000, Lender may retain a local construction consultant to inspect such work and review Borrower’s request for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and expenses of such consultant (which fees and expenses shall constitute

 

 

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Indebtedness).  No payment shall exceed 90% of the value of the work performed from time to time until such time as 50% of the restoration (calculated based on the anticipated aggregate cost of the work) has been completed, and amounts retained prior to completion of 50% of the restoration shall not be paid prior to the final completion of the restoration.  Funds other than Loss Proceeds shall be disbursed prior to disbursement of such Loss Proceeds, and at all times the undisbursed balance of such proceeds remaining in the Loss Proceeds Account, together with any additional funds irrevocably and unconditionally deposited therein or irrevocably and unconditionally committed for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration free and clear of all Liens or claims for Lien.  Upon completion of the restoration free and clear of all Liens or claims for Lien, any Loss Proceeds in excess of the restoration costs shall be held by Lender and Lender shall apply such excess amount to the Indebtedness and Borrower shall not be responsible for any Yield Maintenance Premium as a result of such application; provided, however, that upon the occurrence and during the continuance of an Event of Default, Lender shall have the right, in its sole discretion, to apply such excess amount to the Indebtedness as Lender sees fit.

 

(e) Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Loss Proceeds lawfully or equitably payable to Lender in connection with the Properties.  Lender shall be reimbursed for any expenses reasonably incurred in connection therewith (including, without limitation, reasonable attorneys’ fees and disbursements, and, if reasonably necessary to collect such proceeds, the expense of an Appraisal on behalf of Lender) out of such Loss Proceeds or, if insufficient for such purpose, by Borrower.  Provided that an Event of Default shall have occurred and be continuing, Borrower irrevocably constitutes and appoints Lender as the attorney-in-fact of Borrower for matters in excess of $500,000.00 with respect to any Property, with full power of substitution, subject to the terms of this Section 5.16, to settle for, collect and receive all Loss Proceeds and any other awards, damages, insurance proceeds, payments or other compensation from the parties or authorities making the same, to appear in and prosecute any proceedings therefor and to give receipts and acquittance therefor (which power of attorney shall be irrevocable so long as any of the Indebtedness is outstanding, shall be deemed coupled with an interest, and shall survive the voluntary or involuntary dissolution of Borrower).

 

(f) If Borrower is not entitled to apply Loss Proceeds toward the restoration of a Property pursuant to Section 5.16(d) and Lender elects not to permit such Loss Proceeds to be so applied, such Loss Proceeds shall be applied on the first Payment Date following such election to the prepayment of the Loan and shall be accompanied by interest through the end of the applicable Interest Accrual Period (calculated as if the amount prepaid were outstanding for the entire Interest Accrual Period).  If the Note has been bifurcated into multiple Notes pursuant to Section 1.1(c), all prepayments of the Loan made by Borrower in accordance with this Section 5.16(f) shall be applied to the Notes in ascending order of interest rate (i.e., first to the Note with the lowest interest rate until its outstanding principal balance has been reduced to zero, then to the Note with the second lowest interest rate until its outstanding principal balance has been reduced to zero, and so on) or in such other order as Lender shall determine.

 

 

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(g) Notwithstanding the foregoing provisions of this Section 5.16, to the extent any Lease remains in effect and the tenant thereunder remains liable for the obligations under such Lease, the disposition of any amounts, awards or payments payable with respect to any Casualty or Condemnation relating to the corresponding Property shall be governed by such Lease.

 

Section 5.17 Annual Budget

 

.  Within 30 days prior to the commencement of each Fiscal Year during the term of the Loan, Borrower shall deliver to Lender for informational purposes only an Annual Budget for the Properties for the ensuing Fiscal Year and, promptly after preparation thereof, any subsequent revisions to the Annual Budget.  Upon the occurrence and during the continuance of any Trigger Period or Event of Default, such Annual Budget and any such revisions shall be subject to Lender’s sole but reasonable approval (the Annual Budget, as so approved, the “Approved Annual Budget”).  For so long as Lender shall withhold its consent to any Annual Budget or any revisions thereto, the Annual Budget in effect prior to any such request for approval shall remain in effect.

 

Section 5.18 General Indemnity

 

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(a) In addition to the payment of expenses pursuant to Section 9.17, whether or not the transactions contemplated hereby shall be consummated, Borrower, at its sole cost and expense, shall, jointly and severally, protect, indemnify, reimburse, defend and pay and hold harmless Lender and its officers, partners, members, directors, trustees, advisors, employees, agents, sub-agents, Affiliates, and each Person who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (collectively, the “Indemnified Parties”) for, from and against, and shall be responsible for, any and all Damages payable by any Indemnified Party to any third party of any kind or nature whatsoever, whether direct, indirect, special or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, which may be imposed on, incurred by, or asserted against any of the Indemnified Parties, in any way relating to or arising out of (i) the making or holding or enforcement of the Loan by Lender or the administration of the Transaction; (ii) ownership of the Note(s) or the Mortgages (including, without limitation, any tax on the making and/or recording of any of the Loan Documents), or any interest in any Property or receipt of any rents or Revenues; (iii) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about any Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (iv) any use, nonuse or condition in, on or about any Property any part thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (v) any failure on the part of Borrower or Sponsor to perform or comply with any of the terms of the Loan Documents to which they are a party; (vi) performance of any labor or services or the

 

 

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furnishing of any materials or other property in respect of any Property or any part thereof; (vii) any failure of any Property, Borrower or Sponsor to comply with any Legal Requirements; (viii) any representation or warranty made by Borrower or Sponsor in any of the Loan Documents being false or misleading in any material respect as of the date such representation or warranty was made; (ix) any Use or Release of Hazardous Substances; (x) any claim by brokers, finders or similar persons claiming to be entitled to a commission in connection with any lease or other transaction involving any Property or any part thereof under any legal requirement or any liability asserted against any Indemnified Party with respect thereto; and (xi) any and all claims and demands whatsoever that may be asserted against any Indemnified Party by reason of any alleged obligations or undertakings on such party’s part to perform or discharge any of the terms, covenants, or agreements contained in any Lease, in each case, to the extent resulting, directly or indirectly, from any claim (including, without limitation, any Environmental Claim) made (whether or not in connection with any legal action, suit, or proceeding) by or on behalf of any Person; provided, however, that no Indemnified Party shall have the right to be indemnified hereunder to the extent that such Damages have been found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, fraud, or willful misconduct of such Indemnified Party.

 

(b) Upon written request by any Indemnified Party, Borrower shall defend such Indemnified Party with respect to the matters contemplated by Section 5.18(a) (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals reasonably approved by such Indemnified Party.  Notwithstanding the foregoing, any Indemnified Party may, in the event of a conflict of interest, engage its own attorneys and other professionals to defend or assist it (chosen at Lender’s sole discretion), and, at the option of such Indemnified Party, its attorneys shall control the resolution of any claim or proceeding against such Indemnified Party.  Upon demand, Borrower shall pay or, in the sole discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith.

 

(c) Any amounts payable to Lender by reason of the application of this Section 5.18 shall be secured by the Mortgages and shall become immediately due and payable and shall bear interest at the Default Rate from the date Damages are sustained by the Indemnified Parties until paid.

 

(d) The provisions of and undertakings and indemnification set forth in this Section 5.18 shall survive the satisfaction and payment in full of the Indebtedness and termination of this Agreement, but only with respect to matters arising or accruing or as a result of circumstances that occurred prior to such satisfaction and payment in full.

 

 

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Section 5.19 Nonbinding Consultation

 

.  Lender shall have the right to consult with and advise Borrower regarding significant business activities and business and financial developments of Borrower, provided that any such advice or consultation or the result thereof shall be completely nonbinding on Borrower.

 

Section 5.20 Compliance with Encumbrances and Material Agreements

 

.  Borrower covenants and agrees as follows:

 

(a) Borrower shall comply with all material terms, conditions and covenants of each Material Agreement and each material Permitted Encumbrance, including, without limitation, any reciprocal easement agreement, any declaration of covenants, conditions and restrictions, and any condominium arrangements.

 

(b) Borrower shall promptly deliver to Lender a true, correct and complete copy of each and every notice of default or event of default received by Borrower with respect to any obligation of Borrower under the provisions of any Material Agreement and/or Permitted Encumbrance.

 

(c) Borrower shall deliver to Lender copies of any written notices of default or event of default relating to any Material Agreement and/or Permitted Encumbrance served by Borrower.

 

(d) After the occurrence and during the continuance of an Event of Default, so long as the Loan is outstanding, Borrower shall not grant any material consent, approval or waiver under any such Material Agreement or Permitted Encumbrance without the prior written consent of Lender.

 

(e) Borrower shall deliver to each other party to any Permitted Encumbrance and any Material Agreement notice of the identity of Lender and each assignee of Lender of which Borrower is aware if such notice is reasonably required by Lender in order to protect Lender’s interest thereunder.

 

(f) Borrower shall enforce, short of termination thereof, the performance and observance of each and every material term, covenant and provision of each Material Agreements and Permitted Encumbrance to be performed or observed by each other party thereto, if any.

 

 

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Section 5.21 Prohibited Persons

 

.  None of Borrower or Sponsor shall (i) knowingly conduct any business, or engage in any transaction or dealing, with any Embargoed Person, including, without limitation, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Embargoed Person, or (ii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order 13224.  Borrower shall deliver to Lender from time to time written certification or other evidence as may be reasonably requested by Lender, confirming that (x) none of Borrower, Sponsor nor, to Borrower’s actual knowledge, any Person owning a direct or indirect beneficial interest in Borrower is an Embargoed Person and (y) none of Borrower, Sponsor or, to Borrower’s actual knowledge, any Person owning a direct or indirect beneficial interest in Borrower has knowingly engaged in any business, transaction or dealings with a Embargoed Person, including, without limitation, the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Embargoed Person.  With respect to Persons owning direct or indirect beneficial interests in Sponsor, Lender acknowledges that Borrower shall be permitted to rely exclusively on its U.S. broker-dealer network to implement the normal and customary investor screening practices mandated by applicable law and FINRA regulations in satisfaction of the foregoing covenants and certifications.

 

Section 5.22 Title to the Properties

 

.  Borrowers will warrant and defend (a) the title to each Property, subject only to Liens permitted hereunder (including, without limitation, Permitted Encumbrances, and the releases of Property permitted under this Agreement), and (b) the validity and priority of the Liens of the Mortgages and the Assignments of Rents and Leases, subject only to Liens permitted hereunder (including, without limitation, Permitted Encumbrances), in each case against the claims of all Persons whomsoever.  Borrower shall reimburse Lender for any actual losses, actual costs, actual damages (excluding lost profits, diminution in value and other consequential damages) or reasonable expenses (including, without limitation, reasonable attorneys’ fees and court costs) incurred by Lender if an interest in any Property, other than as permitted hereunder, is claimed by another Person.

 

Section 5.23 Single-Purpose Entity

 

(i) .  Each Borrower covenants and agrees that (i) any factual assumptions made with respect to Borrower in any subsequent nonconsolidation opinion required to be delivered in connection with the Loan Documents, including, without limitation, any exhibits attached thereto, shall be true and correct in all respects, (ii) each Borrower will comply with all of the factual assumptions made with respect to each Borrower in any subsequent nonconsolidation opinion, and (iii) each Person other than any Borrower or Lender, with respect to which a factual assumption shall be made in any subsequent nonconsolidation opinion will comply with all of the factual assumptions made with respect to it in any such subsequent nonconsolidation opinion.

 

 

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Section 5.24 Separate Tax Lots

 

.  Borrower shall diligently pursue separate tax lot designations for each of the Properties listed on Schedule J attached hereto and shall promptly provide evidence of receipt of the same to Lender.

 

Section 5.25 Implementation of Blocked Account

 

.  The Blocked Account shall be opened and fully implemented within ten (10) Business Days after the Closing Date.

 

 

ARTICLE VI                                

 

NEGATIVE COVENANTS

 

Section 6.1 Liens on the Properties

 

.  Borrower shall not permit or suffer the existence of any Lien on any of its assets, other than Permitted Encumbrances.

 

Section 6.2 Ownership

 

.  Borrower shall not own any assets other than the Properties and related personal property and fixtures located therein or used in connection therewith and the Revenues therefrom.

 

Section 6.3 Transfer; Change of Control

 

.  Borrower shall not Transfer any Collateral other than in compliance with Article II and other than the replacement or other disposition of obsolete or non-useful personal property and fixtures in the ordinary course of business, and Borrower shall not hereafter file a declaration of condominium with respect to any of the Properties.  Borrower shall not cause or engage in a Change of Control.

 

Section 6.4 Debt

 

.  Borrower shall not have any Debt, other than Permitted Debt.

 

Section 6.5 Dissolution; Merger or Consolidation

 

.  Borrower shall not dissolve, terminate, liquidate, merge with or consolidate into another Person without first causing the Loan to be assumed by a Qualified Successor Borrower pursuant to Section 2.2.

 

Section 6.6 Change in Business

 

.  Borrower shall not make any material change in the scope or nature of its business objectives, purposes or operations or undertake or participate in activities other than the continuance of its present business.

 

Section 6.7 Debt Cancellation

 

.  Borrower shall not cancel or otherwise forgive or release any material claim or Debt owed to it by any Person, except for adequate consideration or in the ordinary course of its business.

 

Section 6.8 Affiliate Transactions

 

.  Borrower shall not enter into, or be a party to, any transaction with any Affiliate of Borrower, except on terms which are no less favorable to Borrower than would be obtained in a comparable arm’s length transaction with an unrelated third party and except under the Approved Management Agreement to the extent the manager thereunder is an Affiliate of Borrower.

 

 

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Section 6.9 Misapplication of Funds

 

.  Borrower shall not (a) distribute any Revenue or Loss Proceeds in violation of the provisions of this Agreement (and shall promptly cause the reversal of any such distributions made in error of which Borrower becomes aware), (b) fail to remit amounts to the Cash Management Account as required by Section 3.1, or (c) misappropriate any security deposit or portion thereof.

 

Section 6.10 Jurisdiction of Formation; Name

 

.  Borrower shall not change its jurisdiction of formation or name without receiving Lender’s prior written consent and promptly providing Lender such information and replacement Uniform Commercial Code financing statements and legal opinions as Lender may reasonably request in connection therewith.

 

Section 6.11 Modifications and Waivers

 

.  Unless otherwise consented to in writing by Lender, which consent shall not be unreasonably withheld:

 

(a) Borrower shall not amend, modify, terminate, renew, or surrender any rights or remedies under any Lease, or enter into any Lease, except in compliance with Section 5.7;

 

(b) Borrower shall not terminate its organizational documents (including, without limitation, any operating agreement, limited partnership agreement, by-laws, certificate of formation, certificate of limited partnership or certificate of incorporation), or, unless required by applicable law, (i) amend or modify its organizational documents with respect to the matters set forth in the definition of Single-Purpose Entity or Material Action, or (ii) otherwise materially modify or amend its organizational documents;

 

(c) Borrower shall not terminate, amend or modify the Approved Management Agreement and if a Securitization has occurred, Borrower shall satisfy the Rating Condition with regard to the same; and

 

(d) Borrower shall not amend, modify, surrender or waive any material rights or remedies under, or enter into or terminate, or default in its obligations under, any Material Agreement or Permitted Encumbrance, and Borrower shall not amend or cause to be amended any of the Material Agreements in any manner that might diminish (x) the value of the applicable Property or Properties or (y) the rights of Borrower or Lender thereunder, or cause or reasonably expect to cause a Material Adverse Effect.

 

Section 6.12 ERISA

 

.

 

(a) Borrower shall not maintain or contribute to, or agree to maintain or contribute to, or permit any ERISA Affiliate of Borrower to maintain or contribute to or agree to maintain or contribute to, any employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title IV or Section 302 of ERISA or Section 412 of the Code.

 

 

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(b) Borrower shall not engage in a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code, or substantially similar provisions under federal, state or local laws, rules or regulations or 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 Notes, this Agreement, the Mortgages or any other Loan Document) to be a non-exempt prohibited transaction under such provisions.

 

Section 6.13 Alterations and Expansions

 

.  Upon the occurrence and during the continuance of any Trigger Period or Event of Default, Borrower shall not perform or contract to perform any capital improvements requiring Capital Expenditures that are not consistent with the Approved Annual Budget.  Borrower shall not perform, undertake, contract to perform or consent to any Material Alteration without the prior written consent of Lender, which consent (in the absence of an Event of Default) shall not be unreasonably withheld.  If Lender’s consent is requested hereunder with respect to a Material Alteration, Lender may retain a construction consultant to review such request and, if such request is granted, Lender may retain a construction consultant to inspect the work from time to time.  Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant.  If the total unpaid amounts due and payable with respect to alterations to the improvements at any Property (other than such amounts to be paid or reimbursed by tenants under the Leases) shall at any time exceed the greater of five percent (5%) of the Allocated Loan Amount with respect to such Property or $100,000 (the “Alteration Threshold Amount”), Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrower’s obligations under the Loan Documents any of the following as determined by Borrower:  (A) cash, (B) non-redeemable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are direct obligations of the United States of America for the payment of which its full faith and credit is pledged, (C) other securities having a rating acceptable to Lender and that the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the Certificates in connection with any Securitization, (D) a Letter of Credit, or (E) a completion and performance bond issued by an Eligible Institution.  Such security shall be in an amount equal to the excess of the total unpaid amounts with respect to alterations to the improvements on the applicable Property (other than such amounts to be paid or reimbursed by tenants under the Leases) over the Alteration Threshold Amount and upon the occurrence and during the continuance of an Event of Default, Lender may apply such security from time to time at the option of Lender to pay for such alterations.

 

Section 6.14 Advances and Investments

 

.  Borrower shall not lend money or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, except for Permitted Investments.

 

 

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Section 6.15 Single-Purpose Entity

 

.  Borrower shall not cease to be a Single-Purpose Entity.  Borrower shall not remove or replace any Independent Director without Cause and without providing at least two Business Days’ advance written notice thereof to Lender and the Rating Agencies.

 

Section 6.16 Zoning and Uses

 

.  Borrower shall not do any of the following without the prior written consent of Lender, which consent shall not be unreasonably withheld:

 

(a) initiate or support any limiting change in the permitted uses of any of the Properties (or to the extent applicable, zoning reclassification of any of the Properties) or any portion thereof, seek any variance under existing land use restrictions, laws, rules or regulations (or, to the extent applicable, zoning ordinances) applicable to a Property, or use or permit the use of a Property in a manner that would result in the use of such Property becoming a nonconforming use under applicable land-use restrictions or zoning ordinances or that would violate the terms of any Lease, Material Agreement, Permitted Encumbrance, or Legal Requirement (and if under applicable zoning ordinances the use of all or any portion of any Property is a nonconforming use, Borrower shall not cause or permit such nonconforming use to be discontinued or abandoned without the express written consent of Lender);

 

(b) consent to any modification, amendment or supplement to any of the terms of, or materially default in its obligations under, any Permitted Encumbrance;

 

(c) impose or consent to the imposition of any restrictive covenants, easements or encumbrances upon a Property other than Permitted Encumbrances;

 

(d) execute or file any subdivision plat affecting any of the Properties, or institute, or permit the institution of, proceedings to alter any tax lot comprising any of the Properties; or

 

(e) permit or consent to any of  the Properties being used by the public or any Person in such manner as might make possible a claim of adverse usage or possession or of any implied dedication or easement.

 

Section 6.17 Waste

 

.  Borrower shall not commit or permit any Waste on any of the Properties, nor take any actions that might invalidate any insurance carried on any of the Properties (and Borrower shall promptly correct any such actions of which Borrower becomes aware).

 

 

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ARTICLE VII                                

 

DEFAULTS

 

Section 7.1 Event of Default

 

.  The occurrence of any one or more of the following events shall be, and shall constitute the commencement of, an “Event of Default” hereunder (any Event of Default which has occurred shall continue unless and until waived by Lender in writing in its sole discretion or Lender accepts cure of such Event of Default in writing in its sole discretion):

 

(a) Payment.

 

(i) Borrower shall default in the payment when due of any principal or interest owing hereunder or under the Notes (including, without limitation, any mandatory prepayment required hereunder); or

 

(ii) Borrower shall default in the payment when due of fees, expenses or other amounts owing hereunder, under the Notes or under any of the other Loan Documents  (other than principal and interest owing hereunder or under the Note) and such default shall continue for at least three Business Days after notice to Borrower that such amounts are owing.

 

(b) Representations.  Any representation made by Borrower or Sponsor in any of the Loan Documents, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender shall have been false or misleading in any material respect (or, with respect to any representation which itself contains a materiality qualifier, in any respect) as of the date such representation was made.

 

(c) Other Loan Documents.  Any Loan Document shall fail to be in full force and effect or to convey the material Liens, rights, powers and privileges purported to be created thereby; or a default by Borrower or Sponsor shall occur under any of the other Loan Documents or Material Agreements, in each case, beyond the expiration of any applicable cure period.

 

(d) Bankruptcy, etc.

 

(i) Borrower or Sponsor shall commence a voluntary case concerning itself under Title 11 of the United States Code (as amended, modified, succeeded or replaced, from time to time, the “Bankruptcy Code”);

 

(ii) Borrower or Sponsor shall commence any other proceeding under any reorganization, arrangement, adjustment of debt, relief of creditors, dissolution, insolvency or similar law of any jurisdiction whether now or hereafter in effect relating to Borrower or Sponsor, or shall dissolve or otherwise cease to exist;

 

 

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(iii) there is commenced against Borrower or Sponsor an involuntary case under the Bankruptcy Code, or any such other proceeding, which remains undismissed for a period of 90 days after commencement;

 

(iv) Borrower or Sponsor is adjudicated insolvent or bankrupt;

 

(v) Borrower or Sponsor suffers appointment of any custodian or the like for it or for any substantial portion of its property and such appointment continues unchanged or unstayed for a period of 90 days after commencement of such appointment;

 

(vi) Borrower or Sponsor makes a general assignment for the benefit of creditors; or

 

(vii) any action is taken by Borrower or Sponsor for the purpose of effecting any of the foregoing.

 

(e) Change of Control.

 

(i) A Change of Control shall occur; or

 

(ii) any party shall acquire more than 49% of the direct or indirect equity interest in Borrower (even if not constituting a Change of Control) and Borrower shall fail to deliver to Lender with respect to such new equityholder a new non-consolidation opinion satisfactory to (A) prior to the occurrence of any Securitization of the Loan, Lender (Lender’s approval of any such non-consolidation opinion which is in substantially the form of the Nonconsolidation Opinion not to be unreasonably withheld), and (B) at any time following any Securitization or series of Securitizations of the Loan, each of the Rating Agencies rating such Securitization or Securitizations.

 

(f) Equity Pledge; Preferred Equity.  Any direct or indirect equity interest in or right to distributions from Borrower shall be subject to a Lien in favor of any Person, or Borrower or any holder of a direct or indirect interest in Borrower shall issue preferred equity (or debt granting the holder thereof rights substantially similar to those generally associated with preferred equity); except that the following shall be permitted:

 

(i) any pledge of direct and indirect equity interests in and rights to distributions from a Qualified Equityholder;

 

(ii) any pledge in connection with a New Mezzanine Loan (as defined in the Cooperation Agreement) and in accordance with the Cooperation Agreement; and

 

 

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(iii) the issuance of preferred equity interests in a Qualified Equityholder.

 

(g) Insurance.  Borrower shall fail to maintain in full force and effect all Policies required hereunder, except to the extent that (x) there are then sufficient funds in the Basic Carrying Costs Escrow Account to pay the insurance premiums for such Policies and (y) Lender wrongfully fails to or refuses to release the same from the Basic Carrying Costs Escrow Account.

 

(h) ERISA.  A default shall occur in the due performance or observance by Borrower of any term, covenant or agreement contained in Section 5.8.

 

(i) Legal Requirements.  If Borrower fails to cure (or cause to be cured) properly any violations of Legal Requirements affecting all or any portion of any Property within 30 days after Borrower first receives written notice of any such violations; provided, however, if any such violation is reasonably susceptible of cure, but not within such 30 day period, then Borrower shall be permitted up to an additional 60 days to cure such violation provided that Borrower commences a cure within such initial 30 day period and thereafter diligently and continuously pursues such cure.

 

(j) Taxes.  If any of the Taxes are not paid prior to the date upon which any interest or late charges shall begin to accrue thereon, except to the extent that (x) there are then sufficient funds in the Basic Carrying Costs Escrow Account to pay such Taxes and (y) Lender wrongfully fails to or refuses to release the same from the Basic Carrying Costs Escrow Account.

 

(k) Impermissible Transfer.  If any Borrower Transfers or otherwise encumbers any portion of any Property or any interest therein, or any direct or indirect interest in a Borrower, Qualified Equityholder, or Sponsor is Transferred, in each instance, in violation of the provisions of this Agreement and not otherwise consented to by Lender.

 

(l) Nonconsolidation Opinion.  If any of the factual assumptions relating to the conduct of Borrower or Sponsor contained in the Nonconsolidation Opinion delivered to Lender in connection with the Loan, or in any additional nonconsolidation opinion delivered subsequent to the closing of the Loan, is or shall become untrue in any material respect.

 

(m) Approved Property Management Agreement; Approved Property Manager.  If a material default by any Borrower has occurred and continues beyond any applicable cure period under any Approved Management Agreement and as a result of such default the Approved Property Manager thereunder terminates or cancels such Approved Management Agreement, or if any Approved Property Manager (including, without limitation, an Affiliated Approved Property Manager) is removed or resigns other than in accordance with Section 5.10.

 

 

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(n) Negative Covenants.  If any Borrower breaches any of its respective negative covenants contained in Article 6 unless otherwise addressed in any other clause of this Section 7.1.

 

(o) Implementation of Blocked Account.  If the Blocked Account is not opened and implemented within five days after written notice from Lender, provided that Lender shall only deliver such notice if the requirements under Section 5.25 are not satisfied.

 

(p) Other Covenants.  A default shall occur in the performance or observance by Borrower of any term, covenant or agreement (other than those referred to in subsections (a) through (o), inclusive, of this Section 7.1) contained in this Agreement or in any of the other Loan Documents, except that in the case of a default that can be cured by the payment of money, such default shall not constitute an Event of Default unless and until it shall remain uncured for 10 days after Borrower receives written notice thereof; and in the case of a default that cannot be cured by the payment of money but is susceptible of being cured within 30 days, such default shall not constitute an Event of Default unless and until it remains uncured for 30 days after Borrower receives written notice thereof, provided that within 10 days of its receipt of such written notice, Borrower delivers written notice to Lender of its intention and ability to effect such cure within such 30 day period; and if such non-monetary default is not cured within such 30 day period despite Borrower’s diligent efforts but is susceptible of being cured within 90 days of Borrower’s receipt of Lender’s original notice, then Borrower shall have such additional time as is reasonably necessary to effect such cure, but in no event in excess of 90 days from Borrower’s receipt of Lender’s original notice, provided that prior to the expiration of the initial 30 day period, Borrower delivers written notice to Lender of its intention and ability to effect such cure prior to the expiration of such 90 day period.

 

Section 7.2 Remedies

 

.

 

(a) Upon the occurrence and during the continuance of an Event of Default, Lender may by written notice to Borrower, in addition to any other rights or remedies available pursuant to this Agreement, the Notes, the Mortgages and the other Loan Documents, at law or in equity, declare by written notice to Borrower all or any portion of the Indebtedness to be immediately due and payable, whereupon all or such portion of the Indebtedness shall so become due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and the Properties (including, without limitation, all rights or remedies available at law or in equity); provided, however, that, notwithstanding the foregoing, if an Event of Default specified in paragraph 7.1(d) shall occur, then the Indebtedness shall immediately become due and payable without the giving of any notice or other action by Lender.  Any actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth in this Agreement or in the other Loan Documents.

 

 

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(b) If Lender forecloses on any of the Properties, Lender shall apply all net proceeds of such foreclosure to repay the Indebtedness, the Indebtedness shall be reduced to the extent of such net proceeds and the remaining portion of the Indebtedness shall remain outstanding and secured by the Properties and the other Loan Documents, it being understood and agreed by Borrower that Borrower is liable for the repayment of all the Indebtedness; provided, however, that at the election of Lender, the Notes shall be deemed to have been accelerated only to the extent of the net proceeds actually received by Lender with respect to the Properties and applied in reduction of the Indebtedness.

 

(c) Upon the occurrence and during the continuance of any Event of Default (including, without limitation, an Event of Default resulting from a failure to satisfy the insurance requirements specified herein), Lender may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, take any action to cure such Event of Default.  Subject to the rights of Tenants, Lender may enter upon any or all of the Properties upon reasonable notice to Borrower for such purposes or appear in, defend, or bring any action or proceeding to protect its interest in the Properties or to foreclose the Mortgages or collect the Indebtedness.  The costs and expenses incurred by Lender in exercising rights under this paragraph (including, without limitation, reasonable attorneys’ fees), with interest at the Default Rate for the period after notice from Lender that such costs or expenses were incurred to the date of payment to Lender, shall constitute a portion of the Indebtedness, shall be secured by the Mortgages and other Loan Documents and shall be due and payable to Lender upon demand therefor.

 

(d) Interest shall accrue on any judgment obtained by Lender in connection with its enforcement of the Loan at a rate of interest equal to the Default Rate.

 

Section 7.3 No Waiver

 

.  No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed by Lender to be expedient.  A waiver of any Default or Event of Default shall not be construed to be a waiver of any subsequent Default or Event of Default or to impair any remedy, right or power consequent thereon.

 

Section 7.4 Application of Payments after an Event of Default

 

.  Notwithstanding anything to the contrary contained herein, upon the occurrence and during the continuance of an Event of Default, all amounts received by Lender in respect of the Loan shall be applied at Lender’s sole discretion either toward the components of the Indebtedness (e.g., Lender’s expenses in enforcing the Loan, interest, principal and other amounts payable hereunder) and the Notes in such sequence as Lender shall elect in its sole discretion, or toward the payment of Property expenses.

 

 

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ARTICLE VIII                                

 

CONDITIONS PRECEDENT

 

Section 8.1 Conditions Precedent to Closing

 

.  This Agreement shall become effective on the date that all of the following conditions shall have been satisfied (or waived on the date that Lender has funded the Loan):

 

(a) Loan Documents.  Lender shall have received a duly executed copy of each Loan Document.  Each Loan Document which is to be recorded in the public records shall be in form suitable for recording.  Each Mortgage shall secure the entire Indebtedness, provided that in the event that the jurisdiction in which the Property is located imposes a mortgage recording, intangibles or similar Tax and does not permit the allocation of indebtedness for the purpose of determining the amount of such Tax payable, the principal amount secured by such Mortgage shall be equal to the greater of (x) 125% of such Property’s Allocated Loan Amount and (y) the appraised value of such Property.

 

(b) Collateral Accounts.  Each of the Collateral Accounts shall have been established with the Cash Management Bank and funded to the extent required under Article III.

 

(c) Opinions of Counsel.  Lender shall have received, in each case in form and substance reasonably satisfactory to Lender, (i) a New York legal opinion, (ii) a legal opinion with respect to the laws of each state in which one of the Properties is located, (iii) a bankruptcy nonconsolidation opinion with respect to each Person owning at least a 49% direct or indirect equity interest in Borrower and any affiliated property manager, and (iv) a Delaware legal opinion regarding matters related to Single Member LLCs.

 

(d) Organizational Documents.  Lender shall have received all documents reasonably requested by Lender relating to the existence of Borrower, the validity of the Loan Documents and other matters relating thereto, in form and substance satisfactory to Lender, including, without limitation,:

 

(i) Authorizing Resolutions.  A certified copy of the resolutions approving and adopting the Loan Documents to be executed by Borrower and authorizing the execution and delivery thereof.

 

(ii) Organizational Documents.  Certified copies of the organizational documents of Borrower (including, without limitation, any certificate of formation, certificate of limited partnership, certificate of incorporation, operating agreement, limited partnership agreement or by-laws), in each case together with all amendments thereto.

 

 

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(iii) Certificates of Good Standing or Existence.  Certificates of good standing or existence for Borrower issued as of a recent date by its state of organization and by each state in which one of the Properties is located.

 

(iv) Recycled Entity Certificate.  A recycled entity certificate acceptable to Lender, to the extent that Borrower was formed more than 60 days prior to the date hereof.

 

(e) Lease; Material Agreements.  Lender shall have received true, correct and complete copies of all Leases and all Material Agreements.

 

(f) Lien Search Reports.  Lender shall have received satisfactory reports of Uniform Commercial Code, tax lien, bankruptcy and judgment searches conducted by a search firm acceptable to Lender with respect to the Properties and Borrower (including, without limitation, Borrower’s immediate predecessor, if any), such searches to be conducted in such locations as Lender shall have requested.

 

(g) No Default or Event of Default.  No Default or Event of Default shall have occurred and be continuing on such date either before or after the execution and delivery of this Agreement.

 

(h) No Injunction.  No Legal Requirement shall exist, and no litigation shall be pending or threatened, which in the good faith judgment of Lender would enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon, the making or repayment of the Loan or the consummation of the Transaction.

 

(i) Representations.  The representations in this Agreement and in the other Loan Documents shall be true, correct and complete in all respects on and as of the Closing Date with the same effect as if made on such date.

 

(j) Estoppel Letters.  Borrower shall have received and delivered to Lender estoppel certificates from such parties and in such form and substance as shall be satisfactory to Lender, each of which shall specify that Lender and, to the extent obtainable upon using commercially reasonably efforts, Lender’s successors and assigns, may rely thereon.

 

(k) No Material Adverse Effect.  No event or series of events shall have occurred which Lender reasonably believes has had or is reasonably likely to have a Material Adverse Effect.

 

(l) Transaction Costs.  Borrower shall have paid all transaction costs (or provided for the direct payment of such transaction costs by Lender from the proceeds of the Loan).

 

 

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(m) Insurance.  Lender shall have received certificates of insurance on ACORD Form 25 for liability insurance and ACORD Form 28 for casualty insurance demonstrating insurance coverage in respect of the Properties of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in this Agreement.  Such certificates shall indicate that Lender and its successors and assigns are named as additional insured on each liability policy, and that each casualty policy and rental interruption policy contains a loss payee and mortgagee endorsement in favor of Lender, its successors and assigns.

 

(n) Title.  Lender shall have received a marked, signed commitment to issue, or a signed pro-forma version of, a Qualified Title Insurance Policy in respect of each Property, listing only such exceptions as are reasonably satisfactory to Lender.   If any Qualified Title Insurance Policy is to be issued by, or if disbursement of the proceeds of the Loan are to be made through, an agent of the actual insurer under the Qualified Title Insurance Policy (as opposed to the insurer itself), the actual insurer shall have issued to Lender for Lender’s benefit a so-called “Insured Closing Letter.”

 

(o) Zoning.  Lender shall have received evidence reasonably satisfactory to Lender that each Property is in compliance with all applicable zoning requirements (including, without limitation, a zoning report, a zoning endorsement if obtainable or a letter from the applicable municipality if obtainable).

 

(p) Permits; Certificate of Occupancy.  Lender shall have received a copy of all Permits held by Borrower or an Affiliate of Borrower necessary for the use and operation of each Property and the certificate(s) of occupancy, if required, for each Property, all of which shall be in form and substance reasonably satisfactory to Lender.

 

(q) Engineering Report.  Lender shall have received a current Engineering Report with respect to each Property, which report shall be in form and substance reasonably satisfactory to Lender.

 

(r) Environmental Report.  Lender shall have received an Environmental Report with respect to each Property that is in form and substance reasonably satisfactory to Lender, has been prepared within the six months prior to Closing, and which discloses no material environmental contingencies with respect to the Properties.

 

(s) Qualified Survey.  Lender shall have received a Qualified Survey with respect to each Property in form and substance reasonably satisfactory to Lender.

 

(t) Flood Certifications.  With respect to each Property, flood certifications and evidence of flood insurance with respect to each Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the United States Federal Reserve System, in form and substance reasonably satisfactory to Lender.

 

 

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(u) Appraisal.  Lender shall have obtained an Appraisal of each Property satisfactory to Lender.

 

(v) Consents, Licenses, Approvals, etc.  Lender shall have received copies of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by Borrower, and the validity and enforceability, of the Loan Documents, and such consents, licenses and approvals shall be in full force and effect.

 

(w) Financial Information.  Lender shall have received financial information relating to the Sponsor, Borrower and the Properties which is satisfactory to Lender.

 

(x) Annual Budget.  Lender shall have received the 2010 Annual Budget with respect to the Properties.

 

(y) Additional Matters.  Lender shall have received such other certificates, opinions, documents and instruments relating to the Loan as may have been reasonably requested by Lender.  All corporate and other proceedings, all other documents (including, without limitation, all documents referred to in this Agreement and not appearing as exhibits to this Agreement) and all legal matters in connection with the Loan shall be reasonably satisfactory in form and substance to Lender.

 

ARTICLE IX                                

 

MISCELLANEOUS

 

Section 9.1 Successors

 

.  Except as otherwise provided in this Agreement, whenever in this Agreement any of the parties to this Agreement is referred to, such reference shall be deemed to include the successors and permitted assigns of such party.  All covenants, promises and agreements in this Agreement contained, by or on behalf of Borrower, shall inure to the benefit of Lender and its successors and assigns.  All covenants, promises and agreements in this Agreement contained, by or on behalf of Lender, shall inure to the benefit of Borrower and its permitted successors and assigns.

 

Section 9.2 GOVERNING LAW

 

.

 

(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW RULES TO THE EXTENT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

 

 

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(b) ANY LEGAL SUIT, ACTION, CLAIM, CONTROVERSY OR PROCEEDING AGAINST LENDER, BORROWER OR SPONSOR ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE (OTHER THAN ANY ACTION IN RESPECT OF THE CREATION, PERFECTION OR ENFORCEMENT OF A LIEN OR SECURITY INTEREST CREATED PURSUANT TO ANY LOAN DOCUMENTS NOT GOVERNED BY THE LAWS OF THE STATE OF NEW YORK)  SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK.  LENDER, BORROWER AND SPONSOR HEREBY (i) IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (ii) IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND (iii) IRREVOCABLY CONSENT  TO SERVICE OF PROCESS BY MAIL, PERSONAL SERVICE OR IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW, AT THE ADDRESS SPECIFIED IN SECTION 9.4.

 

(c) EACH BORROWER DOES HEREBY DESIGNATE AND APPOINT:

 

CT CORPORATION SYSTEM

 

111 EIGHTH AVENUE

 

NEW YORK, NEW YORK 10011

 

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF SAID SERVICE MAILED OR DELIVERED TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.  EACH BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

 

 

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Section 9.3 Modification, Waiver in Writing

 

.  Neither this Agreement nor any other Loan Document may be amended, changed, waived, discharged or terminated, nor shall any consent or approval of Lender or Borrower be granted hereunder, unless such amendment, change, waiver, discharge, termination, consent or approval is in writing signed by the party against whom enforcement is sought.

 

Section 9.4 Notices

 

.  All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing by expedited prepaid delivery service, either commercial or United States Postal Service, with proof of delivery or attempted delivery, addressed as follows (or at such other address and person as shall be designated from time to time by any party to this Agreement, as the case may be, in a written notice to the other parties to this Agreement in the manner provided for in this Section).  A notice shall be deemed to have been given when delivered or upon refusal to accept delivery.

 

If to Lender:

 

Goldman Sachs Commercial Mortgage Capital, L.P.

 

6011 Connection Drive, Suite 550

 

Irving, Texas 75039

 

Attention: Joe Osborne, Esq.

 

with copies to:

 

Goldman Sachs Mortgage Company

200 West Street

New York, New York 10282

Attention:  Joe Osborne, Esq.

and

Latham & Watkins LLP

885 Third Avenue

New York, New York  10022

Attention:  Michelle Kelban, Esq.

If to Borrower:

c/o Cole Real Estate Investments

2555 East Camelback Road, Suite 400

Phoenix, Arizona 85016

Attention: Legal Department

 

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with a copy to:

Kutak Rock LLP

8601 N. Scottsdale Road, Suite 300

Scottsdale, Arizona 85253

Attention:  Mitch Padover, Esq.

Section 9.5 TRIAL BY JURY

 

.  LENDER, BORROWER AND SPONSOR, TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY LENDER, BORROWER AND SPONSOR AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER, BORROWER AND/OR SPONSOR ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY LENDER, BORROWER AND SPONSOR.

 

Section 9.6 Headings

 

.  The Article and Section headings in this Agreement are included in this Agreement for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

Section 9.7 Assignment and Participation

 

.

 

(a) Except as explicitly set forth in Sections 2.1 and 2.2 or with respect to any Transfer that is not prohibited by this Agreement, Borrower may not sell, assign or transfer any interest in the Loan Documents or any portion thereof (including, without limitation, Borrower’s rights, title, interests, remedies, powers and duties hereunder and thereunder).

 

(b) Lender and each assignee of all or a portion of the Loan shall have the right from time to time in its discretion to sell one or more of the Notes or any interest therein (an “Assignment”) and/or sell a participation interest in one or more of the Notes (a “Participation”).  Borrower agrees to reasonably cooperate with Lender, at Lender’s request, in order to effectuate any such Assignment or Participation, and Borrower shall promptly provide such information, legal opinions and documents relating to Borrower, Sponsor, the Property, the Approved Property Manager, and any Tenants (to the extent readily obtainable) as Lender may reasonably request in connection with such Assignment or Participation; provided that, Borrower shall not be required to incur out-of-pocket expenses pursuant to this Section 9.7(b), Section 1.1(c), and the Cooperation Agreement (other than Borrower’s or Sponsor’s legal expenses and any

 

 

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expenses in connection with any of Borrower’s, Sponsor’s or any of their respective Affiliates’ regulatory filings) in excess of $20,000 in the aggregate.  In the case of an Assignment, (i) each assignee shall have, to the extent of such Assignment, the rights, benefits and obligations of the assigning Lender as a “Lender” hereunder and under the other Loan Documents, (ii) the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to an Assignment, relinquish its rights and be released from its obligations under this Agreement, and (iii) one Lender shall serve as agent for all Lenders and shall be the sole Lender to whom notices, requests and other communications shall be addressed and the sole party authorized to grant or withhold consents hereunder on behalf of the Lenders (subject, in each case, to appointment of a Servicer, pursuant to Section 9.22, to receive such notices, requests and other communications and/or to grant or withhold consents, as the case may be) and to be the sole Lender to designate the account to which payments shall be made by Borrower to the Lenders hereunder.  Goldman Sachs Mortgage Company or, upon the appointment of a Servicer, such Servicer, shall maintain, or cause to be maintained, as agent for Borrower, a register on which it shall enter the name or names of the registered owner or owners from time to time of the Notes.   Borrower agrees that upon effectiveness of any Assignment of any Note in part, Borrower will promptly provide to the assignor and the assignee separate promissory notes in the amount of their respective interests (but, if applicable, with a notation thereon that it is given in substitution for and replacement of an original Note or any replacement thereof), and otherwise in the form of such Note, upon return of the Note then being replaced.  The assigning Lender shall notify in writing each of the other Lenders of any Assignment.  Each potential or actual assignee, participant or investor in a Securitization, and each Rating Agency, shall be entitled to receive all information received by Lender under this Agreement, provided that Lender shall direct such parties to keep all non-public information confidential.  After the effectiveness of any Assignment, the party conveying the Assignment shall provide notice to Borrower and each Lender of the identity and address of the assignee.  Notwithstanding anything in this Agreement to the contrary, after an Assignment, the assigning Lender (in addition to the assignee) shall continue to have the benefits of any indemnifications contained in this Agreement that such assigning Lender had prior to such assignment with respect to matters occurring prior to the date of such assignment.

 

(c) If, pursuant to this Section 9.7, any interest in this Agreement or any Note is transferred to any transferee that is not a U.S. Person, the transferor Lender shall cause such transferee, concurrently with the effectiveness of such transfer, (i) to furnish to the transferor Lender either Form W-8BEN or Form W-8ECI or any other form in order to establish an exemption from, or reduction in the rate of, U.S. withholding tax on all interest payments hereunder, and (ii) to agree (for the benefit of Lender and Borrower) to provide the transferor Lender a new Form W-8BEN or Form W-8ECI or any forms reasonably requested in order to establish an exemption from, or reduction in the rate of, U.S. withholding tax upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

 

 

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Section 9.8 Severability

 

.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

Section 9.9 Preferences; Waiver of Marshalling of Assets

 

.  Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder and under the Loan Documents, provided such application, reversal and reapplication is consistent with the provisions of this Agreement.  To the extent Borrower makes a payment or payments to Lender, which payment or payments or any portion thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or payments received, the obligations hereunder or portion thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or payments had not been received by Lender.    To the fullest extent permitted by law, each Borrower, for itself and its successors and assigns, waives all rights to a marshalling of the assets of any Borrower, and any Borrower’s partners and others with interests in any Borrower, or to a sale in inverse order of alienation in the event of foreclosure of any Mortgage, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of any Property for the collection of the Indebtedness without any prior or different resort for collection or of the right of Lender to the payment of the Indebtedness out of the net proceeds of the Properties in preference to every other claimant whatsoever.  In addition, to the fullest extent permitted by law, each Borrower, for itself and its successors and assigns, waives in the event of foreclosure of any Mortgage, any equitable right otherwise available to such Borrower which would require the separate sale of any Property or require Lender to exhaust its remedies against any Property before proceeding against any other Property; and further in the event of such foreclosure, each Borrower does hereby expressly consent to and authorize, at the option of Lender, the foreclosure and sale either separately or together of any combination of the Properties.

 

Section 9.10 Remedies of Borrower

 

.  If a claim is made that Lender or its agents have unreasonably delayed acting or acted unreasonably in any case where by law or under this Agreement, the Notes, the Mortgages or the other Loan Documents, any of such Persons has an obligation to act promptly or reasonably, Borrower agrees that no such Person shall be liable for any monetary damages, and Borrower’s sole remedy shall be limited to commencing an action seeking specific performance, injunctive relief and/or declaratory judgment.  Without in any way limiting the foregoing, Borrower shall not assert, and hereby waives, any claim against Lender and/or its Affiliates, directors, employees, attorneys, agents or sub-agents, on any theory of liability, for direct, special, indirect, consequential or punitive damages (whether or not the claim

 

 

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therefore is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, as a result of, or in any way related to, the Loan Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, the Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and Borrower hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

 

Section 9.11 Offsets, Counterclaims and Defenses

 

.  All payments made by Borrower hereunder or under the other Loan Documents shall be made irrespective of, and without any deduction for, any setoffs or counterclaims.  Borrower waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Lender arising out of or in any way connected with the Notes, this Agreement, the other Loan Documents or the Indebtedness.  Any assignee of Lender’s interest in the Loan shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to the Loan.

 

Section 9.12 No Joint Venture

 

.  Nothing in this Agreement is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender, nor to grant Lender any interest in any Property other than that of mortgagee or lender.

 

Section 9.13 Conflict; Construction of Documents

 

.  In the event of any conflict between the provisions of this Agreement and the provisions of the Notes, the Mortgages or any of the other Loan Documents, the provisions of this Agreement shall prevail.

 

Section 9.14 Brokers and Financial Advisors

 

.  Each party represents to the other that they have dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement.  Each party agrees to indemnify, defend and hold the other harmless from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a claim by any Person that such Person acted on behalf of such party in connection with the transactions contemplated in this Agreement.  The provisions of this Section 9.14 shall survive the expiration and termination of this Agreement and the repayment of the Indebtedness.

 

Section 9.15 Counterparts

 

.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

 

 

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Section 9.16 Estoppel Certificates

 

.

 

(a) Borrower agrees at any time and from time to time, to execute, acknowledge and deliver to Lender, within ten days after receipt of Lender’s written request therefor, a statement in writing setting forth (A) the Principal Indebtedness, (B) the date on which installments of interest and/or principal were last paid, (C) any offsets or defenses to the payment of the Indebtedness, (D) that the Notes, this Agreement, the Mortgages and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification, (E) that neither Borrower nor, to Borrower’s knowledge, Lender, is in default under the Loan Documents (or specifying any such default), (F) that all Leases are in full force and effect and have not been modified (except in accordance with the Loan Documents), (G) whether or not any of the Tenants under the Leases are in material default under the Leases (setting forth the specific nature of any such material defaults) and (H) such other matters as Lender may reasonably request.  Any prospective purchaser of any interest in a Loan shall be permitted to rely on such certificate.

 

(b) Upon Lender’s written request, Borrower shall use commercially reasonable efforts to obtain from each Tenant whose Lease requires such Tenant to execute and deliver an estoppel certificate in form and substance reasonably satisfactory to Lender, and shall thereafter promptly deliver to Lender duly executed estoppel certificates from any one or more of such Tenants under such Leases as requested by Lender.  Borrower shall not be required to deliver such certificates more frequently than one time in any 12-month period, other than the 12-month period during which a Securitization occurs or is attempted.

 

Section 9.17 Payment of Expenses; Mortgage Recording Taxes

 

.  Borrower, jointly and severally, shall reimburse Lender upon receipt of written notice from Lender for (i) all out-of-pocket costs and expenses incurred by Lender (or any of its Affiliates) in connection with the origination of the Loan, including, without limitation, legal fees and disbursements, accounting fees, and the costs of the Appraisal, the Engineering Report, the Qualified Title Insurance Policy, the Qualified Survey, the Environmental Report and any other third-party diligence materials; (ii) all out-of-pocket costs and expenses incurred by Lender (or any of its Affiliates) in connection with (A) the negotiation, preparation, 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 requested by Borrower or otherwise required hereunder (including, without limitation, Leases, Material Agreements, and Permitted Encumbrances, (B) filing, registration or recording fees and expenses and other similar expenses incurred in creating and perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan Documents (including, without limitation, the filing, registration or recording of any instrument of further assurance) and all federal, state, county and municipal, taxes (including, without limitation, if applicable, intangible taxes), duties, imposts, assessments and charges (other than income taxes) arising out of or in connection with the execution and delivery of the Loan Documents, any mortgage supplemental thereto, any security instrument with respect

 

 

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to the Collateral or any instrument of further assurance, (C) 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 Borrower, this Agreement, the other Loan Documents or any Collateral, and (D) the satisfaction of the Rating Condition when required; and (iii) all out-of-pocket costs and expenses (including, without limitation, if the Loan has been securitized, special servicing fees) incurred by Lender (or any of its Affiliates) in connection with the enforcement of any obligations of Borrower, or a Default by Borrower, under the Loan Documents, including, without limitation, any actual or attempted foreclosure, deed-in-lieu of foreclosure, refinancing, restructuring or workout and any insolvency or bankruptcy proceedings (including, without limitation, any applicable transfer taxes).

 

Section 9.18 No Third-Party Beneficiaries

 

.  This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower, and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein.  All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender, and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof, and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable to do so.

 

Section 9.19 Non-Recourse

 

.

 

(a) Notwithstanding anything herein to the contrary, except as expressly set forth in this Section 9.19 and in the Environmental Indemnity, the Loan shall not be recourse to Borrower.  In addition, no recourse shall be had for the Loan against any other Person, including, without limitation, any Affiliate of Borrower or any officer, director, partner or equityholder of Borrower or any such Affiliate, unless expressly set forth in a Loan Document or other written agreement to which such Person is a party.

 

(b) Borrower shall jointly and severally indemnify Lender and hold Lender harmless from and against any and all Damages to Lender (including, without limitation, the legal and other expenses of enforcing the obligations of Borrower under this Section 9.19 and the Sponsor under the Guaranty) resulting from or arising out of any of the following (the “Indemnified Liabilities”), which Indemnified Liabilities shall be guaranteed by Sponsor pursuant to the Guaranty:

 

(i) any intentional or grossly negligent physical Waste with respect to the Property committed or permitted by Borrower, the Sponsor or any of their respective Affiliates;

 

 

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(ii) any fraud, willful misconduct or intentional misrepresentation committed by Borrower, the Sponsor or any of their respective Affiliates;

 

(iii) the misappropriation or misapplication by Borrower, the Sponsor or any of their respective Affiliates of any funds (including, without limitation, misappropriation or misapplication of Revenues, security deposits and/or Loss Proceeds and the violation of the last sentence of Section 5.7(d));

 

(iv) any voluntary Debt if and to the extent prohibited hereunder (for these purposes, Debt will be regarded as voluntary if either incurred voluntarily or if not repaid by Borrower from available cash flow);

 

(v) any breach by Borrower or the Sponsor of any representation or covenant regarding environmental matters contained in this Agreement or in the Environmental Indemnity;

 

(vi) the failure of Borrower to be a Single-Purpose Entity from and after the Closing Date, and to have always been a single-purpose entity as described in Section 4.17(a);

 

(vii) removal by Borrower, Sponsor, or any of their respective Affiliates of personal property from any Property during or in anticipation of an Event of Default, unless replaced with personal property of the same utility and of the same or greater value and utility;

 

(viii) any fees or commissions paid by Borrower to any Affiliate in violation of the terms of this Agreement; and

 

(ix) if any Property does not constitute one or more separate tax lots or constitutes a portion of any tax lot with any other real property that is not part of the Property, provided that any liability under this clause (ix) shall automatically terminate upon the issuance or one or more separate tax lot designations.

 

In addition to the foregoing, the Loan shall be fully recourse to Borrower and Sponsor, jointly and severally, upon (i) any Transfer, voluntary or collusive Lien on Collateral, or Change of Control which is prohibited hereunder or (ii) the occurrence of any filing by any Borrower under the Bankruptcy Code or any joining or colluding by any Borrower or any of their respective Affiliates (including, without limitation, Sponsor) in the filing of an involuntary case in respect of any Borrower under the Bankruptcy Code.

 

 

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Section 9.20 Right of Set-Off

 

.  In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default, Lender may from time to time, without presentment, demand, protest or other notice of any kind (all of such rights being hereby expressly waived), set-off and appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by Lender (including, without limitation, branches, agencies or Affiliates of Lender wherever located) to or for the credit or the account of Borrower against the obligations and liabilities of Borrower to Lender hereunder, under the Notes, the other Loan Documents or otherwise, irrespective of whether Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of Lender subsequent thereto.

 

Section 9.21 Exculpation of Lender

 

.  Lender neither undertakes nor assumes any responsibility or duty to Borrower or any other party to select, review, inspect, examine, supervise, pass judgment upon or inform Borrower or any third party of (a) the existence, quality, adequacy or suitability of Appraisals of the Properties or other Collateral, (b) any environmental report, or (c) any other matters or items, including, without limitation, engineering, soils and seismic reports which are contemplated in the Loan Documents.  Any such selection, review, inspection, examination and the like, and any other due diligence conducted by Lender, is solely for the purpose of protecting Lender’s rights under the Loan Documents, and shall not render Lender liable to Borrower or any third party for the existence, sufficiency, accuracy, completeness or legality thereof.

 

Section 9.22 Servicer

 

.  Lender may delegate any and all rights and obligations of Lender hereunder and under the other Loan Documents to the Servicer upon notice by Lender to Borrower, whereupon any notice or consent from the Servicer to Borrower, and any action by Servicer on Lender’s behalf, shall have the same force and effect as if Servicer were Lender.

 

Section 9.23 No Fiduciary Duty

 

.  Borrower acknowledges that Lender and its Affiliates (collectively, solely for purposes of this paragraph, the “Lending Parties”) may have economic interests that conflict with those of Borrower, its stockholders and/or its Affiliates.  Borrower agrees that nothing in this Agreement, the other Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between any Lending Party, on the one hand, and Borrower, its stockholders or its Affiliates, on the other.  Borrower acknowledges and agrees that (i) the transactions contemplated by the Loan Documents (including, without limitation, the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactions between the Lending Parties, on the one hand, and Borrower, on the other, and (ii) in connection therewith and with the process leading thereto, (x) no Lending Party has assumed an advisory or fiduciary responsibility in favor of Borrower, its stockholders or its Affiliates with respect to the transactions contemplated hereby

 

 

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(or the exercise of rights or remedies with respect thereto) or the process leading thereto (irrespective of whether any Lending Party has advised, is currently advising or will advise Borrower, its stockholders or its Affiliates on other matters) or any other obligation to Borrower except the obligations expressly set forth in the Loan Documents and (y) each Lending Party is acting solely as principal and not as the agent or fiduciary of Borrower, its management, stockholders, creditors or any other Person.  Borrower acknowledges and agrees that Borrower has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto.  Borrower agrees that it will not claim that any Lending Party has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to Borrower, in connection with such transaction or the process leading thereto.

 

Section 9.24 Borrower Information

 

.  Borrower shall make available to Lender all information concerning its business and operations that Lender may reasonably request.  Provided that Lender shall direct such parties to keep all non-public information confidential, Lender shall have the right to disclose any and all information provided to Lender by Borrower or Sponsor regarding Borrower, Sponsor, the Loan and the Properties (i) to Affiliates of Lender and to Lender’s agents and advisors, (ii) to any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer, participation or Securitization of all or any portion of the Loan or any participations therein or to any direct or indirect contractual counterparties (or the professional advisors thereto) to any swap or derivative transaction relating to Borrower and its obligations, in each case, to the extent reasonably required by such Person, (iii) to any Rating Agency in connection with a Securitization or as otherwise required in connection with a disposition of the Loan, (iv) to any Person necessary or desirable in connection with the exercise of any remedies hereunder or under any other Loan Document, (v) to any governmental agency or representative thereof or by the National Association of Insurance Commissioners or pursuant to legal or judicial process and (vi) in any Disclosure Document (as defined in the Cooperation Agreement), provided that such Disclosure Document directs the recipient thereof to keep all non-public information confidential.  In addition, Lender may disclose the existence of this Agreement and the information about this Agreement to market data collectors, similar services providers to the lending industry, and service providers to Lender in connection with the administration and management of this Agreement and the other Loan Documents.  Each party hereto (and each of their respective Affiliates, employees, representatives or other agents) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all materials of any kind (including, without limitation, opinions and other tax analyses) that are provided to any such party relating to such tax treatment and tax structure.  For the purpose of this Section 9.24, “tax structure” means any facts relevant to the federal income tax treatment of the Transaction but does not include information relating to the identity of any of the parties hereto or any of their respective Affiliates.  Lender, all potential assignees, transferees, participants and/or pledgees of the Loan and all of their respective advisors and professional firms shall be entitled to rely on the information supplied by, or on behalf of, Borrower, and

 

 

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Borrower hereby indemnifies Lender as to any Damages that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any information provided to Lender by Borrower or Sponsor or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information or necessary in order to make the statements in such information, or in light of the circumstances under which they were made, not misleading.

 

Section 9.25 PATRIOT Act Records

 

.  Lender hereby notifies Borrower that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies Borrower and Sponsor, which information includes the name and address of Borrower and Sponsor and other information that will allow Lender to identify Borrower or Sponsor in accordance with the PATRIOT Act.

 

Section 9.26 Prior Agreements

 

.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONTAIN THE ENTIRE AGREEMENT OF THE PARTIES HERETO AND THERETO IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND ALL PRIOR AGREEMENTS AMONG OR BETWEEN SUCH PARTIES, WHETHER ORAL OR WRITTEN, INCLUDING, WITHOUT LIMITATION, ANY TERM SHEETS, CONFIDENTIALITY AGREEMENTS AND COMMITMENT LETTERS, ARE SUPERSEDED BY THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT THAT ANY ORIGINATION FEE SPECIFIED IN ANY TERM SHEET, COMMITMENT LETTER OR FEE LETTER SHALL BE AN OBLIGATION OF BORROWER AND SHALL BE PAID AT CLOSING, AND ANY INDEMNIFICATIONS,  FLEX PROVISION, EXIT FEES AND THE LIKE PROVIDED FOR THEREIN SHALL SURVIVE THE CLOSING).

 

Section 9.27 Publicity

 

.  If the Loan is made, Lender may issue press releases, advertisements and other promotional materials describing in general terms or in detail Lender's participation in such transaction, and may utilize photographs of the Property in such promotional materials.  Borrower shall not make any references to Lender in any press release, advertisement or promotional material issued by Borrower or Sponsor, unless Lender shall have approved of the same in writing prior to the issuance of such press release, advertisement or promotional material.

 

Section 9.28 Joint and Several Liability

 

.  The representations, covenants, warranties and obligations of Borrower hereunder are joint and several.

 

 

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Section 9.29 Delay Not a Waiver

 

.  Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or under any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

 

Section 9.30 Schedule and Exhibits Incorporated

 

.  The Schedules and Exhibits annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.

 

ARTICLE X                      

 

CONTRIBUTION AGREEMENT

 

Section 10.1 Contribution Generally.

 

  As a result of the transactions contemplated by this Agreement, each individual Borrower may benefit, directly and indirectly, from the payment of and performance on the Indebtedness by any other Borrower (or the application of the Collateral owned by such other Borrower to the payment of and performance on the Indebtedness) and, in consideration therefor, each Borrower (i) desires to enter into an allocation and contribution agreement with each other Borrower as set forth in this Article 10 to provide a fair and equitable agreement to make contributions among each of the applicable Borrowers in the event any obligation of any Borrower is performed by any other Borrower and (ii) agrees to subordinate and subrogate any rights or claims it may have against other Borrowers as and to the extent set forth in this Article 10.  The statements and provisions set forth in this Article 10 are intended to effectuate, inter alia, a subordination agreement which shall be effective in any bankruptcy or other similar proceeding involving any or all of the Borrowers and/or the Collateral or any portion thereof. 

 

Section 10.2 Reimbursement Contribution.

 

  In the event any one or more Borrowers (any such Borrower, a “Funding Borrower”) is deemed to have paid an amount in excess of the principal amount attributable to it (such principal amount, the “Allocable Principal Balance”) (any deemed payment in excess of the applicable Allocable Principal Balance, a “Contribution”) as a result of (a) such Funding Borrower’s payment of and/or performance on the Indebtedness and/or (b) Lender’s realization on the Collateral owned by such Funding Borrower (whether by foreclosure, deed in lieu of foreclosure, private sale or other means), then after payment in full of the Loan and the satisfaction of all of Borrowers’ other obligations to Lender, such Funding

 

 

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Borrower shall be entitled to contribution from each benefited Borrower for the amount of the Contribution so benefited (any such contribution, a “Reimbursement Contribution”), up to such benefited Borrower’s then current Allocable Principal Balance.  Any Reimbursement Contributions required to be made hereunder shall, subject to the balance of the provisions in this Article 10 regarding payment, subordination and subrogation, be made within ten (10) days after demand therefor.

 

Section 10.3 Defaulting Borrower.

 

  If a Borrower (a “Defaulting Borrower”) shall have failed to make a Reimbursement Contribution as hereinabove provided, after the later to occur of (a) payment of the Loan in full and the satisfaction of all of all Borrowers’ other obligations to Lender or (b) the date which is 366 days after the payment in full of the Loan, the Funding Borrower to whom such Reimbursement Contribution is owed shall be subrogated to the rights of Lender against such Defaulting Borrower, including the right to receive a portion of such Defaulting Borrower’s Collateral in an amount equal to the Reimbursement Contribution payment required hereunder that such Defaulting Borrower failed to make; provided, however, if Lender returns any payments in connection with a bankruptcy of a Borrower, all other Borrowers shall jointly and severally pay to Lender all such amounts returned, together with interest at the Default Rate accruing from and after the date on which such amounts were returned.  For the avoidance of doubt, until such time as the Indebtedness is indefeasibly paid in full and satisfied, each Borrower hereby subjects and subordinates to payment of the Indebtedness to the Lender any and all rights of such Borrower under this Article 10, including its right to Reimbursement Contribution, and waives any right of subrogation such Funding Borrower may have with respect thereto.

 

Section 10.4 Maximum Liability.

 

  Each Borrower shall be liable under this Article 10 with respect to the Indebtedness only for such total maximum amount (if any) that would not render its Indebtedness hereunder or under any of the Loan Documents subject to avoidance under Chapter 5 of the Bankruptcy Code or any comparable Legal Requirements.

 

Section 10.5 Applicable Contributions.

 

  In the event that at any time there exists more than one Funding Borrower with respect to any Contribution (in any such case, the “Applicable Contribution”), then Reimbursement Contributions from Defaulting Borrowers pursuant hereto shall be equitably allocated among such Funding Borrowers.  In the event that at any time any Borrower pays an amount hereunder in excess of the amount calculated pursuant to this Section 10.5, that Borrower shall be deemed to be a Funding Borrower to the extent of such excess and shall be entitled to a Reimbursement Contribution from the other Borrowers in accordance with the provisions of this Section.

 

Section 10.6 Reimbursement Contribution as Asset

 

.  Each Borrower acknowledges that the right to receive any Reimbursement Contributions in accordance with the terms hereof shall constitute an asset of the Borrower to which any such Reimbursement Contribution is owing.

 

Section 10.7 Subordination.

 

  No Reimbursement Contribution payments payable by a Borrower pursuant to the terms of this Article 10 shall be paid until all amounts then due and payable by all of Borrowers to Lender, pursuant to the terms of the Loan Documents are paid in full in cash.  Nothing contained in this Article 10 shall limit or affect in any way the Indebtedness of any Borrower to Lender under this Agreement or any other Loan Documents.

 

 

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Section 10.8 Waivers

 

.  With respect to the agreements set forth in this Article 10 only, each Borrower waives, to the extent permitted by applicable law:

 

(a) any right to require Lender to proceed against any other Borrower or any other Person or to proceed against or exhaust any security held by Lender at any time or to pursue any other remedy in Lender’s power before proceeding against any Borrower;

 

(b) the defense of the statute of limitations in any action against any other Borrower or for the collection of any indebtedness or the performance of any obligation under the Loan or the repayment of any Contribution and/or collection of any Reimbursement Contribution;

 

(c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal;

 

(d) any defense based upon any failure by Lender to obtain Collateral for the Indebtedness or failure by Lender to perfect a lien on any Collateral;

 

(e) any defense based upon any failure of Lender to give notice of sale or other disposition of any Collateral to any other Borrower or to any other person or entity or any defect in any notice that may be given in connection with any sale or disposition of any Collateral;

 

(f) any defense based upon any failure of Lender to comply with Legal Requirements in connection with the sale or other disposition of any Collateral, including, without limitation, any failure of Lender to conduct a commercially reasonable sale or other disposition of any Collateral;

 

(g) any defense based upon any agreement or stipulation entered into by Lender with respect to the provision of adequate protection in any bankruptcy proceeding;

 

(h) any defense based upon the avoidance of any security interest in favor of Lender for any reason;

 

(i) any defense based upon any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding, including any discharge of, or bar or stay against collecting, all or any of the obligations evidenced by the Note(s) or owing under any of the Loan Documents;

 

(j) any defense or benefit based upon any Borrower’s, or any other party’s, resignation of the portion of any obligation secured by the applicable Loan Documents purporting to create a Lien to be satisfied by any payment from any other Borrower or any such party; or

 

 

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(k) all rights and defenses arising out of an election of remedies by Lender even though the election of remedies, such as non-judicial foreclosure with respect to security for the Indebtedness or any other amounts owing under the Loan Documents, has destroyed any Borrower’s rights of subrogation and reimbursement against any other Borrower.

 

 

[Signatures on the following pages]

 

.

 

 

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Lender and Borrower are executing this Agreement as of the date first above written.

 

	  	
LENDER:

 

GOLDMAN SACHS COMMERCIAL MORTGAGE CAPITAL, L.P., a Delaware limited partnership

 

 

By: /s/ Joseph M. Osborne      

       Name: Joseph M. Osborne

       Title: General Counsel, Chief Operating Officer

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BORROWER:

 

COLE CV MERIDIANVILLE AL, LLC

COLE LA GLENDALE AZ, LLC

COLE WG KINGMAN AZ, LLC

COLE CV NEW PORT RICHEY FL, LLC

COLE WG TWIN FALLS ID, LLC

COLE WG SOUTH ELGIN IL, LLC

COLE WG SOUTH BEND (IRONWOOD) IN, LLC

COLE WG AUGUSTA ME, LLC

COLE WG FRAMINGHAM MA, LLC

COLE WG NORTH MANKATO MN, LLC

COLE CG BLAIR NE, LLC

COLE WG DURHAM (HIGHWAY 54) NC, LLC

COLE WG CLEVELAND (CLARK) OH, LLC

COLE AA HOLLAND OH, LLC

COLE AA SYLVANIA OH, LLC

COLE AA TWINSBURG OH, LLC

COLE MT SUNSET VALLEY TX, LLC

COLE KO MCALLEN TX, LLC

COLE TS PEARSALL TX, LLC

COLE WG APPLETON (NORTHLAND AVENUE) WI, LLC

COLE WG JANESVILLE (WEST COURT) WI, LLC,

each a Delaware limited liability company

By:           /s/ John M. Pons      

John M. Pons, Officer

 

 

109

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