Document:

Exhibit 10.8

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT, effective as of the Effective Date (as hereinafter defined) between PRIAM PROPERTIES, INC., a Maryland corporation (the “Company”), and W. MICHAEL MADDEN (the “Executive”), recites and provides as set forth herein. Capitalized terms that are not defined herein and that are defined in the Priam Properties Inc. 2019 Equity Incentive Plan (the “Plan”) have the meaning set forth in the Plan.

 

W I T N E S S E T H :

 

WHEREAS, the Company desires to employ the Executive to devote substantially all of the Executive’s business time, attention and efforts to the business of the Company and to serve as the Chief Financial Officer of the Company; and

 

WHEREAS, the Executive desires to be so employed on the terms and subject to the conditions hereinafter stated.

 

NOW, THEREFORE, in consideration of the premises and mutual obligations hereinafter set forth, the parties agree as follows:

 

1.                                      RECITALS.  The above recitals are incorporated by reference herein and made a part hereof as set forth verbatim.

 

2.                                      EMPLOYMENT.  The Company shall employ the Executive, and the Executive agrees to be so employed, in the capacity of the Company’s Chief Financial Officer to serve for the Term (as hereinafter defined) hereof, subject to earlier termination as hereinafter provided.  If requested by the Company, Executive agrees to also serve as an officer or director of a subsidiary or affiliate of the Company without any compensation other than as provided in this Agreement.

 

3.                                      TERM.  The Initial Term of the Executive’s employment hereunder (the “Initial Term”) shall be for a period of three (3) years commencing on the initial closing date of the initial public offering of the Company’s Common stock (the “Effective Date”), and continuing until the third anniversary of the Effective Date.  The term of this Agreement shall be extended automatically for successive twelve (12) month periods, beginning on the last day of the Initial Term and each twelve (12) month renewal period thereafter unless the Company or the Executive has provided the other with written notice of an intention to terminate this Agreement at least ninety (90) days before the end of the Initial Term (or any subsequent renewal period).   For purposes of this Agreement, the word “Term” means the Initial Term and any renewal period pursuant to the preceding sentence and any extension pursuant to clause (ii) of the following sentence.  Notwithstanding the preceding sentences (i) this Agreement may be terminated earlier as provided herein and (ii) if a Control Change Date occurs during the Term, then the Term shall not end before the first anniversary of the Control Change Date or the date this Agreement is terminated earlier as provided herein.

 

4.                                      SERVICES.  The Executive shall devote substantially all of the Executive’s business time, attention and effort to the affairs of the Company and its subsidiaries 

 

 

and affiliates. The Company further agrees that the Executive may engage in civic and community activities and endeavors provided that such activities do not interfere with the performance of the Executive’s duties hereunder.  The Executive shall have the duties, responsibilities and authority consistent with the Executive’s position, subject to the general direction, approval and control of the Company’s Chief Executive Officer and Board of Directors (the “Board”).

 

5.                                      COMPENSATION.

 

(a)                                 Base Salary.  During the Term, the Company shall pay the Executive an annual base salary (“Base Salary”) equal to Two Hundred Fifty Thousand Dollars ($250,000), subject to any increases approved by the Board or its Compensation Committee (the “Committee”).  Such Base Salary shall be paid in accordance with the Company’s payroll schedule.  Any increase in Base Salary shall not serve to limit or reduce any other obligations to the Executive under this Agreement.

 

(b)                                 Annual Bonus.  In addition to the Executive’s annual Base Salary, for performance in each calendar year during the Term, the Executive shall have the opportunity to earn an annual cash bonus (“Annual Bonus”).  The Board or the Committee shall determine the Annual Bonus that the Executive may earn in each calendar year during the Term. The Annual Bonus shall be earned and payable to the extent that predetermined individual and/or corporate goals established by the Board or the Committee are achieved and any other requirements, including requirements relating to continued employment or service, prescribed by the Board or the Committee, at the time the performance goals are established, are satisfied; provided that the Annual Bonus for achieving the specified “target” level of performance shall not be less than seventy-five percent (75%) of Executive’s current Base Salary.  Any Annual Bonus that is earned pursuant to the preceding sentences shall be paid in a single lump sum payment no later than March 15 following the calendar year in which the Annual Bonus is earned.

 

6.                                      BENEFITS.  The Company agrees to provide the Executive with the following benefits:

 

(a)                                 Vacation.  The Executive shall be entitled each calendar year to a vacation, during which time the Executive’ compensation shall be paid in full.  The time allotted for such vacation shall be an aggregate of four (4) weeks per calendar year.  Vacation that is not used in one calendar year may be carried over and used in subsequent calendar years; provided that the maximum carryover of vacation at any time shall be two (2) weeks.  In the year the Executive terminates employment, the Executive shall be entitled to receive a prorated paid vacation based upon the amount of time that the Executive has worked during the year of termination.  In the year the Executive terminates employment, if the Executive has not taken all of the vacation time (computed on a prorated basis), the Executive shall be paid, at the Executive’s regular rate of Base Salary, for unused vacation but if the Executive has taken more vacation time than allotted for the year of termination, there shall be no reduction in compensation otherwise payable hereunder.

 

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(b)                                 Employee Benefits.  During the Term, the Executive and/or the Executive’s family, as the case may be, shall be eligible to participate in all Company employee benefit plans in which other executive level employees of the Company and/or the members of their families, as the case may be, are eligible to participate including, but not limited to, any retirement, pension, 401(k), profit-sharing, insurance or other plans which may now be in effect or which may hereafter be adopted by the Company.

 

(c)                                  Equity Plan Participation.  The Executive shall be eligible to participate in the Company’s 2019 Equity Incentive Plan, as it may be amended from time to time, and any subsequent equity incentive plan established during the Term and shall receive awards, in such amounts and subject to such terms, as determined by the Committee and this Section 6(c).  On the Effective Date the Executive shall be granted         LTIP Units under the Plan and such award shall be evidenced by an award agreement.  The agreement shall provide that the LTIP Units shall vest on the first anniversary of the Effective Date, subject to the Executive’s continued employment.  The agreement shall also provide that the LTIP Units shall vest upon termination of the Executive’s employment before such date on account of the Executive’s death, Disability, Termination Without Cause or Voluntary Termination for Good Reason, provided that the Executive remains in the continuous employ of the Company or an Affiliate from the Effective Date until the date of such termination.  The agreement also shall provide that the LTIP Units shall vest upon a Change in Control if the Executive remains in the continuous employ of the Company or an Affiliate from the Effective Date until the Control Change Date.

 

7.                                      EXPENSES.  The Company recognizes that the Executive will have to incur certain out-of-pocket expenses related to the Executive’s services and the Company’s business, and the Company agrees to promptly reimburse the Executive for all reasonable expenses necessarily incurred by the Executive in the performance of the Executive’s duties to the Company upon presentation of a voucher or documentation indicating the amount and business purposes of any such expenses.  These expenses include, but are not limited to, travel, meals and entertainment.  Expenses that are reimbursable to the Executive under this Section 7 shall be paid to the Executive in accordance with the Company’s expense reimbursement policy but in no event later than March 15 following the calendar year in which the expense is incurred.

 

8.                                TERMINATION.

 

(a)                                 Grounds.  This Agreement shall terminate in the event of the Executive’s death.  In the case of the Executive’s Disability, the Company may elect to terminate the Executive’s employment as a result of such Disability.  The Company also may terminate the Executive’s employment pursuant to a Termination With Cause or a Termination Without Cause.  Finally, the Executive may terminate the Executive’s employment with the Company pursuant to either a Voluntary Termination or a Voluntary Termination for Good Reason.  For purposes of this Agreement, the terms Disability, Voluntary Termination, Voluntary Termination for Good Reason, Termination With Cause and Termination Without Cause are defined in Section 11 of this Agreement.

 

(b)                                 Notice of Termination.  Any termination by the Company or the Executive (other than upon death) shall be communicated by Notice of Termination to the

 

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Executive or the Company, as applicable.  For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon and the specific ground for termination; (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination; and (iii) the date of termination in accordance with Section 8(c) below.

 

(c)                                  Date of Termination.  For the purposes of this Agreement, “Date of Termination” means (i) if the Company intends to treat the termination as a termination based upon the Executive’s Disability, the Executive’s employment with the Company shall terminate effective on the thirtieth day after the date of the Notice of Termination (which may not be given before the Executive has been absent from work on account of a physical or mental illness or physical injury for at least one hundred fifty (150) days) provided that, before such date, the Executive shall not have returned to the performance of the Executive’s duties with or without reasonable accommodation); (ii) if the Executive’s employment is terminated by reason of Death, the Date of Termination shall be the date of death of the Executive; (iii) if the Executive’s employment is terminated by reason of Voluntary Termination, the Date of Termination shall be thirty (30) days after the date of the Notice of Termination (and the Executive shall be deemed to have terminated employment by Voluntary Termination if the Executive voluntarily refuses to provide substantially all the services described in Section 4 hereof for a period greater than four (4) consecutive weeks, excluding periods in which the Executive is not performing services on account of vacation in accordance with Section 6(a) hereof and periods in which the Executive is not performing services on account of the Executive’s illness or injury or the illness or injury of a member of the Executive’s immediate family or an approved leave under the Family and Medical Leave Act, if applicable); in such event, the Date of Termination shall be the day after the last day of such four-week period; (iv) if the Company intends to treat the termination as a Termination With Cause, the Company shall provide the Executive written notice of such grounds for termination and the Executive shall have the period specified in Section 11(h) to cure such cause to the reasonable satisfaction of the Board, failing which, the Date of Termination shall be the end of the applicable cure period; (v) if the Executive’s employment is terminated by reason of Voluntary Termination for Good Reason, the Date of Termination shall be thirty (30) days after the end of the thirty (30) day cure period or (vi) if the Executive’s employment is terminated by a Termination Without Cause, the Date of Termination shall be thirty (30) days after the date of the Notice of Termination.

 

9.                                      COMPENSATION UPON TERMINATION WITH CAUSE, VOLUNTARY TERMINATION, DEATH OR DISABILITY.  This Section 9 applies in the event that the Executive’s employment ends upon a Termination With Cause, a Voluntary Termination, death or Disability or any reason other than a Termination Without Cause or a Voluntary Termination With Good Reason.  In any of those events, the Executive (or the Executive’s estate in the event of the Executive’s death) shall be entitled to receive the Standard Termination Benefits.  The Standard Termination Benefits are the benefits or amounts described in the following subsections (a) and (b):

 

(a)                                 The Executive shall be entitled to receive any compensation (including Base Salary and Annual Bonus and accrued but unused vacation) that is earned prior to the Date of Termination but that remains unpaid as of the Date of Termination, which shall be paid in a single cash payment within fifteen (15) days of the Date of Termination.

 

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(b)                                 The Executive shall be entitled to receive any benefits due the Executive under the terms of any employee benefit plan maintained by the Company and under the terms of any option, restricted stock, restricted stock units or other equity award; which benefits shall be paid in accordance with the terms of the applicable plan and any award agreement between the Executive and the Company.

 

Except for the Standard Termination Benefits, the Executive shall not be entitled to receive any compensation after the Date of Termination on account of a Termination With Cause, a Voluntary Termination, death, Disability or any reason other than a Termination Without Cause or a Voluntary Termination With Good Reason.

 

10.                               COMPENSATION UPON TERMINATION WITHOUT CAUSE OR VOLUNTARY TERMINATION WITH GOOD REASON.  This Section 10 applies in the event that the Executive’s employment ends during the Term upon a Termination Without Cause or a Voluntary Termination for Good Reason.  In either of those events, but subject to the provisions of this Agreement, the Executive shall be entitled to receive the benefits and amounts described in the following subsections (a), (b), (c) and (d):

 

(a)                                 The Company shall pay or provide the Standard Termination Benefits as provided in Section 9.

 

(b)                                 The Company shall pay an amount equal to three (3.0) times the Executive’s Base Salary at the rate in effect on the Date of Termination (or, in the case of a Voluntary Termination for Good Reason, at the rate in effect before a reduction in Base Salary that constitutes Good Reason for resignation), such amount to be paid in a single cash payment in accordance with Section 10(f).

 

(c)                                  The Company shall pay an amount equal to three (3.0) times the Executive’s “target” Annual Bonus under Section 5(b) for the calendar year that includes the Date of Termination.  If the “target” Annual Bonus for such year has not been established in accordance with Section 5(b) by the Board or the Committee before the Date of Termination, then the amount payable under this Section 10(c) shall be three (3.0) times the amount equal to seventy-five percent (75%) of the Executive’s Base Salary at the rate in effect on the Date of Termination (or, in the case of a Voluntary Termination for Good Reason, at the rate in effect before a reduction in Base Salary that constitutes Good Reason for resignation), such amount to be paid in a single cash payment in accordance with Section 10(f).

 

(d)                                 If the Executive is entitled to continued coverage under a group health plan of the Company or a subsidiary under COBRA or similar state law, the Company shall reimburse the Executive for premiums paid by the Executive for such coverage for the Executive and the Executive’s eligible dependents.  The Company shall reimburse the Executive for such premium payments for coverage during the twelve (12) months following the Date of Termination or until the termination of the right to such coverage, whichever occurs first.  Each reimbursement shall be paid within fifteen (15) days of the Executive’s premium payment or, if later, in accordance with Section 10(f).

 

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(e)                                  No benefits, other than the Standard Termination Benefits, will be paid or provided to, or on behalf of, the Executive under this Section 10 unless the Executive has signed and not revoked a release and waiver of claims in a form reasonably prescribed by the Company (the “Release”) and furnished to the Executive within five (5) days after the Date of Termination, releasing the Company and its officers, directors and affiliates from all claims the Executive has or may have against such parties, and the Release has become effective and irrevocable on or before the sixtieth (60th) day after the date the Executive’s employment ends upon a Termination Without Cause or a Voluntary Termination for Good Reason.

 

(f)                                   Subject to the requirements of Section 10(e), the total of the amounts described in Section 10(b), (c) and (d) (the “Cash Severance”) shall be payable on (or, in the case of reimbursements described in Section 10(d), shall begin to be payable on and after) the first payroll date that occurs after the date that the Release becomes effective and irrevocable; provided, however, that if the Date of Termination occurs in one calendar year and the sixty (60) day period prescribed by Section 10(e) for the Release to become effective and irrevocable ends in the following calendar year, then the Cash Severance shall be paid on the last day of the sixty (60) day period; provided that the Release has become effective and irrevocable.

 

11.                               DEFINITIONS.  For the purposes of this Agreement, the following terms shall have the following definitions:

 

(a)                                 “COBRA” means continued group health plan coverage under Section 4980B of the Code.

 

(b)                                 “Code” means the Internal Revenue Code of 1986, as amended.

 

(c)                                  “Disability” means that the Executive is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.

 

(d)                                 “Separation from Service” has the same meaning as such term is defined under Treasury Regulation §1.409A-1(h).

 

(e)                                  “Specified Employee” has the same meaning as such term is defined under Treasury Regulation §1.409A-1(i).

 

(f)                                   “Termination With Cause” means the termination of the Executive’s employment by act of the Board on account of (i) the Executive’s failure to perform a material duty as directed by the Board or the Company’s Chief Executive Officer other than by reason of the Executive’s mental or physical illness or injury, (ii) the Executive’s material breach of an obligation set forth in this Agreement or a breach of a material and written Company policy other than by reason of the Executive’s mental or physical illness or injury, (iii) the Executive’s breach of Executive’s fiduciary duties to the Company, (iv) the Executive’s conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise, or (v) the Executive’s conviction of, or plea of guilty or nolo contendre to, a felony or crime involving moral turpitude or fraud or dishonesty involving assets of the Company.  The Executive’s termination shall not be deemed a “Termination With Cause” unless the Board has given the Executive written notice of the grounds for such termination as required by Section 8(c)  and the

 

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Executive has failed to cure such grounds to the reasonable satisfaction of the Board during the thirty (30) day period following the Executive’s receipt of the notice.

 

(g)                                  “Termination Without Cause” means the termination of the Executive’s employment by the Company that does not constitute a Termination With Cause.  For the avoidance of doubt, termination of the Executive’s employment on account of death, Disability or Voluntary Termination is not a Termination Without Cause.

 

(h)                                 “Voluntary Termination” means the Executive’s voluntary termination of employment hereunder for any reason other than a Voluntary Termination for Good Reason.  For purposes of this Agreement, the term Voluntary Termination does not include a voluntary refusal to perform services on account of a vacation taken in accordance with Section 6(a) hereof, the Executive’s failure to perform services on account of the Executive’s illness or injury or the illness or injury of a member of the Executive’s immediate family, provided such illness or injury is adequately substantiated at the reasonable request of the Company, or any other absence from service with the written consent of the Board.

 

(i)                                     Voluntary Termination for “Good Reason” means the Executive’s termination of employment hereunder on account of (i) the Company’s material breach of the terms of this Agreement or a direction from the Board or the Company’s Chief Executive Officer that the Executive act or refrain from acting which in either case would be unlawful or contrary to a material and written Company policy, (ii) a material diminution in the Executive’s duties, functions and responsibilities to the Company and its affiliates without the Executive’s consent (and the Company ceasing to be a reporting company under the Securities Exchange Act of 1934, as amended, constitutes a material diminution in the Executive’s duties, functions and responsibilities to the Company and its affiliates) or the Company preventing the Executive from fulfilling or exercising the Executive’s material duties, functions and responsibilities to the Company and its affiliates without the Executive’s consent (iii) a material reduction in the Executive’s Base Salary or if the Executive’s target Annual Bonus opportunity is less than the target Annual Bonus described in Section 5(b), or (iv) a requirement that the Executive relocate the Executive’s employment more than fifty (50) miles from the location of the Company’s principal office in Nashville, Tennessee, without the written consent of the Executive.  The Executive’s resignation shall not be deemed a “Voluntary Termination for Good Reason” unless the Executive gives the Board written notice (delivered within thirty (30) days after the Executive knows of the event, action, etc. that the Executive asserts constitutes Good Reason), the written notice specifies the event, action, etc. that the Executive asserts constitutes Good Reason, the event, action, etc. that the Executive asserts constitutes Good Reason is not cured, to the reasonable satisfaction of the Executive, within thirty (30) days after such notice and the Executive resigns effective not later than thirty (30) days after the expiration of such cure period.

 

12.                               CODE SECTION 280G.  The benefits that the Executive may be entitled to receive under this Agreement and other benefits that the Executive is entitled to receive under other plans, agreements and arrangements (which, together with the benefits provided under this Agreement, are referred to as “Payments”), may constitute Parachute Payments that are subject to Sections 280G and 4999 of the Code.  As provided in this Section 12, the Parachute Payments will be reduced if, and only to the extent that, a reduction will allow the Executive to receive a greater Net After Tax Amount than the Executive would receive absent a reduction.

 

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The Accounting Firm will first determine the amount of any Parachute Payments that are payable to the Executive.  The Accounting Firm also will determine the Net After Tax Amount attributable to the Executive’s total Parachute Payments.

 

The Accounting Firm will next determine the largest amount of Payments that may be made to the Executive without subjecting the Executive to tax under Section 4999 of the Code (the “Capped Payments”).  Thereafter, the Accounting Firm will determine the Net After Tax Amount attributable to the Capped Payments.

 

The Executive will receive the total Parachute Payments or the Capped Payments, whichever provides the Executive with the higher Net After Tax Amount.  If the Executive will receive the Capped Payments, the total Parachute Payments will be reduced until the value of the remaining Parachute Payments for purposes of Section 280G of the Code equals the Capped Amount.  The reduction shall be effected by the Committee by first reducing the amount of any benefits under this Agreement or any other plan, agreement or arrangement that are not subject to Section 409A of the Code (by reducing such benefits in the order that maximizes the reduction in the value of the Parachute Payments under Section 280G of the Code) and then by the Committee reducing the amount of any benefits under this Agreement or any other plan, agreement or arrangement that are subject to Section 409A of the Code (by reducing such benefits  in the order that maximizes the reduction in the value of the Parachute Payments under Section 280G of the Code). The Accounting Firm will notify the Executive and the Company if it determines that the Parachute Payments must be reduced to the Capped Payments and will send the Executive and the Company a copy of its detailed calculations supporting that determination.

 

As a result of the uncertainty in the application of Sections 280G and 4999 of the Code at the time that the Accounting Firm makes its determinations under this Section 12, it is possible that amounts will have been paid or distributed to the Executive that should not have been paid or distributed under this Section 12 (“Overpayments”), or that additional amounts should be paid or distributed to the Executive under this Section 12 (“Underpayments”).  If the Accounting Firm determines, based on either the assertion of a deficiency by the Internal Revenue Service against the Company or the Executive, which assertion the Accounting Firm believes has a high probability of success or controlling precedent or substantial authority, that an Overpayment has been made, the Executive must repay such Overpayment to the Company, without interest; provided, however, that no amount will be payable by the Executive to the Company unless, and then only to the extent that, the payment would either reduce the amount on which the Executive is subject to tax under Section 4999 of the Code or generate a refund of tax imposed under Section 4999 of the Code.  If the Accounting Firm determines, based upon controlling precedent or substantial authority, that an Underpayment has occurred, the Accounting Firm will notify the Executive and the Company of that determination and the amount of that Underpayment will be paid to the Executive promptly by the Company.

 

For purposes of this Section 12, the term “Accounting Firm” means the independent accounting firm engaged by the Company immediately before the Control Change Date.  For purposes of this Section 12, the term “Net After Tax Amount” means the amount of any Parachute Payments or Capped Payments, as applicable, net of taxes imposed under Sections 1, 3101(b) and 4999 of the Code and any State or local income taxes applicable to the Executive on

 

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the date of payment.  The determination of the Net After Tax Amount shall be made using the highest combined effective rate imposed by the foregoing taxes on income of the same character as the Parachute Payments or Capped Payments, as applicable, in effect on the date of payment.  For purposes of this Section 12, the term “Parachute Payment” means a payment that is described in Section 280G(b)(2) of the Code, determined in accordance with Section 280G of the Code and the regulations promulgated or proposed thereunder.

 

13.                               CODE SECTION 409A.  This Agreement and the amounts payable and other benefits provided under this Agreement are intended to comply with, or otherwise be exempt from, Section 409A of the Code (“Section 409A”), after giving effect to the exemptions in Treasury Regulation section 1.409A-1(b)(3) through (b)(12).  This Agreement shall be administered, interpreted and construed in a manner consistent with Section 409A.  If any provision of this Agreement is found not to comply with, or otherwise not be exempt from, the provisions of Section 409A, it shall be modified and given effect, in the sole discretion of the Board and without requiring the Executive’s consent, in such manner as the Committee determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Section 409A; provided, however, that in exercising its discretion under this Section 13, the Committee shall modify this Agreement in the least restrictive manner necessary and without reducing any payment or benefit due under this Agreement.  Each payment under this Agreement shall be treated as a separate identified payment for purposes of Section 409A.

 

With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following limitations:  (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made as specified in this Agreement and in no event later than the end of the year after the year in which such expense was incurred and (iii) the right to reimbursement or in-kind benefit shall not be subject to liquidation or exchange for another benefit.

 

If a payment obligation under this Agreement arises on account of the Executive’s termination of employment and such payment obligation constitutes “deferred compensation” (as defined under Treasury Regulation section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation section 1.409A-1(b)(3) through (b)(12)), it shall be payable only after the Executive’s Separation from Service; provided, however, that if the Executive is a Specified Employee, any such payment that is required to be delayed under Section 409A(a)(2)(B)(i) of the Code and that is scheduled to be paid within six months after such Separation from Service shall accrue without interest and shall be paid on the first day of the seventh month beginning after the date of the Executive’s Separation from Service or, if earlier, within fifteen days after the appointment of the personal representative or executor of the Executive’s estate following the Executive’s death.

 

14.                               TAX WITHHOLDING.  All payments to be made under this Agreement shall be reduced by applicable income and employment tax withholdings.

 

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15.                               COVENANTS OF THE EXECUTIVE.

 

(a)                                 General Covenants of the Executive.  The Executive acknowledges that (i) the principal business of the Company and its subsidiaries is the ownership and operation of multi-tenant office buildings and any and all other businesses that after the Effective Date, and from time to time during the Term, become material with respect to the Company’s then-overall business, herein being collectively referred to as the “Business”), (ii) the Company knows of a limited number of persons who have developed the Business; (iii) the Business is, in part, national in scope; (iv) the Executive’s work for the Company and its subsidiaries has given and will continue to give the Executive access to the confidential affairs, proprietary information and trade secrets of the Company; (v) the covenants and agreements of the Executive contained in this Section 15 are essential to the business and goodwill of the Company; and (vi) the Company would not have entered into this Agreement but for the covenants and agreements set forth in this Section 15.

 

(b)                                 Covenants Against Competition.  The covenant against competition herein described shall apply during the Executive’s employment with the Company and its subsidiaries and following a termination of the Executive’s employment with the Company and its subsidiaries until the first anniversary of such termination (the “Restriction Period”).  During the Restriction Period the Executive shall not, directly or indirectly, own, manage, control or participate in the ownership, management, or control of, or be employed or engaged by or otherwise affiliated or associated with, in an executive, senior management, strategic or professional capacity, whether as an employee, employer, consultant, agent, principal, partner, stockholder, corporate officer, director or in any other individual or representative capacity, any entity or venture that is similar to the Company or engages in any business similar to the Business in a metropolitan statistical area in which the Company or a subsidiary of the Company owns a multi-tenant office building or otherwise is engaged in the Business; provided, however, that, notwithstanding the foregoing, (i) the Executive may own, manage or participate in the ownership of any entity which the Executive owned or managed or participated in the ownership or management of prior to the Effective Date, which ownership, management or participation has been disclosed to the Company; and (ii) the Executive may invest in securities of any entity, solely for investment purposes and without participating in the business thereof, if (A) such securities are traded on any national securities exchange or equivalent non-U.S. securities exchange, (B) the Executive is not a controlling person of, or a member of a group which controls, such entity and (C) the Executive does not, directly or indirectly, own one percent (1%) or more of any class of securities of such entity.  Notwithstanding the foregoing, this Section 15(b) shall not apply after the Executive’s Termination Without Cause or Voluntary Termination for Good Reason.

 

(c)                                  Confidentiality.  During and after the Executive’s employment with the Company and its affiliates, except in connection with the business and affairs of the Company and its affiliates: the Executive shall keep secret and retain in strictest confidence, and shall not use for the Executive’s benefit or the benefit of others, any and all confidential matters relating to the Business or learned by the Executive heretofore or hereafter directly or indirectly from the Company or any of its subsidiaries (or any predecessor of either) (the “Confidential Company Information”), including, without limitation, information with respect to the Business and any aspect thereof, profit or loss figures, and the Company’s or its affiliates’ (or any of their

 

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predecessors) properties, and shall not disclose such Confidential Company Information to anyone outside of the Company except with the Company’s express written consent and except for Confidential Company Information which (i) at the time of receipt or thereafter becomes publicly known through no wrongful act of the Executive; (ii) is clearly obtainable in the public domain; (iii) was not acquired by the Executive in connection with the Executive’s employment or affiliation with the Company; (iv) was not acquired by the Executive from the Company or its representatives or from a third-party who has an agreement with the Company not to disclose such information; or (v) is required to be disclosed by rule of law or by order of a court or governmental body or agency.

 

(d)                                 Nonsolicitation.  During the Restriction Period, the Executive shall not, without the Company’s prior-written consent, directly or indirectly, (i) knowingly solicit or knowingly encourage to leave the employment or other service of the Company or any of its affiliates, any employee employed by the Company on the Date of Termination or knowingly hire (on behalf of the Executive or any other person or entity) any employee employed by the Company on the Date of Termination who has left the employment or other service of the Company or any of its affiliates (or any predecessor of either) within one (1) year of the termination of such employee’s or independent contractor’s employment or other service with the Company and its affiliates; or (ii) whether for the Executive’s own account or for the account of any other person, firm, corporation or other business organization, intentionally interfere with the Company’s or any of its affiliates’ relationship with, or endeavor to entice away from the Company or any of its affiliates, any person who during the Executive’s employment with the Company is or was a tenant, leasing representative, property manager, vendor, customer or client of the Company or any of its affiliates (or any predecessor of either).

 

(e)                                  Company Property.  During and after the Executive’s employment with the Company and its affiliates, all memoranda, notes, lists, records, property and any other tangible product and documents (and all copies thereof) made, produced or compiled by the Executive or made available to the Executive during or prior to the Term concerning the Business of the Company and its affiliates shall be the Company’s property and shall be delivered to the Company at any time on request.

 

(f)                                   Nondisparagement.  The Executive agrees that during and after the Term, the Executive will not make any negative comments or otherwise disparage the Company or its officers, the Board or individual directors, employees, shareholders or agents.  Similarly, the Company agrees that during and after the Term, the Company will direct its officers and directors to not make any negative comments or otherwise disparage the Executive.  The preceding sentences shall not be violated by (i) truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) or (ii) communications by the Executive to the Board or an officer of the Company or by the Board, members of the Board, Company directors, Company officers, or Company employees that are made in the good faith performance of their duties.

 

(g)                                  Rights and Remedies upon Breach.  The Executive acknowledges and agrees that any breach by the Executive of any of the provisions of this section 15 (the “Covenants”) would result in irreparable injury and damage for which money damages, would

 

11

 

not provide an adequate remedy.  Therefore, if the Executive breaches, or threatens to commit a breach of, any of the Covenants, the Company and its affiliates shall have the right and remedy to have the Covenants specifically enforced (without posting bond and without the need to prove damages) by any court having equity jurisdiction, including, without limitation, the right to an entry against the Executive of restraining orders and injunctions (preliminary, mandatory, temporary and permanent) against violations, threatened or actual, and whether or not then continuing, of such covenants.  This right and remedy shall be in addition to, and not in lieu of, any other rights and remedies available to the Company and its affiliates under law or in equity (including, without limitation, the recovery of damages).  The existence of any claim or cause of action by the Executive, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement of the Covenants.

 

(h)                                 Severability.  The Executive acknowledges and agrees that the Executive has had an opportunity to seek advice of counsel in connection with this Agreement; and that the Covenants are reasonable in geographical and temporal scope and in all other respects.  If it is determined that any of the provisions of this Agreement, including, without limitation, any of the Covenants, or any part thereof, is invalid or unenforceable, the remainder of the provisions of this Agreement shall not thereby be affected and shall be given full affect, without regard to the invalid portions.

 

(i)                                     Duration and Scope of Covenants.  If any court or other decision maker of competent jurisdiction determines that any of the Covenants, including, whether any provision thereof is unenforceable because of the duration or geographical scope of such provision, then, after such determination has become final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced.

 

(j)                                    Enforceability of Restrictive Covenants; Jurisdictions.  The Company and the Executive intend to and hereby consent to jurisdiction to enforce the Covenants upon the courts of any jurisdiction within the geographical scope of the Covenants.  If the courts of any one or more of such jurisdictions hold the Covenants wholly unenforceable by reason of breadth of scope or otherwise it is the intention of the Company and the Executive that such determination not bar or in any way affect the Company’s right, or the right of any of its affiliates, to the relief provided above in the courts of any other jurisdiction within the geographical scope of such Covenants, as to breaches of such Covenants in such other respective jurisdictions, such Covenants as they relate to each jurisdiction’s being, for this purpose, severable, diverse and independent covenants, subject, where appropriate, to the doctrine of res judicata.

 

16.                               NOTICES.  All notices or deliveries authorized or required pursuant to this Agreement shall be deemed to have been given when in writing and personally delivered or three (3) days following the date when deposited in the U.S. mail, certified, return receipt requested, postage prepaid, addressed to the parties at the following addresses or to such other addresses as either may designate in writing to the other party:

 

12

 

To the Company:                                               Priam Properties, Inc.

Attn:  Corporate Secretary

 

 

 

To the Executive:                                                W. Michael Madden

 

 

 

17.                               ENTIRE AGREEMENT. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and shall not be modified in any manner except by instrument in writing signed, by or on behalf of, the parties hereto.  This Agreement shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto.

 

18.                               ARBITRATION.  Any claim or controversy arising out of, or relating to, this Agreement or its breach or the Executive’s employment with the Company, other than a claim or controversy arising under Section 15, shall be settled by arbitration in Nashville, Tennessee in accordance with the governing Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association.  Judgment upon the award rendered may be entered in any court of competent jurisdiction.  In the event one of the parties hereto requests an arbitration proceeding under this Agreement, such proceeding shall commence within 30 days from the date of such request.  The prevailing party shall be entitled to reasonable attorney’s fees and costs.

 

19.                               APPLICABLE LAW.  This Agreement shall be governed and construed in accordance with the laws of the State of Tennessee.

 

20.                               NO SETOFF.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by a setoff, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to the Executive under the provisions of this Agreement.  The provisions of this Section 20 do not affect or detract from the Company’s rights under Section 15 or Section 22.

 

21.                               ASSIGNMENT.  The Executive acknowledges that the Executive’s services are unique and personal.  Accordingly, the Executive may not assign the Executive’s rights or delegate the Executive’s duties or obligations under this Agreement.  The Executive’s rights and obligations under this Agreement shall insure to the benefit of and shall be binding upon the Executive’s successors and assigns.

 

22.                               RECOUPMENT.  The Executive acknowledges and agrees that any incentive compensation, whether payable in cash or equity that is payable under this Agreement or under any other agreement or any plan or arrangement is subject to recoupment or repayment

 

13

 

if such action is required under applicable law or the terms of any Company recoupment or “clawback” policy as in effect on the date that such compensation or benefit was paid.

 

23.                               HEADINGS.  Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the      day of          , 2019.

 

	
 
    	
PRIAM   PROPERTIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
W. MICHAEL MADDEN
    
	
 
    	
 
    
	
 
    	
 
    

 

14Exhibit 10.10

 

 

Loan No: 31-0932832

 

LOAN AGREEMENT

 

Dated as of January 14, 2016

 

Between

 

CHASE CORPORATE CENTER, LLC,
 as Borrower

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
 as Lender

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE 1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
    	
1
    
	
 
    	
 
    
	
Section 1.1
    	
Definitions
    	
1
    
	
Section 1.2
    	
Principles of   Construction
    	
16
    
	
 
    
	
ARTICLE 2. GENERAL TERMS  
    	
16
    
	
 
    	
 
    	
 
    
	
Section 2.1
    	
The Loan
    	
16
    
	
Section 2.2
    	
Disbursement to   Borrower
    	
17
    
	
Section 2.3
    	
The Note and the Other   Loan Documents
    	
17
    
	
Section 2.4
    	
Use of Proceeds
    	
17
    
	
Section 2.5
    	
Interest Rate
    	
17
    
	
Section 2.6
    	
Loan Payments
    	
18
    
	
Section 2.7
    	
Prepayments
    	
19
    
	
Section 2.8
    	
Defeasance
    	
20
    
	
 
    	
 
    
	
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
    	
23
    
	
 
    	
 
    
	
Section 3.1
    	
Legal Status and   Authority
    	
23
    
	
Section 3.2
    	
Validity of Documents
    	
23
    
	
Section 3.3
    	
Litigation
    	
24
    
	
Section 3.4
    	
Agreements
    	
24
    
	
Section 3.5
    	
Financial Condition
    	
25
    
	
Section 3.6
    	
Disclosure
    	
25
    
	
Section 3.7
    	
No Plan Assets
    	
25
    
	
Section 3.8
    	
Not a Foreign Person
    	
25
    
	
Section 3.9
    	
Business Purposes
    	
25
    
	
Section 3.10
    	
Borrower Information
    	
26
    
	
Section 3.11
    	
Status of Property
    	
26
    
	
Section 3.12
    	
Financial Information
    	
27
    
	
Section 3.13
    	
Condemnation
    	
28
    
	
Section 3.14
    	
Separate Lots
    	
28
    
	
Section 3.15
    	
Insurance
    	
28
    
	
Section 3.16
    	
Use of Property
    	
28
    
	
Section 3.17
    	
Leases and Rent Roll
    	
28
    
	
Section 3.18
    	
Filing and Recording   Taxes
    	
29
    
	
Section 3.19
    	
Management Agreement
    	
29
    
	
Section 3.20
    	
Illegal   Activity/Forfeiture
    	
29
    

 

i

 

	
Section 3.21
    	
Taxes
    	
30
    
	
Section 3.22
    	
Permitted Encumbrances
    	
30
    
	
Section 3.23
    	
Material Agreements
    	
30
    
	
Section 3.24
    	
Intentionally Omitted
    	
30
    
	
Section 3.25
    	
Federal Reserve   Regulations
    	
30
    
	
Section 3.26
    	
Investment Company Act
    	
31
    
	
Section 3.27
    	
Fraudulent Conveyance
    	
31
    
	
Section 3.28
    	
Embargoed Person
    	
31
    
	
Section 3.29
    	
Patriot Act
    	
32
    
	
Section 3.30
    	
Organizational Chart
    	
32
    
	
Section 3.31
    	
Bank Holding Company
    	
33
    
	
Section 3.32
    	
Intentionally Omitted
    	
33
    
	
Section 3.33
    	
REA Representations
    	
33
    
	
Section 3.34
    	
No Change in Facts or   Circumstances
    	
33
    
	
Section 3.35
    	
Perfection of Accounts
    	
33
    
	
Section 3.36
    	
Intentionally Omitted
    	
33
    
	
Section 3.37
    	
Guarantor and Sponsor   Representations
    	
34
    
	
 
    	
 
    
	
ARTICLE 4. BORROWER COVENANTS
    	
34
    
	
 
    	
 
    
	
Section 4.1
    	
Existence
    	
34
    
	
Section 4.2
    	
Applicable Law
    	
34
    
	
Section 4.3
    	
Maintenance and Use of   Property
    	
35
    
	
Section 4.4
    	
Waste
    	
35
    
	
Section 4.5
    	
Taxes and Other Charges
    	
36
    
	
Section 4.6
    	
Litigation
    	
36
    
	
Section 4.7
    	
Access to Property
    	
36
    
	
Section 4.8
    	
Notice of Default
    	
37
    
	
Section 4.9
    	
Cooperate in Legal   Proceedings
    	
37
    
	
Section 4.10
    	
Performance by Borrower
    	
37
    
	
Section 4.11
    	
Awards
    	
37
    
	
Section 4.12
    	
Books and Records
    	
37
    
	
Section 4.13
    	
Estoppel Certificates
    	
40
    
	
Section 4.14
    	
Leases and Rents
    	
41
    
	
Section 4.15
    	
Management Agreement
    	
43
    
	
Section 4.16
    	
Payment for Labor and   Materials
    	
44
    
	
Section 4.17
    	
Performance of Other   Agreements
    	
45
    
	
Section 4.18
    	
Debt Cancellation
    	
45
    
	
Section 4.19
    	
ERISA
    	
45
    

 

ii

 

	
Section 4.20
    	
No Joint Assessment
    	
46
    
	
Section 4.21
    	
Alterations
    	
46
    
	
Section 4.22
    	
REA Covenants
    	
47
    
	
Section 4.23
    	
Material Agreements
    	
47
    
	
Section 4.24
    	
Immediate Repairs
    	
47
    
	
Section 4.25
    	
Regus Estoppel
    	
48
    
	
 
    	
 
    
	
ARTICLE 5. ENTITY COVENANTS
    	
48
    
	
 
    	
 
    
	
Section 5.1
    	
Single Purpose   Entity/Separateness
    	
48
    
	
Section 5.2
    	
Independent Director
    	
52
    
	
Section 5.3
    	
Change of   Name, Identity or Structure
    	
53
    
	
Section 5.4
    	
Business and Operations
    	
53
    
	
 
    	
 
    
	
ARTICLE 6. NO SALE OR ENCUMBRANCE
    	
54
    
	
 
    	
 
    
	
Section 6.1
    	
Transfer Definitions
    	
54
    
	
Section 6.2
    	
No Sale/Encumbrance
    	
54
    
	
Section 6.3
    	
Permitted Equity   Transfers
    	
55
    
	
Section 6.4
    	
Permitted Property   Transfers (Assumptions)
    	
56
    
	
Section 6.5
    	
Lender’s Rights
    	
58
    
	
 
    	
 
    
	
ARTICLE 7. INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
    	
59
    
	
 
    	
 
    
	
Section 7.1
    	
Insurance
    	
59
    
	
Section 7.2
    	
Casualty
    	
64
    
	
Section 7.3
    	
Condemnation
    	
64
    
	
Section 7.4
    	
Restoration
    	
65
    
	
 
    	
 
    
	
ARTICLE 8. RESERVE FUNDS
    	
69
    
	
 
    	
 
    
	
Section 8.1
    	
Tax Reserve Funds
    	
69
    
	
Section 8.2
    	
Insurance Reserve Funds
    	
69
    
	
Section 8.3
    	
Intentionally Omitted
    	
70
    
	
Section 8.4
    	
Replacement Reserve   Funds
    	
70
    
	
Section 8.5
    	
Leasing Reserve Funds
    	
72
    
	
Section 8.6
    	
The Accounts Generally
    	
73
    
	
Section 8.7
    	
Major Tenant TI/LC   Reserve Funds
    	
74
    
	
Section 8.8
    	
Existing TI/LC   Obligations Reserve Funds
    	
75
    
	
Section 8.9
    	
Rent Concession Reserve   Funds
    	
75
    

 

iii

 

	
ARTICLE 9. CASH MANAGEMENT AGREEMENT
    	
75
    
	
 
    	
 
    
	
Section 9.1
    	
Springing Cash   Management Provisions
    	
75
    
	
 
    	
 
    
	
ARTICLE 10. EVENTS OF DEFAULT; REMEDIES
    	
75
    
	
 
    	
 
    
	
Section 10.1
    	
Event of Default
    	
75
    
	
Section 10.2
    	
Remedies
    	
78
    
	
 
    	
 
    
	
ARTICLE 11. SECONDARY MARKET
    	
80
    
	
 
    	
 
    
	
Section 11.1
    	
Securitization
    	
80
    
	
Section 11.2
    	
Securitization   Indemnification
    	
81
    
	
Section 11.3
    	
REMIC Savings Clause
    	
82
    
	
Section 11.4
    	
Servicer
    	
82
    
	
Section 11.5
    	
Rating Agency Costs
    	
83
    
	
 
    	
 
    
	
ARTICLE 12. INDEMNIFICATIONS
    	
83
    
	
 
    	
 
    
	
Section 12.1
    	
General Indemnification
    	
83
    
	
Section 12.2
    	
Mortgage and Intangible   Tax and Transfer Tax Indemnification
    	
83
    
	
Section 12.3
    	
ERISA Indemnification
    	
84
    
	
Section 12.4
    	
Duty to Defend, Legal   Fees and Other Fees and Expenses
    	
84
    
	
Section 12.5
    	
Survival
    	
84
    
	
Section 12.6
    	
Environmental Indemnity
    	
84
    
	
 
    	
 
    
	
ARTICLE 13. EXCULPATION
    	
84
    
	
 
    	
 
    
	
Section 13.1
    	
Exculpation
    	
84
    
	
Section 13.2
    	
Survival
    	
88
    
	
 
    	
 
    
	
ARTICLE 14. NOTICES
    	
88
    
	
 
    	
 
    
	
Section 14.1
    	
Notices
    	
88
    
	
 
    	
 
    
	
ARTICLE 15. FURTHER ASSURANCES
    	
89
    
	
 
    	
 
    
	
Section 15.1
    	
Replacement Documents
    	
89
    
	
Section 15.2
    	
Recording of Security   Instrument, etc.
    	
89
    
	
Section 15.3
    	
Further Acts, etc.
    	
89
    
	
Section 15.4
    	
Changes in Tax, Debt,   Credit and Documentary Stamp Laws
    	
90
    
	
 
    	
 
    
	
ARTICLE 16. WAIVERS
    	
91
    
	
 
    	
 
    
	
Section 16.1
    	
Remedies Cumulative;   Waivers
    	
91
    

 

iv

 

	
Section 16.2
    	
Modification, Waiver in   Writing
    	
91
    
	
Section 16.3
    	
Delay Not a Waiver
    	
91
    
	
Section 16.4
    	
Waiver of Trial by Jury
    	
91
    
	
Section 16.5
    	
Waiver of Notice
    	
92
    
	
Section 16.6
    	
Remedies of Borrower
    	
92
    
	
Section 16.7
    	
Marshalling and Other   Matters
    	
92
    
	
Section 16.8
    	
Waiver of Statute of   Limitations
    	
92
    
	
Section 16.9
    	
Waiver of Counterclaim
    	
93
    
	
Section 16.10
    	
Sole Discretion of   Lender
    	
93
    
	
 
    	
 
    
	
ARTICLE 17. MISCELLANEOUS
    	
93
    
	
 
    	
 
    
	
Section 17.1
    	
Survival
    	
93
    
	
Section 17.2
    	
Governing Law
    	
93
    
	
Section 17.3
    	
Headings
    	
93
    
	
Section 17.4
    	
Severability
    	
94
    
	
Section 17.5
    	
Preferences
    	
94
    
	
Section 17.6
    	
Expenses
    	
94
    
	
Section 17.7
    	
Cost of Enforcement
    	
95
    
	
Section 17.8
    	
Exhibits and Schedules   Incorporated
    	
95
    
	
Section 17.9
    	
Offsets, Counterclaims   and Defenses
    	
96
    
	
Section 17.10
    	
No Joint Venture or   Partnership; No Third Party Beneficiaries
    	
96
    
	
Section 17.11
    	
Publicity; Advertising
    	
97
    
	
Section 17.12
    	
Conflict; Construction   of Documents; Reliance
    	
97
    
	
Section 17.13
    	
Entire Agreement
    	
98
    
	
Section 17.14
    	
Liability
    	
98
    
	
Section 17.15
    	
Duplicate Originals;   Counterparts
    	
98
    
	
 
    	
 
    
	
SCHEDULES AND EXHIBITS
    	
 
    
	
 
    	
 
    
	
Exhibit A
    	
Additional Definitions
    	
 
    
	
Exhibit B
    	
Springing Cash   Management Provisions
    	
 
    
	
 
    	
 
    	
 
    
	
Schedule I
    	
Immediate Repairs
    	
 
    
	
Schedule II
    	
Organizational Chart
    	
 
    
	
Schedule III
    	
Description of REA’s
    	
 
    
	
Schedule IV
    	
Intentionally Omitted
    	
 
    
	
Schedule V
    	
Existing TI/LC Reserve   Funds Schedule
    	
 
    
				

 

v

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT, dated as of January 14, 2016 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”), between WELLS FARGO BANK, NATIONAL ASSOCIATION, having an address at Wells Fargo Center, 1901 Harrison Street, 2nd Floor, Oakland, California 94612 (together with its successors and/or assigns, “Lender”) and CHASE CORPORATE CENTER, LLC, a Delaware limited liability company having an address at c/o Priam Capital, 201 Fourth Avenue North, Nashville, Tennessee 37219 (together with its permitted successors and/or assigns, “Borrower”).

 

RECITALS:

 

Borrower desires to obtain the Loan (defined below) from Lender.

 

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 (defined below).

 

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:

 

“30/360 Basis” shall mean on the basis of a 360-day year consisting of 12 months of 30 days each.

 

“Acceptable LLC” shall mean a limited liability company formed under Delaware law which (i) has at least one springing member, which, upon the dissolution of all of the members or the withdrawal or the disassociation of all of the members from such limited liability company, shall immediately become the sole member of such limited liability company, and (ii) otherwise meets the Rating Agency criteria then applicable to such entities.

 

“Accounts” shall mean the Tax Reserve Account, the Insurance Reserve Account, the Replacement Reserve Account, the Leasing Reserve Account, the Existing TI/LC Reserve Account, the Major Tenant TI/LC Reserve Account, the Rent Concession Reserve Account, and any other account established pursuant to this Agreement or the other Loan Documents.

 

“Act” shall have the meaning set forth in Section 5.1(c) hereof.

 

“Actual/360 Basis” shall mean on the basis of a 360-day year and charged on the basis of actual days elapsed for any whole or partial month in which interest is being calculated.

 

 

“Affiliate” shall mean, as to any Person, any other Person that, directly or indirectly, owns more than twenty percent (20%) of, is in Control of, is Controlled by or is under common ownership or 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 managing agent of the Property in which Borrower, Guarantor, Sponsor, any SPE Component Entity (if any) or any Affiliate of such entities has, directly or indirectly, any legal, beneficial or economic interest.

 

“ALTA” shall mean American Land Title Association, or any successor thereto.

 

“Alteration Threshold” shall mean an amount equal to 2.5% of the outstanding principal balance of the Loan.

 

“Annual Budget” shall have the meaning set forth in Section 4.12(a)(v) hereof.

 

“Applicable Law” shall mean all applicable federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting Borrower or the 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, including, without limitation, the Americans with Disabilities Act of 1990, 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 Borrower or the Property or any part thereof, including, without limitation, any which may (i) require repairs, modifications or alterations in or to the Property or any part thereof, or (ii) in any way limit the use and enjoyment thereof.

 

“Approved ID Provider” shall mean each of CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company and Lord Securities Corporation; provided, that, additional national providers of independent directors may be deemed added to the foregoing hereunder to the extent approved in writing by Lender and the Rating Agencies.

 

“Assignment of Management Agreement” shall mean that certain Conditional Assignment of Management Agreement 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 by any Governmental Authority in connection with a Condemnation in respect of all or any part of the Property.

 

“Bankruptcy Code” shall mean Title 11 of the United States Code entitled “Bankruptcy”, as amended from time to time, and any successor statute or statutes and all rules and regulations from time to time promulgated thereunder, and any comparable foreign laws relating to bankruptcy, insolvency or creditors’ rights.

 

“Borrower” shall have the meaning set forth in the introductory paragraph hereof.

 

2

 

“Borrower Party” shall mean any Person acting at the direction of Borrower, SPE Component Entity, Guarantor and/or Sponsor.

 

“Business Day” shall mean any day other than a Saturday, Sunday or any other day on which commercial banks in the State of California are not open for business.

 

“Cash Management Account” shall have the meaning set forth on Exhibit B attached hereto and made a part hereof.

 

“Cash Management Agreement” shall have the meaning set forth on Exhibit B attached hereto and made a part hereof.

 

“Cash Trap Event Period” shall have the meaning set forth on Exhibit B attached hereto and made a part hereof.

 

“Casualty” shall have the meaning set forth in Section 7.2 hereof.

 

“Casualty Consultant” shall have the meaning set forth in Section 7.4 hereof.

 

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

 

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

 

“Constituent Members” shall have the meaning set forth in Section 5.2(b) hereof.

 

“Control” shall mean the power to direct the management and policies of an entity, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise.

 

“Creditors Rights Laws” shall mean any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to its debts or debtors.

 

“DBRS” shall mean DBRS, Inc.

 

“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 due to Lender in respect of the Loan under the Note, this Agreement or the other Loan Documents, including, without limitation, the payment of all sums advanced and costs and expenses incurred (including unpaid or unreimbursed servicing and special servicing fees) by Lender in connection with the enforcement and/or collection of the Debt or any part thereof.

 

3

 

“Debt Service” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments under the Loan.

 

“Debt Yield” shall have the meaning set forth on Exhibit A attached hereto and made a part hereof.  All capitalized terms in such definition are also set forth on Exhibit A.

 

“Default” shall mean the occurrence of any event hereunder or under the Note or the other Loan Documents 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 (i) the Maximum Legal Rate, or (ii) the sum of (a) the Interest Rate and (b) five percent (5%).

 

“Defeasance Approval Item” shall have the meaning set forth in Section 2.8 hereof.

 

“Defeasance Collateral Account” shall have the meaning set forth in Section 2.8 hereof.

 

“Defeasance Lockout Release Date” shall mean the earlier to occur of (i) the fourth anniversary of the Monthly Payment Date immediately following the Closing Date and (ii) the date that is two (2) years from the “startup day” (within the meaning of Section 860G(a)(9) of the IRS Code) of the REMIC Trust established in connection with the last Securitization involving any portion of or interest in the Loan.

 

“Defined Benefit Plan” shall mean a plan, document, agreement, or arrangement currently or previously maintained or sponsored by the Borrower or by any ERISA Affiliate or to which either the Borrower or any ERISA Affiliate currently makes, or previously made, contributions and (i) that provides or is expected to provide retirement benefits to employees or other workers and (ii) under which the Borrower could reasonably be expected to have any liability (including liability attributable from an ERISA Affiliate).  A Defined Benefit Plan shall include any plan that if it were terminated at any time, would result in Borrower or any ERISA Affiliate being deemed to be a “contributing sponsor” (as defined in Section 4001(a)(13) of ERISA) of the terminated plan pursuant to ERISA Section 4069.  A Defined Benefit Plan does not include a Multiemployer Plan.

 

“Disclosure Document” shall have the meaning set forth in Section 11.2 hereof.

 

“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 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.

 

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“Eligible Institution” shall mean (a) a depository institution or trust company insured by the Federal Deposit Insurance Corporation, (i) the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” (or its equivalent) from each of the Rating Agencies in the case of accounts in which funds are held for thirty (30) days or less and (ii) the senior unsecured debt obligations of which are rated at least “A” (or its equivalent) from each of the Rating Agencies in the case of accounts in which funds are held for more than thirty (30) days or (b) such other depository institution otherwise approved by the Rating Agencies from time-to-time.

 

“Embargoed Person” shall have the meaning set forth in Section 3.28 hereof.

 

“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 Laws” shall have the meaning set forth in the Environmental Indemnity.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may heretofore have been or may hereafter be amended, restated, replaced or otherwise modified.

 

“ERISA Affiliate” shall mean all members of a controlled group of corporations and all trades and business (whether or not incorporated) under common control and all other entities which, together with Borrower, are treated as a single employer under any or all of Sections 414(b), (c), (m) or (o) of the IRS Code.

 

“Event of Default” shall have the meaning set forth in Section 10.1 hereof.

 

“Exchange Act” shall have the meaning set forth in Section 11.2 hereof.

 

“Exchange Act Filing” shall mean any filing under or pursuant to the Exchange Act in connection with or relating to a Securitization.

 

“Exculpated Parties” shall have the meaning set forth in Section 13.1 hereof.

 

“Existing TI/LC Reserve Account” shall have the meaning set forth in Section 8.8 hereof.

 

“Existing TI/LC Reserve Funds” shall have the meaning set forth in Section 8.8 hereof.

 

“Fitch” shall mean Fitch, Inc.

 

“Flood Insurance Acts” shall have the meaning set forth in Section 7.1 hereof.

 

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

 

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“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.

 

“Guarantor” shall mean, individually and/or collectively (as the context may require), ABHISHEK MATHUR, BRIAN ADAMS, and ANDREW STONE, each an individual.

 

“Guaranty” shall mean that certain Guaranty of Recourse Obligations executed by Guarantor and dated as of the date hereof.

 

“Hazardous Substances” shall have the meaning set forth in the Environmental Indemnity.

 

“Immediate Repairs” shall have the meaning set forth in Section 4.24 hereof.

 

“Improvements” shall have the meaning set forth in the granting clause of the Security Instrument.

 

“Indebtedness” shall mean, for any Person, without duplication: (i) all indebtedness of such Person for borrowed money, for amounts drawn under a letter of credit, or for the deferred purchase price of property for which such Person or its assets is liable, (ii) all unfunded amounts under a loan agreement, letter of credit, or other credit facility for which such Person would be liable if such amounts were advanced thereunder, (iii) all amounts required to be paid by such Person as a guaranteed payment to partners or a preferred or special dividend, including any mandatory redemption of shares or interests, (iv) all indebtedness guaranteed by such Person, directly or indirectly, (v) all obligations under leases that constitute capital leases for which such Person is liable, (vi) all obligations of such Person under interest rate swaps, caps, floors, collars and other interest hedge agreements, in each case whether such Person is liable contingently or otherwise, as obligor, guarantor or otherwise, or in respect of which obligations such Person otherwise assures a creditor against loss, (vii) any property-assessed clean energy loans or similar indebtedness including, without limitation, such loans or indebtedness that are made or otherwise provided by any Governmental Authority or secured or repaid (directly or indirectly) by any taxes or similar assessments, and (viii) any other similar amounts.

 

“Indemnified Parties” shall mean (a) Lender, (b) any successor owner or holder of the Loan or participations in the Loan, (c) any Servicer or prior Servicer of the Loan, (d) any Investor or any prior Investor in any Securities, (e) any trustees, custodians or other fiduciaries who hold or who have held a full or partial interest in the Loan for the benefit of any Investor or other third party, (f) any receiver or other fiduciary appointed in a foreclosure or other Creditors Rights Laws proceeding, (g) any officers, directors, shareholders, partners, members, employees, agents, servants, representatives, contractors, subcontractors, affiliates or subsidiaries of any and all of the foregoing, and (h) the heirs, legal representatives, successors and assigns of any and all of the foregoing (including, without limitation, any successors by merger, consolidation or acquisition of all or a substantial portion of the Indemnified Parties’ assets and business) in all cases whether during the term of the Loan or as part of or following a foreclosure of the Loan.

 

“Independent Director” shall have the meaning set forth in Section 5.2(a) hereof.

 

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“Initial Cash Management Notice” shall have the meaning set forth in Section 13.1(x) hereof.

 

“Insurance Premiums” shall have the meaning set forth in Section 7.1 hereof.

 

“Insurance Reserve Account” shall have the meaning set forth in Section 8.2 hereof.

 

“Insurance Reserve Funds” shall have the meaning set forth in Section 8.2 hereof.

 

“Interest Accrual Period” shall mean the period beginning on the eleventh (11th) day of each calendar month during the term of the Loan and ending on (but including) the tenth (10th) day of the following calendar month.

 

“Interest Bearing Reserve Funds” shall mean, collectively, the Replacement Reserve Funds, the Leasing Reserve Funds, the Major Tenant TI/LC Reserve Funds, the Existing TI/LC Reserve Funds, and the Rent Concession Reserve Funds.

 

“Interest Rate” shall mean a rate per annum equal to five and three hundredths percent (5.03%).

 

“Interest Shortfall” shall have the meaning set forth in Section 2.7 hereof.

 

“Investor” shall mean any investor or potential investor in the Loan (or any portion thereof or interest therein) in connection with a Securitization of the Loan (or any portion thereof or interest therein).

 

“IRS Code” shall mean the Internal Revenue Code of 1986, as amended from time to time or any successor statute.

 

“Kroll” shall mean Kroll Bond Rating Agency, Inc.

 

“Land” shall have the meaning set forth in the Security Instrument.

 

“Lease” shall mean any and all leases, subleases, rental agreements and other agreements whether or not in writing affecting the use, enjoyment or occupancy of the Land and/or the Improvements heretofore or hereafter entered into and all extensions, amendments and modifications thereto, whether before or after the filing by or against Borrower of any petition for relief under Creditors Rights Laws.

 

“Leasing Reserve Account” shall have the meaning set forth in Section 8.5 hereof.

 

“Leasing Reserve Funds” shall have the meaning set forth in Section 8.5 hereof.

 

“Leasing Reserve Monthly Deposit” shall have the meaning set forth in Section 8.5 hereof.

 

“Lender” shall have the meaning set forth in the introductory paragraph hereof.

 

“Liabilities” shall have the meaning set forth in Section 11.2 hereof.

 

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“Licenses” shall have the meaning set forth in Section 3.11(a) hereof.

 

“Lien” shall mean any mortgage, deed of trust, lien (statutory or otherwise), pledge, hypothecation, easement, restrictive covenant, preference, assignment, security interest, or any other encumbrance, charge or transfer of, or any agreement to enter into or create any of the foregoing, on or affecting all or any portion of the Property or any interest therein, or any direct or indirect interest in Borrower or any SPE Component Entity, including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.

 

“LLC Agreement” shall have the meaning set forth in Section 5.1(c) hereof.

 

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

 

“Loan Bifurcation” shall have the meaning set forth in Section 11.1 hereof.

 

“Loan Documents” shall mean, collectively, this Agreement, the Note, the Security Instrument, the Environmental Indemnity, the Assignment of Management Agreement, the Cash Management Agreement, the Guaranty and all other documents executed and/or delivered in connection with the Loan.

 

“Losses” shall mean any and all claims, suits, liabilities (including, without limitation, strict liabilities and any impairment of Lender’s security for the Loan), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, judgments, awards, amounts paid in settlement of whatever kind or nature (including but not limited to legal fees and other costs of defense).

 

“Major Lease” shall mean (i) any Lease which, individually or when aggregated with all other Leases with the same Tenant or its Affiliate, either (A) accounts for 20% or more of the total rental income for the Property, or (B) demises 20% or more of the Property’s gross leasable area, (ii) any Lease which contains any option, offer, right of first refusal or other similar entitlement to acquire all or any portion of the Property, and (iii) any instrument guaranteeing or providing credit support for any Lease meeting the requirements of (i) and/or (ii) above.

 

“Major Tenant TI/LC Reserve Account” shall have the meaning set forth in Section 8.7 hereof.

 

“Major Tenant TI/LC Reserve Funds” shall have the meaning set forth in Section 8.7 hereof.

 

“Major Tenant TI/LC Reserve Monthly Deposit” shall have the meaning set forth in Section 8.7 hereof.

 

“Management Agreement” shall mean the management agreement entered into by and between Borrower and the current Manager or any replacement management agreement entered into by and between Borrower and any Manager in accordance with the terms hereof and of the

 

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other Loan Documents, pursuant to which Manager is to provide management and other services with respect to the Property.

 

“Manager” shall mean EGS Commercial Real Estate, Inc., an Alabama corporation, or such other entity selected as the manager of the Property in accordance with the terms of this Agreement or the other Loan Documents.

 

“Material Adverse Effect” shall mean a material adverse effect on (i) the Property, (ii) the business, profits, management, operations or condition (financial or otherwise) of Borrower, Guarantor, Sponsor or the Property, (iii) the enforceability, validity, perfection or priority of the lien of the Security Instrument or the other Loan Documents, (iv) the ability of Borrower to perform its obligations under the Security Instrument or the other Loan Documents, or (v) the ability of Guarantor to perform its obligations under the Guaranty.

 

“Material Agreements” shall mean each contract and agreement relating to the ownership, management, development, use, operation, leasing, maintenance, repair or improvement of the Property, other than the Management Agreement and the Leases, as to which either (i) there is an obligation of Borrower to pay more than $50,000.00 per annum; or (ii) the term thereof extends beyond one year (unless cancelable on thirty (30) days or less notice without requiring the payment of termination fees or payments of any kind).

 

“Maturity Date” shall mean February 11, 2023 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 non-usurious 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.

 

“Member” shall have the meaning set forth in Section 5.1(c) hereof.

 

“Minimum Disbursement Amount” shall mean Ten Thousand and No/100 Dollars ($10,000).

 

“Monthly Debt Service Payment Amount” shall mean (i) for the Monthly Payment Date occurring in March, 2016 and for each Monthly Payment Date occurring thereafter up to and including the Monthly Payment Date occurring in February, 2021, a payment equal to the amount of interest which has accrued during the preceding Interest Accrual Period computed at the Interest Rate and (ii) for the Monthly Payment Date occurring in March, 2021 and for each Monthly Payment Date occurring thereafter, a constant monthly payment of $124,968.33.

 

“Monthly Insurance Deposit” shall have the meaning set forth in Section 8.2 hereof.

 

“Monthly Payment Date” shall mean the eleventh (11th) day of every calendar month occurring during the term of the Loan.

 

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“Monthly Tax Deposit” shall have the meaning set forth in Section 8.1 hereof.

 

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

 

“Morningstar” shall mean Morningstar Credit Ratings, LLC.

 

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 3(37)(A) of ERISA or Section 4001(a)(3) of ERISA, and to which Borrower or any ERISA Affiliate is making, is obligated to make or has made or been obligated to make during the last six years, contributions on behalf of participants who are or were employed by any of them.

 

“Net Proceeds” shall mean: (i) the net amount of all insurance proceeds payable as a result of a Casualty to the Property, after deduction of reasonable costs and expenses (including, but not limited to, reasonable attorneys’ fees), if any, in collecting such insurance proceeds, or (ii) the net amount of the Award, after deduction of reasonable costs and expenses (including, but not limited to, reasonable attorneys’ fees), if any, in collecting such Award.

 

“Net Proceeds Deficiency” shall have the meaning set forth in Section 7.4 hereof.

 

“New Manager” shall have the meaning set forth in Section 4.15 hereof.

 

“Non-Conforming Policy” shall have the meaning set forth in Section 7.1 hereof.

 

“Note” shall mean that certain Promissory Note of even date herewith in the principal amount of $23,200,000, made by Borrower in favor of Lender, as the same may be amended, restated, replaced, extended, renewed, supplemented, severed, split, or otherwise modified from time to time.

 

“OFAC” shall have the meaning set forth in Section 3.28 hereof.

 

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed by Responsible Officer of Borrower.

 

“Open Period Start Date” shall have the meaning set forth in Section 2.7(a) hereof.

 

“Other Charges” shall mean all maintenance charges, impositions other than Taxes, and any other charges, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof.

 

“Patriot Act” shall have the meaning set forth in Section 3.29 hereof.

 

“Permitted Encumbrances” shall mean collectively, (a) the lien and security interests created by this Agreement and the other Loan Documents, (b) all liens, encumbrances and other matters disclosed in the Title Insurance Policy, (c) liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent (but excluding any lien securing any property-assessed clean energy loans or similar indebtedness with respect to Borrower or the Property, including, without limitation, such loans or indebtedness that are made or otherwise provided by

 

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any Governmental Authority or secured or repaid (directly or indirectly) by any taxes or similar assessments), and (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s sole discretion.

 

“Permitted Equipment Leases” shall mean equipment leases or other similar instruments entered into with respect to the Personal Property; provided, that, in each case, such equipment leases or similar instruments (i) are entered into on commercially reasonable terms and conditions in the ordinary course of Borrower’s business and (ii) relate to Personal Property which is (A) used in connection with the operation and maintenance of the Property in the ordinary course of Borrower’s business and (B) readily replaceable without material interference or interruption to the operation of the Property.

 

“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.

 

“Personal Property” shall have the meaning set forth in the granting clause of the Security Instrument.

 

“Policies” shall have the meaning specified in Section 7.1 hereof.

 

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

 

“Property” shall have the meaning set forth in the Security Instrument.

 

“Provided Information” shall have the meaning set forth in Section 11.2(b) hereof.

 

“Prudent Lender Standard” shall, with respect to any matter, be deemed to have been met if the matter in question (i) prior to a Securitization, is reasonably acceptable to Lender and (ii) after a Securitization, would be acceptable to a prudent lender of securitized commercial mortgage loans.

 

“Qualified Insurer” shall have the meaning set forth in Section 7.1 hereof.

 

“Qualified Leasing Expenses” shall mean actual, out-of-pocket expenses incurred by Borrower in leasing space at the Property pursuant to Leases entered into in accordance with the terms hereof, including brokerage commissions and tenant improvements, which expenses (a) (i) in connection with Leases which require Lender’s approval under the Loan Documents, are specifically approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed, (ii) in connection with Leases which do not require Lender’s approval under the Loan Documents, are incurred in the ordinary course of business and are on market terms and conditions, or (iii) are otherwise approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed, and (b) are substantiated by executed Lease documents and/or brokerage agreements. With respect to Qualified Leasing Expenses pursuant to clauses (ii) and (iii) above, Lender shall have received and approved a budget for such tenant improvement costs and a schedule of leasing commissions payments payable in connection with any Qualified Leasing Expenses.

 

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“Qualified Manager” shall have the meaning set forth in the Assignment of Management Agreement.

 

“Rating Agencies” shall mean each of S&P, Moody’s, Fitch, DBRS, Kroll and Morningstar, or any successor thereto, or any other nationally-recognized statistical rating agency which has been approved by Lender, but only to the extent that such Rating Agency has been designated by Lender, or is anticipated to be designated by Lender, in connection with any Secondary Market Transaction.

 

“Rating Agency Confirmation” shall mean a written affirmation from each of the Rating Agencies (obtained at Borrower’s sole cost and expense) that the credit rating of the Securities by such Rating Agency immediately prior to the occurrence of the event with respect to which such Rating Agency Confirmation is sought will not be qualified, downgraded or withdrawn as a result of the occurrence of such event, which affirmation may be granted or withheld in such Rating Agency’s sole and absolute discretion.  For the purposes of this Agreement and the other Loan Documents, if any Rating Agency shall waive, decline or refuse to review or otherwise engage any request for a Rating Agency Confirmation hereunder or under the other Loan Documents (hereinafter, a “RA Consent”), such RA Consent shall be deemed to eliminate, for such request only, the condition that a Rating Agency Confirmation by such Rating Agency (only) be obtained for purposes of this Agreement or the other Loan Documents, as applicable; provided, however, if Lender does not have a separate and independent approval right with respect to such event set forth herein or in the other Loan Documents, as applicable, then the term “Rating Agency Confirmation” shall be deemed instead to require the approval of Lender based on its good faith determination.  For purposes of clarity, any such waiver, declination or refusal to review or otherwise engage in any request for a Rating Agency Confirmation hereunder or under the other Loan Documents shall not be deemed a waiver, declination or refusal to review or otherwise engage in any subsequent request for a Rating Agency Confirmation hereunder or under the other Loan Documents, and the condition for Rating Agency Confirmation pursuant to this Agreement and the other Loan Documents for any subsequent request shall apply regardless of any previous waiver, declination or refusal to review or otherwise engage in such prior request.

 

“REA” shall mean, individually and/or collectively (as the context may require), each reciprocal easement, covenant, condition and restriction agreement or similar agreement affecting the Property as more particularly described on Schedule III hereto and any future reciprocal easement or similar agreement affecting the Property entered into in accordance with the applicable terms and conditions hereof.

 

“Regulation AB” shall mean Regulation AB under the Securities Act and the Exchange Act, as such Regulation may be amended from time to time.

 

“REMIC Requirements” shall mean any applicable federal income tax requirements relating to the continued qualification of any REMIC Trust (including, without limitation, the continued treatment of the Loan as a “qualified mortgage” in the hands of the REMIC Trust) as such under the IRS Code, the non-imposition of any tax on such REMIC Trust under the IRS Code (including, without limitation, the taxes on “prohibited transactions” and “contributions”), and any other constraints, rules or other regulations or requirements relating to the servicing,

 

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modification or other similar matters with respect to the Loan (or any portion thereof or interest therein) that may exist in, or be promulgated administratively under, the IRS Code.

 

“REMIC Trust” shall mean a “real estate mortgage investment conduit” within the meaning of Section 860D of the IRS Code that holds any interest in all or any portion of the Loan (including, without limitation, the Note).

 

“Rent Concession Reserve Account” shall have the meaning set forth in Section 8.9 hereof.

 

“Rent Concession Reserve Funds” shall have the meaning set forth in Section 8.9 hereof.

 

“Rent Loss Proceeds” shall have the meaning set forth in Section 7.1 hereof.

 

“Rent Roll” shall have the meaning set forth in Section 3.17 hereof.

 

“Rents” shall have the meaning set forth in the Security Instrument.

 

“Replacement Reserve Account” shall have the meaning set forth in Section 8.4 hereof.

 

“Replacement Reserve Funds” shall have the meaning set forth in Section 8.4 hereof.

 

“Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section 8.4 hereof.

 

“Replacements” for any period shall mean amounts expended for replacements and/or alterations to the Property and required to be capitalized according to GAAP and approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed.

 

“Reporting Failure” shall have the meaning set forth in Section 4.12 hereof.

 

“Required Financial Item” shall have the meaning set forth in Section 4.12 hereof.

 

“Reserve Funds” shall mean the Tax Reserve Funds, the Insurance Reserve Funds, the Replacement Reserve Funds, the Leasing Reserve Funds, the Major Tenant TI/LC Reserve Funds, the Existing TI/LC Reserve Funds, the Rent Concession Reserve Funds, and any other escrow funds established by this Agreement or the other Loan Documents.

 

“Responsible Officer” shall mean with respect to a Person, the chairman of the board, president, chief operating officer, chief financial officer, treasurer or vice president of such Person or such other similar officer of such Person reasonably acceptable to Lender and appropriately authorized by the applicable Person in a manner reasonably acceptable to Lender.

 

“Restoration” shall have the meaning set forth in Section 7.2 hereof.

 

“Restoration Retainage” shall have the meaning set forth in Section 7.4 hereof.

 

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“Restoration Threshold” shall mean an amount equal to 5% of the outstanding principal balance of the Loan.

 

“Restricted Party” shall have the meaning set forth in Section 6.1 hereof.

 

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

 

“Sale or Pledge” shall have the meaning set forth in Section 6.1 hereof.

 

“Scheduled Defeasance Payments” shall mean scheduled payments of interest and principal under the Note for all Monthly Payment Dates occurring after the Total Defeasance Date and up to and including the Open Period Start Date (including the outstanding principal balance on the Note as of the Open Period Start Date), and all payments required after the Total Defeasance Date, if any, under the Loan Documents for servicing fees, rating surveillance charges (to the extent applicable) and other similar charges.

 

“Secondary Market Transaction” shall have the meaning set forth in Section 11.1 hereof.

 

“Securities” shall have the meaning set forth in Section 11.1 hereof.

 

“Securities Act” shall have the meaning set forth in Section 11.2 hereof.

 

“Securitization” shall have the meaning set forth in Section 11.1 hereof.

 

“Security Agreement” shall mean a security agreement in form and substance that would be satisfactory to a prudent lender pursuant to which Borrower grants Lender a perfected, first priority security interest in the Defeasance Collateral Account and the Total Defeasance Collateral.

 

“Security Instrument” shall mean that certain first priority Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated the date hereof, executed and delivered by Borrower as security for the Loan and encumbering the Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Servicer” shall have the meaning set forth in Section 11.4 hereof.

 

“Severed Loan Documents” shall have the meaning set forth in Article 10.

 

“Single Purpose Entity” shall mean an entity which satisfies all of the requirements of Section 5.1 hereof and whose structure and organizational and governing documents are otherwise in form and substance acceptable to Lender and the Rating Agencies.

 

“SPE Component Entity” shall have the meaning set forth in Section 5.1(b) hereof.

 

“Special Member” shall have the meaning set forth in Section 5.1(c) hereof.

 

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“Sponsor” shall mean, individually and/or collectively (as the context may require), ABHISHEK MATHUR and BRIAN ADAMS, each an individual.

 

“State” shall mean the state in which the Property or any part thereof is located.

 

“Successor Borrower” shall have the meaning set forth in Section 2.8 hereof.

 

“Tax Reserve Account” shall have the meaning set forth in Section 8.1 hereof.

 

“Tax Reserve Funds” shall have the meaning set forth in Section 8.1 hereof.

 

“Taxes” shall mean all taxes, assessments, water rates, sewer rents, business improvement district or other similar assessments and other governmental impositions, including, without  limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Land, now or hereafter levied or assessed or imposed against the Property or any part thereof.

 

“Tenant” shall mean any Person leasing, subleasing or otherwise occupying any portion of the Property under a Lease or other occupancy agreement with Borrower.

 

“Title Insurance Policy” shall mean that certain ALTA mortgagee title insurance policy issued with respect to the Property and insuring the lien of the Security Instrument.

 

“Total Defeasance Collateral” shall mean U.S. Obligations, which provide payments (i) on or prior to, but as close as possible to, the Business Day immediately preceding all Monthly Payment Dates and other scheduled payment dates, if any, under the Note after the Total Defeasance Date and up to and including the Open Period Start Date, and (ii) in amounts equal to or greater than the Scheduled Defeasance Payments relating to such Monthly Payment Dates and other scheduled payment dates.

 

“Total Defeasance Date” shall have the meaning set forth in Section 2.8 hereof.

 

“Total Defeasance Event” shall have the meaning set forth in Section 2.8 hereof.

 

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in the State.

 

“Updated Information” shall have the meaning set forth in Section 11.1 hereof.

 

“U.S. Obligations” shall mean “government securities” as defined in Section 2(a)(16) of the Investment Company Act of 1940 and within the meaning of Treasury Regulation Section 1.860G-2(a)(8); provided, that, (i) such “government securities” are not subject to prepayment, call or early redemption, (ii) to the extent that any REMIC Requirements require a revised and/or alternate definition of “government securities” in connection with any defeasance hereunder, the foregoing shall be deemed amended in a manner commensurate therewith and (iii) the aforesaid laws and regulations shall be deemed to refer to the same as may be and/or may hereafter be amended, restated, replaced or otherwise modified.

 

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“Wells Fargo” shall mean Wells Fargo Bank, National Association.

 

“Work Charge” shall have the meaning set forth in Section 4.16(a) hereof.

 

“Yield Maintenance Premium” shall mean an amount equal to the greater of the following two amounts: (a) an amount equal to 3% of the amount prepaid; or (b) an amount equal to (i) the amount, if any, by which the sum of the present values as of the prepayment date of all unpaid principal and interest payments required hereunder, calculated by discounting such payments from the respective dates each such payment was due hereunder (or, with respect to the payment required on the Open Period Start Date (assuming the outstanding principal balance of the Loan is due on the Open Period Start Date), from the Open Period Start Date) back to the prepayment date at a discount rate equal to the Periodic Treasury Yield (defined below) exceeds the outstanding principal balance of the Loan as of the prepayment date, multiplied by (ii) a fraction whose numerator is the amount prepaid and whose denominator is the outstanding  principal balance of the Loan as of the prepayment date.  For purposes of the foregoing, “Periodic Treasury Yield” shall mean (y) the annual yield to maturity of the actively traded non-callable United States Treasury fixed interest rate security (other than any such security which can be surrendered at the option of the holder at face value in payment of federal estate tax or which was issued at a substantial discount) that has a maturity closest to (whether before, on or after) the Open Period Start Date (or if two or more such securities have maturity dates equally close to the Open Period Start Date, the average annual yield to maturity of all such securities), as reported in The Wall Street Journal or other authoritative publication or news retrieval service on the fifth Business Day preceding the prepayment date, divided by (z) 12. Lender’s calculation of the Yield Maintenance Premium, and all component calculations, shall be conclusive and binding on Borrower absent manifest error.

 

Section 1.2                                   Principles of Construction

 

All references to sections, exhibits and schedules are to sections, exhibits 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                                   The Loan

 

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.

 

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Section 2.2                                   Disbursement to Borrower

 

Borrower may request and receive only one borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be re-borrowed.

 

Section 2.3                                   The Note and the Other Loan Documents

 

The Loan shall be evidenced by the Note and this Agreement and secured by this Agreement, the Security Instrument and the other Loan Documents.

 

Section 2.4                                   Use of Proceeds

 

Borrower shall use the proceeds of the Loan to (i) acquire the Property and/or pay and discharge any existing loans relating to the Property, (ii) pay all past-due Taxes, Insurance Premiums and Other Charges, if any, in respect of the Property, (iii) make initial deposits of the Reserve Funds, (iv) pay costs and expenses incurred in connection with the closing of the Loan,  and (v) to the extent any proceeds remain after satisfying clauses (i) through (iv) above, for such lawful purpose as Borrower shall designate.

 

Section 2.5                                   Interest Rate

 

(a)                                 Generally.  Interest on the outstanding principal balance of the Loan shall accrue from the Closing Date up to but excluding the Maturity Date at the Interest Rate.

 

(b)                                 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 Applicable Law, overdue interest in respect of the Loan, 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.

 

(c)                                  Interest Calculation.  Interest on the outstanding principal balance of the Loan shall accrue at the Interest Rate calculated on an Actual/360 Basis.  Borrower acknowledges that interest calculated on an Actual/360 Basis exceeds interest calculated on a 30/360 Basis and, therefore:  (i) a greater portion of each monthly installment of principal (if applicable) and interest will be applied to interest using the Actual/360 Basis than would be the case if interest accrued on a 30/360 Basis and (ii) the unpaid principal balance of the Loan on the Maturity Date will be greater using the Actual/360 Basis than would be the case if interest accrued on a 30/360 Basis.

 

(d)                                 Usury Savings.  This Agreement and the other Loan Documents are subject to the express condition that at no time shall Borrower be 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 and not on account of the interest due 

 

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hereunder.  All sums paid or agreed to be paid to Lender for the use or forbearance 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 from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

 

Section 2.6                                   Loan Payments

 

(a)                                 Payment Before Maturity.  Borrower shall make a payment to Lender of interest only on the Closing Date for the period from the Closing Date through (but excluding) the eleventh (11th) day of either (i) the month in which the Closing Date occurs (if such Closing Date is on or after the first (1st) day of such month, but prior to the eleventh (11th) day of such month) or (ii) if the Closing Date is after the eleventh (11th) day of the then current calendar month, the calendar month following the calendar month in which the Closing Date occurs (unless the Closing Date is the eleventh (11th) day of a calendar month, in which case no such separate payment of interest shall be due).  Borrower shall make a payment to Lender of principal (if applicable) and interest in the amount of the Monthly Debt Service Payment Amount on the Monthly Payment Date occurring in March, 2016 and on each Monthly Payment Date thereafter to and including the Maturity Date.  Each payment shall be applied first to accrued and unpaid interest and the balance, if any, to principal.  The Monthly Debt Service Payment Amount required hereunder (where such Monthly Debt Service Payment Amount includes both principal and interest) is based upon a thirty (30) year amortization schedule.

 

(b)                                 Intentionally Omitted.

 

(c)                                  Payment on Maturity.  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 Security Instrument and the other Loan Documents.

 

(d)                                 Late Payment Charge.  If any principal, interest or any other sum due under the Loan Documents, other than the payment of principal due on the Maturity Date, is not paid by Borrower within five (5) days when due, Borrower shall pay to Lender upon demand an amount equal to the lesser of five percent (5%) of such unpaid sum or the maximum amount permitted by Applicable Law 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; provided that for so long as Borrower has agreed to make all payments due to Lender for the Loan via automatic debit from the Borrower’s operating account pursuant to Lender’s standard procedures, then no late payment charge shall be payable to Lender for any Monthly Debt Service Payment Amount or any monthly amount to be paid into the Reserve Accounts not paid within five (5) days when due if sufficient funds for such payments were on deposit in Borrower’s operating account at the time when such payments were due.  Any such amount shall be secured by the Security Instrument and the other Loan Documents.

 

(e)                                  Method and Place of Payment.

 

(i)                                     Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 

 

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10:00 A.M., California 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, 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.

 

(ii)                                  Whenever any payment to be made hereunder or under any other Loan Document shall be stated to be due on a day which is not a Business Day, the due date thereof shall be deemed to be the immediately succeeding Business Day.

 

(iii)                               All payments required to be made by Borrower hereunder or under the Note or the other Loan Documents shall be made irrespective of, and without deduction for, any setoff, claim or counterclaim and shall be made irrespective of any defense thereto.

 

Section 2.7                                   Prepayments

 

(a)                                 Except as otherwise provided herein, Borrower shall not have the right to prepay the Loan in whole or in part.  On and after the Monthly Payment Date occurring nine (9) months prior to the Maturity Date (the “Open Period Start Date”), Borrower may, provided no Event of Default has occurred and is continuing, at its option and upon thirty (30) days prior notice to Lender (or such shorter period of time as may be permitted by Lender in its sole discretion), prepay the Debt in whole on any date without payment of the Yield Maintenance Premium.  Any prepayment received by Lender on a date other than a Monthly Payment Date shall include interest which would have accrued thereon to the next Monthly Payment Date (such amounts, the “Interest Shortfall”).

 

(b)                                 Mandatory Prepayments.  On each date on which Lender actually receives a distribution of Net Proceeds, and if such Net Proceeds are not made available to Borrower for Restoration, Borrower shall prepay the outstanding principal balance of the Note in an amount equal to one hundred percent (100%) of such Net Proceeds together with any applicable Interest Shortfall and, if such Net Proceeds equal or exceed the Restoration Threshold, within ninety (90) days of such prepayment, Borrower may prepay the entire outstanding balance of the Loan together with any applicable Interest Shortfall upon ten (10) days prior written notice to Lender.  No Yield Maintenance Premium shall be due in connection with any prepayment made pursuant to this Section 2.7(b).

 

(c)                                  Prepayments After Default.  After (A) the occurrence and during the continuance of an Event of Default and (B)(i) any acceleration of the Debt, including, without limitation, any acceleration pursuant to Section 10.2(a) hereof due to an Event of Default under Section 10.1(g) hereof or (ii) any prepayment of the Debt, the Yield Maintenance Premium shall, in all cases, be deemed a portion of the Debt due and owing hereunder and under the other Loan Documents.  Without limitation of the foregoing, if, after the occurrence and during the continuance of an Event of Default, (x) payment of all or any part of the Debt is tendered by Borrower (voluntarily or involuntarily), a purchaser at foreclosure, or any other Person (which such payment shall be deemed an attempt to circumvent the prohibition against prepayment prior to the Defeasance Lockout Release Date as set forth herein), (y) Lender obtains a recovery of all or a portion of the Debt (through an exercise of remedies hereunder or under the other Loan Documents or 

 

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otherwise), or (z) the Debt is deemed satisfied (in whole or in part) through an exercise of remedies hereunder or under the other Loan Documents or at law, the Yield Maintenance Premium, in addition to the outstanding principal balance, all accrued and unpaid interest, Interest Shortfall, and other amounts payable under the Loan Documents, shall be deemed due and payable hereunder.  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 tendered, prepaid or repaid (in each case, in whole or in part and voluntarily or involuntarily) prior to the Maturity Date; (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 tender, prepayment or repayment of the Debt (in each case, in whole or in part and voluntarily or involuntarily) 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.  Notwithstanding anything to the contrary contained herein or in any other Loan Document, any tender, prepayment or repayment of the Debt shall be applied to the Debt in such order and priority as may be determined by Lender in its sole discretion.

 

(d)                                 Intentionally Omitted.

 

(e)                                  Release of Lien.  Except as expressly set forth in this Article 2, no repayment, prepayment or defeasance of all or any portion of the Note shall cause, give rise to a right to require, or otherwise result in, the release of the lien of the Security Instrument.

 

Section 2.8                                   Defeasance

 

(a)                                 Provided no Event of Default shall have occurred and remain uncured, Borrower shall have the right at any time after the Defeasance Lockout Release Date and prior to the Open Period Start Date to voluntarily defease the entire Loan and obtain a release of the lien of the Security Instrument by providing Lender with the Total Defeasance Collateral (hereinafter, a “Total Defeasance Event”), subject to the satisfaction of the following conditions precedent:

 

(i)                                     Borrower shall provide Lender not less than sixty (60) days’ notice (or such shorter period of time if permitted by Lender in its sole discretion) but not more than ninety (90) days’ notice specifying a date (the “Total Defeasance Date”) on which the Total Defeasance Event is to occur;

 

(ii)                                  Borrower shall pay to Lender (A) all payments of principal and interest due and payable on the Loan to and including the Total Defeasance Date; (B) all other sums, if any, then due and payable under the Note, this Agreement, the Security Instrument and the other Loan Documents through and including the Total Defeasance Date (or, if the Total Defeasance Date is not a Monthly Payment Date, the next occurring Monthly Payment Date); (C) all escrow, closing, recording, legal, appraisal, Rating Agency and other fees, costs and expenses paid or incurred by Lender or its agents in connection with the Total Defeasance Event, the release of the lien of Security Instrument on the Property, the review of the proposed Total Defeasance Collateral and the preparation of the Security Agreement and related documentation; and (D) any revenue, 

 

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documentary stamp, intangible or other taxes, charges or fees due in connection with the transfer or assumption of the Note and/or the Total Defeasance Event;

 

(iii)                               Borrower shall deposit the Total Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of Section 2.8(d) hereof;

 

(iv)                              Borrower shall execute and deliver to Lender a Security Agreement in respect of the Defeasance Collateral Account and the Total Defeasance Collateral;

 

(v)                                 Borrower shall deliver to Lender an opinion of counsel for Borrower that is standard in commercial lending transactions and subject only to customary qualifications, assumptions and exceptions opining, among other things, that (A) Lender has a legal and valid perfected first priority security interest in the Defeasance Collateral Account and the Total Defeasance Collateral; and (B) if a Securitization has occurred (1) the REMIC Trust formed pursuant to such Securitization and/or any subsequent or prior Securitization of the Loan or any portion thereof or interest therein will each not fail to maintain their respective status as a “real estate mortgage investment conduit” within the meaning of Section 860D of the IRS Code as a result of a Total Defeasance Event pursuant to this Section 2.8 and (2) the Total Defeasance Event would neither (I) constitute a “significant modification” of the Loan within the meaning of Treasury Regulation Section 1.860G-2(b) nor (II) cause the Loan to fail to be a “qualified mortgage” within the meaning of Section 860G(a)(3)(A) of the IRS Code;

 

(vi)                              Borrower shall deliver to Lender a Rating Agency Confirmation as to the Total Defeasance Event;

 

(vii)                           Borrower shall deliver an Officer’s Certificate certifying that the requirements set forth in this Section 2.8 have been satisfied;

 

(viii)                        Borrower shall deliver a certificate of a “big four” or other nationally recognized public accounting firm acceptable to Lender certifying that the Total Defeasance Collateral will generate monthly amounts equal to or greater than the Scheduled Defeasance Payments;

 

(ix)                              Borrower shall deliver such other certificates, opinions, documents and instruments as Lender may reasonably request; and

 

(x)                                 Borrower shall pay all costs and expenses of Lender incurred in connection with the Total Defeasance Event, including, without limitation, Lender’s reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

 

(b)                                 If Borrower has elected to defease the entire Note and the requirements of this Section 2.8 have been satisfied, the Property shall be released from the lien of the Security Instrument and the Total Defeasance Collateral pledged pursuant to the Security Agreement shall be the sole source of collateral securing the Note.  In connection with the release of the lien, Borrower shall submit to Lender, not less than thirty (30) days prior to the Total Defeasance Date (or such shorter time as is acceptable to Lender in its sole discretion), a release of lien (and 

 

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related Loan Documents) for execution by Lender.  Such release shall be in a form appropriate in the jurisdiction in which the Property is located and shall contain standard provisions 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, together with an Officer’s Certificate certifying that such documentation (i) is in compliance with all Applicable Law, and (ii) will affect such release in accordance with the terms of this Agreement.  Borrower shall pay all costs, taxes and expenses associated with the release of the lien of the Security Instrument, including Lender’s reasonable attorneys’ fees.

 

(c)                                  Intentionally Omitted.

 

(d)                                 On or before the date on which Borrower delivers the Total Defeasance Collateral, Borrower or Successor Borrower (as applicable) shall open at any Eligible Institution an Eligible Account (the “Defeasance Collateral Account”).  The Defeasance Collateral Account shall contain only (i) Total Defeasance Collateral, and (ii) cash from interest and principal paid on the Total Defeasance Collateral.  All cash from interest and principal payments paid on the Total Defeasance Collateral shall be paid over to Lender on each Monthly Payment Date and applied first to accrued and unpaid interest and then to principal.  Any cash from interest and principal paid on the Total Defeasance Collateral not needed to pay the Scheduled Defeasance Payments shall be paid to Borrower or Successor Borrower (as applicable).  Borrower or Successor Borrower (as applicable) shall cause the Eligible Institution at which the Total Defeasance Collateral is deposited to enter into an agreement with Borrower or Successor Borrower (as applicable) and Lender, satisfactory to Lender in its sole discretion, pursuant to which such Eligible Institution shall agree to hold and distribute the Total Defeasance Collateral in accordance with this Agreement.  Borrower or Successor Borrower (as applicable) shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Total Defeasance Collateral for federal, state and local income tax purposes in its income tax return.  Borrower shall prepay all cost and expenses associated with opening and maintaining the Defeasance Collateral Account.  Lender shall not in any way be liable by reason of any insufficiency in the Defeasance Collateral Account.

 

(e)                                  In connection with a Total Defeasance Event under this Section 2.8, Borrower shall transfer and assign all obligations, rights and duties under and to the Note and the Security Agreement, together with the Total Defeasance Collateral to a newly-created successor entity, which entity shall be a Single Purpose Entity and which entity shall be designated or established by Lender, at Lender’s option (the “Successor Borrower”).  Lender shall also have the right to purchase on behalf of Borrower, or cause to be purchased on behalf of Borrower, the pledged Total Defeasance Collateral.  Such rights to designate or establish the Successor Borrower as provided above or to purchase, or cause the purchase of, on behalf of Borrower the pledged Total Defeasance Collateral as provided above may be exercised by Wells Fargo in its sole discretion and shall be retained by Wells Fargo as the original Lender herein (and any successor or assign of Wells Fargo under a specific assignment of such retained rights separate and apart from a Secondary Market Transaction related to all or any portion of the Loan), notwithstanding any Secondary Market Transaction related to all or any portion of the Loan.  Such Successor Borrower shall assume the obligations under the Note and the Security Agreement and Borrower shall be relieved of its obligations under the Loan Documents (other than those obligations which by their terms survive a repayment, defeasance or other satisfaction of the Loan and/or a transfer 

 

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of the Property in connection with Lender’s exercise of its remedies under the Loan Documents).  Borrower shall pay a minimum of $1,000 to any such Successor Borrower as consideration for assuming the obligations under the Note and the Security Agreement.  Borrower shall pay all costs and expenses incurred by Lender, including the cost of establishing the Successor Borrower and Lender’s attorney’s fees and expenses, incurred in connection therewith.

 

(f)                                   Notwithstanding anything to the contrary contained in this Section 2.8, the parties hereto hereby acknowledge and agree that after the Securitization of the Loan (or any portion thereof or interest therein), with respect to any Lender approval or similar discretionary rights over any matters contained in this Section (any such matter, a “Defeasance Approval Item”), such rights shall be construed such that Lender shall only be permitted to withhold its consent or approval with respect to any Defeasance Approval Item if the same fails to meet the Prudent Lender Standard.

 

ARTICLE 3.

 

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants as of the Closing Date that:

 

Section 3.1                                   Legal Status and Authority

 

Borrower (a) is duly organized, validly existing and in good standing under the laws of its state of formation; (b) is duly qualified to transact business and is in good standing in the State; and (c) has all necessary approvals, governmental and otherwise, and full power and authority to own, operate and lease the Property.  Borrower has full power, authority and legal right to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey the Property pursuant to the terms hereof and to keep and observe all of the terms of this Agreement, the Note, the Security Instrument and the other Loan Documents on Borrower’s part to be performed.

 

Section 3.2                                   Validity of Documents

 

(a) The execution, delivery and performance of this Agreement, the Note, the Security Instrument and the other Loan Documents by Borrower and its applicable Affiliates and the borrowing evidenced by the Note and this Agreement (i) are within the power and authority of such parties; (ii) have been authorized by all requisite organizational action of such parties; (iii) have received all necessary approvals and consents, corporate, governmental or otherwise; (iv) will not violate, conflict with, result in a breach of or constitute (with notice or lapse of time, or both) a material default under any provision of law, any order or judgment of any court or Governmental Authority, any license, certificate or other approval required to operate the Property, Borrower’s organizational documents, or any indenture, agreement or other instrument to which Borrower is a party or by which it or any of its assets or the Property is or may be bound or affected, including, without limitation, the Management Agreement; (v) will not result in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of its assets, except the lien and security interest created hereby and by the other Loan Documents; and (vi) will not require any authorization or license from, or any filing with, any Governmental Authority (except for the recordation of the Security Instrument in appropriate land records in the 

 

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State and except for Uniform Commercial Code filings relating to the security interest created hereby), (b) this Agreement, the Note, the Security Instrument and the other Loan Documents have been duly executed and delivered by Borrower through the undersigned authorized representative of Borrower and (c) this Agreement, the Note, the Security Instrument and the other Loan Documents constitute the legal, valid and binding obligations of Borrower and are enforceable against Borrower in accordance with their respective terms (subject to applicable bankruptcy, insolvency, and similar laws affecting rights of creditors generally, and subject to, as to enforceability, general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or in law).  The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower, 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 (except as such enforcement may be limited by bankruptcy, insolvency, fraudulent transfers, reorganization, moratorium or other similar Creditors Rights Laws, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in  equity or at law)), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto.

 

Section 3.3                                   Litigation

 

There is no action, suit, investigation, arbitration or proceeding, judicial, governmental, administrative or otherwise (including any condemnation or similar proceeding), pending, filed or, to the best of Borrower’s knowledge, threatened or contemplated against or affecting Borrower, Sponsor or Guarantor or against or affecting the Property that has not been disclosed to Lender by Borrower in writing in connection with the closing of the Loan, is not fully covered by insurance or, if determined adversely to Borrower, would have a material adverse effect on (a) Borrower’s title to the Property, (b) the validity or enforceability of the Security Instrument, (c) Borrower’s ability to perform under the Loan Documents, (d) Guarantor’s ability to perform under the Guaranty, (e) the use, operation or value of the Property, (f) the principal benefit of the security intended to be provided by the Loan Documents, or (g) the ability of the Property to generate net cash flow sufficient to pay the Debt Service and other amounts due under the Loan.

 

Section 3.4                                   Agreements

 

Borrower is not a party to any agreement or instrument or subject to any restriction which would have a Material Adverse 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 agreement or instrument to which it is a party or by which Borrower or the Property is bound.  Borrower has no material financial obligation under any agreement or instrument to which Borrower is a party or by which Borrower or the Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Property and (b) obligations under this Agreement, the Security Instrument, the Note and the other Loan Documents.  There is no agreement or instrument to which Borrower is a party or by which Borrower is bound that would require the subordination in right of payment of any of Borrower’s obligations hereunder or under the Note to an obligation owed to another party.

 

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Section 3.5                                   Financial Condition

 

(a)                                 Borrower is solvent, and no proceeding under Creditors Rights Laws with respect to Borrower has been initiated and Borrower has received reasonably equivalent value for the granting of the Security Instrument.

 

(b)                                 Neither the Property nor any portion thereof is the subject of any proceeding under any Creditors Rights Laws.

 

(c)                                  No petition in bankruptcy has been filed by or against Borrower, Sponsor, Guarantor or any related entity, or any principal, general partner or member thereof, in the last ten (10) years, and neither Borrower, Sponsor, Guarantor nor any related entity, or any principal, general partner or member thereof, in the last ten (10) years has ever made any assignment for the benefit of creditors or taken advantage of any Creditors Rights Laws.

 

(d)                                 Borrower is not contemplating either the filing of a petition by it under any Creditors Rights Laws or the liquidation of its assets or property, and Borrower does not have any knowledge of any Person contemplating the filing of any such petition against it.

 

Section 3.6                                   Disclosure

 

Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any representation or warranty made herein to be materially misleading.

 

Section 3.7                                   No Plan Assets

 

As of the date hereof and throughout the term of the Loan (a) Borrower is not and will not be an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, (b) Borrower is not and will not be a “governmental plan” within the meaning of Section 3(32) of ERISA, (c) transactions by or with Borrower are not and will not be subject to any state statute, regulation or ruling regulating investments of, or fiduciary obligations with respect to, governmental plans, and (d) 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, as modified by Section 3(42) of ERISA.  As of the date hereof, neither Borrower nor any ERISA Affiliate maintains, sponsors or contributes to a Defined Benefit Plan or a Multiemployer Plan.  Neither the Borrower nor any ERISA Affiliate sponsors, contributes to or maintains, either currently or in the past, a plan, document, agreement, or arrangement subject to ERISA.

 

Section 3.8                                   Not a Foreign Person

 

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

 

Section 3.9                                   Business Purposes

 

The Loan is solely for the business purpose of Borrower, and is not for personal, family, household, or agricultural purposes.

 

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Section 3.10                            Borrower Information

 

Borrower’s principal place of business and its chief executive office as of the date hereof is c/o Priam Capital, 201 Fourth Avenue North, Nashville, Tennessee 37219.  Borrower’s mailing address, as set forth in the opening paragraph hereof or as changed in accordance with the provisions hereof, is true and correct.  Borrower is not subject to back-up withholding taxes.

 

Section 3.11                            Status of Property

 

(a)                                 Borrower has obtained all material certificates, licenses, permits, franchises, consents and other approvals, governmental and otherwise, necessary for the ownership and operation of the Property and the conduct of its business (collectively, “Licenses”) and all required zoning, building code, land use, environmental and other similar permits or approvals, all of which are in full force and effect as of the date hereof and not subject to revocation, suspension, forfeiture or modification.

 

(b)                                 The Property and the present and contemplated use and occupancy thereof are in material compliance with all applicable zoning ordinances, building codes, land use laws, Environmental Laws and other similar Applicable Law.

 

(c)                                  The Property is served by all utilities necessary for the current or contemplated use thereof.  All utility service is provided by public utilities and the Property has accepted or is equipped to accept such utility service. The Property is served by public water and sewer systems.  All utilities and public water and sewer systems serving the Property are adequate for the current or contemplated use thereof.

 

(d)                                 All public roads and streets necessary for service of and access to the Property for the current or contemplated use thereof have been completed, are serviceable and all-weather and are physically and legally open for use by the public.  The Property has either direct access to such public roads or streets or access to such public roads or streets by virtue of a perpetual easement or similar agreement inuring in favor of Borrower and any subsequent owners of the Property.

 

(e)                                  To Borrower’s knowledge, the Property is free from damage caused by fire or other casualty.  To Borrower’s knowledge, the 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 knowledge, there exists no structural or other material defects or damages in the Property, whether latent or otherwise, and Borrower has not received notice from any insurance company or bonding company of any defects or inadequacies in the 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.

 

(f)                                   To Borrower’s knowledge, all costs and expenses of any and all labor, materials, supplies and equipment used in the construction of the Improvements have been paid in full.  To 

 

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Borrower’s knowledge, there are no mechanics’ or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under Applicable Law could give rise to any such liens) affecting the Property which are or may be prior to or equal to the lien of the Security Instrument.

 

(g)                                  Borrower has paid in full for, and is the owner of, all furnishings, fixtures and equipment (other than Tenants’ property) used in connection with the operation of the Property, free and clear of any and all security interests, liens or encumbrances, except the lien and security interest created by this Agreement, the Note, the Security Instrument and the other Loan Documents.

 

(h)                                 To Borrower’s knowledge, all liquid and solid waste disposal, septic and sewer systems located on the Property are in a good and safe condition and repair and in compliance with all Applicable Law.

 

(i)                                     No portion of the Improvements is located in an area identified by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the Flood Insurance Acts or, if any portion of the Improvements is located within such area, Borrower has obtained and will maintain the insurance prescribed in Section 7.1(a) hereof.  No part of the Property consists of or is classified as wetlands, tidelands or swamp and overflow lands.

 

(j)                                    Except for encroachments that are insured against pursuant to the Title Insurance Policy or otherwise do not cause a Material Adverse Effect, all the Improvements lie within the boundaries of the Land and any building restriction lines applicable to the Land and no improvements on adjoining properties encroach onto the Property.

 

(k)                                 To Borrower’s knowledge after due inquiry, there are no pending or proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.

 

Section 3.12                            Financial Information

 

All financial data, including, without limitation, the balance sheets, statements of cash flow, statements of income and operating expense and rent rolls, that have been delivered to Lender in respect of Borrower, Sponsor, Guarantor and/or the Property (a) are true, complete and correct in all material respects, (b) accurately represent the financial condition of Borrower, Sponsor, Guarantor or, to Borrower’s knowledge, the Property, as applicable, as of the date of such reports, and (c) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein.  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 Material Adverse Effect, 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, 

 

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operations or business of Borrower, Sponsor or Guarantor from that set forth in said financial statements.

 

Section 3.13                            Condemnation

 

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

 

Section 3.14                            Separate Lots

 

The Property is assessed for real estate tax purposes as one or more wholly independent tax lot or lots, separate from any adjoining land or improvements not constituting a part of such lot or lots, and no other land or improvements is assessed and taxed together with the Property or any portion thereof.

 

Section 3.15                            Insurance

 

Borrower has obtained and has delivered to Lender certified copies of all Policies reflecting the insurance coverages, amounts and other requirements set forth in this Agreement.  There are  no present claims of any material nature under any of the Policies, and to Borrower’s knowledge, no Person, including Borrower, has done, by act or omission, anything which would impair the coverage of any of the Policies.

 

Section 3.16                            Use of Property

 

The Property is used exclusively as an office complex and for other appurtenant and related uses.

 

Section 3.17                            Leases and Rent Roll

 

Except as disclosed in the rent roll for the Property delivered to and approved by Lender (the “Rent Roll”) and the aging report and Tenant estoppels delivered to and approved by Lender, (a) Borrower is the sole owner of the entire lessor’s interest in the Leases; (b) to Borrower’s knowledge, the Leases are valid and enforceable against Borrower and the Tenants set forth therein and are in full force and effect; (c) to Borrower’s knowledge, all of the Leases are arms-length agreements with bona fide, independent third parties; (d) to Borrower’s knowledge, no party under any Lease is in default; (e) to Borrower’s knowledge, all Rents due have been paid in full and no Tenant is in arrears in its payment of Rent; (f) none of the Rents reserved in the Leases have been assigned or otherwise pledged or hypothecated; (g) to Borrower’s knowledge, none of the Rents have been collected for more than one (1) month in advance (except a security deposit shall not be deemed rent collected in advance); (h) to Borrower’s knowledge, the premises demised under the Leases have been completed and the Tenants under the Leases have accepted the same and have taken possession of the same on a rent-paying basis with no rent concessions to any Tenants; (i) to Borrower’s knowledge, there exist no offsets or defenses to the payment of any portion of the Rents and Borrower has no monetary obligation to any Tenant under any Lease; (j) Borrower has received no notice from any Tenant challenging the validity or enforceability of any Lease; (k) to Borrower’s knowledge, 

 

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there are no agreements with the Tenants under the Leases other than expressly set forth in each Lease; (l) no Lease contains an option to purchase, right of first refusal to purchase, right of first refusal to lease additional space at the Property, or any other similar provision; (m) to Borrower’s knowledge, no person or entity has any possessory interest in, or right to occupy, the Property except under and pursuant to a Lease; (n) to Borrower’s knowledge, no Tenants have exercised any right to “go dark” that they may have under their Leases and no event has occurred that, but for the giving of notice and/or passage of time, would give any Tenant any right to abate rent, “go dark” or terminate any Lease; (o) to Borrower’s knowledge, all security deposits relating to the Leases reflected on the Rent Roll have been collected by Borrower; (p) to Borrower’s knowledge, no brokerage commissions or finder’s fees are due and payable regarding any Lease; (q) each Tenant is in actual, physical occupancy of the premises demised under its Lease and is paying full rent under its Lease; and (r) to Borrower’s knowledge, no Tenant occupying 20% or more (by square feet) of the net rentable area of the Property is, to Borrower’s knowledge, a debtor in any state or federal bankruptcy, insolvency or similar proceeding.

 

Section 3.18                            Filing and Recording Taxes

 

All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under Applicable Law currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of this Agreement, the  Security Instrument, the Note and the other Loan Documents, including, without limitation, the Security Instrument, have been paid or will be paid, and, under current Applicable Law, the Security Instrument is enforceable in accordance with its terms by Lender (or any subsequent holder thereof), except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Creditors Rights Laws, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

Section 3.19                            Management Agreement

 

The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and, to Borrower’s knowledge, no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder.  As of the date hereof, no management fees under the Management Agreement are due and payable.

 

Section 3.20                            Illegal Activity/Forfeiture

 

(a)                                 No portion of the Property has been (to Borrower’s knowledge) or will be purchased, improved, equipped or furnished with proceeds of any illegal activity and to the best of Borrower’s knowledge, there are no illegal activities or activities relating to controlled substances at the Property (including, without limitation, any growing, distributing and/or dispensing of medical marijuana).

 

(b)                                 There has not been and shall never be committed by Borrower, and Borrower shall use commercially reasonable efforts to ensure that no other Person in occupancy of or involved with the operation or use of the Property commits, any act or omission affording the 

 

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federal government or any state or local government the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Borrower’s obligations under this Agreement, the Note, the Security Instrument or the other 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 also hereby covenants and agrees that it shall not commit, permit or suffer to exist any illegal activities or activities relating to controlled substances at the Property (including, without limitation, any growing, distributing and/or dispensing of medical marijuana).

 

Section 3.21                            Taxes

 

Borrower has filed all federal, state, county, municipal, and city income, personal property and other tax returns required to have been filed by it and has paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by it.  Borrower knows of no basis for any additional assessment in respect of any such taxes and related liabilities for prior years.

 

Section 3.22                            Permitted Encumbrances

 

None of the Permitted Encumbrances, individually or in the aggregate, materially interferes with the benefits of the security intended to be provided by this Agreement, the Security Instrument, the Note and the other Loan Documents, materially and adversely affects the value or marketability of the Property, impairs the use or the operation of the Property or impairs Borrower’s ability to pay its obligations in a timely manner.

 

Section 3.23                            Material Agreements

 

With respect to each Material Agreement, to Borrower’s knowledge, (a) each Material Agreement is in full force and effect and has not been amended, restated, replaced or otherwise modified (except, in each case, as expressly set forth herein), (b) there are no defaults under any Material Agreement by any party thereto and, to Borrower’s knowledge, no event has occurred which, but for the passage of time, the giving of notice, or both, would constitute a default under any Material Agreement, (c) all payments and other sums due and payable under the Material Agreements have been paid in full, (d) no party to any Material Agreement has commenced any action or given or received any notice for the purpose of terminating any Material Agreement, and (e) the representations made in any estoppel or similar document delivered with respect to any Material Agreement in connection with the Loan are true, complete and correct and are hereby incorporated by reference as if fully set forth herein.

 

Section 3.24                            Intentionally Omitted

 

Section 3.25                            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 

 

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prohibited by Applicable Law or by the terms and conditions of this Agreement, the Security Instrument, the Note or the other Loan Documents.

 

Section 3.26                            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.

 

Section 3.27                            Fraudulent Conveyance

 

Borrower (a) has not entered into the Loan or any Loan Document with the actual intent to hinder, delay, or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under the Loan Documents. Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds and will, immediately following the execution and delivery of the Loan Documents, exceed Borrower’s total liabilities, including, without limitation, subordinated, unliquidated, disputed or contingent liabilities.  The fair saleable value of Borrower’s assets is and will, immediately following the execution and delivery of the Loan Documents, be greater than Borrower’s probable liabilities, including the maximum amount of its contingent liabilities or its debts as such debts become absolute and matured.  Borrower’s assets do not and, immediately following the execution and delivery of the Loan Documents 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 liabilities and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower) (in each case to the extent there exists sufficient net excess cash flow from the Property).

 

Section 3.28                            Embargoed Person

 

As of the date hereof and at all times throughout the term of the Loan, including after giving effect to any transfers of interests permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower, Sponsor or Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or country which is a sanctioned person, entity or country under U.S. law, including but not limited to, 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 regulations administered by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury and the Specially Designated Nationals List maintained by OFAC) with the result that the investment in Borrower, Sponsor and/or Guarantor, as applicable (whether directly or indirectly), is prohibited by Applicable Law or the Loan made by Lender is in violation of Applicable Law (“Embargoed Person”); (b) unless expressly waived in writing by Lender, no Embargoed Person has any interest of any nature whatsoever in Borrower, Sponsor or Guarantor, as applicable, with the result that the investment in Borrower, Sponsor 

 

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and/or Guarantor, as applicable (whether directly or indirectly), is prohibited by Applicable Law or the Loan is in violation of Applicable Law; and (c) to the best knowledge of Borrower, none of the funds of Borrower, Sponsor or Guarantor, as applicable, have been derived from any unlawful activity with the result that the investment in Borrower, Sponsor and/or Guarantor, as applicable (whether directly or indirectly), is prohibited by Applicable Law or the Loan is in violation of Applicable Law.  Borrower covenants and agrees that in the event Borrower receives any notice that Borrower, Sponsor or Guarantor (or any of their respective beneficial owners, affiliates or participants) or any Person that has an interest in the Property is designated as an Embargoed Person, Borrower shall immediately notify Lender in writing.  At Lender’s option, it shall be an Event of Default hereunder if Borrower, Guarantor, Sponsor or any other party to the Loan is designated as an Embargoed Person.

 

Section 3.29                            Patriot Act

 

All capitalized words and phrases and all defined terms used in the USA Patriot Act of 2001, 107 Public Law 56 (October 26, 2001) and in other statutes and all orders, rules and regulations of the United States government and its various executive departments, agencies and offices related to the subject matter of the Patriot Act (collectively referred to in this Section only as the “Patriot Act”) are incorporated into this Section.  Borrower hereby represents and warrants that Borrower, Sponsor and Guarantor and each and every Person affiliated with Borrower, Sponsor and/or Guarantor or that to Borrower’s knowledge has an economic interest in Borrower, or, to Borrower’s knowledge, that has or will have an interest in the transaction contemplated by this Agreement or in the Property or will participate, in any manner whatsoever, in the Loan, is:  (i) in full compliance with all applicable requirements of the Patriot Act and any regulations issued thereunder; (ii) operated under policies, procedures and practices, if applicable, that are in compliance with the Patriot Act and available to Lender for Lender’s review and inspection during  normal business hours and upon reasonable prior notice; (iii) not in receipt of any notice from the Secretary of State or the Attorney General of the United States or any other department, agency or office of the United States claiming a violation or possible violation of the Patriot Act; (iv) not a person who has been determined by competent authority to be subject to any of the prohibitions contained in the Patriot Act; and (v) not owned or controlled by or now acting and/or will in the future act for or on behalf of any person who has been determined to be subject to the prohibitions contained in the Patriot Act.  Borrower covenants and agrees that in the event Borrower receives any notice that Borrower, Sponsor or Guarantor (or any of their respective beneficial owners, affiliates or participants) or any Person that has an interest in the Property is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, Borrower shall immediately notify Lender.  At Lender’s option, it shall be an Event of Default hereunder if Borrower, Guarantor, Sponsor or any other party to the Loan is indicted, arraigned or custodially detained on charges involving money laundering or predicate crimes to money laundering.

 

Section 3.30                            Organizational Chart

 

The organizational chart attached as Schedule II hereto, relating to Borrower and certain Affiliates and other parties, is true, complete and correct on and as of the date hereof.

 

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Section 3.31                            Bank Holding Company

 

Borrower is not a “bank holding company” or a direct or indirect subsidiary of a “bank holding company” as defined in the Bank Holding Company Act of 1956, as amended, and Regulation Y thereunder of the Board of Governors of the Federal Reserve System.

 

Section 3.32                            Intentionally Omitted

 

Section 3.33                            REA Representations

 

With respect to each REA, to Borrower’s knowledge, (a) each REA is in full force and effect and has not been amended, restated, replaced or otherwise modified (except, in each case, as expressly set forth herein), (b) there are no defaults under any REA by any party thereto and, to Borrower’s knowledge, no event has occurred which, but for the passage of time, the giving of notice, or both, would constitute a default under any REA, (c) all sums due and payable under each REA have been paid in full, (d) no party to any REA has commenced any action or given or received any notice for the purpose of terminating any REA, and (e) the representations made in any estoppel or similar document delivered with respect to any REA in connection with the Loan, if any, are true, complete and correct and are hereby incorporated by reference as if fully set forth herein.

 

Section 3.34                            No Change in Facts or Circumstances

 

All information submitted by Borrower, Guarantor or Sponsor to Lender and in all financial statements, rent rolls, 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, Sponsor and/or Guarantor in this Agreement or in the other Loan Documents, 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 would otherwise have a Material Adverse Effect.

 

Section 3.35                            Perfection of Accounts

 

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) in the Accounts in favor of Lender, 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 or otherwise conveyed the Accounts; and

 

(b)                                 The Accounts constitute “deposit accounts” or “securities accounts” within the meaning of the Uniform Commercial Code.

 

Section 3.36                            Intentionally Omitted

 

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Section 3.37                            Guarantor and Sponsor Representations

 

(a)                                 Borrower hereby represents and warrants that, as of the date hereof, the representations and warranties set forth in Sections 3.2 through 3.8, 3.12, 3.18, 3.21, 3.27, 3.28, 3.29, 3.32, and 3.34 above are true and correct with respect to Guarantor, as the same are applicable to Guarantor.  Wherever the term “Borrower” is used in each of the foregoing Sections it shall be deemed to be “Guarantor” with respect to Guarantor.

 

(b)                                 Borrower hereby represents and warrants that, as of the date hereof, the representations and warranties set forth in Sections 3.3, 3.5, 3.12, and 3.27 through 3.29 above are true and correct with respect to Sponsor, as the same are applicable to Sponsor. Wherever the term “Borrower” is used in each of the foregoing Sections it shall be deemed to be “Sponsor” with respect to Sponsor.

 

Borrower agrees that, unless expressly provided otherwise, all of the representations and warranties of Borrower set forth in this Article 3 and elsewhere in this Agreement and the other Loan Documents shall survive for so long as any portion of the Debt remains owing to Lender.  All representations, warranties, covenants and agreements made in this Agreement and 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.

 

ARTICLE 4.

 

BORROWER COVENANTS

 

From the date hereof and until payment and performance in full of all obligations of Borrower under this Agreement, the Security Instrument, the Note and the other Loan Documents or the earlier release of the lien of the Security Instrument (and all related obligations) in  accordance with the terms of this Agreement, the Security Instrument, the Note and the other Loan Documents, Borrower hereby covenants and agrees with Lender that:

 

Section 4.1                                   Existence

 

Borrower will continuously maintain (a) its existence and shall not dissolve or permit its dissolution, (b) its rights to do business in the applicable State and (c) its franchises and trade names, if any.

 

Section 4.2                                   Applicable Law

 

(a)                                 Borrower shall promptly comply and shall cause the Property to comply in all material respects with all Applicable Law affecting the Borrower and the Property, or the use thereof, including, without limitation, all Environmental Laws and Applicable Law relating to OFAC, Embargoed Persons and the Patriot Act. 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, trade names, and franchises. Borrower shall give prompt notice to Lender of the receipt by Borrower of any notice related to a violation of any Applicable Law and of the commencement of any proceedings or investigations which relate to compliance with Applicable Law.

 

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(b)                                 After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the validity of any Applicable Law, the applicability of any Applicable Law to Borrower or the Property or any alleged violation of any Applicable Law, 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 permitted by and conducted in accordance with all Applicable Law; (iii) neither the 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 Applicable Law determined to be valid or applicable or cure any violation of any Applicable Law; (v) such proceeding shall suspend the enforcement of the contested Applicable Law against Borrower or the 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 Applicable Law, together with all interest and penalties payable in connection therewith.  Lender may apply any such security or part thereof, as necessary to cause compliance with such Applicable Law at any time when, in the judgment of Lender, the validity, applicability or violation of such Applicable Law is finally established or the Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost.

 

Section 4.3                                   Maintenance and Use of Property

 

Borrower shall cause the Property to be maintained in a good and safe condition and repair in all material respects.  The Improvements and the Personal Property shall not be removed, demolished or materially altered (except for normal replacement of the Personal Property) without the consent of Lender or as otherwise permitted pursuant to Section 4.21 hereof.  Borrower shall promptly repair, replace or rebuild any part of the Property which may be destroyed by any  casualty, or become damaged, worn or dilapidated or which may be affected by any proceeding of the character referred to in Section 3.13 hereof and shall complete and pay for any structure at any time in the process of construction or repair on the Land.  Borrower shall not initiate, join in, acquiesce in, or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of the Property or any part thereof.  If under applicable zoning provisions the use of all or any portion of the Property is or shall become a nonconforming use, Borrower will not cause or permit the nonconforming use to be discontinued or the nonconforming Improvement to be abandoned without the express written consent of Lender.

 

Section 4.4                                   Waste

 

Borrower shall not commit or suffer any waste of the Property or make any change in the use of the Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Property, or take any action that might invalidate or give cause for cancellation of any Policy, or do or permit to be done thereon anything that may in any way impair the value of the Property or the security for the Loan.  Borrower will 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.

 

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Section 4.5                                   Taxes and Other Charges

 

(a)                                 Borrower shall pay all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Property or any part thereof as the same become due and payable; provided, however, Borrower’s obligation to directly pay Taxes and Other Charges shall be suspended for so long as Borrower complies with the terms and provisions of Section 8.1 hereof.  Borrower shall furnish to Lender receipts for the payment of the Taxes and the Other Charges prior to the date the same shall become delinquent (provided, however, that Borrower is not required to furnish such receipts for payment of Taxes and Other Charges in the event that such Taxes and Other Charges have been paid by Lender pursuant to Section 8.1 hereof).  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 Property, and shall promptly pay for all utility services provided to the Property.

 

(b)                                 After prior written notice to Lender, Borrower, 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) 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 permitted by and conducted in accordance with all Applicable Law; (iii) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled 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 the Property; and (vi) Borrower shall furnish such security as may be required in the proceeding, or deliver to Lender such reserve deposits as may be requested by Lender, to ensure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon.  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 the Property (or part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, canceled or lost or there shall be any danger of the lien of the Security Instrument being primed by any related lien.

 

Section 4.6                                   Litigation

 

Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened in writing against Borrower or any SPE Component Entity which might have a Material Adverse Effect.

 

Section 4.7                                   Access to Property

 

Subject to the rights of Tenants as set forth in the Leases, Borrower shall permit agents, representatives and employees of Lender to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice; provided, however, so long as no Event of Default has 

 

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occurred and is then continuing, such inspections will occur no more than two (2) times in any calendar year or as may be necessary for disbursement of Reserve Funds.

 

Section 4.8                                   Notice of Default

 

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

 

Section 4.9                                   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 Note, the Security Instrument or the other Loan Documents and, in connection therewith, permit Lender, at Lender’s election, to participate in any such proceedings.

 

Section 4.10                            Performance by Borrower

 

Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term and provision to be observed and performed by Borrower under this Agreement, the Security Instrument, the Note and the other Loan Documents and any other agreement or instrument affecting or pertaining to the Property and any amendments, modifications or changes thereto.

 

Section 4.11                            Awards

 

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

 

Section 4.12                            Books and Records

 

(a)                                 Borrower shall keep adequate books and records of account in accordance with GAAP, or in accordance with other methods acceptable to Lender in its reasonable discretion (consistently applied), and furnish to Lender:

 

(i)                                     quarterly (and prior to a Securitization, monthly) certified rent rolls (in the form approved by Lender in connection with the closing of the Loan) and tenant sales reports (if applicable), each signed and dated by a Responsible Officer of Borrower, within twenty-five (25) days after the end of each calendar month or forty-five (45) days after the end of each calendar quarter, as applicable;

 

(ii)                                  quarterly (and prior to a Securitization, monthly) operating statements of the Property, prepared and certified by a Responsible Officer of Borrower in the form 

 

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required by Lender, detailing the revenues received, the expenses incurred and major capital improvements for the period of calculation and containing appropriate year-to-date information, within twenty-five (25) days after the end of each calendar month or forty-five (45) days after the end of each calendar quarter, as applicable;

 

(iii)                               an annual balance sheet, profit and loss statement, statement of cash flow, and statement of change in financial position of Borrower within one hundred twenty (120) days after the close of each fiscal year of Borrower, which shall be (A) during the continuation of an Event of Default, audited by a “Big Four” accounting firm or other independent certified public accountant reasonably acceptable to Lender (Lender hereby confirms that Cohn Reznick LLP is an acceptable accounting firm) or (B) if no Event of Default is then continuing, prepared and certified by a Responsible Officer of Borrower to be true and correct;

 

(iv)                              an annual operating statement of the Property detailing the revenues received, the expenses incurred and major capital improvements for the period of calculation and containing appropriate year-to-date information, within one hundred twenty (120) days after the close of each fiscal year of Borrower, which shall be (A) during the continuation of an Event of Default, audited by a “Big Four” accounting firm or other independent certified public accountant reasonably acceptable to Lender (Lender hereby confirms that Cohn Reznick LLP is an acceptable accounting firm) or (B) if no Event of Default is then continuing, prepared and certified by a Responsible Officer of Borrower to be true and correct;

 

(v)                                 by no later than December 15 of each calendar year, an annual operating budget for the next succeeding calendar year presented on a monthly basis consistent with the annual operating statement described above for the Property, including cash flow projections for the upcoming year and all proposed capital replacements and improvements (the “Annual Budget”); Lender hereby acknowledges that, as of the date hereof, Borrower has delivered the items required by this Section 4.12(a)(v) with respect to the 2016 calendar year.  Upon the occurrence and during the continuance of any Cash Trap Event Period, Lender shall have the right to approve each Annual Budget and no Annual Budget shall take effect unless and until the same has been approved by Lender.  Within ten (10) Business Days of the commencement of any Cash Trap Event Period, Borrower shall deliver to Lender the Annual Budget for approval by Lender;

 

(vi)                              by no later than February 1 of each calendar year, an updated organizational chart, substantially in the form attached as Schedule II hereto, depicting the ownership of the direct and indirect interests in Borrower as of December 31st of the preceding calendar year; provided that, so long as all equity transfers completed since Borrower’s delivery of the most recent prior updated organizational chart meet the requirements of Section 6.3, such updated organizational chart will not be required to contain an update to the ownership of the direct and indirect equity interests in Hall Capital III, LP; and

 

(vii)                           except as provided in (A), by no later than twenty-five (25) days after and as of the end of each calendar month during the period prior to Securitization, and 

 

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thereafter by no later than forty-five (45) days after and as of the end of each calendar quarter, a summary report containing each of the following with respect to the Property for the most recently completed calendar month or quarter (as applicable): (A) if and to the extent and within the time periods such information is provided by such tenants or occupants, aggregate sales by tenants under Leases or other occupants of the Property, both on an actual and on a comparable store basis, (B) rent per square foot payable by each such tenant or occupant, (C) aggregate occupancy of the Property by anchor space and in-line store space and (D) a tenant aging and receivables report.

 

(b)                                 Upon request from Lender, Borrower shall furnish in a timely manner to Lender:

 

(i)                                     a property management report for the Property, showing the number of inquiries made and/or rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender, in reasonable detail and certified by a Responsible Officer of Borrower to be true and complete, but no more frequently than quarterly; and

 

(ii)                                  an accounting of all security deposits held in connection with any Lease of any part of the Property, including the name and identification number of the accounts in which such security deposits are held, the name and address of the financial institutions in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to obtain information regarding such accounts directly from such financial institutions.

 

(c)                                  Within ten (10) days of Lender’s request, Borrower shall furnish Lender (and shall cause Sponsor and/or Guarantor to furnish to Lender) with such other additional financial or management information (including State and Federal tax returns) as may, from time to time, be reasonably required by Lender in form and substance satisfactory to Lender.  Borrower shall furnish to Lender and its agents convenient facilities for the examination and audit of any such books and records at any reasonable time from time to time during business hours upon reasonable advance notice.

 

(d)                                 Borrower agrees that all financial statements and other items required to be delivered to Lender pursuant to this Section 4.12 (each a “Required Financial Item” and,  collectively, the “Required Financial Items”) shall: (i) be complete and correct in all material respects; (ii) present fairly the financial condition of the party; (iii) disclose all liabilities that are required to be reflected or reserved against; and (iv) be prepared (A) in hardcopy and electronic formats and (B) in accordance with GAAP or in accordance with other methods acceptable to Lender in its sole discretion (consistently applied). Borrower shall be deemed to warrant and represent that, as of the date of delivery of any such financial statement, there has been no material adverse change in financial condition, nor have any assets or properties been sold, transferred, assigned, mortgaged, pledged or encumbered since the date of such financial statement except as disclosed by Borrower in a writing delivered to Lender.  Borrower agrees that all Required Financial Items shall not contain any misrepresentation or omission of a material fact.

 

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(e)                                  If any Required Financial Item is not timely delivered (“Reporting Failure”), following written notice from Lender, Borrower shall promptly pay to Lender, as a late charge, the sum of Five Hundred and No/100 Dollars ($500.00) per Required Financial Item.  In addition, Borrower shall promptly pay to Lender an additional late charge of Two Hundred Fifty and No/100 Dollars ($250.00) per Required Financial Item for each full month during which such Reporting Failure continues following written notice from Lender.  Borrower acknowledges that Lender will incur additional expenses as a result of any such Reporting Failure, which expenses would be impracticable to quantify, and that Borrower’s payments under this Section 4.12 are a reasonable estimate of such expenses.  Borrower acknowledges further that the payment by Borrower of this late charge does not in any manner affect or otherwise impair or waive any rights and remedies Lender may have hereunder, under the Loan Documents or under applicable law for any Event of Default.

 

Section 4.13                            Estoppel Certificates

 

(a)                                 After request by Lender, Borrower, within ten (10) days of such request, shall furnish Lender or any proposed assignee 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 rate of interest of the Note, (iv) the terms of payment and maturity date of the Note, (v) the date installments of interest and/or principal were last paid, (vi) that, except as provided in such statement, no Event of Default exists, (vii) that this Agreement, the Note, the Security Instrument and the other Loan Documents are valid, legal and binding obligations (subject to applicable bankruptcy, insolvency, and similar laws affecting rights of creditors generally, and subject to, as to enforceability, general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or in law) and have not been modified or if modified, giving particulars of such modification, (viii) whether any offsets or defenses exist against the obligations secured hereby and, if any are alleged to exist, a detailed description thereof, (ix) that all Leases are in full force and effect and have not been modified (or if modified, setting forth all modifications), (x) the date to which the Rents thereunder have been paid pursuant to the Leases, (xi) whether or not, to the best knowledge of Borrower, any of the Tenants are in default under the Leases, and, if any of the Tenants are in default, setting forth the specific nature of all such defaults, (xii) the amount of security deposits held by Borrower under each Lease and that such amounts are consistent with the amounts required under each Lease, and (xiii) as to any other matters reasonably requested by Lender and reasonably related to the Leases, the obligations created and evidenced hereby and by the Security Instrument or the Property.

 

(b)                                 Borrower shall use its best efforts to deliver to Lender, promptly upon request, duly executed estoppel certificates from any one or more Tenants as required by Lender attesting to such facts regarding the Lease as Lender may require, including, but not limited to, attestations that each Lease covered thereby is in full force and effect with no defaults thereunder on the part of any party, that none of the Rents have been paid more than one month in advance, except as security, and that the lessee claims no defense or offset against the full and timely performance of its obligations under the Lease.

 

(c)                                  In connection with a Secondary Market Transaction involving the Loan (or any portion thereof or interest therein), at Lender’s request, Borrower shall provide an estoppel 

 

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certificate to any Investor or any prospective Investor in such form, substance and detail as Lender, such Investor or prospective Investor may require.

 

(d)                                 Borrower shall use commercially reasonable efforts to deliver to Lender, upon request, estoppel certificates from each party under each REA and each Material Agreement in form and substance reasonably acceptable to Lender.

 

Section 4.14                            Leases and Rents

 

(a)                                 Upon request, Borrower shall furnish Lender with executed copies of all Leases then in effect.  All renewals of Leases and all proposed leases shall provide for rental rates and terms comparable to existing local market rates and shall be arm’s length transactions with bona fide, independent third-party Tenants.  Within ten (10) days after the execution of a Lease or any renewals, amendments or modification of a Lease, Borrower shall deliver to Lender a copy thereof, together with Borrower’s certification that such Lease (or such renewal, amendment or modification) was entered into in accordance with the terms of this Agreement.

 

(b)                                 Any Lease and any renewals, amendments or modification of a Lease (provided such Lease or Lease renewal, amendment or modification is not a Major Lease (or a renewal, amendment or modification to a Major Lease)) that meets the following requirements may be entered into by Borrower without Lender’s prior consent: such Lease (i) provides for rental rates comparable to existing local market rates for similar properties and is otherwise on commercially reasonable terms, (ii) intentionally omitted, (iii) is written substantially in accordance with the standard form of Lease delivered to Lender in connection with the closing of the Loan, or the then-current standard form of Lease if such form shall have been approved by Lender (in either case, subject to any commercially-reasonable changes made in the course of negotiations with the applicable Tenant), (iv) is not with an Affiliate of Borrower or any Guarantor, and (v) does not contain any option to purchase, any right of first refusal to purchase, any right to terminate (except in the event of the destruction or condemnation of substantially all of the Property) or any other terms which would cause a Material Adverse Effect.  All other Leases (including Major Leases) and all renewals, amendments and modifications thereof (including, without limitation, any subletting or assignment thereunder not contemplated by the express terms of such Lease (other than any subletting or assignment that does not require Borrower’s consent under such Lease)) executed after the date hereof shall be subject to Lender’s prior approval, which approval shall not be unreasonably withheld or delayed.

 

(c)                                  Lender shall execute and deliver a Subordination, Non-Disturbance and Attornment Agreement on Lender’s then current standard form to Tenants under future Major Leases approved by Lender promptly upon request with such commercially reasonable changes as may be requested by Tenants, from time to time, as are reasonably acceptable to Lender.  Lender’s execution of a Subordination, Non-Disturbance and Attornment Agreement which is not in compliance with the foregoing sentence shall be at Lender’s sole discretion and subject to such additional conditions as Lender shall reasonably determine.

 

(d)                                 Borrower (i) shall observe and perform the obligations imposed upon the lessor under the Leases in all material respects in a commercially reasonable manner; (ii) shall enforce the terms, covenants and conditions contained in the Leases upon the part of the lessee 

 

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thereunder to be observed or performed in a commercially reasonable manner, provided, however, Borrower shall not terminate or accept a surrender of a Major Lease without Lender’s prior approval; (iii) shall not collect any of the Rents more than one (1) month in advance (other than security deposits); (iv) shall not execute any assignment of lessor’s interest in the Leases or the Rents (except as contemplated by the Loan Documents); (v) shall not, without Lender’s consent, alter, modify or change any Lease so as to change the amount of or payment date for rent, change the expiration date, grant any option for additional space or term, materially reduce the obligations of the lessee or increase the obligations of lessor; and (vi) shall hold all security deposits under all Leases in accordance with Applicable Law.

 

(e)                                  Notwithstanding anything contained herein to the contrary, Borrower shall not willfully withhold from Lender any information regarding renewal, extension, amendment, modification, waiver of provisions of, termination, rental reduction of, surrender of space of, or shortening of the term of, any Lease during the term of the Loan.  Borrower’s delivery of the certified rent roll required pursuant to Section 4.12 hereof shall not, in and of itself, satisfy the requirements of this subsection (e).

 

(f)                                   Borrower shall notify Lender in writing, within two (2) Business Days following receipt thereof, of Borrower’s receipt of any termination fee or payment (“Lease Event Payment”) paid by any Tenant under any Lease in consideration of any termination, modification or amendment or settlement of any Lease or any release or discharge of any Tenant under any Lease from any obligation thereunder (a “Lease Event”).  Borrower further covenants and agrees that (i) Borrower shall hold any such Lease Event Payment in trust for the benefit of Lender and (ii) (A) in the event such Lease Event Payment is less than $50,000 and such Lease Event does not have a Material Adverse Effect, and provided there is no Event of Default or Cash Trap Event Period then continuing, such Lease Event Payment shall be payable to Borrower or (B) in the event such Lease Event Payment equals or exceeds $50,000, such Lease Event has a Material Adverse Effect, or there is an Event of Default or Cash Trap Event Period then continuing, such Lease Event Payment shall be placed by Borrower in reserve with Lender, to be disbursed by Lender for tenant improvement and leasing commission costs with respect to the Property.

 

(g)                                  Notwithstanding anything to the contrary contained herein, to the extent Lender’s prior approval is required for any leasing matters set forth in this Section 4.14, Lender shall have ten (10) Business Days from receipt of written request and all required information and documentation relating thereto in which to approve or disapprove such matter, provided that such request to Lender is marked in bold lettering with the following language: “LENDER’S RESPONSE IS REQUIRED WITHIN TEN (10) BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER” and the envelope containing the request must be marked “PRIORITY”.  In the event that Lender fails to respond to the leasing matter in question within such time, Lender’s approval shall be deemed given for all purposes.  Borrower shall provide Lender with such information and documentation as may be reasonably required by Lender, including, without limitation, lease comparables and other market information as reasonably required by Lender.  For purposes of clarification, Lender’s requesting additional and/or clarified information, in addition to approving or denying any request (in whole or in part), shall be deemed a response by Lender for purposes of the foregoing.

 

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Section 4.15                            Management Agreement

 

(a)                                 Borrower shall (i) diligently perform, observe and enforce all of the terms, covenants and conditions of the Management Agreement on the part of Borrower to be performed, observed and enforced to the end that all things shall be done which are necessary to keep unimpaired the rights of Borrower under the Management Agreement and (ii) promptly notify Lender of the giving of any notice to Borrower of any default by Borrower in the performance or observance of any of the terms, covenants or conditions of the Management Agreement on the part of Borrower to be performed and observed and deliver to Lender a true copy of each such notice.  Without Lender’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed, Borrower shall not surrender the Management Agreement, consent to the assignment by Manager of its interest under the Management Agreement, or terminate or cancel the Management Agreement or modify, change, supplement, alter or amend the Management Agreement, in any respect, either orally or in writing, and Borrower hereby assigns to Lender as further security for the payment of the Debt and for the performance and observance of the terms, covenants and conditions of this Agreement, all the rights, privileges and prerogatives of Borrower to surrender the Management Agreement or to terminate, cancel, modify, change, supplement, alter or amend the Management Agreement in any respect, and any such surrender of the Management Agreement or termination, cancellation, modification, change, supplement, alteration or amendment of the Management Agreement without the prior consent of Lender shall be void and of no force and effect.

 

(b)                                 If Borrower shall default in the performance or observance of any material term, covenant or condition of the Management Agreement on the part of Borrower to be performed or observed, then, without limiting the generality of the other provisions of this Agreement, and without waiving or releasing Borrower from any of its obligations hereunder, Lender shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of the Management Agreement on the part of Borrower to be performed or observed to be promptly performed or observed on behalf of Borrower, to the end that the rights of Borrower in, to and under the Management Agreement shall be kept unimpaired and free from default.  Lender and any person designated by Lender shall have, and are hereby granted, the right to enter upon the Property at any time and from time to time for the purpose of taking any such action.  If Manager shall deliver to Lender a copy of any notice sent to Borrower of default under the Management Agreement, such notice shall constitute full protection to Lender for any action taken or omitted to be taken by Lender in good faith, in reliance thereon.

 

(c)                                  Borrower shall notify Lender if Manager sub-contracts to a third party or an affiliate any or all of its management responsibilities under the Management Agreement.  Borrower shall, from time to time, use its best efforts to obtain from Manager under the Management Agreement such certificates of estoppel with respect to compliance by Borrower with the terms of the Management Agreement as may be requested by Lender.  Borrower shall exercise each individual option, if any, to extend or renew the term of the Management Agreement upon demand by Lender made at any time within one (1) year of the last day upon which any such option may be exercised, and Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to exercise any such option in the name of and upon behalf of Borrower, which power of attorney shall be irrevocable and shall be deemed to be coupled with 

 

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an interest.  Any sums expended by Lender pursuant to this paragraph shall bear interest at the Default Rate from the date such cost is incurred to the date of payment to Lender, shall be deemed to constitute a portion of the Debt, shall be secured by the lien of the Security Instrument and the other Loan Documents and shall be immediately due and payable upon demand by Lender therefor.

 

(d)                                 Without limitation of the foregoing, if the Management Agreement is terminated pursuant to the Assignment of Management Agreement or for any other reason, then Lender, at its option, may require Borrower to engage, within sixty (60) days of the termination of such Management Agreement and otherwise in accordance with the terms and conditions set forth in the Assignment of Management Agreement, a new manager (the “New Manager”) to manage the Property, which such New Manager shall be a Qualified Manager.  New Manager shall be engaged by Borrower pursuant to a written management agreement that complies with the terms hereof and of the Assignment of Management Agreement and is otherwise satisfactory to Lender in all respects.  New Manager and Borrower shall execute an Assignment of Management Agreement in the form then used by Lender.  Without limitation of the foregoing, if required by Lender, Borrower shall, as a condition precedent to Borrower’s engagement of such New Manager, obtain a Rating Agency Confirmation with respect to such New Manager and management agreement.

 

Section 4.16                            Payment for Labor and Materials

 

(a)                                 Subject to Section 4.16(b), Borrower will promptly pay when due all bills and costs for labor, materials, and specifically fabricated materials incurred in connection with the Property (any such bills and costs, a “Work Charge”) and never permit to exist in respect of the Property or any part thereof any lien or security interest, even though inferior to the liens and the security interests hereof, and in any event never permit to be created or exist in respect of the Property or any part thereof any other or additional lien or security interest other than the liens or security interests created hereby and by the Security Instrument, except for the Permitted Encumbrances.

 

(b)                                 After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the validity of any Work Charge, the applicability of any Work Charge to Borrower or to the Property or any alleged non-payment of any Work Charge and defer paying the same, 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 Law; (iii) neither the Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly upon final determination thereof pay (or cause to be paid) any such contested Work Charge determined to be valid, applicable or unpaid; (v) such proceeding shall suspend the collection of such contested Work Charge from the Property or Borrower shall have paid the same (or shall have caused the same to be paid) under protest; and (vi) Borrower shall furnish (or cause to be furnished) such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure payment of such Work Charge, together with all interest and penalties payable in connection therewith.  Lender may apply any such security

 

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or part thereof, as necessary to pay for such Work Charge at any time when, in the judgment of Lender, the validity, applicability or non-payment of such Work Charge is finally established or the Property (or any part thereof or interest therein) shall be in present danger of being sold, forfeited, terminated, cancelled or lost.

 

Section 4.17                            Performance of Other Agreements

 

Borrower shall observe and perform each and every term to be observed or performed by Borrower pursuant to the terms of any agreement or recorded instrument affecting or pertaining to the Property, or given by Borrower to Lender for the purpose of further securing the Debt and any amendments, modifications or changes thereto.

 

Section 4.18                            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.

 

Section 4.19                            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 or constitute a violation of any state statute, regulation or ruling impacting a Defined Benefit Plan or a governmental plan.

 

(b)                                 Borrower shall 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 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, regulation or ruling regulating investments of, or fiduciary obligations with respect to, governmental plans; and (C) one or more of the following circumstances is true:

 

(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 is held by “benefit plan investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2), as modified by ERISA Section 3(42), disregarding the value of any equity interests in Borrower held by (I) a person (other than a benefit plan investor) who has discretionary authority or control with respect to the assets of Borrower, (II) any person who provides investment advice for a fee (direct or indirect) with respect to the assets of Borrower, or (III) any affiliate of a person described in the immediately preceding clause (I) or (II);

 

(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);

 

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(iv)                              The assets of Borrower are not otherwise “plan assets” of one or more “employee benefit plans” (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, within the meaning of 29 C.F.R. §2510.3-101, as modified by ERISA Section 3(42); or

 

(v)                                 If a state statute, regulation or ruling does apply to transactions by or with Borrower regulating investments of, or fiduciary obligations with respect to, governmental plans, no transactions contemplated by the Loan Documents will violate such statute, regulation or ruling.

 

(c)                                  Borrower shall not maintain, sponsor, contribute to or become obligated to contribute to, or suffer or permit any ERISA Affiliate of Borrower to, maintain, sponsor, contribute to or become obligated to contribute to, any Defined Benefit Plan or Multiemployer Plan, or permit the assets of Borrower to (i) become “plan assets”, whether by operation of law or under regulations promulgated under ERISA or (ii) become subject to any state statute, regulation or ruling regulating investments of, or fiduciary obligations with respect to, governmental plans.

 

Section 4.20                            No Joint Assessment

 

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

 

Section 4.21                            Alterations

 

Lender’s prior approval (which approval shall not be unreasonably withheld or delayed) shall be required in connection with any alterations to any Improvements (a) that may have a Material Adverse Effect, (b) the cost of which (including any related alteration, improvement or replacement) is reasonably anticipated to exceed the Alteration Threshold, or (c) that are structural in nature, except for (x) any alterations performed as a part of a Restoration in accordance with Section 7.4 hereof, and (y) any alterations or tenant improvements being made expressly pursuant to existing Leases that have been reviewed and approved by Lender and (z) any Immediate Repairs.  If the total unpaid amounts incurred and to be incurred with respect to any alterations to the Improvements shall at any time exceed the Alteration Threshold, Borrower shall, to the extent that such amounts are not to be paid from the Replacement Reserve Account, 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: (i) cash, (ii) U.S. Obligations, (iii) other securities acceptable to Lender (provided that Lender shall have received a Rating Agency Confirmation as to the form and issuer of same), or (iv) a completion bond (provided that Lender shall have received a Rating Agency Confirmation as to the form and issuer of same).  Such security shall be in an amount equal to the excess of the total unpaid amounts incurred and to be incurred with respect to such alterations to the Improvements over the Alteration Threshold.  All alterations to any Improvements shall be made lien-free and in a good and workmanlike manner in accordance with all Applicable Laws.

 

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Section 4.22                            REA Covenants

 

Borrower shall (a) promptly perform and/or observe, in all material respects, all of the covenants and agreements required to be performed and observed by it under any REA and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (b) promptly notify Lender of any material default under any REA of which it is aware; (c) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice, report and estimate received by it under any REA; (d) enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed under any REA in a commercially reasonable manner; (e) cause the Property to be operated, in all material respects, in accordance with any REA; and (f) not, without the prior written consent of Lender, (i) enter into any new REA or execute modifications to any existing REA, (ii) surrender, terminate or cancel any REA, (iii) reduce or consent to the reduction of the term of any REA, (iv) increase or consent to the increase of the amount of any charges under any REA, (v) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, any REA in any material respect, or (vi) following the occurrence and during the continuance of an Event of Default, exercise any rights, make any decisions, grant any approvals or otherwise take any action under any REA.

 

Section 4.23                            Material Agreements

 

Borrower shall (a) 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 Material Agreements and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (b) promptly notify Lender of any material default under the Material Agreements of which it is aware; (c) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, notice, report and estimate received by it under the Material Agreements; (d) enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed under the Material Agreements in a commercially reasonable manner; (e) cause the Property to be operated, in all material respects, in accordance with the Material Agreements; and (f) not, without the prior written consent of Lender, (i) enter into any new Material Agreement or execute modifications to any existing Material Agreements, (ii) surrender, terminate or cancel the Material Agreements, (iii) reduce or consent to the reduction of the term of the Material Agreements, (iv) increase or consent to the increase of the amount of any charges  under the Material Agreements, (v) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Material Agreements in any material respect, or (vi) following the occurrence and during the continuance of an Event of Default, exercise any rights, make any decisions, grant any approvals or otherwise take any action under the Material Agreements.

 

Section 4.24                            Immediate Repairs

 

Borrower shall perform the repairs at the Property as set forth on Schedule I hereto (such repairs hereinafter referred to as “Immediate Repairs”) in good and workmanlike manner on or before the date occurring six months from the date hereof; provided that, Lender may, in its sole discretion, extend the respective deadlines for performance of such Immediate Repairs by written notice to Borrower.

 

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Section 4.25                            Regus Estoppel

 

Borrower shall deliver to Lender within ten days of the date hereof an estoppel from the Tenant known as Regus.

 

ARTICLE 5.

 

ENTITY COVENANTS

 

Section 5.1                                   Single Purpose Entity/Separateness

 

(a)                                 Borrower has not and will not:

 

(i)                                     engage in any business or activity other than the ownership, operation and maintenance of the Property, and activities incidental thereto;

 

(ii)                                  acquire or own any assets other than (A) the Property, and (B) such incidental Personal Property as may be necessary for the ownership, leasing, maintenance and operation of the Property;

 

(iii)                               merge into or consolidate with any Person, or, to the fullest extent permitted by law, dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure;

 

(iv)                              fail to observe all organizational formalities, or fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the Applicable Law of the jurisdiction of its organization or formation, or, without the prior written consent of Lender, amend, modify, terminate or fail to comply with the provisions of its organizational documents;

 

(v)                                 own any subsidiary, or make any investment in, any Person;

 

(vi)                              commingle its assets with the assets of any other Person;

 

(vii)                           incur any Indebtedness, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (A) the Debt, (B) trade and operational indebtedness incurred in the ordinary course of business with trade creditors, provided such indebtedness is (1) unsecured, (2) not evidenced by a note, (3) on commercially reasonable terms and conditions, and (4) due not more than ninety (90) days past the date incurred and paid on or prior to such date, and/or (C) Permitted Equipment Leases; provided however, the aggregate amount of the indebtedness described in (B) and (C) shall not exceed at any time three percent (3%) of the outstanding principal amount of the Debt.  No Indebtedness other than the Debt may be secured (subordinate or pari passu) by the Property;

 

(viii)                        fail to maintain all of its books, records, financial statements and bank accounts separate from those of its affiliates and any constituent party.  Borrower’s assets have not and will not be listed as assets on the financial statement of any other Person; 

 

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provided, however, that Borrower’s assets may be included in a consolidated financial statement of its affiliates provided that (i)  appropriate notation shall be made on such consolidated financial statements to indicate the separateness of Borrower and such affiliates and to indicate that Borrower’s assets and credit are not available to satisfy the debts and other obligations of such affiliates or any other Person and (ii) such assets shall be listed on Borrower’s own separate balance sheet.  Borrower has maintained and will maintain its books, records, resolutions and agreements as official records;

 

(ix)                              enter into any contract or agreement with any member, principal or affiliate, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arm’s-length basis with unaffiliated third parties;

 

(x)                                 maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

 

(xi)                              assume or guaranty the debts of any other Person, hold itself out to be responsible for the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person;

 

(xii)                           make any loans or advances to any Person;

 

(xiii)                        fail to file its own tax returns unless prohibited by Applicable Law from doing so (except that Borrower may file or may include its filing as part of a consolidated federal tax return, to the extent required and/or permitted by Applicable Law, provided that there shall be an appropriate notation indicating the separate existence of Borrower and its assets and liabilities);

 

(xiv)                       fail either to hold itself out to the public as a legal entity separate and distinct from any other Person and not as a division or part of any other Person or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

 

(xv)                          fail to 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 (to the extent there exists sufficient net excess cash flow from the Property to do so after the payment of all operating expenses and Debt Service and the foregoing shall not require any equity owner to make additional capital contributions to Borrower);

 

(xvi)                       without the unanimous written consent of all of its partners or members, as applicable, and the consent of each Independent Director (regardless of whether such Independent Director is engaged at the Borrower or SPE Component Entity level), (a) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any Creditors Rights Laws, (b) seek or consent to the appointment of a receiver, liquidator or any similar official, (c) take any action that would reasonably be expected to 

 

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cause Borrower to become insolvent, or (d) make an assignment for the benefit of creditors;

 

(xvii)                    fail to allocate shared expenses (including, without limitation, shared office space) or fail to use separate stationery, invoices and checks;

 

(xviii)                 fail to remain solvent, to pay its own liabilities (including, without limitation, salaries of its own employees) from its own funds or fail to maintain a sufficient number of employees in light of its contemplated business operations (in each case, to the extent there exists sufficient net excess cash flow from the Property to do so); or

 

(xix)                       acquire obligations or securities of its members or other Affiliates, as applicable, or identify its members or other Affiliates, as applicable, as a division or part of it.

 

(b)                                 If Borrower is a limited partnership or a limited liability company (other than an Acceptable LLC), each general partner or managing member (each, an “SPE Component Entity”) shall be a corporation or an Acceptable LLC (I) whose sole asset is its interest in Borrower, (II) which has not been and shall not be permitted to engage in any business or activity other than owning an interest in Borrower; (III) which has not been and shall not be permitted to incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation); and (IV) which has and will at all times own at least a 0.5% direct equity ownership interest in Borrower.  Each such SPE Component Entity will at all times comply, and will cause Borrower to comply, with each of the representations, warranties, and covenants contained in this Article 5 (to the extent applicable) as if such representation, warranty or covenant was made directly by such SPE Component Entity.  Upon the withdrawal or the disassociation of an SPE Component Entity from Borrower, Borrower shall immediately appoint a new SPE Component Entity whose articles of incorporation or organization are substantially similar to those of such SPE Component Entity.

 

(c)                                  In the event Borrower or the SPE Component Entity is an Acceptable LLC, the limited liability company agreement of Borrower or the SPE Component Entity (as applicable) (the “LLC Agreement”) shall provide that (i) upon the occurrence of any event that causes the last remaining member of Borrower or the SPE Component Entity (as applicable) (“Member”) to cease to be a member of Borrower or the SPE Component Entity (as applicable) (other than upon continuation of Borrower without dissolution upon an assignment by Member of all of its limited liability company interest in Borrower or the SPE Component Entity (as applicable) and the admission of the transferee in accordance with the LLC Agreement), any person acting as the Independent Director of Borrower or the SPE Component Entity (as applicable) shall, without any action of any Person and simultaneously with the Member ceasing to be a member of Borrower or the SPE Component Entity (as applicable) automatically be admitted to Borrower or the SPE Component Entity (as applicable) as a member with a 0% economic interest (“Special Member”) and shall continue Borrower or the SPE Component Entity (as applicable) without dissolution and (ii) any Special Member may not resign from Borrower or the SPE Component Entity (as applicable) or transfer its rights as a Special Member unless (A) a successor Special Member has been admitted to Borrower or the SPE Component Entity (as applicable) as a 

 

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Special Member by executing a counterpart to the LLC Agreement and (B) after giving effect to such resignation or transfer, there remains at least one (1) Independent Director of the SPE Component Entity or Borrower (as applicable) in accordance with Section 5.2 below.  The LLC Agreement shall further provide that (i) Special Member shall automatically cease to be a member of Borrower or the SPE Component Entity (as applicable) upon the admission to Borrower or the SPE Component Entity (as applicable) of the first substitute member, (ii) Special Member shall be a member of Borrower or the SPE Component Entity (as applicable) that has no interest in the profits, losses and capital of Borrower or the SPE Component Entity (as applicable) and has no right to receive any distributions of the assets of Borrower or the SPE Component Entity (as applicable), (iii) pursuant to the applicable provisions of the limited liability company act of the State of Delaware (the “Act”), Special Member shall not be required to make any capital contributions to Borrower or the SPE Component Entity (as applicable) and shall not receive a limited liability company interest in Borrower or the SPE Component Entity (as applicable), (iv) Special Member, in its capacity as Special Member, may not bind Borrower or the SPE Component Entity (as applicable) and (v) except as required by any mandatory provision of the Act, Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, Borrower or the SPE Component Entity (as applicable) including, without limitation, the merger, consolidation or conversion of Borrower or the SPE Component Entity (as applicable); provided, however, such prohibition shall not limit the obligations of any Special Member, in its capacity as Independent Director, to vote on such matters required by the Loan Documents or the LLC Agreement.  In order to implement the admission to Borrower or the SPE Component Entity (as applicable) of Special Member, each Person acting as Independent Director shall execute a counterpart to the LLC Agreement.  Prior to its admission to Borrower or the SPE Component Entity (as applicable) as a member, Special Member shall not be a member of Borrower or the SPE Component Entity (as applicable).

 

(d)                                 The LLC Agreement shall further provide that, (i) upon the occurrence of any event that causes the Member to cease to be a member of Borrower or the SPE Component Entity (as applicable) to the fullest extent permitted by law, the personal representative of Member shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of Member in Borrower or the SPE Component Entity (as applicable) agree in writing (A) to continue Borrower or the SPE Component Entity (as applicable) and (B) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of Borrower or the SPE Component Entity (as applicable) effective as of the occurrence of the event that terminated the continued membership of Member in Borrower or the SPE Component Entity (as applicable), (ii) any action initiated by or brought against Member or Special Member under any Creditors Rights Laws shall not cause Member or Special Member to cease to be a member of Borrower or the SPE Component Entity (as applicable) and upon the occurrence of such an event, the business of Borrower or the SPE Component Entity (as applicable) shall continue without dissolution, and (iii) each of Member and Special Member waives any right it might have to agree in writing to dissolve Borrower or the SPE Component Entity (as applicable) upon the occurrence of any action initiated by or brought against Member or Special Member under any Creditors Rights Laws, or the occurrence of an event that causes Member or Special Member to cease to be a member of Borrower or the SPE Component Entity (as applicable).

 

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Section 5.2                                   Independent Director

 

(a)                                 The organizational documents of Borrower (to the extent Borrower is a corporation or an Acceptable LLC) or the SPE Component Entity, as applicable, shall provide that so long as any obligations of the Borrower secured by the Security Instrument remain outstanding and not discharged in full, the Members shall cause the Borrower to have at least one (1) duly appointed member of its board of directors or managers, as applicable (each, an “Independent Director”) who each shall not have been at the time of each such individual’s initial appointment, and (I) shall not have been at any time during the preceding five (5) years, and shall not be at any time while serving as Independent Director, either (i) a shareholder (or other equity owner) of, or an officer, director (other than in its capacity as Independent Director), partner, member (other than Special Member) or employee of, Borrower or any of its respective members, subsidiaries or affiliates, (ii) a customer of, or supplier to, or other Person who derives any of its purchases or revenues from its activities with, Borrower or any of its respective members, subsidiaries or affiliates, (iii) a Person who Controls or is under common Control with any such shareholder, officer, director, partner, member, employee supplier, customer or other Person, or (iv) a member of the immediate family of any such shareholder, officer, director, partner, member, employee, supplier, customer or other Person, and (II) shall be employed by, in good standing with and engaged by Borrower in connection with, in each case, an Approved ID Provider.  Each Independent Director at the time of its initial engagement shall have had at least three (3) years prior experience as an independent director to a company or a corporation in the business of owning and operating commercial properties similar in type and quality to the Property.

 

(b)                                 The organizational documents of Borrower or the SPE Component Entity (as applicable) shall further provide that so long as any obligations of the Borrower secured by the Security Instrument remain outstanding and not discharged in full (I) the board of directors or managers of Borrower or the SPE Component Entity as applicable, and the constituent members of such entities (the “Constituent Members”) shall not take any action which, under the terms of any organizational documents of Borrower or the SPE Component Entity, as applicable, requires the unanimous vote of (1) the board of directors or managers of Borrower or the SPE Component Entity as applicable, or (2) the Constituent Members, unless at the time of such action there shall be at least one (1) Independent Director engaged as provided by the terms hereof; (II) any resignation, removal or replacement of any Independent Director shall not be effective without two (2) Business Days’ prior written notice to Lender accompanied by evidence that the replacement Independent Director satisfies the applicable terms and conditions hereof and of the applicable organizational documents; (III) to the fullest extent permitted by applicable law, including Section 18-1101(c) of the Act and notwithstanding any duty otherwise existing at law or in equity, the Independent Director shall consider only the interests of the Constituent Members and Borrower and any SPE Component Entity (including Borrower’s and any SPE Component Entity’s respective creditors) in acting or otherwise voting on the matters provided for herein and in Borrower’s and SPE Component Entity’s organizational documents (which such fiduciary duties to the extent applicable to the Constituent Members’ and Borrower’s and any SPE Component Entity’s creditors, in each case, shall be deemed to apply solely to the extent of their respective economic interests in Borrower or SPE Component Entity (as applicable) exclusive of (x) all other interests (including, without limitation, all other interests of the Constituent Members), (y) the interests of other affiliates of the Constituent Members, 

 

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Borrower and SPE Component Entity and (z) the interests of any group of affiliates of which the Constituent Members, Borrower or SPE Component Entity is a part); (IV) other than as provided in subsection (III) above, the Independent Director shall not have any fiduciary duties to any Constituent Members, any directors of Borrower or SPE Component Entity or any other Person bound by the organizational documents of Borrower or the SPE Component Entity; (V) the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing under applicable law; (VI) to the fullest extent permitted by applicable law, including Section 18-1101(e) of the Act, an Independent Director shall not be liable to Borrower, SPE Component Entity, any Constituent Member or any other Person bound by the organizational documents of Borrower or the SPE Component Entity for breach of contract or breach of duties (including fiduciary duties), unless the Independent Director acted in bad faith or engaged in willful misconduct; and (VII) no resignation or removal of an Independent Director, and no appointment of a successor Independent Director, shall be effective until such successor shall have executed a counterpart to the LLC Agreement.  In the event of a vacancy in the position of Independent Director, the Members shall, as soon as practicable, appoint a successor Independent Director.  Each Independent Director is a “manager” of the Borrower within the meaning of the Act; however, all right, power and authority of the Independent Directors shall be limited to the extent necessary to exercise those rights and perform those duties specifically set forth in the LLC Agreement and the Independent Directors shall otherwise have no authority to bind the Borrower.

 

Section 5.3                                   Change of Name, Identity or Structure

 

Borrower shall not change (or permit to be changed) Borrower’s or the SPE Component Entity’s (a) name, (b) identity (including its trade name or names), (c) principal place of business set forth on the first page of this Agreement or, (d) except as permitted in Section 6.3 of this Agreement, if not an individual, Borrower’s or the SPE Component Entity’s corporate, partnership or other structure, without notifying Lender of such change in writing at least thirty (30) days prior to the effective date of such change and, in the case of a change in Borrower’s or the SPE Component Entity’s structure, without first obtaining the prior written consent of Lender.  Borrower shall execute and deliver to Lender, prior to or contemporaneously with the effective date of any such change, any financing statement or financing statement change required by Lender to establish or maintain the validity, perfection and priority of the security interest granted herein.  At the request of Lender, Borrower shall execute a certificate in form satisfactory to Lender listing the trade names under which Borrower or the SPE Component Entity intends to operate the Property, and representing and warranting that Borrower or the SPE Component Entity does business under no other trade name with respect to the Property.

 

Section 5.4                                   Business and Operations

 

Borrower will continue to engage in the businesses now conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of the  Property.  Borrower will qualify to do business and will remain in good standing under the laws of the jurisdiction as and to the extent the same are required for the ownership, maintenance, management and operation of the Property.

 

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ARTICLE 6.

 

NO SALE OR ENCUMBRANCE

 

Section 6.1                                   Transfer Definitions

 

For purposes of this Article 6, “Restricted Party” shall mean Borrower, Sponsor, Guarantor, any SPE Component Entity, any Affiliated Manager, or any shareholder, partner, member or non-member manager, or any direct or indirect legal or beneficial owner of Borrower, Sponsor, Guarantor, any SPE Component Entity, any Affiliated Manager or any non-member manager; and a “Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, mortgage, grant, bargain, lien, encumbrance, pledge, assignment, grant of any options with respect to, or any other transfer or disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) a legal or beneficial interest.

 

Section 6.2                                   No Sale/Encumbrance

 

(a)                                 Without the prior written consent of Lender, Borrower shall not cause or permit (i) a Sale or Pledge of the Property or any part thereof or any legal or beneficial interest therein, (ii) a Sale or Pledge of an interest in any Restricted Party or (iii) any change in Control of Borrower, Sponsor, Guarantor, any Affiliated Manager, or any change in control of the day-to-day operations of the Property (collectively, a “Prohibited Transfer”), other than pursuant to (x) Leases of space in the Improvements to Tenants in accordance with the provisions of Section 4.14, (y) any Permitted Encumbrances, and (z) any Permitted Equipment Leases.

 

(b)                                 A Prohibited Transfer shall include, but not be limited to, (i) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments; (ii) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a 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 (A) any Leases or any Rents or (B) any REA or any Material Agreements; (iii) any action for partition of the Property (or any portion thereof or interest therein) or any similar action instituted or prosecuted by Borrower or by any other person or entity, pursuant to any contractual agreement or other instrument or under Applicable Law (including, without limitation, common law); (iv) any other action instituted by (or at the behest of) Borrower or its affiliates or consented to or acquiesced in by Borrower or its affiliates which results in a termination of an REA or any Material Agreements; (v) 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 in one or a series of transactions; (vi) if a Restricted Party is a limited or general partnership or 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 or limited partner or any profits or proceeds relating to such partnership interests or the creation or issuance of new limited partnership interests; (vii) 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 any member or any profits or proceeds relating to such membership 

 

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interest; (viii) 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; or (ix) the incurrence of any property-assessed clean energy loans or similar indebtedness with respect to Borrower or the Property, including, without limitation, such loans or indebtedness that are made or otherwise provided by any Governmental Authority or secured or repaid (directly or indirectly) by any taxes or similar assessments.

 

Section 6.3                                   Permitted Equity Transfers

 

Notwithstanding the restrictions contained in this Article 6, the following equity transfers shall be permitted without Lender’s consent: (a) a transfer (but not a pledge) by devise or descent or by operation of law upon the death of a Restricted Party or any member, partner or shareholder of a Restricted Party, (b) the transfer (but not the pledge), in one or a series of transactions, of the stock, partnership interests or membership interests (as the case may be) in a Restricted Party (including, without limitation, transfers for estate planning purposes), (c) the sale, transfer or issuance of shares of common stock in any Restricted Party that is a publicly traded entity, provided such shares of common stock are listed on the New York Stock Exchange or another nationally recognized stock exchange, and (d) the sale, transfer or issuance of stock in a Restricted Party that is a non-traded public real estate investment trust to third party investors through licensed U.S. broker-dealers in accordance with Applicable Law (provided that the foregoing provisions of clauses (c) and (d) shall not be deemed to waive, qualify or otherwise limit Borrower’s obligation to comply (or to cause the compliance) with the other covenants set forth herein and in the other Loan Documents (including, without limitation, the covenants contained herein relating to ERISA matters)); provided, further, that, with respect only to the transfers listed in clauses (a) and/or (b) above, (A) if such transfer results in any Person owning, directly or indirectly, 20% or more of the interests in the Borrower, and such Person did not own 20% of more of the interests in Borrower prior to such transfer, then (x) Lender shall receive written notice of any transfers pursuant to clause (a) above within ten (10) days of such transfer and (y) Lender shall receive not less than thirty (30) days prior written notice of such transfers in connection with any transfer pursuant to clause (b) above, (B) no such transfers shall result in a change in Control of Sponsor, Guarantor or Affiliated Manager, (C) after giving effect to such transfers, Sponsor shall (I) in the aggregate own (or be the settlor of a trust that owns) at least a 0.62% direct or indirect equity ownership interest in each of Borrower and any SPE Component Entity; (II) Control Borrower and any SPE Component Entity; and (III) control the day-to-day operation of the Property, (D) after giving effect to such transfers, the Property shall continue to be managed by Manager or a New Manager approved in accordance with the applicable terms and conditions hereof, (E) in the case of the transfer of any direct equity ownership interests in Borrower or in any SPE Component Entity, such transfers shall be conditioned upon continued compliance with the relevant provisions of Article 5 hereof, (F) intentionally omitted, and (G) such transfers shall be conditioned upon Borrower’s ability to, after giving effect to the equity transfer in question, (I) remake the representations contained herein relating to ERISA, OFAC and Patriot Act matters (and, upon Lender’s request, Borrower shall deliver to Lender (x) an Officer’s Certificate containing such updated representations effective as of the date of the consummation of the  applicable equity transfer and (y) searches, acceptable to Lender, for any Person owning, directly or indirectly, 20% or more of the interests in the Borrower as a result of such transfer) and (II) continue to comply with the covenants contained herein relating to ERISA OFAC and Patriot Act matters.  Prior to Securitization, upon request from Lender, Borrower 

 

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shall promptly provide Lender a revised version of the organizational chart delivered to Lender in connection with the Loan reflecting any equity transfer consummated in accordance with this Section 6.3; provided that, so long as all equity transfers completed since Borrower’s delivery of the most recent prior updated organizational chart meet the requirements of this Section 6.3, such updated organizational chart will not be required to contain an update to the ownership of the direct and indirect equity interests in Hall Capital III, LP.  Furthermore, in the event of the death or incompetency of any Guarantor, it shall not be an Event of Default hereunder, provided that, a Satisfactory Replacement Guarantor (as defined in the Guaranty) is provided pursuant to the terms of Section 23 of the Guaranty.

 

Section 6.4                                   Permitted Property Transfers (Assumptions)

 

Notwithstanding the foregoing provisions of this Article 6, following the date which is twelve (12) months from the Closing Date, Lender shall not unreasonably withhold, condition or delay consent to the transfer of the Property, on two (2) occasions, in its entirety to, and the related assumptions of the Loan by, any Person (a “Transferee”) provided that, with respect to each such transfer, each of the following terms and conditions are satisfied:

 

(a)                                 no Default or Event of Default has occurred and is continuing;

 

(b)                                 Borrower shall have (i) delivered written notice to Lender of the terms of such prospective transfer not less than forty-five (45) days before the date on which such transfer is scheduled to close and, concurrently therewith, all such information concerning the proposed Transferee as Lender shall reasonably require and (ii) paid to Lender a non-refundable processing fee in the amount of $25,000.  Lender shall have the right to approve or disapprove the proposed transfer based on its then current underwriting and credit requirements for similar loans secured by similar properties which loans are sold in the secondary market, such approval not to be unreasonably withheld.  In determining whether to give or withhold its approval of the proposed transfer, Lender shall consider the experience and track record of Transferee and its principals in owning and operating facilities similar to the Property, the financial strength of Transferee and its principals, the general business standing of Transferee and its principals and Transferee’s and its principals’ relationships and experience with contractors, vendors, tenants, lenders and other business entities; provided, however, that, notwithstanding Lender’s agreement to consider the foregoing factors in determining whether to give or withhold such approval, such approval shall be given or withheld based on what Lender determines to be commercially reasonable and, if given, may be given subject to such conditions as Lender may deem reasonably appropriate;

 

(c)                                  Borrower shall have paid to Lender, concurrently with the closing of such prospective transfer, (i) a non-refundable assumption fee in an amount equal to the greater of (y) (A) three quarters of one percent (0.75%) of the then outstanding principal balance of the Loan for the first transfer and (B) one percent (1%) of the then outstanding principal balance of the Loan for the second transfer or (z) $15,000, (ii) all out-of-pocket costs and expenses, including reasonable attorneys’ fees, incurred by Lender in connection therewith and (iii) all fees, costs and expenses of all third parties and the Rating Agencies incurred in connection therewith;

 

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(d)                                 Transferee assumes and agrees to pay the Debt as and when due subject to the provisions of Article 13 hereof and, prior to or concurrently with the closing of such transfer, Transferee and its constituent partners, members, shareholders, affiliates or sponsors as Lender may require, shall execute, without any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to evidence and effectuate said assumption and an Affiliate of Transferee reasonably acceptable to Lender shall execute a recourse guaranty and an environmental indemnity in form and substance identical to the Guaranty and Environmental Indemnity, respectively, with such changes to each of the foregoing as may be reasonably required by Lender;

 

(e)                                  Borrower and Transferee, without any cost to Lender, shall furnish any information requested by Lender for the preparation of, and shall authorize Lender to file, new financing statements and financing statement amendments and other documents to the fullest extent permitted by Applicable Law, and shall execute any additional documents reasonably requested by Lender;

 

(f)                                   Borrower shall have delivered to Lender, without any cost or expense to Lender, such endorsements to Lender’s Title Insurance Policy insuring that fee simple or leasehold title to the Property, as applicable, is vested in Transferee (subject to Permitted Encumbrances), hazard insurance endorsements or certificates and other similar materials as Lender may deem necessary at the time of the transfer, all in form and substance satisfactory to Lender;

 

(g)                                  Transferee shall have furnished to Lender all appropriate papers evidencing Transferee’s organization and good standing, and the qualification of the signers to execute the assumption of the Debt, which papers shall include certified copies of all documents relating to the organization and formation of Transferee and of the entities, if any, which are partners or members of Transferee.  Transferee and such constituent partners, members or shareholders of Transferee (as the case may be), as Lender shall require, shall comply with the covenants set forth in Article 5 hereof;

 

(h)                                 Transferee shall assume the obligations of Borrower under any Management Agreement or provide a new management agreement with a new manager which meets with the requirements of the Assignment of Management Agreement and Section 4.15 hereof and assign to Lender as additional security such new management agreement;

 

(i)                                     Transferee shall furnish to Lender an opinion of counsel satisfactory to Lender and its counsel (A) that Transferee’s formation documents provide for the matters described in subparagraph (g) above, (B) that the assumption of the Debt has been duly authorized, executed and delivered, and that the assumption agreement and the other Loan Documents are valid, binding and enforceable against Transferee in accordance with their terms, (C) that Transferee and any entity which is a controlling stockholder, member or general partner of Transferee, have been duly organized, and are in existence and good standing, (D) that the transfer will not constitute a “significant modification” of the Loan under Section 1001 of the IRS Code or otherwise cause a tax to be imposed on a “prohibited transaction” by any REMIC Trust and (E) with respect to such other matters as Lender may reasonably request;

 

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(j)                                    if required by Lender, Lender shall have received a Rating Agency Confirmation with respect to such transfer;

 

(k)                                 intentionally omitted;

 

(l)                                     Transferee shall deposit with Lender such new or increased Reserve Funds as Lender may require, including, without limitation, new or increased Reserve Funds for taxes, insurance, tenant improvements and leasing commissions, capital expenditures and immediate repairs, and the amendment of the Loan Documents to require the Transferee to make monthly deposits of such new or increased Reserve Funds for such purposes thereafter; and

 

(m)                             Borrower’s obligations under the contract of sale pursuant to which the transfer is proposed to occur shall expressly be subject to the satisfaction of the applicable terms and conditions of this Section 6.4.

 

Notwithstanding the foregoing or anything herein to the contrary, Borrower may not exercise its rights pursuant to this Section 6.4 during the period that commences on the date that is sixty (60) days prior to the date of any intended Securitization of the Loan and ending on the date that is sixty (60) days after the date of such Securitization of the Loan.

 

Section 6.5                                   Lender’s Rights

 

Lender reserves the right to condition the consent to a Prohibited Transfer requested hereunder upon (a) a modification of the terms hereof and on assumption of this Agreement and the other Loan Documents as so modified by the proposed Prohibited Transfer, (b) payment of a transfer fee of 1% of outstanding principal balance of the Loan and all of Lender’s expenses incurred in connection with such Prohibited Transfer, (c) to the extent required by Lender, receipt of a Rating Agency Confirmation with respect to the Prohibited Transfer, (d) the proposed transferee’s continued compliance with the covenants set forth in this Agreement, including, without limitation, the covenants in Article 5, (e) intentionally omitted, and/or (f) such other conditions and/or legal opinions as Lender shall determine in its sole discretion to be in the interest of Lender.  All expenses incurred by Lender shall be payable by Borrower whether or not Lender consents to the Prohibited Transfer.  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 a Prohibited Transfer without Lender’s consent.  This provision shall apply to every Prohibited Transfer, whether or not Lender has consented to any previous Prohibited Transfer.

 

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ARTICLE 7.

 

INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

 

Section 7.1                                   Insurance

 

(a)                                 Borrower shall obtain and maintain, or cause to be obtained and maintained, insurance for Borrower and the Property providing at least the following coverages:

 

(i)                                     insurance with respect to the Improvements and, if applicable, the Personal Property insuring against any peril now or hereafter included within the “Special” or “All Risks” Causes of Loss form (which shall not exclude fire, lightning, windstorm (including named storms), hail, explosion, riot, civil commotion, aircraft, vehicles and smoke), in each case (A) in an amount equal to 100% of the “Full Replacement Cost,” which for purposes of this Agreement shall mean actual replacement value exclusive of costs of excavations, foundations, underground utilities and footings waiving of depreciation; (B) to be written on a no coinsurance form or containing an agreed amount endorsement with respect to the Improvements and, if applicable, Personal Property waiving all co-insurance provisions; (C) providing for no deductible in excess of $25,000, excluding windstorm and earthquake insurance which may have a deductible of 5% of the total insurable value; (D) at all times insuring against at least those hazards that are commonly insured against under a “Special” or “All Risks” Causes of Loss form of policy, as the same shall exist on the date hereof, and together with any increase in the scope of coverage provided under such form after the date hereof; and (E) providing Law & Ordinance coverage, including Coverage for Loss to the Undamaged Portion of the Building, Demolition Costs and Increased Cost of Construction in amounts acceptable to Lender.  The Full Replacement Cost shall be re-determined from time to time (but not more frequently than once in any twelve (12) calendar months) at the request of Lender by an appraiser or contractor designated and paid by Borrower and approved by Lender, or by an engineer or appraiser in the regular employ of the insurer.  After the first appraisal, additional appraisals may be based on construction cost indices customarily employed in the trade.  No omission on the part of Lender to request any such ascertainment shall relieve Borrower of any of its obligations under this Subsection;

 

(ii)                                  commercial general liability insurance against all claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Property, including “Dram Shop” or other liquor liability coverage if the Borrower sells or distributes alcoholic beverages from the Property, such insurance (A) to be on the so-called “occurrence” form with a general aggregate limit of not less than $2,000,000 and a per occurrence limit of not less than $1,000,000; (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) contractual liability for all insured contracts; and (5) contractual liability covering the indemnities contained in Articles 12 and 13 hereof to the extent the same is available;

 

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(iii)                               loss of rents and/or business interruption insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in Subsections 7.1(a)(i), (iv) and (vi) through (viii); (C) in an amount equal to 100% of the projected gross income from the Property on an actual loss sustained basis for a period beginning on the date of Casualty and continuing until the Restoration of the Property is completed, or the expiration of twelve (12) months, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; the amount of such business interruption/loss of rents insurance shall be determined prior to the Closing Date and at least once each year thereafter based on the greatest of: (x) Borrower’s reasonable estimate of the gross income from the Property and (y) the highest gross income received during the term of the Loan for any full calendar year prior to the date the amount of such insurance is being determined, in each case for the succeeding twelve (12) month period and (D) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements 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 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.  All Net Proceeds payable to Lender pursuant to this Subsection (the “Rent Loss Proceeds”) shall be held by Lender (1) during the continuation of a Cash Trap Event Period, in accordance with the terms of the Cash Management Agreement or (2) otherwise, in an Eligible Account (which shall be deemed to be included within the definition of the “Accounts” hereunder) and shall be applied to the obligations secured hereunder from time to time due and payable hereunder and under the Note; provided, however, that (I) nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured hereunder on the respective dates of payment provided for in the Note except to the extent such amounts are actually paid out of the Rent Loss Proceeds and (II) in the event the Rent Loss Proceeds are paid in a lump sum in advance and Borrower is entitled to disbursement of such Rent Loss Proceeds in accordance with the terms hereof, Lender or Servicer shall hold such Rent Loss Proceeds in a segregated interest-bearing Eligible Account and Lender or Servicer shall estimate the number of months required for Borrower to restore the damage caused by the applicable Casualty, shall divide the applicable aggregate Rent Loss Proceeds by such number of months and shall disburse such monthly installment of Rent Loss Proceeds from such Eligible Account (1) during the continuation of a Cash Trap Event Period, into the Cash Management Account each month during the performance of such Restoration or (2) otherwise, to Borrower after Lender’s deduction therefrom of the amount of Debt Service and deposits into the Reserve Funds then due and payable hereunder;

 

(iv)                              at all times during which structural construction, repairs or alterations are being made with respect to the Improvements and only if the current property and liability coverage forms do not otherwise apply (A) commercial general liability and umbrella liability insurance covering claims related to the construction, repairs or alterations being made at the Property which are not covered by or under the terms or provisions of the commercial general liability and umbrella liability insurance policies required herein; and (B) the insurance provided for in Subsection 7.1(a)(i) written in a so-called builder’s risk completed value form (1) on a non-reporting basis, (2) against all 

 

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risks insured against pursuant to Subsections 7.1(a)(i), (iv) and (vi) through (viii), as applicable, (3) including  permission to occupy the Property, and (4) written on a no coinsurance form or containing an agreed amount endorsement waiving co-insurance provisions;

 

(v)                                 workers’ compensation, subject to the statutory limits of the state in which the Property is located, and employer’s liability insurance with a limit of at least $1,000,000 per accident and per disease per employee, and $1,000,000 for disease aggregate in respect of any work or operations on or about the Property, or in connection with the Property or its operation (if applicable);

 

(vi)                              equipment breakdown/boiler and machinery insurance covering all mechanical and electrical equipment in such amounts as shall be reasonably be required by Lender, on terms and in amounts consistent with the commercial property insurance policy required under Subsection 7.1(a)(i) above or in such other amount as shall be reasonably required by Lender (if applicable to the Property);

 

(vii)                           if any portion of the Improvements is at any time located in an area identified in the Federal Register by the Federal Emergency Management Agency or any successor thereto as an area having special flood hazards pursuant to the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended, or any successor law (the “Flood Insurance Acts”), flood hazard insurance in an amount equal to “Full Replacement Cost”, which shall include, without limitation, the maximum limit of coverage available for the Property under the Flood Insurance Acts; provided, that, the insurance provided pursuant to this clause (vii) shall be on terms consistent with the “All Risk” insurance policy required in Section 7.1(a)(i) above;

 

(viii)                        intentionally omitted;

 

(ix)                              umbrella liability insurance in an amount not less than $10,000,000 per occurrence on terms consistent with the commercial general liability insurance policy required under subsection (ii) above;

 

(x)                                 insurance against employee dishonesty in amounts acceptable to Lender (if applicable to the Property and Borrower);

 

(xi)                              auto liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of One Million and No/100 Dollars ($1,000,000) (if applicable); and

 

(xii)                           such other insurance and in such 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 Property located in or around the region in which the Property is located.

 

(b)                                 All insurance provided for in Subsection 7.1(a) hereof shall be obtained under valid and enforceable policies (the “Policies” or in the singular, the “Policy”), in such forms and, 

 

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from time to time after the date hereof, in such amounts as may be satisfactory to Lender, issued by financially sound and responsible insurance companies authorized to do business in the state in  which the Property is located and approved by Lender.  The insurance companies must have a financial strength rating of “A” or better and a financial size category of “VIII” or better by A.M. Best Company, Inc., or a rating of (i) “A-” or better by S&P, and (ii) if Moody’s rates the insurance company and is designated by Lender in connection with the Securitization, “A3” or better by Moody’s (each such insurer shall be referred to below as a “Qualified Insurer”).  Not less than fifteen (15) days prior to the expiration dates of the Policies theretofore furnished to Lender pursuant to Subsection 7.1(a), Borrower shall deliver carrier-issued binders and certificates of the renewal Policies, and thereafter, complete copies of the Policies when issued.  Upon renewal of the Policies, Borrower shall deliver, if such payment is not made from the Insurance Reserve Account, evidence satisfactory to Lender of payment of the premiums due thereunder (the “Insurance Premiums”).

 

(c)                                  Except to the extent required pursuant to Section 7.1(a) hereof, Borrower shall not obtain (or permit to be obtained) (i) any umbrella or blanket liability or casualty Policy unless, in each case, such Policy is approved in advance in writing by Lender and Lender’s interest is included therein as provided in this Agreement and such Policy is issued by a Qualified Insurer, or (ii) separate insurance concurrent in form or contributing in the event of loss with that required in Subsection 7.1(a) to be furnished by, or which may be reasonably required to be furnished by, Borrower.  In the event Borrower obtains (or causes to be obtained) separate insurance or an umbrella or a blanket Policy, Borrower shall notify Lender of the same and shall cause complete copies of each Policy to be delivered as required in Subsection 7.1(a).  Any umbrella or blanket Policy remains subject to review and approval by Lender based on the schedule of locations and values.

 

(d)                                 All Policies of insurance provided for or contemplated by Subsection 7.1(a) shall name Borrower as the named insured and, in the case of liability policies, except for the Policies referenced in Subsection 7.1(a)(v) and (xi), shall name Lender as additional insured, as their respective interests may appear, and in the case of property coverages, including but not limited to the all-risk/special form coverage, rent loss, business interruption, terrorism, boiler and machinery, earthquake and flood insurance, shall name Lender as mortgagee/lender’s loss payable by a standard noncontributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender.

 

(e)                                  All property Policies of insurance provided for in Subsection 7.1(a) shall provide that:

 

(i)                                     no (A) act, failure to act, violation of warranties, declarations or conditions, or negligence by Borrower, or anyone acting for Borrower, or by any Tenant under any Lease or other occupant, (B) occupancy or use of the Property for purposes more hazardous than those permitted, (C) foreclosure or similar action by Lender, or (D) 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;

 

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(ii)                                  the Policy shall not be cancelled without at least thirty (30) days’ written notice to Lender;

 

(iii)                               each Policy shall provide that (A) the issuers thereof shall give written notice to Lender if the Policy has not been renewed ten (10) days prior to its expiration and (B) Lender is permitted to make payments to effect the continuation of such Policy upon notice of cancellation due to non-payment of Insurance Premiums; and

 

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

 

Additionally, Borrower further covenants and agrees to promptly send to Lender any notices of non-renewal or cancellation it receives from the insurer with respect to the Policies required pursuant to this Section 7.1.

 

(f)                                   Borrower shall furnish to Lender, on or before thirty (30) days after the close of each of Borrower’s fiscal years, a statement certified by Borrower or a Responsible Officer of Borrower of the amounts of insurance maintained in compliance herewith, of the risks covered by such insurance and of the insurance company or companies which carry such insurance and, if requested by Lender, verification of the adequacy of such insurance by an independent insurance broker or appraiser acceptable to Lender.

 

(g)                                  If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right, without notice to Borrower to take such action as Lender deems necessary to protect its interest in the Property, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate and, unless sufficient funds are available in the Insurance Reserve Account and no Event of Default has occurred and is continuing, all expenses 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 Security Instrument and shall bear interest at the Default Rate.

 

(h)                                 In the event of a foreclosure of the Security Instrument or other transfer of title to the Property in extinguishment in whole or in part of the Debt, all right, title and interest of Borrower in and to the Policies then in force concerning the Property and all proceeds payable thereunder shall thereupon vest exclusively in Lender or the purchaser at such foreclosure or other transferee in the event of such other transfer of title.

 

(i)                                     As an alternative to the Policies required to be maintained pursuant to the preceding provisions of this Section 7.1, Borrower will not be in default under this Section 7.1 if Borrower maintains (or causes to be maintained) Policies which (i) have coverages, deductibles and/or other related provisions other than those specified above and/or (ii) are provided by insurance companies not meeting the credit ratings requirements set forth above (any such Policy, a “Non-Conforming Policy”), provided, that, prior to obtaining such Non-Conforming Policies (or permitting such Non-Conforming Policies to be obtained), (1) Borrower shall have received Lender’s prior written consent thereto and (2) if required by Lender, confirmed that

 

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Lender has received a Rating Agency Confirmation with respect to any such Non-Conforming Policy.

 

(j)                                    The property, loss of rents/business interruption, general liability and umbrella liability insurance policies required in this Section 7.1 shall not exclude Terrorism Coverage (defined below) (such insurance policies, the “Applicable Policies”).  Such Terrorism Coverage shall comply with each of the applicable requirements for Policies set forth above (including, without limitation, those relating to deductibles); provided that, Lender, at Lender’s option, may reasonably require Borrower to obtain or cause to be obtained the Terrorism Coverage with higher deductibles than set forth above.  As used above, “Terrorism Coverage” shall mean insurance for acts of terror or similar acts of sabotage; provided, that, for so long as the Terrorism Risk Insurance Act of 2002, as extended and modified by the Terrorism Risk Insurance Program Authorization Act of 2007 (as the same may be further modified, amended, or extended, “TRIPRA”) (i) remains in full force and effect and (ii) continues to cover both foreign and domestic acts of terror, the provisions of TRIPRA shall determine what is deemed to be included within this definition of “Terrorism Coverage.”

 

Section 7.2                                   Casualty

 

If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give prompt notice of such damage to Lender and shall promptly commence and diligently prosecute the completion of the repair and restoration of the Property as nearly as possible to the condition the Property was in immediately prior to such Casualty, with such alterations as may be reasonably approved by Lender (a “Restoration”) and otherwise in accordance with Section 7.4.  Borrower shall pay 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.

 

Section 7.3                                   Condemnation

 

Borrower shall promptly give Lender notice of the actual or threatened commencement of any proceeding for the Condemnation of the Property of which Borrower has knowledge 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 shall, at its 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.  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 the Property or any portion thereof is taken by a condemning authority, Borrower shall promptly commence and diligently prosecute the Restoration of the Property and otherwise comply with the provisions of 

 

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Section 7.4.  If the 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.

 

Section 7.4                                   Restoration

 

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

 

(a)                                 If the Net Proceeds shall be less than the Restoration Threshold and the costs of completing the Restoration shall be less than the Restoration Threshold, the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided that all of the conditions set forth in Section 7.4(b)(i) 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 the Restoration Threshold or the costs of completing the Restoration are equal to or greater than the Restoration Threshold, Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 7.4.

 

(i)                                     The Net Proceeds shall be made available 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 thirty percent (30%) of each of (i) the fair market value of the Property as reasonably determined by Lender, and (ii) the rentable area of the Property has been damaged, destroyed or rendered unusable as a result of a Casualty or (2) in the event the Net Proceeds are condemnation proceeds, less than ten percent (10%) of each of (i) the fair market value of the Property as reasonably determined by Lender and (ii) the rentable area of the Property is taken, such land is located along the perimeter or periphery of the Property, no portion of the Improvements is located on such land, and such taking does not materially impair the existing access to the Property;

 

(C)                               Leases demising in the aggregate a percentage amount equal to or greater than 75% of the total rentable space in the Property which has been demised under executed and delivered Leases in effect as of the date of the occurrence of such fire or other casualty or taking, 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 Casualty or Condemnation, whichever the case may be, and Borrower furnishes to Lender evidence satisfactory to Lender that all Tenants under 

 

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Major Leases shall continue to operate their respective space at the Property after the completion of the Restoration;

 

(D)                               Borrower shall commence the Restoration as soon as reasonably practicable (but in no event later than thirty (30) days after the issuance of a building permit with respect thereto) and shall diligently pursue the same to satisfactory completion in compliance with all Applicable Laws, in all material respects, including, without limitation, all applicable Environmental Laws;

 

(E)                                Lender shall be satisfied that any operating deficits which will be incurred with respect to the Property as a result of the occurrence of any such fire or other casualty or taking will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Section 7.1(a)(iii) above, or (3) by other funds of Borrower;

 

(F)                                 Lender shall be satisfied that, upon the completion of the Restoration, the fair market value and cash flow of the Property will not be less than the fair market value and cash flow of the Property as the same existed immediately prior to the applicable Casualty or Condemnation (assuming the affected portion of the Property is relet within a reasonable period after the date of such Casualty or Condemnation);

 

(G)                               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 expiration of the insurance coverage referred to in Section 7.1(a)(iii) above, (3) such time as may be required under applicable zoning law, ordinance, rule or regulation in order to repair and restore the Property to the condition it was in immediately prior to such fire or other casualty or taking, or (4) the earliest date required for such completion under the terms of any Material Agreements or REA;

 

(H)                              the Property and the use thereof after the Restoration will be in compliance with and permitted under any REA, any Material Agreements and all Applicable Law;

 

(I)                                   the Restoration shall be done and completed in an expeditious and diligent fashion and in compliance with any REA, any Material Agreements and all Applicable Law; and

 

(J)                                   Lender shall be satisfied that making the Net Proceeds available for Restoration shall be permitted pursuant to REMIC Requirements.

 

(ii)                                  The Net Proceeds shall be held by Lender and, until disbursed in accordance with the provisions of this Section 7.4(b), shall constitute additional security for the Debt and other obligations under this Agreement, the Security Instrument, the Note and the other Loan Documents.  The Net Proceeds (other than the Rent Loss 

 

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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 related Restoration item 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 reasonable acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the “Casualty Consultant”), which approval shall not be unreasonably withheld, conditioned or delayed.  All such plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration shall be assigned to Lender as additional collateral for the Loan and Lender shall have the use of the same.  The identity of the contractors, subcontractors and materialmen engaged in the Restoration shall be subject to prior review and reasonable acceptance by Lender and the Casualty Consultant.  All 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 fees, shall be paid by Borrower.  Borrower shall have the right to settle all claims under the Policies jointly with Lender, provided that (a) no Event of Default exists, (b) Borrower promptly and with commercially reasonable diligence negotiates a settlement of any such claims and (c) the insurer with respect to the Policy under which such claim is brought has not raised any act of the insured as a defense to the payment of such claim.  If an Event of Default exists, Lender shall, at its election, have the exclusive right to settle or adjust any claims made under the Policies in the event of a Casualty.

 

(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 Restoration Retainage.  The term “Restoration Retainage” as used in this Section 7.4(b) shall mean an amount equal to 10% of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until such time as the Casualty Consultant certifies to Lender that Net Proceeds representing 50% of the required Restoration have been disbursed.  There shall be no Restoration Retainage with respect to costs actually incurred by Borrower for work in place in completing the last 50% of the required Restoration.  The Restoration Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 7.4(b), be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration.  The Restoration 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 7.4(b) and that all approvals necessary for the re-occupancy and use of the Property have been obtained from all appropriate 

 

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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 Restoration Retainage, provided, however, that Lender will release the portion of the Restoration 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, and 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 insuring the lien of the Security Instrument.  If required by Lender, the release of any such portion of the Restoration Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or 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 reasonable 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 7.4(b) shall constitute additional security for the Debt and other obligations under this Agreement, the Security Instrument, the Note and the other Loan Documents.

 

(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 7.4(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 remitted by Lender to Borrower, provided no Event of Default shall have occurred and shall be continuing under this Agreement, the Security Instrument, the Note 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 7.4(b)(vii) shall be retained and applied by Lender toward the payment of the Debt whether or not then due and payable, but without the application of the Yield Maintenance Premium or any other prepayment premium, in such order, priority and proportions as Lender in its discretion shall deem proper.  If Lender shall receive and retain Net Proceeds, the lien of the Security Instrument shall be reduced only by the amount thereof received and retained by Lender and actually applied by Lender in reduction of the Debt.

 

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(d)                                 Notwithstanding the foregoing provisions of this Section 7.4 or anything herein to the contrary, this Section 7.4 is subject to the terms of Section 11.3 hereof to the extent applicable with respect to any Casualty or Condemnation.

 

ARTICLE 8.

 

RESERVE FUNDS

 

Section 8.1                                   Tax Reserve Funds

 

(a)                                 On the Closing Date, Borrower shall deposit with Lender the amount of $84,518 and Borrower shall deposit on each Monthly Payment Date an amount equal to one-twelfth (1/12th) of the Taxes that Lender estimates will be payable during the next ensuing twelve (12) months in order to accumulate sufficient funds to pay all such Taxes at least ten (10) days prior to their respective due dates in order to take advantage of any prepayment discount available from the local taxing authorities (the “Monthly Tax Deposit”).  Amounts deposited pursuant to this Section 8.1 are referred to herein as the “Tax Reserve Funds”.  The initial estimated Monthly Tax Deposit shall be $28,172. If at any time Lender reasonably determines that the Tax Reserve Funds will not be sufficient to pay the Taxes, Lender shall notify Borrower of such determination and the monthly deposits for Taxes shall be increased by the amount that Lender estimates is sufficient to make up the deficiency at least ten (10) days prior to the respective due dates for the Taxes in order to take advantage of any prepayment discount available from the local taxing authorities; provided that if Borrower receives notice of any deficiency after the date that is ten (10) days prior to the date that Taxes are due, Borrower will deposit such amount within three (3) Business Days after its receipt of such notice.  All Tax Reserve Funds shall be held by Lender or Servicer in an Eligible Account (the “Tax Reserve Account”) which, during the continuation of a Cash Trap Event Period, may be a sub-account of the Cash Management Account.

 

(b)                                 So long as no Event of Default has occurred and is continuing, Lender shall apply the Tax Reserve Funds to payments of Taxes in order to take advantage of any prepayment discount available from the local taxing authorities.  In making any payment relating to Taxes, Lender may do so according to any bill, statement or estimate procured from the appropriate public office (with respect to Taxes) 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 Reserve Funds shall exceed the amounts due for Taxes, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Tax Reserve Funds.  Any Tax Reserve Funds remaining after the Debt has been paid in full shall be returned to Borrower.

 

Section 8.2                                   Insurance Reserve Funds

 

(a)                                 On the Closing Date, Borrower shall deposit with Lender the amount of $9,005 and Borrower shall deposit on each Monthly Payment Date an amount equal to one-twelfth (1/12th) 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 sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration of the 

 

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Policies (the “Monthly Insurance Deposit”).  The initial estimated Monthly Insurance Deposit shall be $4,501. Amounts deposited pursuant to this Section 8.2 are referred to herein as the “Insurance Reserve Funds”. If at any time Lender reasonably determines that the Insurance Reserve Funds will not be sufficient to pay the Insurance Premiums, Lender shall notify Borrower of such determination and the monthly deposits for Insurance Premiums shall be increased by the amount that Lender  estimates is sufficient to make up the deficiency at least thirty (30) days prior to expiration of the Policies.  All Insurance Reserve Funds shall be held by Lender or Servicer in an Eligible Account (the “Insurance Reserve Account”) which, during the continuation of a Cash Trap Event Period, may be a sub-account of the Cash Management Account.

 

(b)                                 So long as no Event of Default has occurred and is continuing, Lender shall apply the Insurance Reserve Funds to payment of Insurance Premiums.  In making any payment relating to Insurance Premiums, Lender may do so according to any bill, statement or estimate procured from the insurer or its agent, without inquiry into the accuracy of such bill, statement or estimate.  If the amount of the Insurance Reserve Funds shall exceed the amounts due for Insurance Premiums, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Insurance Reserve Funds.  Any Insurance Reserve Funds remaining after the Debt has been paid in full shall be returned to Borrower.

 

(c)                                  Notwithstanding the foregoing, Borrower shall not be required to make the Monthly Insurance Deposit as set forth above, provided that (i) no Event of Default shall have occurred and be continuing, (ii) the Policies maintained by Borrower covering the Property are part of a blanket or umbrella policy approved by Lender in its reasonable discretion pursuant to Section 7.1 hereof, including, without limitation, approval of the schedule of locations and values, (iii) Borrower provides Lender evidence of renewal of such Policies pursuant to Section 7.1 hereof, and (iv) Borrower provides Lender paid receipts for the payment of the Insurance Premiums by no later than ten (10) Business Days prior to the expiration dates of the Policies.  Borrower shall immediately commence making all Monthly Insurance Deposits, as required pursuant to this Section 8.2, within five (5) days of receipt of notice from Lender of Borrower’s failure to comply with items (i), (ii), (iii) or (iv) above, which such notice shall instruct Borrower to immediately commence making all Monthly Insurance Deposits.

 

Section 8.3                                   Intentionally Omitted

 

Section 8.4                                   Replacement Reserve Funds

 

(a)                                 Borrower shall deposit with Lender on each Monthly Payment Date an amount equal to $3,521 (the “Replacement Reserve Monthly Deposit”) for the Replacements; provided, however, that so long as no Event of Default occurs and the Property is being adequately maintained (as reasonably determined by Lender based on annual site inspections), Borrower shall only be required to make a Replacement Reserve Monthly Deposit on any Monthly Payment Date to the extent that the amount of funds on deposit in the Replacement Reserve Account (minus any pending disbursements therefrom) is less than $250,000.00.  Amounts deposited pursuant to this Section 8.4 are referred to herein as the “Replacement Reserve Funds”.  All Replacement Reserve Funds shall be held by Lender or Servicer in an 

 

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Eligible Account (the “Replacement Reserve Account”) which, during the continuation of a Cash Trap Event Period, may be a sub-account of the Cash Management Account.

 

(b)                                 Lender shall disburse Replacement Reserve Funds only for Replacements.  Provided no Event of Default has occurred and is continuing, Lender shall disburse Replacement Reserve Funds to Borrower within fifteen (15) Business Days after the delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least the Minimum Disbursement Amount (or a lesser amount if the total amount of the Replacement Reserve Funds is less than the Minimum Disbursement Amount, in which case only one disbursement of the amount remaining shall be made), accompanied by the following items (which items shall be in form and substance reasonably satisfactory to Lender):  (i) an Officer’s Certificate (A) stating that the items to be funded by the requested disbursement are Replacements, (B) stating that all Replacements at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with all Applicable Law, (C) identifying each Person that supplied materials or labor in connection with the Replacements to be funded by the requested disbursement, (D) stating that each such Person has been paid in full or will be paid in full upon such disbursement or, if such payment is a progress payment, that such payment represents full payment to such Person, less any applicable retention amount, for work completed through the date of the relevant invoice from such Person, (E) stating that the Replacements (or relevant portion thereof) to be funded have not been the subject of a previous disbursement, and (F) stating that all previous disbursements of for Replacements have been used to pay the previously identified Replacements, (ii) as to any completed Replacement, a copy of any license, permit or other approval by any Governmental Authority required, if any, in connection with the Replacement and not previously delivered to Lender, (iii) copies of appropriate lien waivers (or conditional lien waivers) or other evidence of payment satisfactory to Lender, (iv) at Lender’s option if the cost of any individual Replacement exceeds $50,000, a title search for the Property indicating that the Property is free from all Liens, claims and other encumbrances not previously approved by Lender, (v) at Lender’s option, if the cost of any individual Replacement exceeds $50,000, Lender shall have received a report satisfactory to Lender in its reasonable discretion from an architect or engineer approved by Lender in respect of such architect or engineer’s inspection of the applicable Replacement, and (vi) such other evidence as Lender shall reasonably request to demonstrate that the Replacements to be funded by the requested disbursement have been completed (or completed to the extent of the requested payment) and are paid for or will be paid upon such disbursement to Borrower.

 

(c)                                  Nothing in this Section 8.4 shall (i) make Lender responsible for making or completing the Replacements; (ii) require Lender to expend funds in addition to the Replacement Reserve Funds to complete any Replacements; (iii) obligate Lender to proceed with the Replacements; or (iv) obligate Lender to demand from Borrower additional sums to complete any Replacements.

 

(d)                                 Borrower shall permit Lender and Lender’s agents and representatives (including, without limitation, Lender’s engineer, architect, or inspector) or third parties to enter onto the Property during normal business hours upon reasonable advance notice (subject to the rights of Tenants under their Leases) to inspect the progress of any Replacements and all materials being used in connection therewith and to examine all plans and shop drawings relating to such Replacements.  Borrower shall cause all contractors and subcontractors to cooperate with Lender 

 

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or Lender’s representatives or such other Persons described above in connection with inspections described in this Section.

 

(e)                                  In addition to any insurance required under the Loan Documents, Borrower shall provide or cause to be provided workmen’s compensation insurance, builder’s risk, and public liability insurance and other insurance to the extent required under Applicable Law in connection with the Replacements.  All such policies shall be in form and amount reasonably satisfactory to Lender.

 

Section 8.5                                   Leasing Reserve Funds

 

(a)                                 Borrower shall deposit with Lender on each Monthly Payment Date the sum of $8,803 (the “Leasing Reserve Monthly Deposit”) for tenant improvements and leasing commissions that may be incurred following the date hereof.  Amounts deposited pursuant to this Section 8.5 are referred to herein as the “Leasing Reserve Funds”.  All Leasing Reserve Funds shall be held by Lender or Servicer in an Eligible Account (the “Leasing Reserve Account”) which, during the continuation of a Cash Trap Event Period, may be a sub-account of the Cash Management Account.

 

(b)                                 Provided no Event of Default has occurred and is continuing, Lender shall disburse Leasing Reserve Funds to Borrower for Qualified Leasing Expenses, within fifteen (15) Business Days after the delivery by Borrower to Lender of a request therefor (but not more often than once per month), in increments of at least the Minimum Disbursement Amount (or a lesser amount if the total amount of Leasing Reserve Funds is less than the Minimum Disbursement Amount, in which case only one disbursement of the amount remaining shall be made), accompanied by the following items (which items shall be in form and substance satisfactory to Lender):  (i) an Officer’s Certificate (A) stating that all Qualified Leasing Expenses at the Property to be funded by the requested disbursement have been completed in a good and workmanlike manner and in accordance with all Applicable Law, (B) identifying each Person that supplied materials or labor in connection with the Qualified Leasing Expenses to be funded by the requested disbursement, (C) stating that each such Person has been paid in full or will be paid in full upon such disbursement, or if such payment is a progress payment, that such payment represents full payment to such Person, less any applicable retention amount, for work completed through the date of the relevant invoice from such Person, (D) stating that the Qualified Leasing Expenses to be funded have not been the subject of a previous disbursement, and (E) stating that all previous disbursements for Qualified Leasing Expenses have been used to pay the previously identified Qualified Leasing Expenses, (ii) as to any completed Qualified Leasing Expenses, a copy of any license, permit or other approval by any Governmental Authority required, if any, in connection with the Qualified Leasing Expenses and not previously delivered to Lender, (iii) copies of appropriate lien waivers or conditional lien waivers (except in the case of disbursements or reimbursements for leasing or brokerage commissions), or other evidence of payment satisfactory to Lender, (iv) at Lender’s option if the cost of any Qualified Leasing Expense exceeds $50,000, a title search for the Property indicating that the Property is free from all Liens, claims and other encumbrances not previously approved by Lender, (v) if required by Lender, an estoppel certificate from the applicable Tenant in form and substance reasonably acceptable to Lender and (vi) such other evidence as Lender shall reasonably request to demonstrate that the Qualified Leasing Expenses to be funded by the requested disbursement 

 

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have been completed (or completed to the extent of the requested payment) and are paid for or will be paid upon such disbursement to Borrower.

 

Section 8.6                                   The Accounts Generally

 

(a)                                 All Reserve Funds shall be held in Eligible Accounts.  Borrower grants to Lender a first-priority perfected security interest in each of the Reserve Funds and all sums now or hereafter deposited in the Reserve Funds 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.  The provisions of this Section 8.6 are intended to give Lender and/or Servicer “control” of the Reserve Funds within the meaning of the UCC.  Borrower acknowledges and agrees that the Reserve Funds are subject to the sole dominion, control and discretion of Lender, its authorized agents or designees, subject to the terms hereof, and Borrower shall have no right of withdrawal with respect to any Reserve Funds except with the prior written consent of Lender or as otherwise provided herein.  The Reserve Funds shall not constitute trust funds and may be commingled with other monies held by Lender.

 

(b)                                 Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in the Reserve Funds or permit any lien 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.  Lender shall have the right to file a financing statement or statements under the UCC in connection with any of the Reserve Funds with respect thereto in the form required to properly perfect Lender’s security interest therein.  Borrower agrees that at any time and from time to time, at the expense of Borrower, Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary or desirable, or that Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to any Reserve Funds.

 

(c)                                  Notwithstanding anything to the contrary contained herein or in any other Loan Document, upon the occurrence and during the continuance of an Event of Default, without notice from Lender or Servicer (i) Borrower shall have no rights in respect of the Reserve Funds and (ii) Lender shall have all rights and remedies with respect to the Accounts and the amounts on deposit therein and the Reserve Funds as described in this Agreement, the Cash Management Agreement and in the Security Instrument, in addition to all of the rights and remedies available to a secured party under the UCC, and, notwithstanding anything to the contrary contained in this Agreement, the Cash Management Agreement or in the Security Instrument, may apply the Reserve Funds as Lender determines in its sole discretion including, but not limited to, payment of the Debt.

 

(d)                                 The insufficiency of Reserve Funds on deposit with Lender shall not absolve Borrower of 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.

 

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(e)                                  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 Reserve Funds, the sums deposited therein or the performance of the obligations for which the Reserve Funds were established, except to the extent arising from the gross negligence or willful misconduct of Lender, its agents or employees.  Borrower shall assign to Lender all rights and claims Borrower may have against all Persons 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)                                   Interest accrued, if any, on the Reserve Funds, other than on the Interest Bearing Reserve Funds, shall not be required to be remitted to any Account and may instead be retained by Lender.  Reserve Funds that are Interest Bearing Reserve Funds shall be held in an interest-bearing account.  In no event shall Lender or any Servicer be required to select any particular interest-bearing account or the account that yields the highest rate of interest, provided that selection of the account shall be consistent with the general standards at the time being utilized by Lender or such Servicer, as applicable, in establishing similar accounts for loans of comparable type.  All such interest that so becomes part of the applicable Interest Bearing Reserve Funds shall be disbursed in accordance with the disbursement procedures contained herein applicable to such Interest Bearing Reserve Funds; provided, however, that Lender may, at its election, retain any such interest for its own account during the occurrence and continuance of an Event of Default.

 

(g)                                  Borrower acknowledges and agrees that it solely shall be, and shall at all times remain, liable to Lender or Servicer for all fees, charges, costs and expenses in connection with the Reserve Funds, this Agreement and the enforcement hereof, including, without limitation, any monthly or annual fees or charges as may be assessed by Lender or Servicer (but excluding monthly servicing fees to the Servicer and any fees or expenses required to be borne by, and not reimbursable to, Servicer) in connection with the administration of the Accounts and the Reserve Funds and the reasonable fees and expenses of legal counsel to Lender and Servicer as needed to enforce, protect or preserve the rights and remedies of Lender and/or Servicer under this Agreement.

 

Section 8.7                                   Major Tenant TI/LC Reserve Funds

 

Borrower shall deposit with Lender on the date hereof $71,923 and on each Monthly Payment Date the sum of $8,803 (the “Major Tenant TI/LC Reserve Monthly Deposit”) for tenant improvements and leasing commissions that may be incurred in connection with the Major Tenant Space following the date hereof.  Amounts deposited pursuant to this Section 8.7 are referred to herein as the “Major Tenant TI/LC Reserve Funds”.  All Major Tenant TI/LC Reserve Funds shall be held by Lender or Servicer in an Eligible Account (the “Major Tenant TI/LC Reserve Account”) which, during the continuation of a Cash Trap Event Period, may be a sub-account of the Cash Management Account.  Provided no Event of Default has occurred and is continuing, Lender shall disburse Major Tenant TI/LC Reserve Funds to Borrower for Qualified Leasing Expenses incurred in connection with the Major Tenant Space pursuant to the terms and conditions of Section 8.5 hereof as if the same were Leasing Reserve Funds.  In the 

 

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event that (i) a Major Tenant Lease Renewal Event or a Major Tenant Re-Tenanting Event occurs and (ii) no Event of Default or other Cash Trap Event Period is then continuing, Lender shall permit Borrower to request and utilize Major Tenant TI/LC Reserve Funds pursuant to the terms and conditions of Section 8.5(b) hereof as if such funds were Leasing Reserve Funds.

 

Section 8.8                                   Existing TI/LC Obligations Reserve Funds

 

Borrower shall deposit with Lender on the date hereof $161,432, representing the tenant improvements and leasing commissions which are payable by Borrower under existing Leases at the Property.  Amounts deposited pursuant to this Section 8.8 are referred to herein as the “Existing TI/LC Reserve Funds”.  Provided no Event of Default has occurred and is continuing, Lender shall disburse Existing TI/LC Reserve Funds as set forth on Schedule V attached hereto to Borrower for the applicable tenant improvement and leasing commission costs pursuant to the terms and conditions of Section 8.5(b) hereof as if the same were Leasing Reserve Funds.  All Existing TI/LC Reserve Funds shall be held by Lender or Servicer in an Eligible Account (the “Existing TI/LC Reserve Account”) which, during the continuation of a Cash Trap Event Period, may be a sub-account of the Cash Management Account.

 

Section 8.9                                   Rent Concession Reserve Funds

 

Borrower shall deposit with Lender on the date hereof $70,737, representing the amount of future rent credits or abatements under existing Leases (the “Rent Concession Reserve Funds”).  So long as no Event of Default has occurred and is continuing, Lender shall disburse all Rent Concession Reserve Funds to Borrower on the Monthly Payment Date occurring in February, 2016.  All Rent Concession Reserve Funds shall be held by Lender or Servicer in an Eligible Account (the “Rent Concession Reserve Account”) which, during the continuation of a Cash Trap Event Period, may be a sub-account of the Cash Management Account.

 

ARTICLE 9.

 

CASH MANAGEMENT AGREEMENT

 

Section 9.1                                   Springing Cash Management Provisions

 

The terms of Exhibit B are hereby incorporated into this Section 9.1 as if the same were set forth in this Section in their entirety.

 

ARTICLE 10.

 

EVENTS OF DEFAULT; REMEDIES

 

Section 10.1                            Event of Default

 

The occurrence of any one or more of the following events shall constitute an “Event of Default”:

 

(a)                                 if Borrower shall fail to (i) pay when due (A) any sums which by the express terms of this Agreement and the other Loan Documents require immediate or prompt payment 

 

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without any grace period, (B) any monthly Debt Service and any amount required to be paid into the Reserve Funds or (C) sums which are payable on the Maturity Date, or (ii) pay within five (5) days when due any other sums payable under this Agreement or any of the other Loan Documents;

 

(b)                                 if any of the Taxes or Other Charges is not paid when the same is due and payable except to the extent sums sufficient to pay such Taxes and Other Charges have been deposited with Lender in accordance with the terms of this Agreement and Lender’s access to such sums is not restricted or constrained in any manner;

 

(c)                                  if the Policies are not kept in full force and effect or if evidence of the same is not delivered to Lender as provided in Section 7.1 hereof, except to the extent sums sufficient to pay the related Insurance Premiums have been deposited with Lender in accordance with the terms of this Agreement and Lender’s access to such sums is not restricted or constrained in any manner;

 

(d)                                 if any of the representations or covenants contained in Article 5 hereof are breached or violated; provided, however, if (1) Lender determines that such breach of covenant or representation (i) was not made in bad faith, (ii) is capable of being cured, (iii) is not material and (iv) Lender would not be prejudiced by permitting Borrower to cure the same, and (2) at the request of Lender, Borrower provides a non-consolidation opinion addressing such breach, Lender will permit Borrower (30) days after written notice thereof to cure such misrepresentation or breach of warranty before it becomes an Event of Default hereunder;

 

(e)                                  if any of the representations or covenants contained in Article 6 hereof are breached or violated;

 

(f)                                   if any representation or warranty of, or with respect to, Borrower, Sponsor, Guarantor or any member, general partner, principal or beneficial owner of any of the foregoing, made herein, in the Guaranty or in the Environmental Indemnity or in any other guaranty, or in any certificate, report, financial statement or other instrument or document furnished to Lender shall have been false or misleading in any material adverse respect when made;

 

(g)                                  if (i) Borrower, any SPE Component Entity, Sponsor or Guarantor shall commence any case, proceeding or other action (A) under any Creditors Rights Laws seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Borrower or any managing member or general partner of Borrower, any SPE Component Entity, Sponsor or Guarantor shall make a general assignment for the benefit of its creditors; (ii) there shall be commenced against Borrower or any managing member or general partner of Borrower, any SPE Component Entity, Sponsor or Guarantor any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of ninety (90) days; (iii) there shall be commenced against Borrower, any SPE Component Entity, Sponsor or Guarantor any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order for any such relief which shall not have 

 

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been vacated, discharged, or stayed or bonded pending appeal within ninety (90) days from the entry thereof; (iv) Borrower, any SPE Component Entity, Sponsor or Guarantor shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Borrower, any SPE Component Entity, Sponsor or Guarantor shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due;

 

(h)                                 if Borrower shall be in default beyond applicable notice and grace periods under any other mortgage, deed of trust, deed to secure debt or other security agreement covering any part of the Property whether it be superior or junior in lien to the Security Instrument;

 

(i)                                     subject to Borrower’s right to contest pursuant to Sections 4.5(b) and 4.16(b)  hereof, if the Property becomes subject to any mechanic’s, materialman’s or other lien other than a lien for any Taxes not then due and payable and the lien shall remain undischarged of record (by payment, bonding or otherwise) for a period of thirty (30) days;

 

(j)                                    if any federal tax lien is filed against Borrower, any SPE Component Entity, Sponsor, Guarantor or the Property and same is not discharged of record (by payment, bonding or otherwise) within forty-five (45) days after same is filed;

 

(k)                                 if Borrower shall fail to comply with the covenants in Article 15 or otherwise fails to deliver to Lender, within ten (10) days after request by Lender, the estoppel certificates required by Section 4.13(a) or (c) hereof;

 

(l)                                     if any default occurs under any guaranty or indemnity executed in connection herewith (including, without limitation, the Environmental Indemnity and/or the Guaranty) and such default continues after the expiration of applicable grace periods, if any;

 

(m)                             intentionally omitted;

 

(n)                                 if Borrower shall fail to deliver to Lender within thirty (30) days after request by Lender any Required Financial Item;

 

(o)                                 if Borrower defaults under the Management Agreement beyond the expiration of applicable notice and grace periods, if any, thereunder or if the Management Agreement is canceled, terminated or surrendered or expires pursuant to its terms, unless in such case either (i) Borrower shall enter into a new management agreement with a Qualified Manager in accordance with the applicable terms and provisions hereof or (ii) Lender has notified Borrower that it has opted, pursuant to the terms of Section 4.15(d), not to require Borrower to engage a new Qualified Manager to manage the Property;

 

(p)                                 if any representation and/or covenant herein relating to ERISA matters is breached;

 

(q)                                 if (i) Borrower shall fail (beyond any applicable notice or grace period) to pay any charges payable under any REA or Material Agreements as and when payable thereunder, (ii) Borrower defaults under any REA or Material Agreements beyond the expiration of applicable notice and grace periods, if any, thereunder, (iii) any REA or Material Agreements are 

 

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amended, supplemented, replaced, restated or otherwise modified without Lender’s prior written consent or if Borrower consents to a transfer of any party’s interest thereunder without Lender’s prior written consent, or (iv) any REA or Material Agreements and/or the estate created thereunder is canceled, rejected, terminated, surrendered or expires pursuant to its terms, unless in such case Borrower enters into a replacement thereof in accordance with the applicable terms and provisions hereof;

 

(r)                                    intentionally omitted;

 

(s)                                   if Borrower shall continue to be in default under any term, covenant or condition of this Agreement not specified in subsections (a) through (r) above or not otherwise specifically specified as an Event of Default herein, (i) for more than ten (10) days after notice from Lender, in the case of any default which can be cured by the payment of a sum of money or (ii) for thirty (30) days after notice from Lender, in the case of any other default, provided that if such default cannot reasonably be cured within such thirty (30) day period and 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 so long as it shall require Borrower in the exercise of due diligence to cure such default, it being agreed that no such extension shall be for a period in excess of one hundred twenty (120) days (subject to further extension by Lender, in Lender’s sole discretion); and/or

 

(t)                                    if there shall be default under any of the other Loan Documents beyond any applicable cure periods contained in such Loan Documents, whether as to Borrower or the Property, or if any other such event shall occur or condition shall exist, if the effect of such 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.

 

Section 10.2                            Remedies

 

(a)                                 Upon the occurrence and during the continuance of an Event of Default (other than an Event of Default described in Section 10.1(g) above with respect to Borrower and SPE Component Entity only) and at any time thereafter Lender may, in addition to any other rights or remedies available to it pursuant to this Agreement, the Security Instrument, the Note and the other Loan Documents or at law or in equity, take such action, without notice or demand, that Lender deems advisable to protect and enforce its rights against Borrower and in the Property, 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 this Agreement, the Security Instrument, the Note and the other Loan Documents against Borrower and the Property, including, without limitation, all rights or remedies available at law or in equity. Upon any Event of Default described in Section 10.1(g) above (with respect to Borrower and SPE Component Entity only), the Debt and all other obligations of Borrower under this Agreement, the Security Instrument, the Note and 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 the Security Instrument, the Note and the other Loan Documents to the contrary notwithstanding.

 

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(b)                                 Upon the occurrence and during the continuance of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement, the Security Instrument, the Note or 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 this Agreement, the Security Instrument, the Note or the other Loan Documents with respect to the Property.  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 Applicable Law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by Applicable Law, equity or contract or as set forth herein or in the Security Instrument, the Note or the other Loan Documents.  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.

 

(c)                                  Upon the occurrence and during the continuance of an Event of Default, Lender shall have the right from time to time to partially foreclose the Security Instrument in any manner and for any amounts secured by the Security Instrument 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 the Security Instrument 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 the Security Instrument to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Security Instrument as Lender may elect.  Notwithstanding one or more partial foreclosures, the Property shall remain subject to the Security Instrument to secure payment of sums secured by the Security Instrument and not previously recovered.

 

(d)                                 Upon the occurrence and during the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, security instruments 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.  Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to, upon the occurrence and during the continuance of an Event of Default, 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 

 

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power until three (3) days after notice has been given to Borrower by Lender of Lender’s intent to exercise its rights under such power.  Borrower shall not 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.

 

(e)                                  Any amounts recovered from the Property or any other collateral for the Loan after an Event of Default may be applied by Lender toward the payment of any interest and/or principal of the Loan and/or any other amounts due under the Loan Documents in such order, priority and proportions as Lender in its sole discretion shall determine.

 

(f)                                   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 or being deemed to have cured any Event of Default hereunder, make, do or perform any obligation of Borrower hereunder in such manner and to such extent as Lender may deem necessary.  Lender is authorized to enter upon the Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the Property for such purposes, and the cost and expense thereof (including reasonable attorneys’ fees to the extent permitted by Applicable Law), with interest as provided in this Section, shall constitute a portion of the Debt and shall be due and payable to Lender upon demand.  All such costs and expenses incurred by Lender in remedying such Event of Default or such failed payment or act or in appearing in, defending, or bringing any action or proceeding shall bear interest at the Default Rate, for the period after such cost or expense was incurred through and including the date of payment to Lender.  All such costs and expenses incurred by Lender together with interest thereon calculated at the Default Rate shall be deemed to constitute a portion of the Debt and be secured by the liens, claims and security interests provided to Lender under the Loan Documents and shall be immediately due and payable upon demand by Lender therefor.

 

ARTICLE 11.

 

SECONDARY MARKET

 

Section 11.1                            Securitization

 

(a)                                 Lender shall have the right (i) to sell or otherwise transfer the Loan or any portion thereof as a whole loan, (ii) to sell participation interests in the Loan or (iii) to securitize the Loan or any portion thereof in a single asset securitization or a pooled loan securitization.  The transaction referred to in clauses (i), (ii) and (iii) above shall hereinafter be referred to collectively as “Secondary Market Transactions” and the transactions referred to in clause (iii) shall hereinafter be referred to as a “Securitization”.  Any certificates, notes or other securities issued in connection with a Securitization are hereinafter referred to as “Securities”.

 

(b)                                 If requested by Lender, Borrower shall assist Lender in satisfying the market standards to which Lender customarily adheres or which may be reasonably required in the marketplace or by the Rating Agencies in connection with any Secondary Market Transactions, 

 

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at Borrower’s cost and expense (such expense not to exceed $5,000 in the aggregate during the term of the Loan), including, without limitation, to:

 

(i)                                     (A) provide updated financial and other information with respect to the Property, the business operated at the Property, Borrower, Guarantor, Sponsor and Manager, (B) provide updated budgets relating to the Property and (C) provide updated appraisals, market studies, environmental reviews (Phase I’s and, if appropriate, Phase II’s), property condition reports and other due diligence investigations of the Property (the “Updated Information”), together, if customary, with appropriate verification of the Updated Information through letters of auditors or opinions of counsel acceptable to Lender and the Rating Agencies;

 

(ii)                                  provide opinions of counsel, which may be relied upon by Lender, the Rating Agencies and their respective counsel, agents and representatives, as to matters of Delaware and federal bankruptcy law relating to limited liability companies or any other opinion customary in Secondary Market Transactions or required by the Rating Agencies with respect to the Property and Borrower and Borrower’s Affiliates, which counsel and opinions shall be satisfactory in form and substance to Lender and the Rating Agencies;

 

(iii)                               provide updated, as of the closing date of the Secondary Market Transaction, representations and warranties made in the Loan Documents and such additional representations and warranties as the Rating Agencies may require; and

 

(iv)                              execute such amendments to the Loan Documents and Borrower’s or any SPE Component Entity’s organizational documents as may be reasonably requested by Lender or requested by the Rating Agencies or otherwise to effect the Securitization including, without limitation, bifurcation of the Loan into two or more components and/or separate notes and/or creating a senior/subordinate note structure (any of the foregoing, a “Loan Bifurcation”); provided, however, that Borrower shall not be required to modify or amend any Loan Document if such modification or amendment would change the interest rate, the stated maturity or the amortization of principal set forth in the Note, except in connection with a Loan Bifurcation which may result in varying fixed interest rates and amortization schedules, but which shall have the same initial weighted average coupon of the original Note.

 

(c) Upon request, Borrower shall furnish to Lender from time to time such financial data and financial statements as Lender determines to be necessary, advisable or appropriate for complying with any Applicable Law (including those applicable to Lender or any Servicer (including, without limitation and to the extent applicable, Regulation AB)) within the timeframes necessary, advisable or appropriate in order to comply with such Applicable Law.

 

Section 11.2                            Securitization Indemnification

 

(a)                                 Borrower understands that information provided to Lender by Borrower and its agents, counsel and representatives may be included in disclosure documents in connection with the Securitization, including, without limitation, an offering circular, a prospectus, prospectus supplement, private placement memorandum or other offering document (each, a “Disclosure 

 

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Document”) and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and may be made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers relating to the Securitization.

 

(b)                                 Borrower shall indemnify Lender and its officers, directors, partners, employees, representatives, agents and affiliates against any losses, claims, damages or liabilities (collectively, the “Liabilities”) to which Lender and/or its officers, directors, partners, employees, representatives, agents and/or affiliates may become subject in connection with any information furnished to Lender by or at the direction of Borrower in connection with the underwriting or closing of the Loan or in connection with the preparation of any Disclosure Document, including, without limitation, financial statements of Borrower, operating statements and rent rolls with respect to the Property (collectively, the “Provided Information”), which Provided Information was furnished to the Rating Agencies in connection with issuing, monitoring and/or maintaining the Securities (“Covered Rating Agency Information”), insofar as such Liabilities arise out of or are based upon any untrue statement of any material fact in the Provided Information and/or arise out of or are based upon the omission to state a material fact in the Provided Information required to be stated therein or necessary in order to make the statements in the applicable Disclosure Document and/or Covered Rating Agency Information, in light of the circumstances under which they were made, not misleading.

 

(c)                                  The liabilities and obligations of Borrower under this Section 11.2 shall survive the termination of this Agreement and the satisfaction and discharge of the Debt.

 

Section 11.3                            REMIC Savings Clause

 

Notwithstanding anything herein to the contrary, if the Loan is included in a REMIC Trust and, immediately following a release of any portion of the real property relating to the Property, the ratio of the unpaid principal balance of the Loan to the value of the remaining real property relating to the Property is greater than 125% (such value to be determined, in Lender’s sole discretion, by any commercially reasonable method permitted to a REMIC Trust and it being agreed and acknowledged that such loan-to-value determination shall be based on the value of only real property and shall exclude any personal property or going-concern value, if any), the principal balance of the Loan must be paid down by Borrower by an amount sufficient to satisfy REMIC Requirements, unless the Lender receives an opinion of counsel that the Loan will not fail to maintain its status as a “qualified mortgage” within the meaning of Section 860G(a)(3)(A) of the IRS Code as a result of the related release of lien.

 

Section 11.4                            Servicer

 

At the option of Lender, the Loan may be serviced by a servicer/trustee selected by Lender (the “Servicer”) and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to such servicer/trustee pursuant to a servicing agreement between Lender and such Servicer; provided, however, Borrower shall not be obligated to pay any monthly servicing fees to such Servicer or any fees or expenses required to be borne by, and not reimbursable to, Servicer.

 

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Section 11.5                            Rating Agency Costs

 

In connection with any Rating Agency Confirmation or other Rating Agency consent, approval or review required hereunder (other than the initial review of the Loan by the Rating Agencies in connection with a Securitization), Borrower shall pay all of the costs and expenses of Lender, Servicer and each Rating Agency in connection therewith, and, if applicable, shall pay any fees imposed by any Rating Agency in connection therewith.

 

ARTICLE 12.

 

INDEMNIFICATIONS

 

Section 12.1                            General Indemnification

 

Except to the extent arising solely from the gross negligence or willful misconduct of any Indemnified Party, its agents or employees, Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all actual Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (b) any use, nonuse or condition in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (c) performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof; (d) any failure of the Property to be in compliance with any Applicable Law; (e) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease; (f) the payment of any commission, charge or brokerage fee to anyone (other than a broker or other agent retained by Lender) which may be payable in connection with the funding of the Loan evidenced by the Note and secured by the Security Instrument; and/or (g) the holding or investing of the funds on deposit in the Accounts or the performance of any work or the disbursement of funds in each case in connection with the Reserve Funds.  Any amounts payable to Indemnified Parties by reason of the application of this Section 12.1 shall become immediately due and payable and shall bear interest at the Default Rate from the date loss or damage is sustained by Indemnified Parties until paid.

 

Section 12.2                            Mortgage and Intangible Tax and Transfer Tax Indemnification

 

Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to (a) any tax on the making and/or recording of the Security Instrument, the Note or any of the other Loan Documents (whether due upon the making of same or upon the exercise of its remedies under the Loan Documents), and (b) any transfer tax incurred by Indemnified Parties in connection with the exercise of remedies hereunder or under any other Loan Documents.

 

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Section 12.3                            ERISA Indemnification

 

Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys’ fees and costs incurred in the investigation, defense, and settlement of Losses incurred in correcting any prohibited transaction or in the sale of a prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that may be  required, in Lender’s sole discretion) that Indemnified Parties may incur, directly or indirectly, as a result of a default under Sections 3.7 or 4.19 of this Agreement.

 

Section 12.4                            Duty to Defend, Legal Fees and Other Fees and Expenses

 

Upon written request by any Indemnified Party, Borrower shall defend such Indemnified Party (if requested by any Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals approved by the Indemnified Parties.  Notwithstanding the foregoing, any Indemnified Parties may, in their sole discretion, engage their own attorneys and other professionals to defend or assist them, and, at the option of Indemnified Parties, their attorneys shall control the resolution of any claim or proceeding.  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.

 

Section 12.5                            Survival

 

The obligations and liabilities of Borrower under this Article 12 shall fully survive indefinitely notwithstanding any termination, satisfaction, assignment, entry of a judgment of foreclosure, exercise of any power of sale, or delivery of a deed in lieu of foreclosure of the Security Instrument.

 

Section 12.6                            Environmental Indemnity

 

Simultaneously herewith, Borrower and Guarantor have executed and delivered the Environmental Indemnity to Lender, which Environmental Indemnity is not secured by the Security Instrument.

 

ARTICLE 13.

 

EXCULPATION

 

Section 13.1                            Exculpation

 

(a)                                 Notwithstanding any provision in this Agreement and the other Loan Documents to the contrary, 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 Security Instrument or the other Loan Documents by any action or proceeding wherein a money judgment or any deficiency judgment or other judgment establishing personal liability shall be sought against Borrower or any principal, director, officer, employee, beneficiary, shareholder, partner, member, trustee, agent, or Affiliate of Borrower (but 

 

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specifically excluding Guarantor with respect to its obligations under the Guaranty and the Environmental Indemnity Agreement) or any legal representatives, successors or assigns of any of the foregoing (collectively, the “Exculpated Parties”), 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 Security Instrument and the other Loan Documents, or in the Property, the Rents, or any other collateral given to Lender pursuant to the Loan Documents; provided, however, that, except as specifically provided in this  Section 13.1, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower’s interest in the Property, in the Rents and in any other collateral given to Lender, and Lender, by accepting the Note, this Agreement, the Security Instrument and the other Loan Documents, shall not sue for, seek or demand any deficiency judgment against Borrower or any of the Exculpated Parties in any such action or proceeding under or by reason of or under or in connection with the Note, this Agreement, the Security Instrument or the other Loan Documents.  The provisions of this Section shall not, however, (1) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (2) impair the right of Lender to name Borrower as a party defendant in any action or suit for foreclosure and sale under the Security Instrument; (3) affect the validity or enforceability of any indemnity, guaranty or similar instrument (including, without limitation, the indemnities set forth in Sections 12.2 and 12.3 hereof, Section 11.2 hereof, in the Guaranty and in the Environmental Indemnity) made in connection with the Loan or any of the rights and remedies of Lender thereunder; (4) impair the right of Lender to seek the appointment of a receiver; (5) impair the enforcement of the assignment of leases and rents contained in the Security Instrument; (6) intentionally omitted; (7) constitute a prohibition against Lender to seek a deficiency judgment against Borrower if necessary in order to fully realize the security granted by the Security Instrument or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against the Property; or (8) 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 Losses incurred by Lender (including attorneys’ fees and costs reasonably incurred) arising out of or in connection with any of the following:

 

(i)                                     fraud or intentional misrepresentation or any intentional failure to disclose a material fact by Borrower, any SPE Component Entity, Guarantor, Sponsor, or any Borrower Party in connection with the Loan;

 

(ii)                                  the gross negligence or willful misconduct of Borrower, any SPE Component Entity, Guarantor, Sponsor, or any Borrower Party in connection with the Loan or the commission of a criminal act by Borrower, any SPE Component Entity, Guarantor, Sponsor or any Borrower Party which results in any seizure or forfeiture of the Property, or any portion thereof, or Borrower’s interest therein;

 

(iii)                               material physical waste to the Property caused by the intentional acts or intentional omissions of Borrower, any SPE Component Entity, Guarantor, Sponsor, or any Borrower Party (including, without limitation, any arson or abandonment of the Property) and/or the removal or disposal of any portion of the Property after an Event of Default by Borrower, any SPE Component Entity, Guarantor, Sponsor or any Borrower 

 

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Party, unless any personal property that is removed or disposed of is replaced with personal property of the same utility and the same or greater value;

 

(iv)                              the misapplication, misappropriation or conversion by Borrower of (A) any insurance proceeds paid by reason of any loss, damage or destruction to the Property, (B) any Awards or other amounts received in connection with the Condemnation of all or a portion of the Property, (C) any Rents or (D) any Tenant security deposits or Rents collected in advance, except to the extent any such security deposits were applied in accordance with applicable Leases;

 

(v)                                 failure to pay any Taxes or Other Charges, charges for labor or materials or any other charges that can create liens on any portion of the Property to the extent that the net excess cash flow from the Property is sufficient to pay such amounts (other than (x) amounts deposited with Lender as Tax Reserve Funds for Taxes or Other Charges where Lender elects not to apply such funds toward payment of such Taxes or Other Charges owed or (y) Taxes or Other Charges owed or charges for labor or materials or any other charges that can create liens on any portion of the Property that are contested strictly in accordance with the terms of the Loan Documents);

 

(vi)                              failure to maintain insurance as required by this Agreement to the extent that the net excess cash flow from the Property is sufficient to pay the Insurance Premiums relating thereto (other than the failure to pay amounts deposited with Lender as Insurance Reserve Funds for Insurance Premiums to be paid to maintain such insurance where Lender elects not to apply such funds toward payment of such Insurance Premiums);

 

(vii)                           the breach of any representation, warranty, covenant or indemnification provision in the Environmental Indemnity, this Agreement or in the Security Instrument concerning Environmental Laws and Hazardous Substances;

 

(viii)                        any fees or commissions paid by Borrower after the occurrence of any Event of Default to Guarantor, Sponsor and/or any Affiliate of Borrower, Guarantor and/or Sponsor in violation of the terms of the Note, this Agreement, the Security Instrument or the other Loan Documents;

 

(ix)                              Borrower’s breach of, or failure to comply with, the representations, warranties and covenants contained in Sections 11.2, 12.2 and 12.3 hereof;

 

(x)                                 Borrower fails to appoint a new property manager upon the request of Lender as required by, and in accordance with the terms and provisions of, this Agreement, the Assignment of Management Agreement and the other Loan Documents or Borrower appoints a new property manager or replaces the property manager other than in accordance with the terms of this Agreement, the Assignment of Management Agreement and the other Loan Documents;

 

(xi)                              any representation, warranty or covenant contained in Article 5 hereof is violated or breached; provided, however, that any such breach or violation with respect to 

 

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Article 5 shall not result in recourse liability hereunder unless such breach was material and Borrower fails to cure such breach within fifteen (15) days of notice from Lender;

 

(xii)                           any litigation or other legal proceeding related to the Debt filed in bad faith by Borrower, any SPE Component Entity, Guarantor, Sponsor or any Borrower Party solely to delay, oppose, impede, obstruct, hinder, enjoin or otherwise interfere with or frustrate the efforts of Lender to exercise any rights and remedies available to Lender as provided herein and in the other Loan Documents; and/or

 

(xiii)                        any defaults or other material issues raised by the Tenant known as Regus in the estoppel delivered to Lender pursuant to Section 4.25 hereof.

 

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 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 in the event that: (i) any representation, warranty or covenant contained in Article 5 hereof is violated or breached and such breach results in the substantive consolidation of Borrower with any other Person; (ii) any representation, warranty or covenant contained in Article 6 hereof is violated or breached; (iii) Borrower or any SPE Component Entity files a voluntary petition under the Bankruptcy Code or any other Creditors Rights Laws; (iv) an Affiliate, officer, director, or representative which Controls, directly or indirectly, Borrower or any SPE Component Entity files, or joins in the filing of, an involuntary petition against Borrower or any SPE Component Entity under the Bankruptcy Code or any other Creditors Rights Laws, or solicits or causes to be solicited petitioning creditors for any involuntary petition against Borrower or any SPE Component Entity from any Person; (v) Borrower or any SPE Component Entity files 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 Creditors Rights Laws, or solicits or causes to be solicited petitioning creditors for any involuntary petition from any Person; (vi) any Affiliate, officer, director, or representative which Controls Borrower or any SPE Component Entity consents to or acquiesces in or joins in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower, any SPE Component Entity or any portion of the Property; (vii) Borrower or any SPE Component Entity makes an assignment for the benefit of creditors or admits in any legal proceeding its insolvency or inability to pay its debts as they become due; (viii) there is substantive consolidation of Borrower or any SPE Component Entity with any other Person in connection with any federal or state bankruptcy proceeding involving the Guarantor or any of its Affiliates; (ix) Borrower or any SPE Component Entity contests or opposes any motion made by Lender to obtain relief from the automatic stay or seeks to reinstate the automatic stay in the event of any federal or state bankruptcy or insolvency proceeding involving the Guarantor or its Affiliates; or (x) Borrower fails to provide a fully-executed Deposit Account Control Agreement and a fully-executed Cash Management Agreement in accordance with Section 9.1 hereof within thirty (30) days from receipt of written notice from Lender that a Cash Trap Event Period has commenced (the “Initial Cash Management Notice”), and such failure continues for an additional thirty (30) days after Borrower’s receipt of 

 

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an additional written notice from Lender notifying Borrower that it has failed to comply with the Initial Cash Management Notice.

 

Section 13.2                            Survival

 

The obligations and liabilities of Borrower under this Article 13 shall fully survive indefinitely notwithstanding any termination, satisfaction, assignment, entry of a judgment of foreclosure, exercise of any power of sale, or delivery of a deed in lieu of foreclosure of the Security Instrument.

 

ARTICLE 14.

 

NOTICES

 

Section 14.1                            Notices

 

All notices or other written communications hereunder shall be deemed to have been properly given (a) upon delivery, if delivered in person or by facsimile transmission with receipt acknowledged by the recipient thereof and confirmed by telephone by sender, (b) one (1) Business Day after having been deposited for overnight delivery with any reputable overnight courier service, or (c) three (3) Business Days after having been deposited in any post office or mail depository regularly maintained by the U.S.  Postal Service and sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

 

If to Borrower:                                                                                                               Chase Corporate Center, LLC
 c/o Priam Capital
 201 Fourth Avenue North
 Nashville, Tennessee 37219
 Attention:  Abhishek Mathur

 

With a copy to:                                                                                                            Stites & Harbison PLLC
 400 West Market Street
 Suite 1800
 Louisville, Kentucky  40202
 Attention:  Greg Ehrhard
 Facsimile No.:  502-779-8291

 

If to Lender:                                                                                                                           Wells Fargo Bank, National Association
 Wells Fargo Center
 1901 Harrison Street, 2nd Floor
 MAC A0227-020
 Oakland, California 94612
 Attention:  Commercial Mortgage Servicing
 Facsimile No.:  866-359-5352

 

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With a copy to:                                                                                                            Winstead PC
 201 North Tryon Street
 Suite 2000
 Charlotte, North Carolina 28202
 Attention:  Jeffrey J. Lee
 Facsimile No.:  704-339-1701

 

or addressed as such party may from time to time designate by written notice to the other parties.

 

Either party by notice to the other may designate additional or different addresses for subsequent notices or communications.

 

ARTICLE 15.

 

FURTHER ASSURANCES

 

Section 15.1                            Replacement Documents

 

Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note, this Agreement or any of the other Loan Documents which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of the Note, this Agreement or such other Loan Document, Borrower will issue, in lieu thereof, a replacement thereof, dated the date of the Note, this Agreement or such other Loan Document, as applicable, in the same principal amount thereof and otherwise of like tenor.

 

Section 15.2                            Recording of Security Instrument, etc

 

Borrower forthwith upon the execution and delivery of the Security Instrument and thereafter, from time to time, will cause the Security Instrument and any of the other Loan Documents creating a lien or security interest or evidencing the lien hereof upon the Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect and perfect the lien or security interest hereof upon, and the interest of Lender in, the Property.  Borrower will pay all taxes, filing, registration or recording fees, and all expenses incident to the preparation, execution, acknowledgment and/or recording of the Note, the Security Instrument, this Agreement, the other Loan Documents, any note, deed of trust or mortgage supplemental hereto, any security instrument with respect to the Property and any instrument of further assurance, and any modification or amendment of the foregoing documents, and all federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of the Security Instrument, any deed of trust or mortgage supplemental hereto, any security instrument with respect to the Property or any instrument of further assurance, and any modification or amendment of the foregoing documents, except where prohibited by Applicable Law so to do.

 

Section 15.3                            Further Acts, etc

 

Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every further acts, deeds, conveyances, deeds of trust, 

 

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mortgages, assignments, notices of assignments, transfers and assurances as Lender shall, from time to time, reasonably require, for the better assuring, conveying, assigning, transferring, and confirming unto Lender the property and rights hereby mortgaged, deeded, granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and transferred or intended now or hereafter so to be, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out the intention or facilitating the performance of the terms of this Agreement or for filing, registering or recording the Security Instrument, or for complying with all Applicable Law.  Borrower, on demand, will execute and deliver, and in the event it shall fail to so execute and deliver, hereby authorizes Lender to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements to evidence more effectively the security interest of Lender in the Property.  Borrower grants to Lender an  irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Lender at law and in equity, including without limitation, such rights and remedies available to Lender pursuant to this Section 15.3.

 

Section 15.4                            Changes in Tax, Debt, Credit and Documentary Stamp Laws

 

(a)                                 If any law is enacted or adopted or amended after the date of this Agreement which deducts the Debt from the value of the Property for the purpose of taxation and which imposes a tax, either directly or indirectly, on the Debt or Lender’s interest in the Property, Borrower will pay the tax, with interest and penalties thereon, if any.  If Lender is advised by counsel chosen by it that the payment of tax by Borrower would be unlawful or taxable to Lender or unenforceable or provide the basis for a defense of usury then Lender shall have the option by written notice of not less than ninety (90) days to declare the Debt immediately due and payable, but without the application of the Yield Maintenance Premium or any other prepayment premium if no Event of Default has occurred and is then continuing.

 

(b)                                 Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against the Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Property, or any part thereof, for real estate tax purposes by reason of the Security Instrument or the Debt.  If such claim, credit or deduction shall be required by Applicable Law, Lender shall have the option, by written notice of not less than ninety (90) days, to declare the Debt immediately due and payable.

 

(c)                                  If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, the Security Instrument, or any of the other Loan Documents or impose any other tax or charge on the same, Borrower will pay for the same, with interest and penalties thereon, if any.

 

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ARTICLE 16.

 

WAIVERS

 

Section 16.1                            Remedies Cumulative; Waivers

 

The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement, the Security Instrument, the Note 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.

 

Section 16.2                            Modification, Waiver in Writing

 

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

 

Section 16.3                            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 under this Agreement, the Security Instrument, the Note or the other Loan Documents, 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 Security Instrument, the Note or the other Loan Documents, 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 Security Instrument, the Note and the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.

 

Section 16.4                            Waiver of Trial by Jury

 

TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND LENDER, BY ACCEPTANCE OF THIS AGREEMENT, HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY 

 

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JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THIS AGREEMENT, THE NOTE, THE SECURITY INSTRUMENT OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER OR BORROWER.

 

Section 16.5                            Waiver of Notice

 

Borrower shall not be entitled to any notices of any nature whatsoever from Lender except (a) with respect to matters for which this Agreement specifically and expressly provides for the giving of notice by Lender to Borrower and (b) with respect to matters for which Lender is required by Applicable Law to give notice, and Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement does not specifically and expressly provide for the giving of notice by Lender to Borrower.

 

Section 16.6                            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 Applicable Law or under this  Agreement, the Security Instrument, the Note and 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.  Lender agrees that, in such event, it shall cooperate in expediting any action seeking injunctive relief or declaratory judgment.

 

Section 16.7                            Marshalling and Other Matters

 

Borrower hereby waives, to the extent permitted by Applicable Law, the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale under the Security Instrument of the Property or any part thereof or any interest therein.  Further, Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of the Security Instrument on behalf of Borrower, and on behalf of each and every person acquiring any interest in or title to the Property subsequent to the date of the Security Instrument and on behalf of all persons to the extent permitted by Applicable Law.

 

Section 16.8                            Waiver of Statute of Limitations

 

To the extent permitted by Applicable Law, Borrower hereby expressly waives and releases to the fullest extent permitted by Applicable Law, the pleading of any statute of limitations as a defense to payment of the Debt or performance of its obligations hereunder, under the Note, Security Instrument or other Loan Documents.

 

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Section 16.9                            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 16.10                     Sole Discretion of Lender

 

(a)                                 Wherever pursuant to this Agreement (a) Lender exercises any right given to it to approve or disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c) any other decision or determination is to be made by Lender, the decision to approve or disapprove all decisions that arrangements or terms are satisfactory or not satisfactory, and all other decisions and determinations made by Lender, shall be in the sole discretion of Lender, except as may be otherwise expressly and specifically provided herein. Prior to a Securitization, whenever pursuant to this Agreement or any other Loan Document the Rating Agencies are given any right to approve or disapprove any matter, or any arrangement or term is to be satisfactory to the Rating Agencies, to the extent not already required, the decision of Lender to approve or disapprove such matter or to decide whether arrangements or terms are satisfactory or not satisfactory, shall be substituted therefor.

 

ARTICLE 17.

 

MISCELLANEOUS

 

Section 17.1                            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 in this Agreement, the Security Instrument, the Note or 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 Borrower, shall inure to the benefit of the legal representatives, successors and assigns of Lender.

 

Section 17.2                            Governing Law

 

This Agreement shall be governed, construed, applied and enforced in accordance with the Applicable Laws of the State and Applicable Laws of the United States of America.

 

Section 17.3                            Headings

 

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

 

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Section 17.4                            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 17.5                            Preferences

 

Upon the occurrence and during the continuance of an Event of Default, 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.  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 Creditors Rights Laws, 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 17.6                            Expenses

 

Borrower shall, within ten (10) Business Days of demand, pay Lender all reasonable, out-of-pocket costs and expenses incurred by Lender in connection with: (a) the preparation, negotiation, execution and delivery of this Agreement and all of the other Loan Documents; (b) the administration of this Agreement and the other Loan Documents for the term of the Loan and any modifications and amendments, if any, of this Agreement or any of the other Loan Documents; (c) the processing of any Borrower requests made hereunder and under any of the other Loan Documents; (d) the enforcement of any remedies hereunder or under the other Loan Documents or the satisfaction by Lender of any of Borrower’s or Guarantor’s obligations under this Agreement and the other Loan Documents; (e) 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 Security Instrument, the Note, the other Loan Documents, the Property, or any other security given for the Loan; and (f) otherwise protecting Lender’s interests under this Agreement and any other Loan Document, including, without limitation, in connection with any “work-out” of the Loan or any bankruptcy, insolvency, receivership, reorganization, rehabilitation, liquidation or other similar proceeding in respect of Borrower, SPE Component Entity or Guarantor or an assignment by Borrower, SPE Component Entity or Guarantor for the benefit of its creditors.  For all purposes of this Agreement and the other Loan Documents, Lender’s costs and expenses as described above shall also include, without limitation, all appraisal fees, engineering and architect costs and inspection fees, reasonable legal fees and expenses, accounting fees, fees for the disbursement of any Reserve Funds, any amounts payable in respect of advances (including, without limitation, protective advances, monthly payment advances, special servicer fee advances and advances of delinquent debt service payments, together with interest thereon, made pursuant to the servicing agreement), in each case, as a result of Borrower’s default hereunder beyond any applicable grace period (or, with respect to special servicer fee advances, as a result 

 

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of the Loan becoming a specially serviced loan pursuant to the servicing agreement), environmental and other consultant fees, auditor fees, and the cost to Lender of any title insurance premiums and title company charges (including for down dates, abstracts, tax certificates, title insurance endorsements required by Lender, and UCC financing statements, tax lien and litigation searches), surveys, recording, reconveyance and notary fees, any transfer and mortgage taxes, any Rating Agency fees and expenses, and any loan servicing and special servicing fees and expenses (including, without limitation, any “work-out” and/or liquidation fees, but excluding any monthly servicing fees). 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. Borrower recognizes and agrees that formal written appraisals of the Property by a licensed independent appraiser may be required by Lender’s internal procedures and/or federal regulatory reporting requirements on an annual and/or specialized basis and that Lender may, at its option, require inspection of the Property by an independent supervising architect and/or cost engineering specialist at least semiannually.  Notwithstanding the foregoing, Borrower shall not be required to pay for more than one appraisal in any twelve (12) month period unless an Event of Default occurs and is continuing or as otherwise required by law. Additionally, if Borrower is undertaking a Restoration or is performing work that requires the obtaining of a building permit, then Borrower shall pay the reasonable out-of-pocket costs of architects, engineers and other consultants retained by Lender to review the performance of such Restoration or work.  Any amounts payable to Lender pursuant to this Section 17.6 shall become immediately due and payable upon written demand and, if the same is  not paid within ten (10) Business Days from such written demand, shall bear interest at the Default Rate from the date which is ten (10) Business Days from such written demand until the date such amounts have been paid.

 

Section 17.7                            Cost of Enforcement

 

In the event (a) that the Security Instrument is foreclosed in whole or in part, (b) 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, or (c) Lender exercises any of its other remedies under this Agreement, the Security Instrument, the Note and the other Loan Documents, Borrower shall be chargeable with and agrees to pay all costs of collection and defense, including attorneys’ fees and costs, 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.  Any amounts payable to Lender pursuant to this Section 17.7 shall become immediately due and payable upon written demand and, if the same is not paid within ten (10) Business Days from such written demand, shall bear interest at the Default Rate from the date which is ten (10) Business Days from such written demand until the date such amounts have been paid.

 

Section 17.8                            Exhibits and Schedules Incorporated

 

The Exhibits and 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.

 

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Section 17.9                            Offsets, Counterclaims and Defenses

 

Any assignee of Lender’s interest in and to this Agreement, the Security Instrument, 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 17.10                     No Joint Venture or Partnership; No Third Party Beneficiaries

 

(a)                                 Borrower and Lender intend that the relationships created under this Agreement, the Security Instrument, the Note and 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 or to grant Lender any interest in the Property other than that of mortgagee, beneficiary or lender.

 

(b)                                 This Agreement, the Security Instrument, the Note and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement, the Security Instrument, the Note 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.

 

(c)                                  The general partners, members, principals and (if Borrower is a trust) beneficial owners of Borrower are experienced in the ownership and operation of properties similar to the Property, and Borrower and Lender are relying solely upon such expertise and business plan in connection with the ownership and operation of the Property.  Borrower is not relying on Lender’s expertise, business acumen or advice in connection with the Property.

 

(d)                                 Notwithstanding anything to the contrary contained herein, Lender is not undertaking the performance of (i) any obligations under the Leases; or (ii) any obligations with respect to such agreements, contracts, certificates, instruments, franchises, permits, trademarks, licenses and other documents.

 

(e)                                  By accepting or approving anything required to be observed, performed or fulfilled or to be given to Lender pursuant to this Agreement, the Security Instrument, the Note or the other Loan Documents, including, without limitation, any officer’s certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance 

 

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policy, Lender shall not be deemed to have warranted, consented to, or affirmed the sufficiency, the legality or effectiveness of same, and such acceptance or approval thereof shall not constitute any warranty or affirmation with respect thereto by Lender.

 

(f)                                   Borrower recognizes and acknowledges that in accepting this Agreement, the Note, the Security Instrument and the other Loan Documents, Lender is expressly and primarily relying on the truth and accuracy of the representations and warranties set forth in Article 3 of this Agreement without any obligation to investigate the Property and notwithstanding any investigation of the Property by Lender; that such reliance existed on the part of Lender prior to the date hereof, that the warranties and representations are a material inducement to Lender in making the Loan; and that Lender would not be willing to make the Loan and accept the this Agreement, the Note, the Security Instrument and the other Loan Documents in the absence of the warranties and representations as set forth in Article 3 of this Agreement.

 

Section 17.11                     Publicity; Advertising

 

(a)                                 All news releases, publicity or advertising by Borrower or its Affiliates through any media intended to reach the general public which refers to this Agreement, the Note, the Security Instrument or the other Loan Documents or the financing evidenced by this Agreement, the Note, the Security Instrument or the other Loan Documents, to Lender or any of its Affiliates shall be subject to the prior written approval of Lender, not to be unreasonably withheld, conditioned or delayed.

 

(b)                                 Borrower hereby agrees that Lender and its affiliated entities, including, without limitation, Wells Fargo & Company and its subsidiaries, may publicly identify details of the Loan in their respective advertising and public communications of all kinds, including, but not limited to, press releases, direct mail, newspapers, magazines, journals, e-mail or internet advertising or communications. Such details may include the name of the Property, the address of the Property, the amount of the Loan, the Closing Date, and a description of the size and location of the Property.

 

Section 17.12                     Conflict; Construction of Documents; Reliance

 

In the event of any conflict between the provisions of this Agreement and the Security Instrument, the Note or any of the other Loan Documents, the provisions of this Agreement shall control.  Wherever the phrase “during the continuance of an Event of Default” or the like appears herein or in any other Loan Document, such phrase shall not mean or imply that Lender has any obligation to accept a cure of such Event of Default.  The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of this Agreement, the Note, the Security Instrument and the other Loan Documents and this Agreement, the Note, the Security Instrument and the other 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 this Agreement, the Note, the Security Instrument and the other 

 

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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 17.13                     Entire Agreement

 

This Agreement, the Note, the Security Instrument 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 between Borrower and Lender are superseded by the terms of this Agreement, the Note, the Security Instrument and the other Loan Documents.

 

Section 17.14                     Liability

 

If Borrower consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several.  This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever.

 

Section 17.15                     Duplicate Originals; Counterparts

 

This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original.  The failure of any party hereto to execute this  Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder.

 

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

 

	
 
    	
BORROWER:
    
	
 
    	
 
    	
 
    
	
 
    	
CHASE   CORPORATE CENTER, LLC, a Delaware limited liability company
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Abhishek Mathur
    
	
 
    	
 
    	
Name:   Abhishek Mathur
    
	
 
    	
 
    	
Title:   President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
WELLS   FARGO BANK, NATIONAL ASSOCIATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   John G. Nicol
    
	
 
    	
 
    	
Name:   John G. Nicol
    
	
 
    	
 
    	
Title:   Managing Director
    

 

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EXHIBIT A

 

ADDITIONAL DEFINITIONS

 

“Adjusted Net Cash Flow” shall mean NOI minus (a) normalized tenant improvement and leasing commission expenditures equal to $1.17 per square foot per annum, and (b) normalized capital improvements equal to $0.20 per square foot per annum.

 

“Debt Yield” shall mean, as of the last day of the calendar month immediately preceding the applicable date of determination, the quotient (expressed as a percentage) obtained by dividing (a) Adjusted Net Cash Flow as of such date by (b) the outstanding principal amount of the Loan as of such date.  Lender’s calculation of the Debt Yield, and all component calculations, shall be conclusive and binding on Borrower absent manifest error.

 

“NOI” shall mean EGI minus Underwritten Operating Expenses.

 

INCOME

 

“EGI” shall mean Net Rental Income plus Other Income minus Bad Debt and Rent Concessions.

 

“Net Rental Income” shall mean Gross Potential Rent plus Expense Reimbursements minus Vacancy Deduction plus Percentage Rent.

 

“Gross Potential Rent” shall mean gross potential rent, computed in accordance with accounting principles reasonably acceptable to Lender, based on the most recent rent roll annualized, which should include (a) rent for occupied space (that is, actual rent collected from tenants in actual physical occupancy pursuant to valid Leases, provided that to the extent a particular tenant is either in a scheduled rent concession period at the time of determination or has a rent concession period scheduled in the future, such tenant’s annualized rent may be adjusted by Lender in its reasonable discretion to reflect a normalized annualized amount unless no future rent is scheduled to be received from such tenant in which case no rent will be included for such tenant) and (b) market rents for vacant space.

 

“Expense Reimbursements” shall mean expense reimbursements as determined from the most recent operating statement, to the extent deemed recurring and sustainable, determined on a trailing 12-month basis (which should include actual expense reimbursements for occupied space and market expense reimbursements for vacant space and newly-leased space); provided, however, that total Expense Reimbursements cannot exceed one hundred percent (100%) of Borrower’s Actual Operating Expenses (as defined in the definition of “Operating Expenses” herein).

 

“Vacancy Deduction” shall be determined by multiplying Gross Potential Rent and Expense Reimbursements by the actual vacancy at the Property at the time of determination.

 

“Percentage Rent” shall mean percentage rent as determined from the most recent operating statement, to the extent deemed recurring and sustainable, determined on a trailing 12-month basis.

 

 

“Other Income” shall mean all other applicable income as determined from the most recent operating statement for the Property at the time of determination, to the extent such income is  deemed recurring and sustainable, determined on a trailing 12-month basis, computed in accordance with accounting principles reasonably acceptable to Lender, including, without limitation (and without duplication), parking income, cellular tower income, vending income and other similar items.  Notwithstanding the foregoing, Other Income will not include insurance proceeds (other than proceeds of rent loss, business interruption or other similar insurance allocable to the applicable period); Condemnation Proceeds (other than Condemnation Proceeds arising from a temporary taking or the use and occupancy of all or part of the applicable Property allocable to the applicable period); proceeds of any financing; proceeds of any sale, exchange or transfer of the Property or any part thereof or interest therein (including proceeds of any sales of furniture, fixtures and equipment); capital contributions or loans to Borrower or an Affiliate of Borrower; any item of income otherwise includable in Other Income but paid directly by any tenant to a Person other than Borrower; any other extraordinary, non-recurring revenues; payments paid by or on behalf of any tenant under a Lease which is the subject of any proceeding or action relating to its bankruptcy, reorganization or other arrangement pursuant to the Bankruptcy Code or any similar federal or state law or which has been adjudicated a bankrupt or insolvent unless such Lease has been affirmed by the trustee in such proceeding or action pursuant to a final, non-appealable order of a court of competent jurisdiction; payments paid by or on behalf of any tenant under a Lease the demised premises of which are not occupied either by such tenant or an affiliate or sublessee thereof; payments paid by or on behalf of any tenant under a Lease in whole or partial consideration for the termination of any Lease; sales tax rebates from any Governmental Authority; sales, use and occupancy taxes on receipts required to be accounted for by Borrower to any Governmental Authority; refunds and uncollectible accounts; interest income from any source; unforfeited security deposits, utility and other similar deposits; income from tenants not paying rent; or any disbursements to Borrower from the Reserve Funds.

 

“Bad Debt” shall mean debt that remains uncollectible after reasonable efforts have been exhausted to collect the debt.  Bad Debt will be determined on a trailing 12-month basis.

 

“Rent Concessions” shall mean any remaining rent concessions for the Leases used to determine Gross Potential Rent (other than any concessions already accounted for in the determination of Gross Potential Rent above) to the extent such rent concessions relate to the forward 12-month period at the time of determination.

 

EXPENSE

 

“Underwritten Operating Expenses” shall mean projected annualized Operating Expenses based on a trailing 12-month period adjusted upwards or downwards in Lender’s reasonable discretion by anticipated changes in Operating Expenses.

 

“Operating Expenses” shall mean all expenses, computed in accordance with accounting principles reasonably acceptable to Lender, of whatever kind and from whatever source, relating to the ownership, operation, repair, maintenance and management of the Property that are incurred on a regular monthly or other periodic basis, including, without limitation (and without duplication): Taxes (based on the most current bill annualized, subject to adjustment by Lender 

 

 

to take into account any change in assessment that has not yet been reflected in the most current tax bill); Insurance Premiums (based on the most current premium annualized); management fees (whether or not actually paid) equal to, if managed by a third-party manager, the actual  management fees or, if managed by an Affiliated Manager, 4% of EGI; costs attributable to the ordinary operation, repair and maintenance of the Improvements; common area maintenance costs; advertising and marketing expenses; professional fees; license fees; general and administrative costs and expenses; utilities; payroll, benefits and related taxes and expenses; janitorial expenses; computer processing charges; operating equipment or other lease payments as approved by Lender; ground lease payments; bond assessments; and other similar costs and expenses; in each instance, unless otherwise noted, only to the extent actually paid for by Borrower (the foregoing expenses being referred to herein as “Actual Operating Expenses”).  Notwithstanding the foregoing, Operating Expenses shall not include debt service (including principal, interest, impounds and other reserves), capital expenditures, tenant improvement costs, leasing commissions or other expenses which are paid from escrows required by the Loan Documents; any payment or expense for which Borrower was or is to be reimbursed from proceeds of the loan or insurance or by any third party; federal, state or local income taxes; any non-cash charges such as depreciation and amortization; and any item of expense otherwise includable in Operating Expenses which is paid directly by any tenant except real estate taxes paid directly to any taxing authority by any tenant.

 

In making the calculations described herein, applicable line items may be adjusted by Lender in its reasonable discretion (a) to accurately reflect the amounts of any extraordinary non-recurring items in the relevant period and to reflect on a pro rata basis those items on an annual or semi-annual basis and (b) to reflect Leases (and projected changes to the applicable line items above) which are either (i) anticipated to terminate within the 90 days of the date of calculation or (ii) executed with creditworthy tenants with rent commencement dates scheduled to occur within 90 days of the date of calculation.

 

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EXHIBIT B

 

SPRINGING CASH MANAGEMENT PROVISIONS

 

Section 9.1                                   Cash Management Agreement.

 

(a)                                 Within thirty (30) days from receipt of written notice from Lender that a Cash Trap Event Period has commenced, Borrower shall (i) enter into a deposit account agreement (the “Deposit Account Control Agreement”) with Lender and Wells Fargo or such other bank selected by Borrower and reasonably approved by Lender (“Bank”) in form and substance reasonably satisfactory to Lender that provides, among other things, that an account to which Borrower has no access (the “Deposit Account”) shall be maintained by Bank in the name of Borrower for the benefit of Lender and that all funds in the Deposit Account (subject to any applicable minimum balance requirement) shall be transferred on a periodic basis by Bank (x) so long as no Cash Trap Event Period is then continuing, to an account designated by Borrower in writing or (y) during the continuation of a Cash Trap Event Period, to the Cash Management Account, (ii) enter into the Cash Management Agreement, with such changes thereto as may be acceptable to Lender in its reasonable discretion and (iii) provide such other certificates, opinions, documents and instruments as Lender may reasonably request to grant to Lender a security interest in the Deposit Account and the Cash Management Account and to otherwise establish the cash management system required pursuant to the terms of this Agreement.  Upon the execution of the Deposit Account Control Agreement and the Cash Management Agreement, such documents shall thereafter be considered “Loan Documents” for all purposes under the Loan Documents.

 

(b)                                 From and after the commencement of a Cash Trap Event Period, Borrower and Manager shall cause all Rents to be deposited directly into the Deposit Account.  Without limitation of the foregoing, simultaneously with the execution of the Deposit Account Control Agreement, Borrower shall execute and deliver to Lender an instruction letter substantially in the form shown on this Exhibit B (a “Tenant Direction Letter”) for each Tenant, notifying and advising such Tenant (whether such Tenant’s Lease is presently effective or executed after the date hereof) to send directly to the Deposit Account all payments of Rent.  Borrower hereby authorizes Lender to deliver the Tenant Direction Letters to the Tenants upon the execution of the Deposit Account Control Agreement and the Cash Management Agreement.  Borrower further agrees to promptly execute and deliver to Lender (or, if requested by Lender after the execution of the Deposit Account Control Agreement and the Cash Management Agreement, deliver directly to the applicable Tenants) additional Tenant Direction Letters for Tenants entering into Leases with Borrower after the date hereof and any replacement Tenant Direction Letters that Lender may request from time to time.

 

(c)                                  Upon the occurrence and during the continuance of a Cash Trap Event Period, Lender or Servicer, on behalf of Lender, shall, on each Monthly Payment Date and provided no Event of Default has occurred and is continuing withdraw all funds, if any, on deposit in the Cash Management Account (other than any required minimum account balance) and disburse such funds in the following order of priority:

 

 

(i)             First, the monthly amount required to be deposited pursuant to this Agreement for the payment of Taxes shall be deposited in a subaccount designated for holding such funds;

 

(ii)          Second, the monthly amount, if any, required to be deposited pursuant to this Agreement for the payment of Insurance Premiums shall be deposited in a subaccount designated for holding such funds;

 

(iii)       Third, funds sufficient to pay any interest accruing at the Default Rate and late payment charges, if any, shall be deposited in a subaccount designated for holding such funds;

 

(iv)      Fourth, funds sufficient to pay the Debt Service due on such Monthly Payment Date shall be deposited in a subaccount designated for holding such funds;

 

(v)         Fifth, funds sufficient to pay, to the extent required by this Agreement, the Replacement Reserve Monthly Deposit shall be deposited in a subaccount designated for holding such funds;

 

(vi)      Sixth, funds sufficient to pay, to the extent required by this Agreement, the Leasing Reserve Monthly Deposit shall be deposited in a subaccount designated for holding such funds;

 

(vii)   Seventh, funds sufficient to pay, to the extent required by this Agreement, the Major Tenant TI/LC Reserve Monthly Deposit shall be deposited in a subaccount designated for holding such funds;

 

(viii)                        Eighth, funds sufficient to pay any other amounts then due and payable under the Loan Documents (without duplication of other amounts payable pursuant to the above subsections), if any, shall be deposited with or as directed by Lender;

 

(ix)      Ninth, funds sufficient to pay the Monthly Operating Expense Amount shall be disbursed to Borrower; and

 

(x)         Tenth, all amounts remaining in the Cash Management Account after deposits for items (i) through (ix) above shall be deposited into a subaccount designated for holding such funds (“Excess Cash Flow Account”); provided that Lender shall be entitled to retain any minimum account balance in the Cash Management Account at all times.  Provided no Event of Default has occurred and is continuing, if so requested by Borrower, Lender shall disburse funds from the Excess Cash Flow Account to Borrower for (i) tenant improvement and leasing commission costs at the Property pursuant to the terms and conditions of Section 8.5(b) hereof as if the same were Leasing Reserve Funds or (ii) Replacements pursuant to the terms and conditions of Sections 8.4(b) through 8.4(e) hereof as if the same were Replacement Reserve Funds.

 

After the termination of a Cash Trap Event Period, so long as no other Cash Trap Event Period commences and is then continuing, Lender shall (i) direct Bank to transfer funds on deposit in 

 

 

the Deposit Account to an account designated by Borrower on a periodic basis and (ii) transfer all funds on deposit in the Excess Cash Flow Account to Borrower.

 

(d)                                 If Borrower fails to provide a fully-executed Deposit Account Control Agreement and a fully-executed Cash Management Agreement in accordance with Section 9.1 hereof within thirty (30) days from receipt of the Initial Cash Management Notice, and such failure continues for an additional thirty (30) days after Borrower’s receipt of an additional written notice from Lender notifying Borrower that it has failed to comply with the Initial Cash Management Notice, it shall be, at Lender’s option, an immediate Event of Default hereunder.

 

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

 

“Bank” shall have the meaning set forth on this Exhibit B.

 

“Cash Management Account” shall mean an account established by Lender or Servicer on behalf of Lender.

 

“Cash Management Agreement” shall mean Lender’s then-standard form of Cash Management Agreement executed by Borrower, Manager and Lender and acknowledged by Wells Fargo, as cash management bank.

 

“Cash Trap Event Period” shall mean (1) a Major Tenant Event Period or (2) a period commencing upon the earlier of (i) the occurrence and continuance of an Event of Default or (ii) the Debt Yield being less than 7.5% (tested quarterly), which such Cash Trap Event Period shall expire, provided that no other Cash Trap Event Period has commenced and is then continuing, (y) with regard to any Cash Trap Event Period commenced in connection with clause (i) above, upon the cure (if applicable) of such Event of Default, or (z) with regard to any Cash Trap Event Period commenced in connection with clause (ii) above, upon the date on which the Debt Yield has been at least 7.5% for two (2) consecutive calendar quarters.

 

“Deposit Account” shall have the meaning set forth on this Exhibit B.

 

“Deposit Account Control Agreement” shall have the meaning set forth on this Exhibit B.

 

“Major Tenant” shall mean, individually or collectively, as the context may require, the Tenant called Newquest Management of Alabama, LLC, an Alabama limited liability company, its successors and assigns, and any replacement Tenant that enters into a Major Tenant Lease demising at least 50% of the Major Tenant Space in accordance with the terms of the Loan Agreement.

 

“Major Tenant Event Period” shall mean the period commencing and ending as hereinafter provided:

 

A Major Tenant Event Period shall commence upon the date on which:

 

 

(i)                                     a Major Tenant fails to renew or extend the term of its Lease or to enter into a new Lease, in either case on terms and conditions acceptable to Lender and in accordance with the terms of this Agreement including, without limitation, demising the entirety of the related Major Tenant Space (Lender hereby confirms that the extension option as it is currently written in the Major Tenant Lease is acceptable to Lender, subject to acceptable determination of market rent and tenant improvement allowances pursuant to the terms thereof), on or prior to the date that is eight (8) months prior to the date on which such Lease is then scheduled to terminate;

 

(ii)                                  a Major Tenant fails to continuously occupy its entire Major Tenant Space or fails to be open for business at the Property during customary hours (in either case, other than a temporary cessation of business operations for permitted renovations or necessary repairs), or gives notice of its intent to commence either of the foregoing;

 

(iii)                               a Major Tenant files, as a debtor, a bankruptcy or similar insolvency proceeding, or otherwise becomes involved, as a debtor, in a bankruptcy or any similar insolvency proceeding; or

 

(iv)                              a Major Tenant terminates or cancels its Lease, or gives notice of, or commences a legal proceeding asserting, any of the foregoing.

 

A Major Tenant Event Period shall end upon the occurrence of any of the following:

 

(1)                                 with respect to a Major Tenant Event Period caused by a matter described in clause (i) above, either (A) a Major Tenant Re-Tenanting Event has occurred or (B) a Major Tenant Lease Renewal Event has occurred;

 

(2)                                 with respect to a Major Tenant Event Period caused by a matter described in clause (ii) above, either (A) a Major Tenant Re-Tenanting Event has occurred or (B) the applicable Major Tenant has resumed its normal business operations in its entire Major Tenant Space and is open during customary hours for a period of two (2) consecutive calendar quarters;

 

(3)                                 with respect to a Major Tenant Event Period caused by a matter described in clause (iii) above, either (A) a Major Tenant Re-Tenanting Event has occurred or (B) the bankruptcy or insolvency proceeding has terminated in a manner satisfactory to Lender, the related Major Tenant Lease has been affirmed, and the terms of such Lease, as affirmed, if materially different from the terms of such Lease prior to such proceeding are satisfactory to Lender; or

 

(4)                                 with respect to a Major Tenant Event Period caused by a matter described in clause (iv) above, a Major Tenant Re-Tenanting Event has occurred.

 

“Major Tenant Lease” shall mean any Lease pursuant to which a Major Tenant leases the Major Tenant Space or any portion thereof.

 

“Major Tenant Lease Renewal Event” shall mean that, with respect to a Major Tenant, Lender has received evidence in form and substance reasonably satisfactory to Lender that such 

 

 

Major Tenant has renewed or extended the term of its Lease or entered into a new Lease, in either case on terms and conditions acceptable to Lender and in accordance with the terms of this Agreement including, without limitation, demising the entirety of the related Major Tenant Space (Lender hereby confirms that the extension option as it is currently written in the Major Tenant  Lease is acceptable to Lender, subject to acceptable determination of market rent and tenant improvement allowances pursuant to the terms thereof), such evidence to include, without limitation, a tenant estoppel certificate from the applicable Major Tenant, in form and substance acceptable to Lender, confirming that all obligations of Borrower to such Major Tenant with respect to tenant improvements and leasing commissions have been satisfied in full and that such Major Tenant is then paying full, unabated rent pursuant to the terms thereof.

 

“Major Tenant Re-Tenanting Event” shall mean that Lender has received satisfactory evidence that the applicable Major Tenant Space has been leased to one or more satisfactory replacement Tenants, each pursuant to a satisfactory replacement Lease, including, without limitation, demising in the aggregate the entirety of the related Major Tenant Space, that each such Tenant is in occupancy of its premises, open for business and is then paying full, unabated rent pursuant to the terms of its Lease, and that all tenant improvement costs and leasing commissions provided in each such replacement Lease have been paid, such evidence to include, without limitation, a satisfactory estoppel certificate from each such replacement Tenant affirming the foregoing.

 

“Major Tenant Space” shall mean the space or spaces at the Property demised as of the date hereof to the Tenant called Newquest Management of Alabama, LLC.

 

“Monthly Operating Expense Amount” shall mean, collectively, (A) the monthly amount payable for operating expenses as set forth in the Annual Budget approved by Lender not otherwise paid or reserved for in the accounts described in Sections 9.1(c)(i), (ii), (iv), (v), (vi), and (vii) hereof, and (B) any extraordinary expenses which are not set forth in the Annual Budget and are (I) incurred by Borrower in connection with the operation and maintenance of the Property and (II) approved by Lender, which approval shall not be unreasonably withheld, conditioned or delayed.

 

“Tenant Direction Letter” shall have the meaning set forth on this Exhibit B.

 

(f)                                   The form of Tenant Direction Letter shall be as provided on the following pages:

 

 

[BORROWER LETTERHEAD]

 

[Date]

 

To:                             [Tenant Name (“Tenant”)]

Re:                             [Describe Lease (the “Lease”)]

Loan No.

 

Dear Tenant:

 

Your undersigned landlord under the Lease hereby unconditionally and irrevocably authorizes, directs and instructs you, effective immediately, to send all payments of rent due under the Lease (including without limitation base rent, any amounts due for operating expenses and real estate taxes, and, if applicable, rent due as a percentage of sales receipts) and all other sums payable by you under the Lease directly to the following address:

 

	
Lockbox
    	
 
    	
Overnight to Lockbox
    
	
DEPOSITORY TO PROVIDE
    	
 
    	
DEPOSITORY TO PROVIDE
    

 

OR BANK WIRE TRANSFER AS FOLLOWS:

 

Wells Fargo Bank, N.A.                  
 San Francisco, California

ABA#: 121000248

Account#:

Account Name:

Loan #:

 

You are to continue making all payments due under the Lease as directed in this letter until you receive written instructions to do otherwise from Wells Fargo Bank, National Association (together with its successors and assigns, “Lender”).

 

These payment instructions are provided to you pursuant to a deposit account arrangement between your landlord and Lender.  Please note that Lender is neither a mortgagee-in-possession nor a receiver of rents, and Lender has not assumed any obligations of your landlord under the Lease.  Therefore, you should continue to send all communications regarding the Lease or landlord issues in the manner specified in your Lease and not to Lender.  Lender has no obligation with respect to any such notice, and notice to Lender will not be deemed effective notice to your landlord under the Lease.

 

[NO FURTHER TEXT ON THIS PAGE]

 

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
BORROWER:
    
	
 
    	
 
    
	
 
    	
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a
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

	
Acknowledged   and Agreed to:
    	
 
    
	
 
    	
 
    	
 
    
	
TENANT:
    	
 
    
	
 
    	
 
    	
 
    
	
                                                                                                           ,
    	
 
    
	
 
    	
 
    	
 
    
	
a
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:]
    	
 
    

 

 

SCHEDULE I

 

IMMEDIATE REPAIRS

 

Bring the accessible parking access aisles into compliance by removing the section of sidewalk in front of the accessible parking stalls and installing a flush transition between the access aisles and the sidewalk.

 

 

SCHEDULE II

 

ORGANIZATIONAL CHART

 

(attached hereto)

 

 

SCHEDULE III

 

DESCRIPTION OF REA’S

 

Agreement between Harbert-Kovach Properties and Essex House Condominium Corporation dated August 12, 1986 and recorded in Real Volume 2995, Page 226 in the Jefferson County Probate Court.

 

Declaration of Protective Covenants, Agreements, Easements, Charges and Liens for Riverchase (Business) by Harbert-Equitable Joint Venture recorded in Real Volume 1236, Page 881, as amended by Amendment No. 1 to the Declaration of Protective Covenants, Agreements, Easements, Charges and Liens for Riverchase (Business) recorded in Real Volume 1294, Page 30, and as amended by Amendment No. 2 to the Declaration of Protective Covenants, Agreements, Easements, Charges and Liens for Riverchase (Business) recorded in Real Volume 1437, Page 570.

 

 

SCHEDULE IV

 

INTENTIONALLY OMITTED

 

 

SCHEDULE V

 

EXISTING TI/LC RESERVE FUNDS SCHEDULE

 

(See attached)

 

	
Tenant
    	
 
    	
Amount
    	
 
    
	
Corporate Office Centers
    	
 
    	
$
    	
111,555
    	
 
    
	
US Pipe
    	
 
    	
$
    	
14,807
    	
 
    
	
Hanover Insurance Company
    	
 
    	
$
    	
11,460
    	
 
    
	
Sovereign CPA
    	
 
    	
$
    	
14,555
    	
 
    
	
Hazen & Sawyer
    	
 
    	
$
    	
9,055

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