Document:

exv10w3

 

Exhibit 10.3

LIMITED GUARANTY

 

			
	 
	 	Loan No. 31-0900266A

THIS LIMITED GUARANTY (“Guaranty”) is made as of August 2, 2007, by IXYS CORPORATION, a
Delaware corporation (“Guarantor”) in favor of LASALLE BANK NATIONAL ASSOCIATION, as Trustee for
Morgan Stanley Dean Witter Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series
2001-TOP1 (“Lender”).

RECITALS

	A.	 	Lender’s predecessor in interest extended a loan (the “Loan”) to Barber Lane Associates
L.P., a California limited partnership (“Barber Lane”), in the principal sum of EIGHT
MILLION AND NO/100THS DOLLARS ($8,000,000). The Loan is evidenced by that certain Promissory
Note Secured By Deed of Trust in the original principal amount of the Loan, made by Borrower
and payable to Lender’s predecessor in interest and dated as of December 21, 2000 (the
“Note”) and secured by, among other things, a deed of trust and absolute assignment of rents
and leases and security agreement (and fixture filing) (“Deed of Trust”) on the real
property and improvements described in the Deed of Trust (which real property and
improvements are collectively referred to herein as the “Property”) and other
security instruments, if any specified in the Note.

	B.	 	The Loan Documents (as defined and described in the Note) include the Note, the Deed of
Trust, and such other documents described in the Note as “Loan Documents”. The Loan Documents
have been assigned and transferred to Lender from Lender’s predecessor in interest by mesne
conveyances.

	C.	 	Barber Lane desires to transfer the Property to IXYS BUCKEYE, LLC, a Delaware limited
liability company (“Borrower”) and in connection with such transfer, Borrower, with
Lender’s consent, is to assume Barber Lane’s payment and performance obligations under the
Loan Documents (the “Assumption”) pursuant to a certain Assumption Agreement of even
date herewith (“Assumption Agreement”).

	D.	 	As a condition precedent to Lender consenting to the transfer of the Property and to the
Assumption, Lender has required, among other things, that Guarantor execute and deliver this
Guaranty to Lender. Guarantor has an economic interest in Borrower and will benefit from the
transfer of the Property to Borrower and Borrower’s assumption of the Loan.

	E.	 	This Guaranty is not one of the Loan Documents.

	F.	 	Capitalized terms used herein and not specifically defined herein shall have the respective
meanings ascribed to those terms in the Loan Documents (as may have been amended by the
Assumption Agreement). All references herein or in any of the Loan Documents to Borrower
shall, from and after the date hereof, refer to Borrower as defined herein.

THEREFORE, to induce Lender to enter into the Loan Documents and to make the Loan, and in
consideration thereof, Guarantor unconditionally guarantees and agrees as follows:

	1.	 	LIMITED GUARANTY. Guarantor hereby unconditionally, absolutely, and irrevocably
guarantees and promises to pay to Lender or order, on demand, in lawful money of the United
States of America, in immediately available funds, all sums for which Borrower is now or
hereafter liable to Lender with respect to any of the following matters: (a) fraud or willful
misrepresentation; (b) material physical waste of the Property or the Collateral; (c) failure
to pay property or other
taxes, assessments or charges from available property cash flow (other than amounts paid to
Lender for taxes, assessments or charges pursuant to an impound account and where Lender
elects not to apply such funds toward payment of the taxes, assessments or charges owed)
which may create liens senior to the lien of the Deed of Trust on all or any portion of the
Property; (d) failure to deliver any insurance or condemnation proceeds or awards or any
security deposits received by Borrower to Lender or to otherwise apply such sums as required
under the terms of the Loan Documents or any other instrument now or hereafter securing the
Note; (e) failure to apply any rents, royalties, accounts, revenues, income, issues, profits
and other benefits from the Property which are collected or received by Borrower during the
period of any Default or after acceleration of the indebtedness and other sums owing under
the Loan

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	 	 	Documents to the payment of either (i) such indebtedness or other sums or (ii) the
normal and

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	 	 	necessary operating expenses of the Property; or (f) any breach by Borrower of any covenant in
the Note or in the Deed of Trust regarding Hazardous Materials or any representation
or warranty of Borrower regarding Hazardous Materials proving to have been untrue when made.
	 
	2.	 	REMEDIES. If Guarantor fails to promptly perform its obligations under this Guaranty,
Lender may from time to time, and without first requiring performance by Borrower or
exhausting any or all security for the Loan, bring any action at law or in equity or both to
compel Guarantor to perform its obligations hereunder, and to collect in any such action
compensation for all loss, cost, damage, injury and expense sustained or incurred by Lender as
a direct or indirect consequence of the failure of Guarantor to perform its obligations
together with interest thereon at the rate of interest applicable to the principal balance of
the Note.
	 
	3.	 	RIGHTS OF LENDER. Guarantor authorizes Lender, without giving notice to Guarantor or
obtaining Guarantor’s consent and without affecting the liability of Guarantor, from time to
time to: (a) renew or extend all or any portion of Borrower’s obligations under the Note or
any of the other Loan Documents; (b) declare all sums owing to Lender under the Note and the
other Loan Documents due and payable upon the occurrence of a Default (as defined in the Note)
under the Loan Documents; (c) make non-material changes in the dates specified for payments of
any sums payable in periodic installments under the Note or any of the other Loan Documents;
(d) otherwise modify, amend, supplement or replace from time to time the terms of any of the
Loan Documents, except for (i) increases in the principal amount of the Note or changes in the
terms and conditions by which interest rates, fees or charges are calculated under the Note
and the other Loan Documents (Guarantor acknowledges that if the Note or other Loan Documents
so provide, said interest rates, fees and charges may vary from time to time) or (ii)
advancement of the Maturity Date of the Note where no Default has occurred under the Loan
Documents; (e) take and hold security for the performance of Borrower’s obligations under the
Note or the other Loan Documents and exchange, enforce, waive and release any such security;
(f) apply such security and direct the order or manner of sale thereof as Lender in its
discretion may determine; (g) release, substitute or add any one or more endorsers of the Note
or guarantors of Borrower’s obligations under the Note or the other Loan Documents; (h) apply
payments received by Lender from Borrower to any obligations of Borrower to Lender, in such
order as Lender shall determine in its sole discretion, whether or not any such obligations
are covered by this Guaranty; and (i) assign this Guaranty in whole or in part.
	 
	4.	 	GUARANTOR’S WAIVERS. Guarantor waives: (a) any defense based upon any legal
disability or other defense of Borrower, any other guarantor or other person, or by reason of
the cessation or limitation of the liability of Borrower from any cause other than full
payment of all sums payable under the Note or any of the other Loan Documents; (b) any defense
based upon any lack of authority of the officers, directors, partners or agents acting or
purporting to act on behalf of Borrower or any principal of Borrower or any defect in the
formation of Borrower or any principal of Borrower; (c) any defense based upon the application
by Borrower of the proceeds of the Loan for purposes other than the purposes represented by
Borrower to Lender or intended or understood by Lender or Guarantor; (d) all rights and
defenses arising out of an election of remedies by Lender, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower
by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (e)
any defense based upon Lender’s failure to disclose to Guarantor any information concerning
Borrower’s financial condition or any other circumstances bearing on Borrower’s ability to pay
all sums payable under the Note or any of the other Loan Documents; (f) any defense based upon
any statute or rule of law which provides that the obligation of a surety must be neither
larger in amount nor in any other respects more burdensome than that of a principal; (g) any
defense based upon Lender’s election, in any proceeding instituted under the Federal
Bankruptcy Code, of the application of Section 111 1(b)(2) of the Federal Bankruptcy Code or
any successor statute; (h) any defense based upon any borrowing or any grant of a security
interest under Section 364 of the Federal Bankruptcy Code; (i) presentment, demand, protest
and notice of any kind; (j) the benefit of any statute of limitations affecting the liability
of Guarantor hereunder or the enforcement hereof; and (k) any rights under California Code of
Civil Procedure Sections 580a and 726(b), which provide, among other things, that (i) a
creditor must file a complaint for deficiency within three (3) months of a nonjudicial
foreclosure sale or judicial foreclosure sale, as applicable; (ii) a fair market value hearing
must be held; and (iii) the amount of the deficiency judgment shall be limited to the amount
by which the unpaid debt exceeds the fair market value of the security, but not more than the
amount by which the unpaid debt exceeds the sale price of the security. In addition, Guarantor
waives all rights and defenses that Guarantor may have because Borrower’s debt is secured by
real property. This means, among other things: (l) Lender may collect from Guarantor without
first foreclosing on any real or personal property collateral pledged by Borrower; and (m) if
Lender forecloses on any real property collateral pledged by Borrower, then (i) the amount of
the debt may be reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price, and (ii) Lender may collect
from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed
any right Guarantor may have to collect from Borrower. The foregoing sentence is an

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	 	 	unconditional and irrevocable waiver of any rights and defenses Guarantor may have because
Borrower’s debt is secured by real property. These rights and defenses being waived by
Guarantor include, but are not limited to, any rights or defenses based upon Section 580a,
580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of
the foregoing or any other provision hereof, Guarantor also waives, to the extent permitted by
law, any and all rights and defenses which might otherwise be available to Guarantor under
California Civil Code Sections 2787 to 2855, inclusive, or any of such sections. Finally,
Guarantor agrees that the payment of all sums payable under the Note or any of the other Loan
Documents or any part thereof or other act which tolls any statute of limitations applicable to
the Note or the other Loan Documents shall similarly operate to toll the statute of limitations
applicable to Guarantor’s liability hereunder.
	 
	5.	 	GUARANTOR’S WARRANTIES. Guarantor warrants and acknowledges that: (a) Lender would
not make the Loan but for this Guaranty; (b) there are no conditions precedent to the
effectiveness of this Guaranty; (c) Guarantor has established adequate means of obtaining from
sources other than Lender, on a continuing basis, financial and other information pertaining
to Borrower’s financial condition, the Property and Borrower’s activities relating thereto and
the status of Borrower’s performance of obligations under the Loan Documents, and Guarantor
agrees to keep adequately informed from such means of any facts, events or circumstances which
might in any way affect Guarantor’s risks hereunder and Lender has made no representation to
Guarantor as to any such matters; (d) the most recent financial statements of Guarantor
previously delivered to Lender are true and correct in all respects, have been prepared in
accordance with generally accepted accounting principles consistently applied (or other
principles acceptable to Lender) and fairly present the financial condition of Guarantor as of
the respective dates thereof, and no material adverse change has occurred in the financial
condition of Guarantor since the respective dates thereof; (e) Guarantor has not and will not,
without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate,
transfer or otherwise dispose of all or substantially all of Guarantor’s assets, or any
interest therein, other than in the ordinary course of Guarantor’s business; and (f) Guarantor
shall not later than thirty (30) days from written request from Lender, provide Lender with
year-end financial statements of such Guarantor, such statements to be prepared in a form and
in accordance with accounting principles acceptable to Lender.
	 
	6.	 	SUBORDINATION. Guarantor subordinates all present and future indebtedness owing by
Borrower to Guarantor to the obligations at any time owing by Borrower to Lender under the
Note and the other Loan Documents. Guarantor agrees that as long as this Guaranty is in
effect, Guarantor will not take any action or initiate any proceedings, judicial or otherwise,
to enforce Guarantor’s rights or remedies with respect to any such indebtedness, including,
without limitation, any action to enforce remedies with respect to any defaults under such
indebtedness or to any collateral securing such indebtedness or to obtain any judgment or
prejudgment remedy against Borrower or any such collateral. Guarantor also agrees that it
shall not commence or join with any other creditor or creditors of Borrower in commencing any
bankruptcy, reorganization or insolvency proceedings against Borrower. Guarantor further
agrees not to assign all or any part of such indebtedness unless Lender is given prior notice
and such assignment is expressly made subject to the terms of this Guaranty. If Lender so
requests, (a) all instruments evidencing such indebtedness shall be duly endorsed and
delivered to Lender, (b) all security for such indebtedness shall be duly assigned and
delivered to Lender, (c) such indebtedness shall be enforced, collected and held by Guarantor
as trustee for Lender and shall be paid over to Lender on account of the Loan but without
reducing or affecting in any manner the liability of Guarantor under the other provisions of
this Guaranty, and (d) Guarantor shall execute, file and record such documents and instruments
and take such other action as Lender deems necessary or appropriate to perfect, preserve and
enforce Lender’s rights in and to such indebtedness and any security therefor. If Guarantor
fails to take any such action, Lender, as attorney-in-fact for Guarantor, is hereby authorized
to do so in the name of Guarantor. The foregoing power of attorney is coupled with an interest
and cannot be revoked.
	 
	7.	 	BANKRUPTCY OF BORROWER. In any bankruptcy or other proceeding in which the filing of
claims is required by law, Guarantor shall file all claims which Guarantor may have against
Borrower relating to any indebtedness of Borrower to Guarantor and shall assign to Lender all
rights of Guarantor thereunder. If Guarantor does not file any such claim, Lender, as
attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in
Lender’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed
in the name of Lender’s nominee. The foregoing power of attorney is coupled with an interest
and cannot be revoked. Lender or its nominee shall have the right, in its reasonable
discretion, to accept or reject any plan proposed in such proceeding and to take any other
action which a party filing a claim is entitled to do. In all such cases, whether in
administration, bankruptcy or otherwise, the person or persons authorized to pay such claim
shall pay to Lender the amount payable on such claim and, to the full extent necessary for
that purpose, Guarantor hereby assigns to Lender all of Guarantor’s rights to any such
payments or distributions; provided, however, Guarantor’s obligations hereunder shall
not be satisfied except to the extent that Lender receives cash by reason of any such payment
or distribution. If Lender receives anything hereunder other than cash, the same shall be held
as collateral for amounts due under this Guaranty. If all or any

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	 	 	portion of the obligations guarantied hereunder are paid or performed, the obligations of
Guarantor hereunder shall continue and shall remain in full force and effect in the event that
all or any part of such payment or performance is avoided or recovered directly or indirectly
from Lender as a preference, fraudulent transfer or otherwise under the Bankruptcy Code or
other similar laws, irrespective of (a) any notice of revocation given by Guarantor prior to
such avoidance or recovery, and (b) full payment and performance of all of the indebtedness
and obligations evidenced and secured by the Loan Documents.
	 
	8.	 	DISCLOSURE OF INFORMATION; PARTICIPATIONS. Guarantor agrees that Lender may elect, at
any time, to sell, assign, participate or securitize all or any portion of Lender’s rights and
obligations under the Loan Documents, and that any such sale, assignment, participation or
securitization may be to one or more financial institutions or other entities, to private
investors, and/or into the public securities marketplace, at Lender’s sole discretion.
Guarantor further agrees that Lender may disseminate to any such actual or potential
purchaser(s), assignee(s) or participant(s) all documents and information (including, without
limitation, all financial information) which has been or is hereafter provided to or known to
Lender with respect to: (a) the Property and its operation; and/or (b) any party connected
with the Loan (including, without limitation, the Guarantor, the Borrower, any partner of
Borrower, any constituent partner of Borrower, any guarantor and any nonborrower trustor). In
the event of any such sale, assignment, participation, or securitization, Lender and parties
to the same shall share in the rights and obligations of Lender set forth in the Loan
Documents as and to the extent they shall agree among themselves. In connection with any such
sale, assignment, participation, or securitization, Guarantor further agrees that this
Guaranty shall be sufficient evidence of the obligations of Guarantor to each purchaser,
assignee, or participant, and upon request by Lender, Guarantor shall, within fifteen (15)
days after request by Lender, (d) deliver to Lender and any other party designated by Lender
an estoppel certificate verifying for the benefit of Lender and any other party designated by
Lender the status and the terms and provisions of this Guaranty in form and substance
acceptable to Lender, and (e) enter into such amendments or modifications to this Guaranty as
may be reasonably required in order to facilitate any such sale, assignment, participation or
securitization without impairing Guarantor’s rights or increasing Guarantor’s obligations
hereunder. The indemnity obligations of Guarantor under this Guaranty shall also apply with
respect to any purchaser, assignee or participant.
	 
	9.	 	ADDITIONAL, INDEPENDENT AND UNSECURED OBLIGATIONS. This is a guaranty of payment and
not of collection and the obligations of Guarantor hereunder shall be in addition to and shall
not limit or in any way affect the obligations of Guarantor under any other existing or future
guaranties unless said other guaranties are expressly modified or revoked in writing. This
Guaranty is independent of the obligations of Borrower under the Note, the Deed of Trust and
the other Loan Documents. Guarantor agrees that nothing contained in this Guaranty shall
prevent Lender from suing to collect on the Note or from exercising concurrently or
successively any rights available to it at law and/or in equity or under any of the Loan
Documents, and that the exercise of any of the aforesaid rights shall not constitute a legal
or equitable discharge of Guarantor. Guarantor hereby authorizes and empowers Lender to
exercise, in its sole discretion, any rights and remedies, or any combination thereof, which
may then be available, since it is the intent and purpose of Guarantor that the obligations
hereunder shall be absolute, independent and unconditional under any and all circumstances.
Lender may bring a separate action to enforce the provisions hereof against Guarantor without
taking action against Borrower or any other party or joining Borrower or any other party as a
party to such action. Except as otherwise provided in this Guaranty, this Guaranty is not
secured and shall not be deemed to be secured by any security instrument unless such security
instrument expressly recites that it secures this Guaranty.
	 
	10.	 	ATTORNEYS’ FEES; ENFORCEMENT. If any attorney is engaged by Lender to enforce or
defend any provision of this Guaranty, or any of the other Loan Documents, or as a consequence
of any Default under the Loan Documents, with or without the filing of any legal action or
proceeding, Guarantor shall pay to Lender, immediately upon demand all reasonable attorneys’
fees and costs incurred by Lender in connection therewith, together with interest thereon from
the date of such demand until paid at the rate of interest applicable to the principal balance
of the Note as specified therein.
	 
	11.	 	RULES OF CONSTRUCTION. The word “Borrower” as used herein shall include both the
named Borrower and any other person at any time assuming or otherwise becoming primarily
liable for all or any part of the obligations of the named Borrower under the Note and the
other Loan Documents. The term “person” as used herein shall include any individual, company,
trust or other legal entity of any kind whatsoever. If this Guaranty is executed by more than
one person, the term “Guarantor” shall include all such persons. When the context and
construction so require, all words used in the singular herein shall be deemed to have been
used in the plural and vice versa. All headings appearing in this Guaranty are for convenience
only and shall be disregarded in construing this Guaranty. Capitalized terms not otherwise
defined herein shall have the meanings set forth in the Deed of Trust.

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	12.	 	CREDIT REPORTS. Each legal entity and individual obligated on this Guaranty
hereby authorizes Lender to order and obtain, from a credit reporting agency of Lender’s
choice, a third party credit report on such legal entity and individual.
	 
	13.	 	GOVERNING LAW. This Guaranty shall be governed by, and construed in accordance with,
the laws of the State of California, except to the extent preempted by Federal laws. Guarantor
and all persons and entities in any manner obligated to Lender under this Guaranty consent to
the jurisdiction of any Federal or State Court within the State of California having proper
venue and also consent to service of process by any means authorized by California or Federal
law.
	 
	14.	 	MISCELLANEOUS. The provisions of this Guaranty will bind and benefit the heirs,
executors, administrators, legal representatives, nominees, successors and assigns of
Guarantor and Lender. The liability of all persons and entities who are in any manner
obligated hereunder shall be joint and several. If any provision of this Guaranty shall be
determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that
portion shall be deemed severed from this Guaranty and the remaining parts shall remain in
full force as though the invalid, illegal or unenforceable portion had never been part of this
Guaranty.
	 
	15.	 	SURVIVAL. This Guaranty shall be deemed to be continuing in nature and shall remain
in full force and effect and shall survive the exercise of any remedy by Lender under the Deed
of Trust or any of the other Loan Documents, including, without limitation, any foreclosure or
deed in lieu thereof.
	 
	16.	 	ADDITIONAL PROVISIONS. Such additional terms, covenants and conditions as may be set
forth on any exhibit executed by Guarantor and attached hereto which recites that it is an
exhibit to this Guaranty are incorporated herein by this reference.
	 
	17.	 	ENFORCEABILITY. Guarantor hereby acknowledges that: (a) the obligations undertaken by
Guarantor in this Guaranty are complex in nature, and (b) numerous possible defenses to the
enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as
part of Lender’s consideration for entering into this transaction, Lender has specifically
bargained for the waiver and relinquishment by Guarantor of all such defenses, and (d)
Guarantor has had the opportunity to seek and receive legal advice from skilled legal counsel
in the area of financial transactions of the type contemplated herein. Given all of the above,
Guarantor does hereby represent and confirm to Lender that Guarantor is fully informed
regarding, and that Guarantor does thoroughly understand: (i) the nature of such possible
defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the
benefits which such defenses might confer upon Guarantor, and (iv) the legal consequences to
Guarantor of waiving such defenses. Guarantor acknowledges that Guarantor makes this Guaranty
with the intent that this Guaranty and all of the informed waivers herein shall each and all
be fully enforceable by Lender, and that Lender is induced to enter into this transaction in
material reliance upon the presumed full enforceability thereof.
	 
	18.	 	WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, LENDER AND GUARANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS GUARANTY, OR ANY COURSE OR CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF LENDER OR GUARANTOR. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER TO MAKE THIS LOAN TO BORROWER.

IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date appearing on the first
page of this Guaranty.

“GUARANTOR”

	 	 	 	 	 
	IXYS CORPORATION,

a Delaware corporation

 	 
	By:  	/s/ Uzi Sasson
 	 
	 	Uzi Sasson 	 
	 	Vice President of Finance 	 
	 

6exv10w4

 

Exhibit 10.4

PROMISSORY NOTE SECURED BY DEED OF TRUST

Loan No.
31 - 0900266A

$8,000,000.00

	 	 	 
	 

	 	San Francisco, California

 December 21, 2000

	1.	 	PROMISE TO PAY. For value received, the undersigned BARBER LANE ASSOCIATES
L. P. , a California limited partnership
(‘Borrower”), promise(s) to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION
(“Lender”), 1320 Willow Pass Road, Suite 205, Concord, California 94520, or at such other
place as may be designated in writing by Lender, the principal sum of EIGHT MILLION
AND NO/ 10 0 THS DOLLARS ($8 , 0 0 0 , 0 0 0 . 00) (“Loan”), with interest
thereon as specified herein. All sums owing hereunder are payable in lawful money of the
United States of America, in immediately available funds, without offset, deduction or
counterclaim of any kind.
	 
	2.	 	SECURED BY DEED OF TRUST. This Note is secured by, among other things, that Deed of
Trust and Absolute Assignment of Rents and Leases and Security Agreement (and Fixture
Filing) (“Deed of Trust”) of even date herewith, encumbering certain real property described
therein (“Property”).
	 
	3.	 	DEFINITIONS. For the purposes of this Note, the following terms shall have the following
meanings:
	 
	 	 	“Business Day” shall mean any day other than a Saturday, Sunday, legal holiday or other day
on which commercial banks in California are authorized or required by law to close. All
references in this Note to a “day” or a “date” shall be to a calendar day unless
specifically referenced as a Business Day.
	 
	 	 	“Default” shall have the meaning set forth in the Deed of Trust.
	 
	 	 	“Disbursement Date” shall mean the date upon which the Loan proceeds are funded into escrow
in connection with the closing of the Loan.
	 
	 	 	“Effective Date” shall mean the date the Deed of Trust is recorded in the Office of the
County Recorder of the county where the Property is located and Lender authorizes the Loan
proceeds to be released to Borrower.
	 
	 	 	“Loan Documents” shall mean the documents listed in Exhibit B attached hereto and
incorporated herein by this reference.
	 
	 	 	“Maturity Date” shall mean February 1, 2011.
	 
	4.	 	INTEREST; PAYMENTS.

	 	4.1	 	Definitions. The following terms shall have the meanings indicated:
	 
	 	 	 	“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.
	 
	 	 	 	“30/360 Basis” shall mean on the basis of a 360-day year consisting
of 12 months of 30 days each. “Interest Rate” shall mean a fixed annual rate
of 7 . 4 5 5 %.
	 
	 	4.2	 	Interest Accrual. Interest on the outstanding principal balance of this
Note shall accrue from the Disbursement Date at an annual rate equal to the Interest
Rate calculated on an Actual/360 Basis.
	 
	 	4.3	 	Payments. Monthly payments hereunder shall commence on the first day of
the calendar month following the Disbursement Date and continue on the first day of
each calendar month thereafter through the Maturity Date. If the Disbursement Date is
a date other than the fast day of a calendar month, the fast monthly
payment shall be interest only. Subsequent monthly payments shall be
calculated on the basis of an equal-payment 30 year amortization of
principal and interest. Notwithstanding that interest on this Note
accrues on an Actual./360 Basis,

 

 

the total amount of each such amortized monthly payment of principal and interest shall
be determined using a 30/360 Basis. On the Maturity Date, all unpaid principal and
accrued but unpaid interest shall be due and owing in full. All interest shall be paid in
arrears.

	 	4.4	 	Acknowledgments. Borrower acknowledges that interest calculated on an
ActuaU360 Basis exceeds interest calculated on a 30/360 Basis and, therefore: (a) a
greater portion of each monthly installment of principal 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 (b) the unpaid principal balance of this Note on the Maturity Date will
be greater using the Actuall360 Basis than would be the case if interest accrued on a
30/360 Basis.
	 
	 	4.5	 	Application of Payments. In the absence of a specific determination by
Lender to the contrary, all payments paid by Borrower to Lender in connection with the
obligations of Borrower under this Note and under the other Loan Documents shall 3e
applied in the following order of priority: (a) to amounts, other than principal and
interest, due to Lender pursuant to this Note or the other Loan Documents; (b) to accrued
but unpaid interest on this Note; and (c) to the unpaid principal balance of this Note.
Borrower irrevocably waives the right to direct the application of any and all payments
at any time hereafter received by Lender from or on behalf of Borrower, and Borrower
irrevocably agrees that Lender shall have the continuing exclusive right to apply any and
all such payments against the then due and owing obligations of Borrower in such order of
priority as Lender may deem advisable.

	5.	 	LATE CHARGE; DEFAULT RATE.

	 	5.1	 	Late Charge. If all or any portion of any payment or deposit required
hereunder (other than the payment due on the Maturity Date) is not paid or deposited on
or before the fourth day following the day on which such payment or deposit is due,
Borrower shall pay a late or collection charge, as liquidated damages, equal to 5% of the
amount of such unpaid payment or deposit. If all or any portion of the payment due on the
Maturity Date is paid more than 4 days after the Maturity Date and on a date other than
the first day of a month, Borrower shall pay a late or collection charge, as liquidated
damages, equal to the interest which would have accrued on such amount during the period
commencing on the date payment of such amount is actually made and ending on the last day
of the month in which payment of such amount is actually made. Borrower acknowledges that
Lender will incur additional expenses as a result of any late payments or deposits
hereunder, which expenses would be impracticable to quantify, and that Borrower’s
payments under this Section 5.1 are a reasonable estimate of such expenses.
	 
	 	5.2	 	Default Rate. Commencing upon a Default and continuing until such Default
shall have been cured by Borrower, all sums owing on this Note shall bear interest until
paid in full at an annual rate equal to 5% plus the h terest Rate, but not higher than
the maximum rate of interest permitted by applicable law (“Default Rate”).

	6.	 	MAXIMUM RATE PERMITTED BY LAW. Neither this Note nor any of the other Loan Documents
shall require the payment or permit the collection of any interest or any late payment charge
in excess of the maximum rate permitted by law. If any such excess interest or late payment
charge is provided for under this Note or any of the other Loan Documents or if this Note or
any of the other Loan Documents shall be adjudicated to provide for such excess, neither
Borrower nor Borrower’s successors or assigns shall be obligated to pay such excess, and the
right to demand the payment of any such excess shall be and hereby is waived, and this
provision shall control any other provision of this Note or any of the other Loan Documents.
If Lender shall collect amounts which are deemed to constitute interest and which would
increase the effective interest rate to a rate in excess of the maximum rate permitted by law,
all such amounts deemed to constitute interest in excess of the maximum. legal rate shall,
upon such determination, at the option of Lender, be returned to Borrower or credited against
the outstanding principal balance of this Note.

	7.	 	ACCELERATION. If (a) Borrower shall fail to pay when due any sums payable under this
Note; (b) any other Default shall occur; or (c) any other event or condition shall occur
which, under the terms of the Deed of Trust or any other Loan Document, gives rise to a right
of acceleration of sums owing under this Note, then Lender, at its sole option, shall have the
right to declare all sums owing under this Note immediately duc and payable; provided,
however, that if the Deed of Trust or any other Loan Document provides for the automatic
acceleration of payment of sums owing under this Note, all sums owing under this Note shall be
automatically due and payable in accordance with the terms of the Deed of Trust or such other
Loan Document.

 

 

	8.	 	BORROWER’S LIABILITY.

	 	8.1	 	Limitation. Except as otherwise provided in this Section 8, Lender’s
recovery against Borrower under this Note and the other Loan Documents shall be limited
solely to the Property and the “Collateral” (as defined in the Deed of Trust).
	 
	 	8.2	 	Exceptions. Nothing contained in Section 8.1 or elsewhere in this Note or
the other Loan Documents, however, shall limit in any way the personal liability of
Borrower owed to Lender for any losses or damages incurred by Lender (including, without
limitation, any impairment of Lender’s security for the Loan) with respect to any of the
following matters: (a) fraud or willful misrepresentation;; (b) material physical waste
of the Property or the Collateral; (c) failure to pay property or other taxes,
assessments or charges from available property cash flow (other than amounts paid to
Lender for taxes, assessments or charges pursuant to Impounds as defined in Exhibit A and
where Lender elects not to apply such funds toward payment of the taxes, assessments or
charges owed) which may create liens senior to the lien of the Deed of Trust on all or
any portion of the Property; (d) failure to deliver any insurance or condemnation
proceeds or awards or any security deposits received by Borrower to Lender or to
otherwise apply such sums as required under the terms of the Loan Documents or any other
instrument now or hereafter securing this Note; (e) failure to apply any rents,
royalties, accounts, revenues, income, issues, profits and other benefits from the
Property which are collected or received by Borrower during the period of any Default or
after acceleration of the indebtedness and other sums owing under the Loan Documents to
the payment of either (i) such indebtedness or other sums or (ii) the normal and
necessary operating expenses of the Property; or (f) any breach by Borrower of any
covenant in this Note or in the Deed of Trust regarding Hazardous Materials (as defined
in the Deed of Tnrst) or any representation or warranty of Borrower regarding Hazardous
Materials proving to have been untrue when made.
	 
	 	8.3	 	No Release or Impairment. Nothing contained in Section 8.1 shall be deemed
to release, affect or impair the indebtedness evidenced by this Note or the obligations
of Borrower under, or the liens and security interests created by the Loan Documents, or
Lender’s rights to enforce its remedies under this Note and the other Loan Documents,
including, without limitation, the right to pursue any remedy for injunctive or other
equitable relief, or any suit or action in connection with the preservation, erforcement
or foreclosure of the liens, mortgages, assignments and security interests which are now
or at a.any time hereafter security for the payment and performance of all obligations
under this Note or the other Loan Documents.
	 
	 	8.4	 	Prevail and Control. The provisions of this Section 8 shall prevail and
control over any contrary provisions elsewhere in this Note or the other Loan Documents.

	9.	 	NON-TRUSTOR BORROWER. If any Borrower is not also a "Tmstor”
under the Deed of Trust, such Borrower hereby makes all representations and warranties in
favor of Lender contained in Article 5 of the Deed of Trust, all covenants contained in
Section 6.15 of the Deed of Trust, and all indemnities of Lender contained in Section 6.19 of
the Deed of Trust, jointly and severally with the
“Trustor.”

	10.	 	MISCELLANEOUS.

	 	10.1	 	Joint and Several Liability. If this Note is executed by more than one
person or entity as Borrower, the obligations of each such person or entity shall be
joint and several. No person or entity shall be a mere accommodation maker, but each
shall be primarily and directly liable hereunder.
	 
	 	10.2	 	Waiver of Presentment. Except as otherwise provided in any other Loan
Document, Borrower hereby waives presentment, demand, notice of dishonor, notice of
default or delinquency, notice of intent to accelerate, notice of acceleration, notice of
nonpayment, notice of costs, expenses or losses and interest thereon, and notice of
interest on interest and late charges.
	 
	 	10.3	 	Delay In Enforcement. No previous waiver or failure or delay by Lender in
acting with respect to the terms of this Note or the Deed of Trust shall constitute a
waiver of any breach, default or failure of condition under this Note, the Deed of Trust
or the obligations secured thereby. A waiver of any term of this Note, the Deed of Trust
or of any of the obligations secured thereby must be made in writing signed by Lender,
shall be limited to the express terms of such waiver, and shall not constitute a waiver
of any subsequent obligation of Borrower. The acceptance at any time by Lender of any
past-due amount shall not be deemed to be a waiver of the right to require prompt payment
when due of any other amounts then or thereafter due and payable.

 

 

	 	10.4	 	Time of the Essence. Time is of the essence with respect to every provision
hereof
	 
	 	10.5	 	Governing Law. This Note was accepted by Lender in the slate of California
and the proceeds of this Note were disbursed from the state of California, which state
the parties agree has a substantial relationship to the parties and to the underlying
transaction embodied hereby. Accordingly, in all respects, including, without limiting
the generality of the foregoing, matters of construction, validity, enforceability and
performance, this Note, the Deed of Trust and the other Loan Documents and the
obligations arising hereunder and thereunder shall be governed by, and construed in
accordance with, the laws of the state of California applicable to contracts made and
performed in such state and any applicable law of the United States of America, except
that at all times the provisions for the enforcement of Lender’s STATUTORY POWER OF SALE
granted under the Deed of Trust securing this Note and the creation, perfection and
enforcement of the security interests created pursuant thereto and pursuant to the other
Loan Documents shall be governed by and construed according to the law of the state where
the Property is located. Except as provided in the immediately preceding sentence,
Borrower hereby unconditionally and irrevocably waives, to the fullest extent permitted
by law, any claim to assert that the law of any jurisdiction other than California
governs the Deed o f Trutt, this Note and the other Loan Documents.
	 
	 	10.6	 	Consent to Jurisdiction,. Borrower irrevocably submits to the
jurisdiction of: (a) any state or federal court sitting in the state of California over
any suit, action, or proceeding, brought by Borrower against Lender, arising out of or
relating to this Note or the Loan evidenced hereby; (b) any state or federal court
sitting in the state where the Property is located or the state in which
Borrower‘s principal place of business is located over any suit, action or
proceeding, brought by Lender against Borrower, arising out: of or relating to this Note
or the Loan evidenced hereby; and (c) any state court sitting in the county of the state
where the Property is located over any suit, action, or proceeding, brought by Lender to
exercise its STATUTORY POWER OF SALE under the Deed of Trust or any action brought by the
Lender to enforce its rights with respect to the Collateral. Borrower irrevocably waives,
to the fullest extent permitted by law, any objection that Borrower may now or hereafter
have to the laying of venue of any such suit, action, or proceeding brought in a.ny such
court and any claim that any such suit, action, or proceeding brought in any such court
has been brought in an inconvenient forum.
	 
	 	10.7	 	Counterparts. This Note may be executed in any number of counterparts, each
of which when executed and delivered shall be deemed an original and all of which taken
together shall be deemed to be one and the same Note.
	 
	 	10.8	 	Heirs, Successors and Assigns. All of the terns, covenants, conditions and
indemnities contained in this Note and the other an Documents shall be binding upon the
heirs, successors and assigns of Borrower and shall inure to the benefit of the
successors and assigns of Lender. The foregoing sentence shall not be construed to permit
Borrower to assign the Loan except as otherwise petted in this Note or the other Loan
Documents.
	 
	 	10.9	 	Severability. If any tern of this Note, or the application thereof to any
person or circumstances, shall, to any extent, be invalid or unenforceable, the remainder
of this Note, or the application of such term to persons or circumstances other than
those as to which it is invalid or unenforceable, shall not be affected thereby, and each
term of this Note shall be valid and enforceable to the fullest extent permitted by law.
	 
	 	10.10	 	Consents and Approvals. Wherever Lender’s consent, approval, acceptance or
satisfaction is required under any provision of this Note or any of the other Loan
Documents, such consent, approval, acceptance or satisfaction shall not be unreasonably
withheld, conditioned or delayed by Lender unless such provision expressly so provides.

	11.	 	NOTICES. All notices and other communications that are required or permitted to be
given to a party under this Note shall be in writing and shall be sent to such party, either
by personal delivery, by overnight delivery service, by certified first class mail, return
receipt requested, or by facsimile transmission to the address or facsimile number below. All
such notices and communications shall be effective upon receipt of such delivery or facsimile
transmission. The addresses and facsimile numbers of the parties shall be:

 

 

	 	 	 
	Borrower:	 	Lender:
	BARBER LANE ASSOCIATES L.P.

	 	Wells Fargo Bank, N.A.
	490 California Ave.

	 	1320 Willow Pass Road, Suite 205
	4th Floor

	 	Concord, CA 94520
	Palo Alto, CA 94301

	 	Loan No. 31-0900266A
	FAX No.: (650) 326-9333

	 	FAX No.: (925) 691-5947
	 
	 	 
	With copies to:
	 	 
	Cooley Godward LLP 
	 	 
	One
Maritime Plaza
20th Floor

	 	 
	San Francisco, CA 94111

	 	 
	Attn: Paul Churchill, Esq.

	 	 
	(415) 951-3699
	 	 

	12.	 	ADDITIONAL TERMS ANI) CONDITIONS. The additional terms and conditions set forth in
Exhibit A attached hereto are incorporated herein by this reference.

	13.	 	PREPAYMENT. Borrower acknowledges that any prepayment of this Note will cause Lender
to lose its interest rate yield on this Note and will possibly require that Lender reinvest
any such prepayment amount in loans of a lesser interest rate yield (including, without
limitation, in debt obligations other than first mortgage loans on commercial properties). As
a consequence, Borrower agrees as follows, as an integral part of the consideration for
Lender’s making the Loan:

	 	13.1	 	Voluntary Prepayment. Any voluntary prepayment of this Note: (a) is
prohibited except during the last 3 months of the term, (b) is permitted in full
only, and not in part.
	 
	 	13.2	 	Prepayment Charge.

	 	a.	 	Basic Charge. Except as provided below, if this Note is prepaid prior to
the last 3 months of the term, whether such prepayment is involuntary or
upon acceleration of the principal amount of this Note by Lender following a
Default, Borrower shall pay to Lender on the prepayment date (in addition to all
other sums then due and owing to Lender under the Loan Documents) a prepayment
charge equal to the greater of the following two amounts: (a) an amount equal to 1%
of the then outstanding principal balance of the Loan; 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 under this Note, calculated
by discounting such payments from their respective scheduled payment dates 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 of the prepayment
and whose denominator is the outstanding principal balance of the Loan as of the
prepayment date. For purposes of the foregoing, “Periodic Treasury Yield” means (c)
the annual yield to maturity of the actively traded :ion-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 Maturity Date (or if two or more such securities
have maturity dates equally close to the Maturity 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 (d) 12, if scheduled payment dates are
monthly, or 4, if scheduled payment dates are quarterly.
	 
	 	b.	 	Additional Charge. If this Note is prepaid on any day other than the
first day of a month, whether such prepayment is involuntary or upon full
acceleration of the principal amount of this Note by Lender following a Default,
Borrower shall pay to Lender on the prepayment date (in addition to the basic
prepayment charge described in Section 13.2a. above and all other sums then due and
owing to Lender under this Note and the other Loan Documents) an additional
prepayment charge equal to the interest which would otherwise have accrued on the
amount prepaid (had such prepayment not occurred during

 

 

the period commencing on the prepayment date and ending on the last day of the
month in which the prepayment occurred.

	 	c.	 	Exclusion. Notwithstanding the foregoing, no prepayment charge of any
kind shall apply in respect to any prepayment resulting from the application of any
insurance or condenmation proceeds received by Lender and applied by Lender to the
outstanding principal balance of the Loan.

	 	13.3	 	Effect of Prepayment. No partial prepayment of this Note shall change the
dates or amounts of subsequent monthly installments of principal and interest, unless
Lender otherwise agrees in writing.
	 
	 	13.4	 	Waiver. Borrower waives any right to prepay this Note except under the
terms and conditions set forth in this Section and agrees that if this Note is prepaid,
Borrower will pay the prepayment charge set forth above. Borrower hereby acknowledges
that: (a) the inclusion of this waiver of prepayment rights and agreement to pay the
prepayment charge for the right to prepay this Norse was separately negotiated with
Lender; (b) the economic value of the various elements of this waiver and agreement was
discussed; (c) the consideration given by Borrower for the Loan was adjusted to reflect
the specific waiver and agreement negotiated between Borrower and Lender and contained
herein; and (d) this waiver is intended to comply with California Civil Code Section
2954.10.

	 	 	 	 	 
	 	Borrower’s Initials:
       HDB           RP           

 	 

14. DEFEASANCE.

	 	14.1	 	Defeasance Definitions. The following terms shall have the meanings indicated:
	 
	 	 	 	“Allocated Loan Amount” means that portion of the Loan which has been allocated to each
Individual Property which is being dcfeased,
	 
	 	 	 	“Code” means the Internal Revenue Code of 1986, as amended to date and as further amended
from time to time, or any successor statutes thereto, together with applicable
regulations issued pursuant thereto in temporary or final form.
	 
	 	 	 	“Defeasance” means the Borrower’s substitution of collateral and Lender’s full or partial
release of the lien of the Deed of Trust upon satisfaction of all of the terms and
conditions of this Section 14.
	 
	 	 	 	“Defeasance Collateral” means obligations or securities, not subject to prepayment, call
or early redemption, that are direct obligations of, or obligations fully guaranteed as
to timely payment by, the United States of America that are backed by the full faith and
credit of the United States, together with all revenues and proceeds of such obligations
or securities.
	 
	 	 	 	“Defeasance Date” means the date upon which the Defeasance is completed.
	 
	 	 	 	“Defeasance Security Agreements” shall have the meaning specified in
Section 14.3 d.(ii). “Individual Property” means property as described
in Exhibit A of the Deed of Trust.
	 
	 	 	 	“Lockout Expiration Date” means the later of (a) two years after the Startup Day (defined
below) of the REMIC (defined below), if any, that holds this Note on the Defeasance Date,
and (b) the 3RD anniversary of the date of this Note.
	 
	 	 	 	“Rating Agencies” means Fitch ICBA, Inc., Moody’s Investor Services, Inc., Standard &
Poor’s Rating Services and any other nationally-recognized statistical rating
organization that, in connection with the securitization of the Loan by a REMIC,
maintains a rating on the Defeasance Date of the securities issued by the REMIC.
	 
	 	 	 	“REMIC” means a “real estate mortgage investment conduit” within the meaning of Section
860D of the Code.
	 
	 	 	 	“Startup Day” means the “startup day” within the meaning of Section
860G(a)(9) of the Code.

 

 

	 	 	 	“Successor Borrower” means an entity designated by Lender whose sole purpose is to own the
Defeasance Collateral delivered by Borrower under this Section 14 and assume Borrower’s
obligations with respect to the Loan or portion of the Loan affected by the Defeasance, either
alone, or together with the Defeasance Collateral for other, previously deceased loans or
portions of loans assumed by Successor Borrower which are also held by the REMIC that holds
this Note. The Successor Borrower shall, in either case, be restricted from taking actions
that could result in its bankruptcy or dissolution

	 	14.2	 	Borrower Right to Defease. At any time after the Lockout Expiration Date, Borrower
may elect to effect a Defeasance of the entire Loan or one or more partial Defcas.nces of an
Individual Property in accordance with the provisions of this Section 14, at Borrower’s sole
cost and expense.
	 
	 	14.3	 	Conditions. Borrower shall only have the right to cause a Defeasance if all of the
following conditions have been satisfied:

	 	a.	 	Notice. Borrower shall give at least 45 days but rot more than 90 days written notice
to Lender specifying the Borrower’s intended Defeasance Date and, for a partial
Defeasance, the Individual Property affected. Simultaneously with the delivery cf such
notice, Borrower shall deposit with Lender an amount estimated by Lender to be sufficient
to reimburse Lender’s reasonable anticipated expenses in connection with the Defeasance,
for which Borrower shall be solely responsible whether or not the Defeasance shall be
completed. If any such notice shall have been given by Borrower, Borrower shall be
obligated to complete the Defeasance of the Loan on the Defeasance Date, unless such
notice is revoked in writing by Borrower prior to the Defeasance Date. Upon completion of
the Defeasance or revocation by Borrower as specified above, Lender shall return any
surplus deposit to Borrower;
	 
	 	b.	 	No Default. No Default shall have occurred and be continuing on the date of
Borrower’s notice under Section 14.3 a. above or on the Defeasance Date.
	 
	 	c.	 	Payments. Borrower shall pay in full, on or before the Defeasance Date, all unpaid
interest accruing under this Note to and including the Defeasance Date, and all other sums
due under this Note and the other Loan Documents on or before the Defeasance Date,
including without limitation, (i) all costs and expenses paid or incurred by Lender or its
agents in connection with the Defeasance, the release of the lien of the Deed of Trust on
the Property or the Individual Property, as the case may he, the review of the proposed
Defeasance Collateral and the preparation of the Defeasance Security Agreements and
related documentation, and (ii) any revenue, documentary stamp, intangible or other taxes,
charges or fees due in connection with the transfer or assumption of this Note, the New
Note (as hereinafter defined) or the Defeasance;
	 
	 	d.	 	Deliveries. Borrower shall, at Borrower’s sole cost and expense, deliver the
following items to Lender on or before the Defeasance Date:

	 	(i)	 	for any partial Defeasance, a new promissory note in an amount equal
to one hundred twenty-five percent (125%) of the outstanding principal balance of
the Allocated Loan Amount affected by the Defeasance (the “New Note”), and an
amendment to this Note to evidence only the remaining principal balance of the
Loan. The New Note and Defeasance Security Agreements will not be cross-defaulted
to this Note and other Loan Documents;
	 
	 	(ii)	 	The Defeasance Collateral, as substitute collateral for the Loan or,
for a partial Defeasance, for the New Note. The principal and interest payments
under the Defeasance Collateral must be, in timing and amounts, sufficient to
provide for payment prior, but as close as possible, to all successive scheduled
payment dates occurring after the Defeasance Date, with each such payment being
equal to or greater than the amount of the corresponding installment of principal
and interest required to be paid under this Note or, for a partial Defeasance,
under the New Note (including, without limitation, all amounts due on the Maturity
Date) for the balance of the to m hereof Borrower shall take sucl actions, enter
such agreements and issue such orders or directions (including those specified
below), as are necessary or appropriate and in accordance with customary
commercial standards to effectuate book-entry transfers and pledges through the
book-entry facilities of the institution holding the Defeasance Collateral or
otherwise to create and perfect a valid, enforceable, first priority security
interest in the Defeasance Collateral in favor of Lender:

 

 

	 	(iii)	 	a pledge and security agreement and an acccunt control agreement, each in form
and substance customary in commercial mortgage defeasance transactions (such
agreements, together with the New Note in the case of a partial Defeasance, the
“Defeasance Security Agreements”), creating, attaching and perfecting a first priority
security interest in favor of Lender in the Defeasance Collateral under the law of the
] urisdiction selected by Lender, which agreements shall provide, among other things,
that all payments generated by the Defeasance Collateral shall be paid directly to
Lender and applied by Lender to amounts then due and payable under this Note or, for a
partial Defeasance, under the New Note;
	 
	 	(iv)	 	a certificate of Borrower certifying that all of the requirements of this
Section 14 have been satisfied;
	 
	 	(v)	 	opinions of counsel for Borrower, addressed. to Lender and all Rating Agencies
and delivered by counsel reasonably satisfactory to Lender, subject only to customary
assumptions, qualifications and exceptions, stating, among other things, that (a)
Lender has a perfected first priority security interest in the Defeasance Collateral,
(b) the Defeasance Security Agreements are enforceable against Borrower in accordance
with their terms and (c) any REMIC that holds this Note on the Defeasance Date will
not, as a result of the Defeasance, fail to maintain its status as a “real estate
mortgage investment conduit” within the meaning of Section 860D of the Code;
	 
	 	(vi)	 	a certificate, addressed to Lender and all Rating Agencies, from a firm of
independent certified public accountants reasonably acceptable to Lender, subject only
to customary assumptions, qualifications and exceptions, certifying that the Defeasance
Collateral satisfies the requirements of Section 14.3 d.(ii) above and certifying that
in no fiscal year of the Successor Borrower will the interest earned on the Defeasance
Collateral exceed the interest payable for the same period on the Loan under this Note
or, for a partial Defeasance, on the New Note;
	 
	 	(vii)	 	if this Note is held by a REMIC, written evidence from all of the Rating
Agencies that originally rated the pool, that the Defeasance will not result in a
downgrading, withdrawal or qualification of the respective ratings in effect
immediately prior to the Defeasance for any securities representing interests in such
REM IC which are then outstanding;
	 
	 	(viii)	 	for a partial Defeasance, an endorsement to Lender’s title insurance policy
reflecting the Defeasance and otherwise reflecting no material adverse change in the
title to the Property which remains subject to the lien of the Deed of Trust;
	 
	 	(ix)	 	such other certificates, opinions, documents or instruments as are customary in
commercial mortgage defeasance transactions to effect the Defeasance.

	 	e.	 	Partial Release Conditions. For a partial Defeasance, all other conditions specified in the
Note or the Deed of Trust for a release of any Individual Property shall have been satisfied
except payment to Lender of any portion of the outstanding principal balance of the Loan.
	 
	 	f.	 	Release of Lien. Upon satisfaction of all condition, specified above, the Property or, for a
partial Defeasance, the Individual Property shall be released from the lien of the Deed of
Trust and the other Loan Documents, and the Defeasance Collateral and the proceeds thereof
shall constitute the only collateral securing the obligations of Borrower under this Note and
the other Loan Documents or, for a partial Defeasance, under the New Note and the Defeasance
Security Agreements. Lender shall, at Borrower’s expense, prepare, execute and deliver any
agreements reasonably necessary to release the lien of the Deed of Trust from the Property or
the India dual Property, as applicable.
	 
	 	g.	 	Assignment and Assumption. In connection with the Defeasance, Borrower shall, at the request
of Lender, assign al]. of its right, title and interest in and to the pledged Defeasance
Collateral and all its obligations and rights under this Note or, for a partial. Defeasance,
the New Note, and the Defeasance Security Agreements to the Successor Borrower. The Successor
Borrower shall execute an assumption agreement in form and substance customary in commercial
mortgage defeasance transactions, pursuant to which it shall assume Borrower’s obligations
under this Note or, for a partial Defeasance, the New

7

 

	 	 	 	Note, and the Defeasance Security Agreements. On the Defeasance Date, a fee of 1% of the
outstanding balance of the Loan shall be paid by Borrower to Successor Borrower in consideration
of Successor Borrower’s assumption of such obligations of Borrower. As conditions to such
assignment and assumption, Borrower shall (i) deliver to Lender opinions of counsel addressed to
Lender and all Rating Agencies, in form and substance customary in commercial defeasance
transactions and delivered by counsel reasonably satisfactory to Lender, and subject only to
customary assumptions, qualifications and exceptions, stating, among other things, that such
assumption agreement is enforceable against Borrower and Successor Borrower in accordance with its
terms and that this Note or, for a partial Defeasance, the New Note, and the Defeasance Security
Agreements, as so assumed, are enforceable against Successor Borrower in accordance with their
respective terms, and that the bankruptcy of any affiliate of Successor Borrower will not affect
the ii ssets of the Successor Borrower; and (ii) pay all costs and expenses incurred by Lender or
its agents in connection with such assignment and assumption (including, without limitation, the
formation or review of the Successor Borrower and the preparation of the assumption agreement and
related documentation). Upon such assumption, Borrower shall be relieved of its obligations under
this Note or, for a partial Defeasance, under the New Note, the Defeasance Security Agreements and
the other Loan Documents (but in a partial Defeasance, only to the extent applicable to the
Individual Property affected by the Defeasance) other than (iii) representations and warranties
made in connection with the Defeasance, (iv) the obligation to effect the Defeasance in accordance
with this Section 14, and to provide further assurances as necessary to do so, (v) liability for
losses to Lender resulting from an avoidance, rescission or set-aside of the Defeasance as a
result of actions taken or suffered by Borrower, and (vi) those obligations which are specifically
intended to survive the payment of the Loan or other termination, satisfaction or assignment of
this Note, the Defeasance Security Agreements or the other Loan Documents or Lender’s exercise of
its rights and remedies under any of such documents and instruments.

8

 

	15.	 	WAIVER OF JURY TRIAL. LENDER AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR AR][SING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WR][TTEN),
OR ACTIONS OF LENDER OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE
THE LOAN TO BORROWER.

	 	 	 	 	 	 	 	 	 	 	 
	“BORROWER”	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	BARBER LANE ASSOCIATES L.P.,
a California limited
partnership	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	Menlo Equities Associates V LLC,

a California limited liability company,
General
Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Menlo Equities LLC,

a California limited liability company,
Managing
Member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Menlo Equities, Inc.,

a California corporation,

Managing Member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Henry D. Bullock
	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Henry D. Bullock,	 	 
	 

	 	 	 	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Diamant Investments LLC,

a Delaware limited liability company, Member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Richard J. Hollstrom	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Richard J. Hollstrom,	 	 
	 

	 	 	 	 	 	 	 	Managing Member	 	 

9

 

	 	 	 	 	 

LoanNo.31-0900266A

EXHIBIT A TO PROMISSORY NOTE

Additional Terms And Conditions

     This Exhibit A is attached to and forms a part of that Promissory Note (“Note”) executed by
BARBER LANE ASSOCIATES L. P. , a California limited partnership (“Borrower”) in favor
of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”).

     DISBURSEMENT OF LOAN PROCEEDS; LIMITATION OF LIABILITY. Borrower hereby authorizes Lender
to disburse the proceeds of the Loan, after deducting any and all fees owed by Borrower to Lender
in connection with

the Loan, to Commonwealth Land Title Inst:_rance Company. With respect to such
disbursement, Borrower understands and agrees that Lender does not accept responsibility for
errors, acts or omissions of others, including, without limitation, the escrow company, other
banks, communications carriers or clearinghouses through which the transfer of Loan proceeds
may be made or through which Lender receives or transmits information, and no such entity
shall be deemed Lender’s agent. As a consequence, Lender shall not be liable to Borrower for
any actual (whether direct or indirect), consequential or punitive damages which may arise
with respect to the disbursement of Loan proceeds, whether or not (a) any claim for such
damages is based on tort or contract, or (b) either Lender or Borrower knew or should have
known of the likelihood of such damages in any situation.

	2.	 	FINANCIAL STATEMENTS.

	 	2.1	 	Statements Required. During the term of the Loan and while any liabilities
of Borrower to Lender under any of the Loan Documents remain outstanding and unless
Lender otherwise consents in writing, Borrower shall provide to Lender the following:

	 	a.	 	Operating Statement. Not later than 10 days after and as of the end of
each calendar month during the period prior to any sale of the Loan, and thereafter
not later than 30 days after and as of the end of each calendar quarter, an
operating statement, signed and dated by Borrower, in a form acceptable to Lender,
showing all revenues and expenses during such month or quarter and year-to-date,
relating to the Property, including, without limitation, all information requested
under any of the Loan Documents;
	 
	 	b.	 	Rent Roll. Not later than 10 days after and as of the end of each
calendar month during the period prior to any sale of the Loan, and thereafter not
later than 30 days after and as of the end of each calendar quarter, a rent roll
signed and dated by Borrower,, in a form acceptable to Lender, showing the
following lease information with regard to each tenant: the name of the tenant,
monthly or other periodic rental amount, dates of commencement and expiration of
the lease, and payment status;
	 
	 	c.	 	Balance Sheet. If requested by Lender, not later than 90 days after and
as of the end of each fiscal year, a balance sheet, signed and dated by Borrower,
in a form acceptable to Lender (or audited financial statements if Borrower obtains
them), showing all assets and liabilities of Borrower; and
	 
	 	d.	 	Other Information. From time to time, upon Lender’s delivery to Borrower
of at least 30 days’ prior written notice, such other information with regard to
Borrower, principals of Borrower, guarantors or the Property as Lender may
reasonably request in writing.

	 	2.2	 	Form; Warranty. Borrower agrees that all financial statements to be
delivered to Lender pursuant to Section 2.1 shall: (a) be materially complete and
correct:; (b) present fairly the financial condition of the party; (c) disclose all
liabilities that are required to be reflected or reaerved against; and (d) be prepared
in accordance with the same accounting standard used by Borrower to prepare the fmancial
statements delivered to and approved by Lender in connection with the making of the loan
or other accounting standards acceptable to Lender. 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 rent rolls and other information to be delivered to
Lender pursuant to Section 2.1 shall not contain any misrepresentation or omission of a
material fact.

EXHIBIT A

10

 

	 	2.3	 	Late Charge. If any financial statement, leasing schedule or other item
required to be delivered to Lender pursuant to Section 2.1 is not timely delivered,
Borrower shall promptly pay to Lender, as a late charge, the sum of $500 per item. In
addition, Borrower shall promptly pay to Lender an additional late charge of $500 per
item for each full month during which such item remains undelivered following written
notice from Lender. Borrower acknowledges that Lender will incur additional expenses as a
result of any such late deliveries, which expenses would be impracticable to quantify,
and that Borrower’s payments under this Section 2.3 are a reasonable estimate of such
expenses.

	3.	 	IMPOUNDS.

	 	3.1	 	Amounts. Borrower shall deposit with Lender, the amounts (“Impounds”)
stated below on the dates stated below, for the purpose of paying the costs stated below:

	 	a.	 	Taxes. (i) $15,110.00 on the Disbursement Date, and
(ii) on the first payment date on which both principal and interest under the Loan
are payable and on each payment date thereafter, an amount estimated from time to
time by Lender in its sole discretion to be sufficient to pay for taxes and other
liabilities payable by Borrower under Section 6.9 of the Deed of Trust. The initial
estimated monthly amount to be deposited by Borrower on each payment date is $3,022.00.
	 
	 	b.	 	Insurance. (i) $6,392.00 on the Disbursement Date, and (ii)
on the first payment date on which both principal and interest under the Loan are
payable and on each payment date thereafter, an amount estimated from time to time
by Lender in its sole discretion to be sufficient to pay for premiums for insurance
payable by Borrower under Section 6.10 of the Deed of Trust. The initial estimated
monthly amount to be deposited by Borrower on each payment date is $799.00.
	 
	 	c.	 	Tenant Improvements. $3,758.00 on the first
payment date on which both principal and interest under the Loan are payable and on
each payment date thereafter for tenant improvements, brokerage commissions and
other leasing costs that may he required for new tenants in the Property.
Notwithstanding, the foregoing, if tenant has not exercised its renewal option by
the end of the sixth lease year, then Borrower shall enter into a Restricted Account
Agreement (defined in Section 5)
	 
	 	d.	 	Capital Expenditures. $659.00 on the first payment date on
which both principal and interest under the Loan are payable and on each payment
cate thereafter for payment or reimbursement of Capital Expenditures (defined
below).

	 	3.2	 	Application.

	 	a.	 	Taxes. If no Default exists, Lender shall apply the Impounds to the
payment of the taxes and other liabilities stated above.
	 
	 	b.	 	Insurance. If no Default exists, Lender shall apply the Impounds to the
payment of the insurance premiums stated above.
	 
	 	c.	 	Tenant Improvements. If no Default exists, Lender shall release the
Impounds to Borrower once a month, no less than $5,000.00 per release,
to pay or reimburse Borrower for the tenant improvements, brokerage commissions, and
leasing costs stated above; provided, however, that Lender shall
have received and approved each of the following For each tenant for which such
costs were incurred:

	 	(i)	 	Borrower’s written request for such release, including
the name of the tenant, the location and net rentable area of the premises
leased by such tenant and a description and cost breakdown in reasonable
detail of the costs covered by the request;
	 
	 	(ii)	 	Borrower’s certification that the tenant improvements
have been completed lien-free and in a workmanlike manner;
	 
	 	(iii)	 	a fully executed lease, or extension or renewal ef the current lease;

11

 

	 	(iv)	 	prior to the last release of Impounds for each space, an estoppel
certificate executed by the tenant including its acknowledgment that all
tenant improvements have been satisfactorily completed; and
	 
	 	(v)	 	such other information with respect to such costs as Lender may request.

	 	d.	 	Capital Expenditures. If no Default exists, Lender shall release the
Impounds to Borrower once a month, in increments of no less than $5,000.00 per release, to pay or
reimburse Borrower for the Capital Expenditures; provided, however, that
Lender shall have received and approved each of the following:

	 	(i)	 	Borrower’s written request for such release,
including a description of the Capital Expenditures and Borrower’s
certification that all Capital Expenditures have been paid or incurred by
Borrower for work completed lien-free and in a workmanlike manner;
	 
	 	(ii)	 	copies of invoices supporting the request for such release; and
	 
	 	(iii)	 	an inspection report if required by Lender, signed by an
inspector selected by Lender, whose fees and expenses shall be paid by
Borrower and deducted from requested release of Impounds, and such other
evidence as Lender shall require, confirming Borrower’s certification.

	 	3.3	 	General. Any portion of the Impounds that exceeds the amount required for
payment of the foregoing costs shall be repaid to Borrower upon Borrower‘s
compliance with the foregoing. Reference is made to Section 6.12(b) of the Deed of Trust
for a description of the account into which the Impounds shall be deposited and for a
description of certain rights and reme dies of Lender with respect to amounts in such
account. Notwithstanding anything to the contrary in the Deed of Trust, all accounts
containing Impounds for tenant improvements shall bear interest at a rate established by
Lender or its servicing agent, which may or may not be the highest rate then available.

	 	3.4	 	Maintenance and Construction.

	 	a.	 	Tenant Improvements. Borrower shall constrict all tenant improvements in
a workmanlike manner and in accordance with all applicable laws, ordinances, rules
and regulations.
	 
	 	b.	 	Capital Expenditures. Borrower shall complete the lien-free performance
or installation of the Capital Expenditures (as defined below) from time to time as
necessary, in a workmanlike manner and in accordance with all applicable laws,
ordinances, rules and regulations. “Capital Expenditures” shall mean major repairs
and replacements to maintain or improve the Property, including, without limitation,
structural repairs, roof replacements, HVAC repairs and replacements, mechanical and
plumbing repairs and replacements and boiler repair and replacements.
	 
	 	c.	 	Right of Inspection. Lender shall have the right to enter upon the
Property at all reasonable times to inspect all work for the purpose of verifying
information disclosed or required pursuant to this Note. Notwithstanding the
foregoing, Lender shall not be obligated to supervise or inspect any work or to
inform Borrower or any third party regarding any aspect of any work.

	 	3.5	 	Release. Lender shall release any Impounds to Borrower through a funds
transfer of such Impounds initiated by Lender to the following account or such other account as Borrower specifies in a
notice to Lender:

	 	 	 
	Bank Name:

	 	Wells Fargo Impound Distribution 
	ABA Routing Nc.:

	 	122242173
	Account Name:

	 	40302954
	Reference:

	 	Barber Lane
Associates LP         _
	Advise:

	 	Controller (650) 326-9300
               __________

Lender shall determine the funds transfer system and other means to be used in making each such
release. Borrower agrees that each such funds transfer initiated by Lender shall be deemed to be a
funds transfer

EXHIBIT A

12

 

properly authorized by Borrower, even if the transfer is not actually properly authorized
by Borrower. Borrower acknowledges that Lender shall rely on the account number and ABA
routing number set forth above or specified in a notice from Borrower to Lender, even if
such account number identifies an account with a name different from the name so
specified, or the routing number identifies a bank different from the bank so specified.
If Borrower learns of any error in the transfer of any Impounds or of any transfer which
was not properly authorized, Borrower shall notify Lender as soon as possible in writing
but in no case more than 14 days after Lender’s first confirmation to Borrower of such
transfer.

	4.	 	ONE-TIME RIGHT OF TRANSFER OF PROPERTY. Notwithstanding anything to the contrary
contained in Section 6.15 of the Deed of Trust, Lender shall, one time only, consent to the
voluntary sale or exchange of all of the Property by Trustor (as defined in the Deed of Trust)
to a bona-fide third party purchaser, without any modification of the terms of this Note or
the other Loan Documents, if no Default has occurred and is continuing and all of the
following conditions have been satisfied:

	 	4.1	 	Lender’s reasonable determination that the proposed purchaser, the proposed
guarantor, if any, and the Property all satisfy Lender’s then applicable credit review
and undervYrifng standards, taking into consideration, among other things, (a) any
decrease in the Property’s cash flow which would result from any increase in real
property taxes due to any anticipated reassessment of the Property for tax purposes and
(b) any requirement of Lender that the proposed borrowing entity satisfy Lender’s then
applicable criteria for a single purpose bankruptcy remote entity;
	 
	 	4.2	 	Lender’s reasonable determination that the proposed purchaser possesses
satisfactory recent experience in the ownership and operation of properties comparable to
the Property;
	 
	 	4.3	 	if required by Lender, payment to Lender of sufficient funds to establish an
Impound Account for Deferred Maintenance, Capital Improvements and proposed
purchaser‘s agreement to pay monthly Impound payment;
	 
	 	4.4	 	the execution and delivery to Lender of such documents and instruments as Lender
shall reasonably require, in form and content reasonably satisfactory to Lender,
including, without limitation, (i) an assumption agreement under which the purchaser
assumes all obligations and liabilities of Borrower under this Note and the other Loan
Documents and agrees to periodically pay such new or additional Impounds to Lender as
Lender may reasonably require, and (ii) a consent to the transfer by any existing
guarantor and a reaffirmation of such guarantor’s obligations and liabilities under any
guaranty made in connection with the Loan or a new guaranty executed by a new guarantor
reasonably satisfactory to Lender;
	 
	 	4.5	 	if required by Lender, delivery to Lender of evidence of title insurance reasonably
satisfactory to Lender insuring Lender that the lien of the Deed of Trust and the
priority thereof will not be impaired or affected by reason of such transfer or exchange
of the Property;
	 
	 	4.6	 	payment to Lender of an assumption fee equal to 1% of the then outstanding principal
balance of this Note;
	 
	 	4.7	 	reimbursement to Lender of any and all costs and expenses paid or incurred by
Lender in connection with such transfer or exchange, including, without limitation, all
in-house or outside counsel attorneys’ fees, title insurance fees, appraisal fees,
inspection fees, environmental consultant’s fees and any fees or charges of the
applicable rating agencies; and
	 
	 	4.8	 	if required by Lender, delivery to Lender of written evidence from the applicable
rating agencies that such transfer or exchange will not result in a downgrading,
withdrawal or qualification of the respective ratings in effect immediately prior to the
transfer or exchange for any securities issued in connection with the securitization of
the Loan which are then outstanding.

Lender shall fully release Borrower and any existing guarantor from any further obligation or
liability to Lender under this Note and the other Loan Documents upon the assumption by the
purchaser and any new guarantor of all such obligations and liabilities and the satisfaction
of all other conditions precedent to a transfer or exchange in accordance with the provisions
of this Section.

	5.	 	R:EMEC INC. LEASE. If on or before the end of the sixth (6th) lease year,
Remec Inc. (“Remec”) does not exercise its option to extend its lease tenn pursuant to the
Lease dated April 14, 2000 by and between Barber Lane Associates L.P., a California limited
partnership (“Landlord”) and REMEC, Inc., a California corporation (“Tenant”) (said lease

 

being referred to herein as the “Remec Lease”), then Borrower and Lender shall enter into a
Restricted Account Agreement (in form and substance acceptable to Lender attached as Exhibit
A-1) which shall provide, in part, that (a) Remec will make all payments due under the Remec
Lease directly into a pledged account (without check writing privileges) maintained by Lender
(the “Restricted Account"), (b) the Restricted Account shall be in the name of
Borrower, with Lender named as pledgee, and such account shall bear interest at a rate
established by Lender or its servicing agent, which may or may not be the highest rate then
available, (c) Borrower shall cause all payments made by Remec to be deposited into the
Restricted Account on the date that principal and interest payments are due, (d) Lender shall
debit the Restricted Account for all payments due under this Note on the date said amounts are
due, provided immediate available funds are on deposit in the account, (e) Lender shall
disburse funds on deposit in the Restricted Account (no more than once per calendar month)
upon Borrower’s written request to cover the payment of operating expenses (such operating
expenses to be evidenced to Lender’s satisfaction) and (f) on the last Business Day of every
calendar month the balance on deposit in the Restricted Account shall be transferred to the
tenant improvement impound account. If at any time the balance on deposit in the tenant
improvement impound account is greater than or equal to $532,800 (the “TI Floor Amount”), then
(g) Remec shall no longer be required to make payments directly into the Restricted Account,
(h) Remec shall make payments to Borrower, (i) the Restricted Account shall be closed and (j)
Borrower shall not be required to make tenant improvement impound deposits under Section
3.1(c) of this Exhibit A to Promisory Note. If at any time thereafter the balance in the
tenant improvement impound account is less than the TI Floor Amount, Borrower shall promptly
resume making tenant improvement impound deposits under said Section 3.1(c). All amounts on
deposit in the Restricted Account shall constitute Impounds hereunder and reference is made to
Section 6.12(b) of the Deed of Trust for a description of Lender’s rights and remedies with
respect to such amounts.

	6.	 	LETTER OF CREDIT.

	 	6.1	 	Deliveries to Lender. Prior to the closing of the Loan, Borrower shall
deliver to Lender an irrevocable standby letter of credit (the “Initial Letter of
Credit") in the aggregate principal amount of $569,192.40 issued by Union
Bank of California, N.A. in favor of Borrower, guaranteeing the performance of Remec
under the Remec Lease. The term “Letter of Credit”, as used herein, shall mean the
Initial Letter of Credit and any replacement or renewal letters of credit. Subject to
the provisions of this Section 6, Lender shall retain custody of the Letter of Credit
until such time as the Loan is repaid in full (other than through judicial or
nonjudicial foreclosure of the Deed of Trust or deed in lieu thereof) or until Remec is
entitled to have the Letter of Credit returned to it in accordance with the Remec Lease.
	 
	 	6.2	 	Letter of Credit. The Letter of Credit shall be drawable in accordance
with its terms and, solely as between Borrower and Lender, the additional terms of this
Section:

	 	a.	 	Pre-Foreclosure. Until such time, if ever, as Lender acquires
title to the Property and succeeds to the interest of Borrower, as lessor under the
Remec Lease, by judicial or nonjudicial foreclosure or deed in lieu thereof, not
more than ten (10) Business Days’ after Lender’s receipt of (1) Borrower’s written
request that Lender deliver the Letter of Credit to Borrower for draw in a
specified amount, (2) Borrower’s written certification to Lender that there exists
a default under the Remec Lease, that Remec has not cured the default and that the
amount requested for draw is due Borrower under the Remec Lease and (3) a
non-refundable $250 processing fee, Lender shall deliver the Letter of Credit, to
Borrower for draw. Notwithstanding the foregoing, Borrower shall have the right to
request no more than one (1) such drawing per month. If any such draw is a partial
draw, Borrower shall be permitted to retain the funds, but Borrower shall promptly
return the Letter of Credit to Lender. If any such draw is a draw of the entire
amount remaining to be drawn under the Letter of Credit, then Borrower shall
deposit such amount (the “LC Proceeds”) into the Cash Deposit Account (defined
below).
	 
	 	b.	 	Post- Foreclosure:. If Lender acquires title to the Property and
succeeds to the interest of Borrower, as lessor under the Remec Lease, by judicial
or nonjudiciial foreclosure of the Deed of Trust or deed in lieu thereof, Lender
shall have the sole right thereafter, at :any time and from time to time, to have
the Letter of Credit reissued in favor of Lender and to draw upon the Letter of
Credit in accordance with the terms thereof and Borrower shall have no further
rights to request draws under the Letter of Credit. In such circumstances, the
proceeds of any draw under the Letter of Credit by Lender shall be and remain the
sole property of Lender and shall be applied by Lender[ to such purposes as Lender
shall determine in its sole and absolute discretion.

	6.3	 	Cash Deposit Account.

EXHIBIT A

 

	 	a.	 	Deposits. Promptly upon receipt, Lender shall deposit any LC Proceeds
into an account in the name of Lender, as pledgee of Borrower, established and
maintained by Lender at Lender or Lender’s servicer (“Cash Deposit Account”). The
Cash Deposit Account shall be under the sole control of Lender but subject to
Borrower’s rights under this Section 6.3. Borrower acknowledges that the Cash
Deposit Account shall be and remain “Collateral” under the Deed of Trust and shall
be subject to the security interest granted by Borrower to Lender in Article 4 of
the Deed of Trust. Upon any Default, Lender shall have the right, in addition to
any other rights of Lender under the Loan Documents, to foreclose its security
interest in the Cash Deposit Account and apply the sums in the Cash Deposit
Account to the repayment of the indebtedness outstanding under this Note in such
order as Lender shall determine. At any time and from time to time, promptly upon
Lender’s request, Borrower shall execute such additional documents and instruments
as Lender shall reasonably deem necessary or desirable for the purpose of
confirming and perfecting Lender’s security interest in the Cash Deposit Account.
The Cash Deposit Account will be interest bearing at the money market rate and the
interest will be paid to the Borrower.
	 
	 	b.	 	Disbursements for Tenant Improvements. If no Default exists,
Lender shall release amounts on deposit in Cash Deposit Account to pay or reimburse
Borrower for the tenant improvements, brokerage commissions and other leasing costs
that are incurred in connection with new tenants at the Property, provided, Lender
shall have received and approved each of the following for each tenant for which
such costs were incurred:

	 	(i)	 	a fully executed lease (such lease and the tenant
thereunder are subject to the prior written approval of Lender);
	 
	 	(ii)	 	Borrower’s written request for such release, stating the
name, location and net rentable area of the tenant and a description and
cost breakdown of the leasing costs or tenant improvements covered by the
request;
	 
	 	(iii)	 	Borrower’s certification that the tenant improvements
have been completed lien-free and in a workmanlike manner;
	 
	 	(iv)	 	an estoppel certificate executed by the tenant including
its acknowledgment that all tenant improvements have been satisfactorily
completed; and
	 
	 	(v)	 	such other information with respect to such costs as Lender may request.

	 	c.	 	Disbursements for Debt Service. If no Default exists, Lender
shall release amounts on deposit in the Cash Deposit Account to pay the debt
service on the Loan, to pay operating expenses or to be used as a consequence of
the default under the Remec Lease or other matter that gave rise to the right to
draw under the Letter of Credit, provided, that all of the following conditions are
satisfied:

	 	(i)	 	in the case of debt service, Borrower delivers a
direction to Lender directing Lender to pay itself debt service on the Loan
(the direction shall state the amount that Lender is to pay);
	 
	 	(ii)	 	in the case of operating expenses, Borrower delivers a
direction to Lender directing Lender to disburse funds to
Borrower for the payment of operating expenses (the direction shall state
the amount to be disbursed and shall evidence to Lender’s satisfaction the
amount of the operating expenses); and
	 
	 	(iii)	 	in the case of a consequence of a default or other
matter under the Remec Lease, Borrower delivers a direction to Lender
directing Lender to disburse funds to Borrower and describing the matter to
which the funds are to be applied (the direction shall state the amount to
be disbursed and shall evidence to Lender’s satisfaction the
amount requested).

	 	d.	 	Disbursements Generally. With respect to the disbursements provided for in
paragraphs (b) and (c) above (i) it shall be a condition to each disbursement that Lender is satisfied
that Borrower has a right to use such funds under the terms of the Remec Lease, (ii) Lender shall not be
obligated to make the requested disbursement until after all of the conditions have been satisfied, (iii)
Lender shall receive a

 

	 	 	 	non-refundable processing fee of $250 in connection with each request and (iv)
Borrower shall have the right to no more than one (1) disbursement per month.

	 	6.4	 	Transfer and Refund to Borrower. Promptly after the Loan is repaid in full
(other than through judicial or nonjudicial foreclosure of the Deed of Trust or deed in
lieu thereof), Lender shall surrender the Letter of Credit to Borrower and refund to
Borrower all sums contained in the Cash Deposit Account. Additionally, upon a permitted
transfer of the Property by Borrower, Lender shall cause the Cash Deposit Account to be
transferred into the name of Lender, as pledgee for the transferee, provided Borrower and
such transferee execute any documents reasonably requested by Lender with respect to such
transfer of the Cash Deposit Account.
	 
	 	6.5	 	Sale or Transfer of the Property. If Borrower sells or otherwise transfers
the Property (a) the Letter of Credit shall be assigned to Lender and Lender shall become
the beneficiary thereunder and (b) the Loan Documents shall be modified accordingly to
provide for the mechanism for drawings to be made under the Letter of Credit.

	7.	 	PERMITTED TRANSFERS. Notwithstanding anything to the contrary contained in
Section 6.15 of the Mortgage, any sale, exchange, transfer or conveyance of any direct or
indirect ownership interests in DIAMANT INVESTMENTS LLC, a Delaware limited liability company
or MENLO EQUITIES, INC., a California corporation shall be permitted and shall be freely
transferable to immediate farrrily members or entities created for the benefit of such family members, for estate planning purposes so long as (a) MENLO EQUITIES LLC,
a California limited liability company co!rtinues to be liable as guarantor under the
Limited Guaranty of even date herewith and continues to be the managing member of the general
partner of Borrower, and (b) MENLO EQUITIES, INC., a California corporation continues co be
the sole managing member of MENLO EQUITIES LLC, a California limited liability company, and
(c) Henry D. Bullock and/or his immediate family members or entities created for such family
members for estate planning purposes continue to own 100% of MENLO EQUITIES, INC., a
California corporation (“Permitted Transfer”). Borrower agrees that it shall provide to Lender
a certificate in a form acceptable to Lender, signed and dated by Borrower, listing all the
names of the parties holding an ownership interest in Borrower and the percentage interests
held by each such party within 5 days after Lender’s written request for such information.
	 
	 	 	With respect to any Permitted Transfers the following conditions precedent must also be
satisfied in addition to the requirements set forth above:

	 	7.1	 	Lender’s receipt of at least 30 days’ prior written notice from Borrower of the
proposed transfer together with documentation reasonably satisfactory to Lender regarding
the ownership structure of the proposed transferee;
	 
	 	7.2	 	if required by Lender, the execution and delivery to Lender of such documents and
instruments as Lender shall reasonably require, in form and substance reasonably
satisfactory to Lender, including, without limitation, (i) an assumption agreement under
which the transferee assumes all obligations and liabilities of Borrower under the Note
and the other Loan Documents, and (ii) a consent to the Permitted Transfer by any
existing guarantor and a reaffirmation of such guarantor’s obligations and liabilities
under any guaranty made in connection with the Loan;
	 
	 	7.3	 	Lender’s receipt of a transfer fee in the amount of $500.00; and

reimbursement to Lender of any and all costs and expenses paid or incurred by Lender in
connection with such transfer, including, without limitation, all in-house or outside counsel
attorneys’ fees.

EXHIBIT A

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