Document:

Exhibit 10.52

 

 

OPERATING AGREEMENT

 

OF

 

CT/BH INTERCHANGE LLC

(a Delaware limited liability company)

 

Dated as of

 

November 16, 2010

 

 

1

 

TABLE OF CONTENTS

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  Article 1.
  DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  Section 1.1

  	
  Definitions

  	
  1

  
	
  Section 1.2

  	
  Construction

  	
  8

  
	
  Section 1.3

  	
  Headings

  	
  8

  
	
  Section 1.4

  	
  Captions

  	
  8

  
	
   

  	
   

  	
   

  
	
  Article 2.
  FORMATION OF COMPANY

  	
  9

  
	
   

  	
   

  
	
  Section 2.1

  	
  Effect of this Agreement and the Delaware Act

  	
  9

  
	
  Section 2.2

  	
  Name

  	
  9

  
	
  Section 2.3

  	
  Principal Place of Business

  	
  9

  
	
  Section 2.4

  	
  Registered Office and Registered
  Agent

  	
  9

  
	
  Section 2.5

  	
  Filing of Documents

  	
  9

  
	
  Section 2.6

  	
  Qualification in Foreign
  Jurisdictions

  	
  9

  
	
  Section 2.7

  	
  Ownership; Waiver of Right of Partition

  	
  9

  
	
  Section 2.8

  	
  Limitations

  	
  9

  
	
  Section 2.9

  	
  Term

  	
  10

  
	
   

  	
   

  	
   

  
	
  Article 3.
  REPRESENTATIONS AND WARRANTIES

  	
  10

  
	
   

  	
   

  
	
  Section 3.1

  	
  Authority; Enforceability

  	
  10

  
	
  Section 3.2

  	
  Securities Compliance; Indemnification

  	
  10

  
	
  Section 3.3

  	
  Compliance With Anti-Terrorism Laws

  	
  10

  
	
   

  	
   

  	
   

  
	
  Article 4.
  BUSINESS OF COMPANY; INVESTMENT ACTIVITIES

  	
  10

  
	
   

  	
   

  
	
  Section 4.1

  	
  Business of the Company

  	
  10

  
	
  Section 4.2

  	
  Financing

  	
  11

  
	
  Section 4.3

  	
  Guarantees

  	
  11

  
	
  Section 4.4

  	
  Standard of Care; Limited Liability

  	
  11

  
	
  Section 4.5

  	
  HCM Litigation

  	
  11

  
	
   

  	
   

  	
   

  
	
  Article 5.
  MANAGEMENT OF THE COMPANY

  	
  12

  
	
   

  	
   

  
	
  Section 5.1

  	
  Management

  	
  12

  
	
  Section 5.2

  	
  Major Decisions

  	
  12

  
	
  Section 5.3

  	
  Bank Accounts

  	
  15

  
	
  Section 5.4

  	
  Officers

  	
  15

  
	
  Section 5.5

  	
  Indemnification

  	
  16

  
	
  Section 5.6

  	
  Insurance

  	
  16

  
	
  Section 5.7

  	
  Timing of Approval

  	
  16

  
	
   

  	
   

  	
   

  
	
  Article 6.
  RIGHTS AND OBLIGATIONS OF MEMBERS

  	
  17

  
	
   

  	
   

  
	
  Section 6.1

  	
  May Not Bind Company

  	
  17

  
	
  Section 6.2

  	
  Limitation on Liability

  	
  17

  
	
  Section 6.3

  	
  List of Members

  	
  17

  
	
  Section 6.4

  	
  Priority and Return of Capital

  	
  17

  
	
  Section 6.5

  	
  Members Have No Exclusive Duty to Company

  	
  17

  

 

 

	
  Section 6.6

  	
  Indemnification of Members

  	
  17

  
	
   

  	
   

  	
   

  
	
  Article 7.
  CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS

  	
  18

  
	
   

  	
   

  
	
  Section 7.1

  	
  Capital Contributions

  	
  18

  
	
  Section 7.2

  	
  Withdrawal of Members’ Contributions to Capital

  	
  20

  
	
  Section 7.3

  	
  Capital Accounts

  	
  20

  
	
   

  	
   

  	
   

  
	
  Article 8.
  ALLOCATIONS OF PROFITS AND LOSSES

  	
  21

  
	
   

  	
   

  
	
  Section 8.1

  	
  Allocations of Fiscal Year Items

  	
  21

  
	
  Section 8.2

  	
  Proration of Items

  	
  21

  
	
  Section 8.3

  	
  Limitation on Loss Allocations

  	
  21

  
	
  Section 8.4

  	
  Special Allocations

  	
  22

  
	
  Section 8.5

  	
  Built-In Gain or Loss/Section 704(c) Tax
  Allocations

  	
  23

  
	
  Section 8.6

  	
  Recapture

  	
  23

  
	
  Section 8.7

  	
  Retention of Section 751 Assets

  	
  23

  
	
  Section 8.8

  	
  Prohibition Against Retroactive Allocations

  	
  23

  
	
  Section 8.9

  	
  Allocation of Nonrecourse Liabilities

  	
  24

  
	
   

  	
   

  	
   

  
	
  Article 9.
  DISTRIBUTIONS TO MEMBERS

  	
  24

  
	
   

  	
   

  
	
  Section 9.1

  	
  Available Cash Distributions

  	
  24

  
	
  Section 9.2

  	
  Limitation Upon Distributions

  	
  24

  
	
   

  	
   

  	
   

  
	
  Article 10.
  CERTAIN FEES

  	
  24

  
	
   

  	
   

  
	
  Section 10.1

  	
  Certain Fees to Members and Affiliates

  	
  24

  
	
  Section 10.2

  	
  Termination of Affiliate Contracts

  	
  25

  
	
  Section 10.3

  	
  Accounting Period

  	
  25

  
	
  Section 10.4

  	
  Records

  	
  25

  
	
  Section 10.5

  	
  Audits and Reports

  	
  26

  
	
  Section 10.6

  	
  Methods of Accounting

  	
  27

  
	
  Section 10.7

  	
  Tax Matters Member

  	
  27

  
	
  Section 10.8

  	
  Matters Concerning Banking

  	
  28

  
	
  Section 10.9

  	
  REIT Matters

  	
  28

  
	
  Section 10.10

  	
  Legal Counsel

  	
  29

  
	
   

  	
   

  	
   

  
	
  Article 11.
  TRANSFERABILITY, WITHDRAWAL AND MARKETING OF PROJECT

  	
  29

  
	
   

  	
   

  
	
  Section 11.1

  	
  Transfer Limitations

  	
  29

  
	
  Section 11.2

  	
  Buy/Sell Agreement

  	
  30

  
	
  Section 11.3

  	
  Termination of Obligations

  	
  34

  
	
  Section 11.4

  	
  Restraining Order

  	
  34

  
	
  Section 11.5

  	
  No Termination

  	
  35

  
	
  Section 11.6

  	
  Withdrawal

  	
  35

  
	
  Section 11.7

  	
  Change of Control

  	
  35

  
	
   

  	
   

  	
   

  
	
  Article 12.
  DISSOLUTION AND TERMINATION

  	
  36

  
	
   

  	
   

  
	
  Section 12.1

  	
  Waiver of Rights

  	
  36

  
	
  Section 12.2

  	
  Voluntary Termination

  	
  36

  
	
  Section 12.3

  	
  Events of Involuntary Dissolution

  	
  36

  
	
  Section 12.4

  	
  Reformation of Company

  	
  36

  
	
  Section 12.5

  	
  Effect of Dissolution

  	
  36

  
	
  Section 12.6

  	
  Winding Up, Liquidation and Distribution of Assets

  	
  36

  
	
  Section 12.7

  	
  Certificate of Termination

  	
  37

  

 

ii

 

	
  Section 12.8

  	
  Return of Contribution Nonrecourse to Other Members

  	
  37

  
	
   

  	
   

  	
   

  
	
  Article 13.
  ADDITIONAL MEMBERS

  	
  37

  
	
   

  	
   

  
	
  Section 13.1

  	
  Admission of a New Member

  	
  37

  
	
   

  	
   

  	
   

  
	
  Article 14.
  MISCELLANEOUS PROVISIONS

  	
  38

  
	
   

  	
   

  
	
  Section 14.1

  	
  Governing Laws

  	
  38

  
	
  Section 14.2

  	
  No Action for Partition

  	
  38

  
	
  Section 14.3

  	
  Execution of Additional Instruments

  	
  38

  
	
  Section 14.4

  	
  Waivers

  	
  38

  
	
  Section 14.5

  	
  Rights and Remedies Cumulative

  	
  38

  
	
  Section 14.6

  	
  Severability

  	
  38

  
	
  Section 14.7

  	
  Heirs, Successors and Assigns

  	
  38

  
	
  Section 14.8

  	
  Third Parties

  	
  38

  
	
  Section 14.9

  	
  Counterparts

  	
  38

  
	
  Section 14.10

  	
  Certification of Non-Foreign Status

  	
  38

  
	
  Section 14.11

  	
  Notices

  	
  39

  
	
  Section 14.12

  	
  Amendments and Waivers

  	
  39

  
	
  Section 14.13

  	
  Invalidity

  	
  39

  
	
  Section 14.14

  	
  Further Assurances

  	
  39

  
	
  Section 14.15

  	
  Time

  	
  39

  
	
  Section 14.16

  	
  Non Business Days

  	
  39

  
	
  Section 14.17

  	
  General Statutory Override

  	
  39

  
	
  Section 14.18

  	
  Exculpation of BH and Related Parties

  	
  39

  
	
  Section 14.19

  	
  Exculpation of CTRI and Related Parties

  	
  40

  
	
  Section 14.20

  	
  Press Releases

  	
  40

  
	
  Section 14.21

  	
  SPE Provisions

  	
  41

  

 

EXHIBITS:

	
  A

  	
   

  	
  Project

  
	
  B

  	
   

  	
  Pre-Approved
  List of Persons to Serve as Officers

  
	
  C

  	
   

  	
  Addresses
  for Notice

  
	
  D

  	
   

  	
  Pre-Approved
  List of Signatories on Bank Accounts

  

 

iii

 

OPERATING AGREEMENT

 

OF

 

CT/BH INTERCHANGE LLC

(a Delaware limited liability company)

 

*  *  * 
*  *

 

Transfer Restrictions

 

The interests in CT/BH Interchange LLC (the “Membership Interests”)
are subject to the restrictions on transfer and other terms and conditions set
forth in this Agreement.

 

The Membership Interests have been acquired for investment and have not
been registered under (a) the securities laws of the State of Delaware
(the “Delaware Securities Laws”), (b) any other state securities
laws, or (c) the United States Securities Act of 1933, as amended (the “Securities
Act”).

 

Neither the Membership Interests nor any part thereof may be offered
for sale, pledged, hypothecated, sold, assigned, or transferred except in
compliance with the terms and conditions of this Agreement and

 

(1)                                 pursuant
to an effective registration statement under the Delaware Act or in a
transaction which either is exempt from registration under the Delaware
Securities Laws or is otherwise in compliance with the Delaware Securities
Laws,

 

(2)                                 pursuant
to an effective registration statement under any other applicable state
securities laws or in a transaction which either is exempt from registration
under any such laws or is otherwise in compliance with such laws, or

 

(3)                                 pursuant
to an effective registration statement under the Securities Act or in a
transaction which either is exempt from registration under the Securities Act
or is otherwise in compliance with the Securities Act.

 

*  *  * 
*  *

 

 

OPERATING AGREEMENT

 

OF

 

CT/BH INTERCHANGE LLC

(a Delaware limited liability company)

 

THIS OPERATING AGREEMENT of CT/BH Interchange LLC is
entered into as of November 16, 2010 (the “Effective Date”), by and between CT Interchange LLC,
a Delaware limited liability company, and Behringer Harvard Interchange, LLC, a
Delaware limited liability company, as members.

 

Statement of Background

 

In
consideration of the mutual agreements and covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties to this Agreement hereby
agree as follows:

 

ARTICLE 1.

DEFINITIONS

 

Section 1.1            Definitions.  The following terms used in this Agreement
shall have the following meanings (unless otherwise expressly provided herein;
unless otherwise indicated, all references to “Section” shall mean the
referenced Section of this Agreement);

 

“12% IRR Preference Amount” means, as
of any date and with respect to BH, the smallest amount required to be
distributed to BH on such date in order for BH to have received a 12% Internal
Rate of Return as of such date on each of its Capital Contributions.

 

“15% IRR Preference Amount” means, as
of any date and with respect to BH, the smallest amount required to be
distributed to BH on such date in order for BH to have received a 15% Internal
Rate of Return as of such date on each of its Capital Contributions.

 

“20% IRR Preference Amount” means, as
of any date and with respect to BH, the smallest amount required to be
distributed to BH on such date in order for BH to have received a 20% Internal
Rate of Return as of such date on each of its Capital Contributions.

 

“Acquisition Date” means the date the
Project is acquired by the Company pursuant to the terms of the Contract.

 

“Acquisition Fee” means a fee in the
amount of $450,000.00 to be paid in accordance with Section 10.1(a).

 

“Affiliate” means with
respect to any Person, (a) in the case of an individual, any relative of
such Person, (b) any officer, director, trustee, partner, manager,
employee or holder of 10% or more of any class of the voting securities of or
equity interest in such Person; (c) any corporation, partnership, limited
liability company, trust or other entity controlling, controlled by or under
common control with such Person; or (d) any officer, director, trustee,
partner, manager, employee or holder of 10% or more of the outstanding voting
securities of any corporation, partnership, limited liability company, trust or
other entity controlling, controlled by or under common control with such
Person.

 

 

“Agreement” means this
Operating Agreement as originally executed and as amended from time to time in
accordance with the provisions of Section 14.12.

 

“Annual Business Plan” means a plan
setting forth the planned annual operations of the Company, which plan shall
include (a) the Annual Company Budget and (b) a summary in reasonable
detail of all material activities or operations, including but not limited to
anticipated renovations, anticipated leasing activities, and anticipated
capital repairs and improvements, contemplated with respect to the Project  and the Company for the period in question.

 

“Annual
Company Budget” means the budget for the
Company prepared by the Manager for each calendar year.

 

“Answer” is defined in Section 11.2(d).

 

“Approved
Annual Company Budget” means an Annual Company
Budget approved in accordance with Section 5.2(ff).

 

“Asset Management Fee” means an
annual fee of $150,000.00.  The Asset
Management Fee shall be paid in accordance with Section 10.1(b).

 

“Available Cash”  means,
as of any date, an amount equal to the excess of (a) all cash funds of the
Company on hand as of such date; over (b) the sum of (i) all costs
and expenses of the Company attributable to the applicable period, including,
without limitation, any fees paid in accordance with Section 10.1,
and any unpaid interest and outstanding principal on Priority Loans, plus (ii) amounts
allocated during such period to reserves that shall be maintained in amounts
deemed sufficient by BH and CTRI.

 

“Back-End Percentage Interest”  The initial Back-End Percentage Interest of
each Member is set forth below:

 

	
  Member

  	
   

  	
  Back-End Percentage Interest

  	
   

  
	
  BH

  	
   

  	
  0

  	
  %

  
	
  CTRI

  	
   

  	
  100

  	
  %

  
	
  Total:

  	
   

  	
  100

  	
  %

  

 

The
Back-End Percentage Interest of a Member may be adjusted pursuant to Sections
7.1(c).  After such adjustment, the
Back-End Percentage Interest of such Member, as adjusted, shall constitute such
Member’s Back-End Percentage Interest for all purposes under this Agreement.

 

“BH” means Behringer Harvard
Interchange, LLC, a Delaware limited liability company, and its permitted
successors and assigns.

 

“BH’s
Undertakings” has the meaning set forth in Section 14.18.

 

“Book Value” means, with respect to
any asset of the Company, the adjusted basis of such asset for federal income
tax purposes; provided, however, that (a) if any asset is
contributed to the Company, the initial Book Value of such asset shall equal
its fair market value on the date of contribution, and (b) the Book Value
of all Company assets shall be adjusted to equal their respective gross fair
market values, as reasonably determined by the Manager and approved by the
Members, as of the following times: (i) the acquisition of an additional
Membership Interest by any new or existing Member in 

 

2

 

exchange
for more than a de minimis Capital Contribution; (ii) the
distribution by the Company to a Member of more than a de minimis amount
of property as consideration for a Membership Interest; (iii) in
connection with the liquidation of the Company within the meaning of
Section 1.704-1(b)(2)(ii)(g) or (iv) of the Regulations upon the
grant of an additional interest in the Company (other than a de minimis
interest) to any new or existing Member as consideration for the provision of
services to or for the benefit of the Company; provided, however,
that adjustments pursuant to clauses (i), (ii) or (iv) above shall be
made only if the Manager reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic interests of the
Members in the Company.  The Book Value
of all assets of the Company shall be adjusted thereafter by depreciation as
provided in Section 1.704-1(b)(2)(iv)(g) of the Regulations and any
other adjustment to the basis of such assets other than depreciation or
amortization.

 

“Business Day” means a day other than
a Saturday, Sunday, or other day that is a nationally recognized holiday.

 

“Capital
Account” has the meaning set forth in Section 7.3.

 

“Capital
Contribution” means the contributions to the capital of
the Company made by a Member pursuant to this Agreement.

 

“Cause” means, with respect to any
officer of the Company (a) the commission of an act of fraud or willful
misconduct against the Company or any Member, (b) failing to perform the
normal and customary duties of an officer of the Company after such officer has
received at least two prior written notices from a Member briefly describing
such potential performance defaults, (c) conviction of, or entry of a plea
by such officer of nolo contendere to a felony or a crime involving moral
turpitude, (d) conviction of a crime of bribery, or attempted bribery, of
a public official, or (e) commitment of a material act of personal
dishonesty or a material breach of fiduciary duty.

 

“Certificate
of Formation” means the Certificate of Formation of the
Company, as filed with the Secretary of State of Delaware and as the same may
be amended from time to time.

 

“Change of Control” has the meaning
set forth in Section 11.7(b).

 

“Closing” has the meaning set forth
in Section 11.2(g)(i).

 

“Closing Date” has the meaning set
forth in Section 11.2(g)(i).

 

“Code” means the
Internal Revenue Code of 1986, as amended from time to time.

 

“Company” means CT/BH
Interchange LLC, a Delaware limited liability company.

 

“Company Accountant” means a
nationally-recognized independent accounting firm designated by the Manager Member
and approved by BH.

 

“Company Counsel” has the meaning set
forth in Section 10.10(a).

 

“Company Minimum Gain” means “partnership
minimum gain” as defined in Section 1.704-2(d) of the Regulations.

 

“Contract” means that certain
Purchase and Sale Agreement, dated as of November 16, 2010, by and between
IBC Industrial Properties LLC, a Delaware limited liability company, and the
Company.

 

“Contribution Percentages” means the
following with regard to the Members:

 

3

 

	
  Member

  	
   

  	
  Contribution Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BH

  	
   

  	
  80

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  CTRI

  	
   

  	
  20

  	
  %

  

 

“CTRI” means CT Interchange LLC, a
Delaware limited liability company, and its permitted successors and assigns.

 

“CTRI Key
Person”  means James
Watson, Robert Campbell, Larry Mathena, Marc Belluomini, and Carter Ewing.

 

“CTRI’s
Undertakings” has the meaning set forth in Section 14.19.

 

“Default Amount” has the meaning set
forth in Section 7.1(c).

 

“Default
Event” means with respect to the Manager or any Member, as
applicable (a) (i) the filing of a bankruptcy or other insolvency
petition by such Person, or the failure of such Person to have an involuntary
petition in bankruptcy or other insolvency proceeding withdrawn or otherwise
terminated within 120 days after filing, (ii) a failure to timely perform
its obligations under this Agreement, including, without limitation, the
obligation to make any additional Capital Contributions, (iii) any
attempted assignment of its Membership Interests (in whole or in part) not
expressly permitted in this Agreement, (iv) being found guilty of, or
entry of a plea of nolo contendere to, a felony, fraud or wrongdoing in
connection with any business activity of the Company, (v) a
misappropriation of funds of the Company, (vi) gross negligence that has a
material adverse effect on the Company, or (vii) the intentional
misrepresentation by it or any Affiliate of a material fact to another Member
of the Company, and (b) the failure by the relevant Person to cure such
matter arising under (a)(ii) above, (a)(iii) above, and (a)(iv) above
insofar as it pertains to wrongdoing not involving a criminal conviction,
within thirty (30) days following receipt of notice of such failure from any
Member; provided, however, if such matter is subject to cure by
performance, but such matter is such that it is not reasonably susceptible to
being cured within such thirty (30) day period, then the relevant Person shall
be entitled to such additional time as may be required in order to cure such
matter so long as such cure is commenced within such thirty (30) day period and
is thereafter diligently prosecuted to completion on or before thirty (30) days
after the expiration of such thirty (30) day period.

 

“Delaware Act” means the
Delaware Limited Liability Company Act (as from time to time amended).

 

“Deposit” has the meaning set forth
in Section 11.2(e).

 

“Earnest Money” has the meaning set
forth in Section 7.1(a)(i)(A).

 

“Effective Date” has the meaning set
forth in the introductory paragraph of this Agreement.

 

“Emergency Repairs” means repairs necessary for unanticipated
emergency situations that create an imminent threat of property damage or
personal injury or death or mitigate the threat of such injury or death and
resolve such emergency promptly.

 

4

 

“Entity” means any
general partnership, limited partnership, limited liability company,
corporation, joint venture, trust, business trust, cooperative or association,
any foreign trust or foreign business organization, or any other business
entity or organization.

 

“Escrow Agent” has the meaning set
forth in Section 11.2(e).

 

“Fiscal Year” means the
Company’s fiscal year, which shall be the calendar year.

 

“Force Majeure Events”  means acts of God, strikes, lockouts, sit-downs, commercially
reasonable inability to obtain material or labor on a timely basis,
restrictions by any governmental authority which are not the result of a
violation of existing laws and regulations, riots, floods, washouts,
explosions, earthquakes, fire, storms, weather, casualty situations, power
outages, and acts of the public enemy, wars, terrorism, insurrections.

 

“Funding Member” has the meaning set forth in Section 7.1(c).

 

“GAAP” means
generally accepted accounting principles as set forth from time to time in the
opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements of the Financial Account Standards
Board or in such opinions and statements of such other entities as shall be
approved by a significant segment of the accounting profession.

 

“HCM Litigation” means the litigation
involving the Project that has been filed by HCM Solutions, Inc. (and/or
will be filed by its subcontractors) against certain parties including the
prior owners of the Project and IBC Industrial Properties LLC, a Delaware
limited liability company, in its capacity as lender and holder of the deed of
trust, on which lender has since foreclosed (Case No. CIVDS1001489 in the
Superior Court of the State of California for the County of San Bernardino).

 

“Internal Rate of Return” means, with
respect to BH, the internal rate of return on the particular capital invested
by BH (including the return of such capital) calculated from the date BH makes
the applicable Capital Contribution to the Company, expressed as a
percentage.  For purposes of this
definition, BH shall be deemed to have received a specified Internal Rate of
Return on its aggregate Capital Contributions if the present value of all
distributions made to BH on account of such Capital Contributions pursuant to Article 9
attributable to BH’s Percentage Interest (discounted to the date such Capital
Contribution was made at a discount rate equal to such specified Internal Rate
of Return) shall be not less than the amount of such Capital Contribution.  All Internal Rates of Return addressed herein
are quoted at the effective annual rates. 
The calculations, using monthly compounding, will be generally consistent
with the “XIRR” function in Microsoft Excel. 
Both (i) any fees payable to BH or an Affiliate of BH pursuant to Section 10.1;
and (ii) any distributions to BH pursuant to Article 9 which
are attributable to any Back-End Percentage Interest of BH, shall not be
considered as payments to BH for purposes of calculating the Internal Rate of
Return.

 

“Lender”
means the holders of the Loan Documents.

 

“Loan Documents” means all mortgages,
notes, loan agreement, guaranties, and other documents relating to the
financing of the Project.

 

“Lock-Out Period” means the period
beginning on the Acquisition Date and ending on the second (2nd) anniversary of the
Acquisition Date.

 

“Major
Decisions” has the meaning set forth in Section 5.2.

 

5

 

“Manager” means CTRI or
a successor appointed by BH in accordance with to the terms of this Agreement.

 

“Member” means each of
BH and CTRI, or any successor admitted to the Company in accordance with the
terms of this Agreement.

 

“Member Minimum Gain” means the
Company’s “partner nonrecourse debt minimum gain” as defined in
Section 1.704-2(i) of the Regulations.

 

“Member Nonrecourse Debt” has the
meaning set forth in Section 1.704-2(b)(4) of the Regulations.

 

“Member Nonrecourse Deductions” has
the meaning set forth in Section 1.704-2(i) of the Regulations.

 

“Membership
Interest” means a Member’s entire interest in the Company
including such Member’s Percentage Interest and any other rights granted
pursuant to the Delaware Act.

 

“Net Profits” and “Net Losses” means, for each Fiscal
Year or other period, an amount equal to the Company’s taxable income or loss,
respectively, for such year or period, determined in accordance with Section 703(a) of
the Code (and for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Section 703(a)(1) of the
Code shall be included in taxable income or loss), with the following
adjustments:

 

(i)            Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Net Profits or Net Losses shall be
added to such taxable income or loss;

 

(ii)           Any expenditures of the Company described in Section 705(a)(2)(B) of
the Code or treated as 705(a)(2)(B) expenditures pursuant to Regulation Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Net Profits or Net Losses
shall be subtracted from such taxable income or loss;

 

(iii)          In the event the Book Value of any Company asset is adjusted in
compliance with Regulation Section 1.704-1(b), the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Net Profits or Net Losses;

 

(iv)          Gain or loss resulting from any disposition of Company property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Book Value of the property disposed of
notwithstanding that the adjusted tax basis of such property differs from its
Book Value;

 

(v)           In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
whenever the Book Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of a Fiscal Year, depreciation,
amortization or other cost recovery deductions allowable with respect to an
asset shall be an amount which bears the same ratio to such beginning Book
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income taxes of an asset
at the beginning of a year is zero, depreciation, amortization or other cost
recovery deductions shall be determined by reference to the beginning Book
Value of such asset using any reasonable method selected by the Manager with
the approval of BH;

 

6

 

(vi)          To the extent an adjustment
to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of
the Regulations to be taken into account in determining Capital Accounts as a
result of a distribution other than in liquidation of a Member’s interest in
the Company, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and shall
be taken into account for purposes of computing Net Profits or Net Losses; and

 

(vi)          Notwithstanding any other provision of this Article 8, any
items which are specially allocated pursuant to Section 8.4 shall
not be taken into account in computing Net Profits or Net Losses.

 

“Non-Funding
Member” has the meaning set forth in Section 7.1(c).

 

“Nonrecourse Deductions” has the
meaning set forth in Sections 1.704-2(b)(1) of the Regulations.

 

“Notice” means any notice or
notification to be delivered under this Agreement.

 

“Notice of Objection” has the meaning
set forth in Section 11.2(f)(ii).

 

“Partially Adjusted Capital Account”
means, with respect to any Member for any taxable year or other period of the
Company, the Capital Account balance of such Member at the beginning of such
year or period, adjusted for all contributions and distributions made or deemed
made to or by such Member during such year or period and all special
allocations to such Member pursuant to Section 8.4 with respect to
such year or period, but before giving effect to any allocations of Net Profit
or Net Loss to such Member pursuant to Section 8.1 with respect to
such year or period.

 

“Percentage
Interest” means, at any given time, the interest of each
Member in the Company, which is the proportion that a Member’s Capital Contribution
bears to the aggregate amount of Capital Contributions of all other such
Members, as the same may be adjusted pursuant to Section 7.1(c).

 

“Person” means any
individual or Entity, and the heirs, executors, administrators, legal
representatives, successors, and assigns of such “Person” where the context so
permits.

 

“Personal Liability” has the meaning
set forth in Section 11.2(g)(iii).

 

“Pre-Approved Leasing Parameters”
means the leasing parameters for the Project as established in the applicable
Annual Business Plan.

 

“Priority
Loan” means any loan to the Company made by a Member
pursuant to Section 7.1(c), which loans shall bear interest at a
compounding annual interest rate equal to the lesser of 18% or the highest rate
allowed by applicable law.

 

“Project” means the project described
on Exhibit A.

 

“Proposed Net
Value” has the meaning set forth in Section 11.2(b).

 

“Purchasing Member” has the meaning
set forth in Section 11.2(a).

 

“Pursuit Costs” has the meaning set
forth in Section 7.1(a)(i)(B).

 

“Put/Call Price” has the meaning set
forth in Section 11.2(b).

 

7

 

“Regulations” means the
Federal Income Tax Regulations promulgated under the Code, as such regulations
may be amended from time to time; all references in this Agreement to a
specific section of the Regulations shall be deemed also to refer to any
corresponding provision of succeeding regulations.

 

“Response Period” has the meaning set
forth in Section 11.2(d).

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

“Selling Member” has the meaning set
forth in Section 11.2(a).

 

“Shotgun Notice” has the meaning set
forth in Section 11.2(b).

 

“Standard of Care” has the meaning
set forth in Section 4.4.

 

“Substitute Contribution” has the
meaning set forth in Section 7.1(c).

 

“Target Account” means, with respect
to any Member for any taxable year of the Company or other period, the excess
of (a) an amount equal to the hypothetical distribution such Member would
receive if all assets of the Company, including cash, were sold for cash equal
to their Book Value (taking into account any adjustments to Book Value for such
year or other period but not adjustments caused by any such hypothetical
distributions pursuant to this sub-clause), all liabilities allocable to such
assets were then due and were satisfied according to their terms (limited, with
respect to each non-recourse liability, to the Book Value of the assets
securing such liability) and all remaining proceeds from such sale were
distributed pursuant to Section 9.1, as applicable, over
(b) the amount of Company Minimum Gain and Member Minimum Gain that would
be charged back to such Member as determined pursuant to Section 1.704-2
of the Regulations immediately prior to such hypothetical sale.

 

“Tax Matters
Member” means for purposes of Code §§6221 through 6233, and
the initial Tax Matters Member shall be BH.

 

“Undistributed Capital” means, with
respect to each Member, the amount in a special recordkeeping account
maintained by the Company for such Member equal to: (a) any Capital
Contributions made by such Member to the Company on or after the Effective Date
pursuant to Section 4.3, Section 4.5, and Section 7.1,
reduced (but not below zero) by (b) the cash distributions to such Member
pursuant to Section 9.1(a).

 

“Working Capital Call” has the meaning set forth
in Section 7.1(b).

 

Section 1.2            Construction.  Whenever the singular number is used in this
Agreement and when required by the context, the same shall include the plural
and vice versa, and the masculine gender shall include the feminine and neuter
genders and vice versa.

 

Section 1.3            Headings.  The headings in this Agreement are inserted
for convenience only and are in no way intended to describe, interpret, define,
or limit the scope, extent or intent of this Agreement or any provision hereof.

 

Section 1.4            Captions.  Titles and captions are inserted for
convenience only and in no way define, limit, extend or describe the scope or
intent of this Agreement or any of its provisions and in no way are to be
construed to affect the meaning or construction of this Agreement or any of its
provisions.

 

8

 

ARTICLE 2.

FORMATION
OF COMPANY

 

Section 2.1            Effect of this Agreement and the Delaware Act.  Except as otherwise specifically provided for
in this Agreement, the rights and obligations of the Members and the
administration, dissolution, liquidation, and termination of the Company shall
be governed by the Delaware Act.

 

Section 2.2            Name.  The name of
the Company is “CT/BH Interchange LLC.”

 

Section 2.3            Principal Place of Business.  The mailing address and principal place of
business of the Company shall be c/o CT Realty Investors, 65 Enterprise, Suite 150,
Aliso Viejo, CA 92656.  The Company may
locate its places of business and registered office at any other place or
places in the continental United States as the Manager may from time to time
deem advisable.

 

Section 2.4            Registered Office and Registered Agent.  The Company’s initial registered office shall
be at the office of its registered agent at 2711 Centerville Road, Suite 400,
Wilmington, Delaware 19808, and the name of its registered agent at such
address is Corporation Service Company. 
The registered office and registered agent may be changed from time to
time by filing the address of the new registered office or the name of the new
registered agent, as the case may be, with the Secretary of State of Delaware
pursuant to the Delaware Act and the applicable rules promulgated
thereunder.

 

Section 2.5            Filing of Documents.  If not already so filed, immediately
following the execution of this Agreement, the Manager shall cause the
Certificate of Formation to be filed at all appropriate offices in accordance
with the provisions of the Delaware Act. 
The Manager will take all necessary action to cause the Company to execute,
acknowledge, file, record or publish, as necessary, such amendments to this
Agreement as may be required by the terms hereof or by law and such other
certificates and documents as may be appropriate to comply with the
requirements of law for the continuation, preservation and operation of the
Company as a limited liability company under the Delaware Act.

 

Section 2.6            Qualification in Foreign Jurisdictions.  Prior to the Company’s conducting business in
any state other than Delaware, the Manager will cause the Company to comply, to
the extent procedures are available and those matters are reasonably within the
control of the Manager and the Company, with all requirements necessary to
qualify the Company as a foreign limited liability company in that
jurisdiction.  At the request of the
Manager, each Member will execute, acknowledge, swear to and deliver all
certificates and other instruments that conform to this Agreement and that are
necessary or appropriate to qualify, continue or withdraw the Company as a
foreign limited liability company in any jurisdiction in which the Company may
conduct business.

 

Section 2.7            Ownership; Waiver of Right of Partition.  The interest of each Member in the Company
shall be personal property for all purposes. 
All property and interests in property, real or personal, owned by the
Company shall be deemed owned by the Company as an entity, and no Member,
individually, shall have any ownership of such property or interest owned by
the Company except as a Member in the Company. 
Each of the Members irrevocably waives, during the term of the Company
and during any period of its liquidation following any dissolution, any right
that it may have to maintain any action for partition with respect to any of
the assets of the Company.

 

Section 2.8            Limitations.  The
relationship between and among the parties hereto shall be limited to the
carrying on of the business of the Company in accordance with the terms of this
Agreement.  No Member, acting alone,
shall have any authority to act for, or to undertake or assume, any obligation,
debt, duty or responsibility on behalf of any other Member or the Company
except as expressly provided

 

9

 

in this Agreement. 
The Members intend that the Company shall not be a partnership
(including a limited partnership) or joint venture, and that no Member shall be
a partner or joint venturer of any other Member, for any purposes other than
under the Code and the Regulations and other applicable federal and state tax
laws, and this Agreement shall not be construed to suggest otherwise.

 

Section 2.9            Term.  The term of
the Company shall be perpetual, unless earlier terminated in accordance with
the provisions of this Agreement or the Delaware Act.

 

ARTICLE 3.

REPRESENTATIONS
AND WARRANTIES

 

Each
Member hereby represents and warrants to each other Member, severally and not
jointly, with respect to itself as follows:

 

Section 3.1            Authority; Enforceability.  The execution of this Agreement has been duly
authorized by all necessary corporate, partnership, or other action as required
under all applicable laws and agreements and organizational documents to which
such Member is subject.  This Agreement
constitutes the legal, valid and binding obligation of such Member.

 

Section 3.2            Securities Compliance; Indemnification.

 

(a)           Neither such Member nor any of its Affiliates, nor anyone authorized to
act on its or their behalf, has offered, directly or indirectly, any interest
in the Company or any security similar to such security relating to the Company
or to the Project the offering of which, for purposes of the Securities Act,
would be deemed to be part of the same offering, or solicited any offer to
acquire any interest in the Company or any security similar to such security in
violation of Section 5 of the Securities Act, and neither it nor any of
its Affiliates, nor anyone authorized to act on its or their behalf, will take
any action which would subject the issuance or sale of any interest in the
Company to the registration requirements of Section 5 of the Securities
Act.

 

(b)           Such Member is an “accredited investor,” as such term is defined in
Regulation D promulgated under the Securities Act and has executed and
delivered such documents in evidence thereof as the Company has reasonably
requested.

 

Section 3.3            Compliance With Anti-Terrorism Laws.  By its execution of this Agreement, each
Member hereby represents and warrants to the other that such Member (which for
this purpose includes its partners, members, principal stockholders and any
other constituent entities) (i) has not been designated as a “specifically
designated national and blocked person” on the most current list published by
the U.S. Treasury Department Office of Foreign Assets Control at its official
website, http://www.treas.gov/ofac/t11sdn.pdf or at any replacement website or
other replacement official publication of such list, and (ii) is currently
in compliance with and will at all times during the term of this Agreement
(including any extension thereof) remain in compliance with the regulations of
the Office of Foreign Asset Control of the Department of the Treasury and any
statute, executive order (including the September 24, 2001, Executive
Order Blocking Property and Prohibiting Transactions with Persons Who Commit,
Threaten to Commit, or Support Terrorism), or other governmental action
relating thereto.

 

ARTICLE 4.

BUSINESS OF
COMPANY; INVESTMENT ACTIVITIES

 

Section 4.1            Business of the Company.  The business of the Company shall be to (a) acquire,
renovate, operate, sell, and otherwise dispose of all or any portion of the
Project, and (b) to exercise all other powers necessary to or reasonably
connected with the Company’s business, which powers may be

 

10

 

legally exercised by limited liability companies
under the Delaware Act.  The Company
shall not engage in any other business or activity without the approval of all
Members.

 

Section 4.2            Financing.  The Members
acknowledge that the Company will, subject to the limitations of Section 5.2
secure indebtedness that is secured by the Project.  All financing shall be on a nonrecourse basis
to the Members  with customary carve outs and
environmental indemnities as contemplated in Section 4.3 and may or
may not be recourse to the Company.

 

Section 4.3            Guarantees.  CTRI
acknowledges and agrees that with respect to any financing obtained by the
Company pursuant to the terms of this Agreement, CTRI, or an Affiliate thereof
that is acceptable to the applicable lender, shall provide any and all payment,
springing, and/or performance guarantees of standard nonrecourse carve outs and
environmental indemnities (if required from parties other than the Company)
required by the applicable financial institution extending the financing to the
Company, unless an alternate guarantor, which is acceptable to Lender, is
present; provided that such alternate guarantor does not result in financing
terms that are more disadvantageous to the Company than if CTRI or its
Affiliate provided such guarantee.  In no
event will BH or its Affiliates be required to undertake any recourse or
indemnification obligations in connection with any financing obtained by the
Company.  With respect to any guarantee
or indemnification obligations undertaken by CTRI (or an Affiliate thereof), it
is expressly acknowledged and agreed that in the event CTRI (or an Affiliate
thereof) is required to perform any such obligations, CTRI will not have any
right to exercise any remedies under the relevant financing documents against
the Company if BH owns a direct or indirect interest in such entity, and any
amounts CTRI and/or its Affiliate are required to pay pursuant to any guarantee
or indemnification obligations shall not be reimbursed by the Company or be
treated as Capital Contributions made by CTRI to the Company; provided, however,
to the extent CTRI is required to pay pursuant to any guarantee any amounts
which reduce the outstanding principal balance of any indebtedness owed by the
Company on any loan, such amounts will be treated as Capital Contributions made
by CTRI to the Company.

 

Section 4.4            Standard of Care; Limited Liability.  Manager shall undertake its
activities under this Agreement with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent fiduciary, with respect
to the Company, acting in a like capacity and familiar with such matters, would
use in the conduct of an enterprise of like character and with like goals and
investment objectives.  CTRI has not
guaranteed nor shall have any obligation with respect to the return of a Member’s
Capital Contributions or profits from the operation of the Company.  Manager shall not be liable to the Company or
to any Member for any loss or damage sustained by the Company or any Member
except loss or damage resulting from: (a) fraud, gross negligence,
misappropriation of funds, willful misconduct, or any criminal activity
committed by the Manager of the Company; or (b) actions or omissions of
the Manager that do not meet the Standard of Care (as hereinafter
defined).  For purposes hereof, “Standard Of Care” means the
Manager acting in good faith within what the Manager believed to be the
scope of its authority consistent with what Manager reasonably believes
to be the best interest of the Company.  Manager shall be entitled to
rely on information, opinions, reports or statements, including but not limited
to financial statements or other financial data prepared or presented in
accordance with the Delaware Act. 
Manager covenants and agrees to diligently pursue the leasing and/or
sale of the Project in accordance with the Approved Annual Company Budget.

 

Section 4.5            HCM Litigation. 
If the Company incurs any loss, cost, damage,
liability or expense arising out of or in connection with the HCM Litigation,
then such loss, cost, damage, liability or expense shall be: (a) borne by
CTRI up to $100,000; and (b) shared 50% by BH and 50% by CTRI for amounts
exceeding $100,000.   To the extent CTRI
and/or BH are required to pay any amounts pursuant to this Section 4.5,
such amounts shall be treated as Capital Contributions made by CTRI and/or BH,
as applicable, to the Company.

 

11

 

ARTICLE 5.

MANAGEMENT
OF THE COMPANY

 

Section 5.1            Management.  The Manager
shall be responsible for administering the day-to-day business and affairs of
the Company in accordance with this Agreement and the Annual Business Plan that
has been approved in accordance with Section 5.2(aa); provided,
however, if an Annual Company Budget (which shall be contained in the
Annual Business Plan) is not approved prior to the beginning of the applicable
Fiscal Year, the Manager is hereby authorized (a) except as set in forth
in subparagraph (b) below, to continue operating the Company in
accordance with the line items for operating expenses set forth in the prior
year’s Approved Annual Company Budget, and (b) to cause the Company to
make all payments for insurance premiums, taxes, debt service, Emergency
Repairs and utility costs of the Company, regardless of the amounts set forth
in the prior years’ Approved Annual Company Budget; provided further, that with
respect to any amounts spent in accordance with subparagraph (b), the
Manager shall promptly provide the Members with notice of such
expenditures.  Notwithstanding the
foregoing, any Major Decision shall require the prior approval of BH and CTRI,
which approval shall be given in BH’s or CTRI’s sole and absolute
discretion.  The Manager may be removed
or replaced: (a) pursuant to Section 11.7; or (b) provided
that no Default Event has occurred and remains outstanding with respect to BH,
the Manager may be removed or replaced by BH if a Default Event occurs and
remains outstanding with respect to the Manager or any Affiliate of the Manager
that is also a Member

 

Section 5.2            Major Decisions.  “Major Decisions” shall mean
and include:

 

(a)           taking any action, entering into any agreement, or approving any action
or agreement (i) which would impair either Member’s ability to invoke the
procedures set forth in Section 11.2 or their respective rights
thereunder, (ii) that will have the effect of subordinating the rights of
the Members to exercise their respective rights under Section 11.2
hereof, or (iii) that will require any pre-payment of indebtedness owed by
the Company as a result of the exercise of the Members’ rights pursuant to Section 11.2
hereof;

 

(b)           to engage in a merger involving the Company or similar transaction;

 

(c)           to commingle the funds of the Company with the funds of any other Person;

 

(d)           to confess a judgment against the Company;

 

(e)           to incur indebtedness on behalf of the Company, except for indebtedness
described in an Approved Annual Company Budget or Annual Business Plan (which
is therein pre-approved) and ordinary trade payables;

 

(f)            to amend, modify, renew or extend any indebtedness of the Company;

 

(g)           to grant a lien, mortgage, pledge, or other encumbrance on the Project or
on any other Company property;

 

(h)           to admit any additional or substitute Member to the Company, except
pursuant to Section 11.7 or as otherwise permitted hereunder;

 

(i)            to execute any contract between the Company and any Member or Affiliate
of a Member except as expressly contemplated in Section 10.1;

 

12

 

(j)            to determine the amount of any insurance coverage or make any
modifications to any insurance coverage now or hereafter obtained by the
Company unless contemplated in the Approved Annual Company Budget, or unless
specifically required under any loan documents or leases that have otherwise
been approved in accordance with this Agreement;

 

(k)           except as expressly provided in any Approved Annual Company Budget or
Annual Business Plan, to select a general contractor for any Project, or to
enter into any agreement with a general contractor or subcontractor with
financial obligations in excess of $25,000.00 for the construction or
renovation of the Project;

 

(l)            except with respect to the payment of insurance, taxes, Emergency Repairs
and utilities, to expend funds at any time for the management, operation, or
maintenance of the business of the Company which expenditures are not included
in an Approved Annual Company Budget or exceed 105% of the aggregate amount
included in the applicable Approved Annual Company Budget, except that in no event
shall fees or other amounts payable to any Member or Affiliate of a Member be
increased; provided, however, with respect to any expenditures
which are not included in an Approved Annual Company Budget, the making of
which do not constitute a Major Decision, prior to making such expenditure,
CTRI shall provide notice to BH of the amount of such expenditure and the
underlying reason for making the same;

 

(m)          to establish any Annual Company Budget, including the initial Annual
Company Budget, or to modify an Approved Annual Company Budget;

 

(n)           to approve any lease that does not comply with the Pre-Approved Leasing
Parameters;

 

(o)           to extend loans or other credit to any Person or to guaranty any loans or
other obligations;

 

(p)           to make any tax elections required by any federal, state or local laws
for the Company;

 

(q)           to change the elections or choices of methods of reporting income or loss
for federal or state income tax purposes provided for in this Agreement unless
required under applicable law;

 

(r)            to review and approve any federal, state or local tax return on behalf of
the Company;

 

(s)           except as expressly provided in any Approved Annual Company Budget, or
Annual Business Plan to enter into any contract or other agreement, which
obligates the Company to make any payments, that is not cancelable upon 30 days’
notice;

 

(t)            to (i) seek, or consent to, the appointment of a receiver, trustee
or custodian for all or any portion of the Company’s property, (ii) commence
on behalf of the Company any voluntary proceeding, or consent to the
commencement of any involuntary proceeding, under present or future federal
bankruptcy laws or under any other bankruptcy, insolvency or other laws
respecting creditors’ rights, (iii) make an assignment for the benefit of
creditors or (iv) admit in writing the Company’s inability to pay its
debts generally as they become due;

 

13

 

(u)           to knowingly introduce or knowingly permit to be introduced any
environmentally harmful substance or material to the Project (or portion
thereof) which was known at the time to be environmentally harmful (except for
lawful introductions of any such substance or material);

 

(v)           except for settlements in connection with (i) litigation against a
third party (other than with a tenant which is Major Decision) where the amount
in controversy is less than $5,000, or (ii) to settle any litigation by
the Company where the amount in controversy is not fully covered by insurance;

 

(w)          to settle any insurance claims by the Company where the amount in
controversy is greater than $25,000.00;

 

(x)            to make any decision regarding any environmental matter relating to the
Project, including, without limitation, the adoption of and implementation of
any operation and maintenance program or any other program to remove or
otherwise remediate hazardous materials; provided, however, with
respect to any environmental matter that, if not timely resolved, would result
in a violation of any environmental indemnity or covenant provided by CTRI or
the Company to any lender, tenant or insurance company, or would otherwise
result in a violation of law, BH hereby agrees to reply promptly (in no less
than ten (10) days) to requests regarding such environmental matters,
provided that CTRI indicates the urgency of such request when providing notice
of the Major Decision;

 

(y)           to release, compromise, assign or transfer any material claims of or any
material rights or benefits of the Company;

 

(z)            in the event of fire, other casualty or partial condemnation of the
Project where the cost of repair or restoration exceeds 10% of the value of the
Project immediately prior to such casualty or condemnation, to determine
whether to construct or reconstruct improvements unless such construction or
reconstruction is required under the terms and provisions of any lease,
mortgage or security deed affecting the damaged or condemned portion of the
Project;

 

(aa)         to
establish any Annual Business Plan, including the initial Annual Business Plan,
or any modification or amendment to such Annual Business Plan;

 

(bb)         subject
to Section 11.2 and Section 11.7, to approve the sale,
assignment, transfer or other disposition, or refinancing of the Project;

 

(cc)         to
require additional Capital Contributions in accordance with Section 7.1(b);

 

(dd)         to
make any distributions of Available Cash to the Members other than as
contemplated in Section 9.1 or Section 12.6;

 

(ee)         to
open bank accounts or to change an approved bank account, to establish, make
additions to, or remove any Person from a pre-approved list of signatories on
bank accounts (the initial list of pre-approved signatories is attached hereto
as Exhibit D);

 

(ff)           to approve each Annual Company Budget or any modification or amendment to
Annual Company Budget;

 

(gg)         to
select title insurance underwriters which the Company may use for the Project;

 

(hh)         to
establish or make additions to a pre-approved list of officers for the Company
(the initial list of pre-approved officers is attached hereto as Exhibit B);
provided, however, either

 

14

 

Member shall have the
unilateral right to remove any Person from any pre-approved list of officers
for Cause, and upon any such Person’s removal, such Person shall immediately
cease to be an officer of the Company;

 

(ii)           to approve of the actions of the Tax Matters Member set forth in Section 10.7(b) hereof;

 

(jj)           to establish reserves within the meaning of the term “Available Cash”;

 

(kk)         to
select outside Company auditors;

 

(ll)           to select any appraiser or evaluation expert retained by the Company;

 

(mm)       to
adjust the Member’s Capital Accounts as necessary to comply with the
Regulations;

 

(nn)         to
approve the interim closing of the Company’s books on the Transfer of a Member’s
Membership Interest;

 

(oo)         to
make any election with respect to any tax matter, including the election of a
replacement Tax Matters Member;

 

(pp)         to
wind up the affairs of the Company after a voluntary or involuntary
dissolution;

 

(qq)         to
acquire on behalf of the Company any real property in addition to the Project;

 

(rr)           to enter into on behalf of the Company any reciprocal easement agreement
or similar agreement; and

 

(ss)         to
invest funds of the Company in any asset other than the Project that is not in
the ordinary course of business of the Company.

 

Section 5.3            Bank Accounts. 
Subject to Section 5.2(ee), the Manager may from time to
time open bank accounts in the name of the Company.

 

Section 5.4            Officers.

 

(a)           The Manager may, with the
prior approval of BH, but shall not be required to designate one or more
individuals to be officers of the Company, and any officer so designated shall
have such title, authorities and duties as the Manager and BH may delegate to
him. Any officer may be removed as such, either with or without cause, by the
Manager, with the prior approval of BH. 
The initial officers of the Company and their respective titles shall
be:

 

	
  James
  C. Watson

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
  Larry
  Mathena

  	
   

  	
  Vice
  President

  

 

(b)           The appointment of any
Person as an officer of a Company shall require the consent of BH in accordance
with Section 5.2(hh).

 

15

 

Section 5.5            Indemnification.  The
Company shall indemnify each Person who is or was a Manager, director or
officer of the Company (including the heirs, executors, administrators or
estate of such Person), is or was an officer, director or employee of the
Manager, is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or is or was the guarantor of any obligation of the
Company, to the fullest extent permitted by the Delaware Act.

 

(a)           Expenses incurred by a Person who is a Manager, director or officer of
the Company (including the heirs, executors, administrators or estate of such
Person), is or was an officer, director or employee of the Manager, is or was
serving at the request of the Company as an officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, in
defending a civil or criminal action, suit, or proceeding may be paid by the
Company in advance of the final disposition of such action, suit or proceeding,
as authorized by BH in its discretion, upon receipt of an agreement or an
undertaking by or on behalf of such person to repay such amount, unless it is
ultimately determined that he or she is entitled to be indemnified by the
Company as authorized in, or as permitted by, this Section 5.5.  If such a Person requests reimbursement of
expenses pursuant to the foregoing, then BH shall consider such request, and if
BH concludes that it is reasonably probable that such Person would be entitled
to indemnification or if BH concludes the interests of the Company would be
served thereby, then BH shall direct the payment of the expenses subject to the
receipt of an agreement or undertaking as required by the foregoing.  BH shall use commercially reasonable efforts
to respond within seven (7) business days of the date BH is notified of
such request.  BH may pay such expenses
of such Person upon such other terms and conditions as BH deems appropriate.

 

(b)           All rights to indemnification under this Article 5 shall
continue as to a Person who has ceased to be a Manager, officer, employee or
agent of the Company, or officer, director or employee of the Manager, shall
inure to the benefit of heirs, executors, administrators or the estate of such
Person, and shall be deemed to be a contract between the Company and each such
Person.  This Article 5 shall
be binding upon any successor to the Company, whether by way of merger,
consolidation or otherwise.

 

Section 5.6            Insurance.  Manager
shall cause the Company to maintain such insurance coverage on the Project as
approved by BH in accordance with Section 5.2(j), or otherwise
required by a mortgage lender for the Project, or by any lease, any reciprocal
easement affecting the Project, or other contractual obligation of the
Company.   Any such insurance shall name
the Company, BH and CTRI as an additional insured.  Any such insurance shall name the Company, BH
and CTRI as an additional insured.  On or
prior to the Effective Date, the Manager shall provide BH with certificates
evidencing such insurance coverage.

 

Section 5.7            Timing of Approval.

 

In
the event of any need for approval or other action by a Member under Section 5.2
above, the Members shall use commercially reasonable best efforts to respond
within seven (7) calendar days of the date such Member is notified of the
need for such approval or other action, by a request which is accompanied by
all information necessary to consider such request (“Approval Request”).  If additional information is considered
necessary by the recipient Member to evaluate an Approval Request, the
recipient Member shall advise the requesting Member within such seven (7) calendar
day period and shall have an additional period of five (5) calendar days
after receipt of such further information to approve or disapprove the Approval
Request.  If an Approval Request is not
approved or disapproved in writing by a Member within the required time period,
then the Approval Request shall be deemed to have been disapproved by the
non-responding Member.

 

16

 

ARTICLE 6.

RIGHTS AND
OBLIGATIONS OF MEMBERS

 

Section 6.1            May Not Bind Company.  Except as provided in Article 5
above, no Member has the right, power, or authority to act for or on behalf of
the Company, to do any act that would be binding on the Company, or to incur
any expenditures on behalf of the Company.

 

Section 6.2            Limitation on Liability.  Each Member’s liability shall be limited as
set forth in this Agreement, the Delaware Act and other applicable law.  No Member, or its respective members,
manager, employees, agents or other representatives, will have any personal
liability for any debts or losses of the Company, except as required by
applicable law or by the express provisions of this Agreement.  None of the Members, in their capacity as
Members and not in their capacity as a Manager, nor any of their respective
members, managers, employees, agents or other representatives shall have any
fiduciary duties to the Company or any other Member, nor shall they be
responsible to the Company or to any other Member for any loss, liability,
damage (including punitive and/or consequential damages), claim, judgment,
cost, obligation or expense sustained, incurred or resulting directly or
indirectly from the acts or omissions of the Member, unless caused by that
Member’s or any of its members’, managers’, employees’, agents’ or other
representatives’ fraud, gross negligence, misappropriation of funds, willful
misconduct, or any criminal activity committed by the same.

 

Section 6.3            List of Members.  Upon
written request of any Member, the Company shall provide a list showing the
names, addresses and Membership Interest of all Members, and the other
information required by the Delaware Act and maintained pursuant to Section 10.4.

 

Section 6.4            Priority and Return of Capital.  Except as expressly provided in this
Agreement, no Member shall have priority over any other Member, either as to
the return of Capital Contributions or as to Net Profits, Net Losses or
distributions.

 

Section 6.5            Members Have No Exclusive Duty to Company.  The Members may have other business interests
and may engage in other activities in addition to those relating to the
Company, regardless of whether the same compete with the activities of the
Company.  Neither the Company nor any
Member shall have any right, by virtue of this Agreement, to share or
participate in such other investments or activities of any Member or to the
income or proceeds derived therefrom.  No
Member shall incur liability to the Company or to any of the other Members as a
result of engaging in any other business or venture.

 

Section 6.6            Indemnification of Members.  To the extent not due to the fraud, gross
negligence, or willful misconduct (including but not limited to fraud,
misappropriation of funds or any criminal activity) of any Member or such
Member’s members, managers, employees, agents or representatives, the Company
will indemnify the Members and their members, managers, employees, agents, or
representatives, against judgments, fines, amounts paid in settlement and
expenses (including attorneys’ fees) reasonably incurred by them in any civil,
criminal or investigative proceeding in which they are involved or threatened
to be involved by reason of being a Member in the Company, provided, that the
Member acted in good faith, within what it reasonably believed to be the scope
of its authority and for a purpose which it reasonably believed to be in the
best interest of the Company or the Members. 
The provisions of this Section 6.6, however, shall not
relieve the Member of its obligation as a Member to share in the losses, costs
and expenses of the Company.  The
provisions of this Section 6.6 shall survive any termination or
expiration of this Agreement. 
Notwithstanding any of the preceding provisions of this Section 6.6,
in no event shall the Company have any obligation under this Section 6.6
that is prohibited by the charter of Behringer Harvard Opportunity REIT II, Inc.

 

17

 

ARTICLE 7.

CONTRIBUTIONS
TO THE COMPANY AND CAPITAL ACCOUNTS

 

Section 7.1            Capital Contributions.

 

(a)           Initial Capital Contributions.

 

(i)            Due Diligence by Members.

 

(A)          Earnest Money.  On the Effective Date, each Member has
contributed to the Company its pro rata share (based on the Members’
Contribution Percentages) of the $2,000,000 deposit required under the Contract
(the “Earnest Money”).

 

(B)           Pursuit Costs.  Prior to the Effective Date, CTRI and BH and
their respective Affiliates, have incurred, and may hereafter incur prior to
the Acquisition Date third party out-of-pocket costs and expenses in connection
with the negotiation and closing of the Contract and their respective due
diligence analyses and other evaluations of the Project (including, without
limitation, costs of environmental and engineering and other feasibility
reports and studies, costs related to analyzing the Project (including, without
limitation, travel costs) and costs (including, without limitation, attorneys’
fees and the Earnest Money) incurred by the Members in reviewing and analyzing
the Project and costs to complete an audit of the financial statements in
respect of the Project in compliance with certain laws and regulations
applicable to BH and/or its Affiliates (collectively, the “Pursuit Costs”).  Provided that the Company acquires the
Project pursuant to the Contract, the Company shall pay or reimburse each
Member for and all Pursuit Costs actually incurred by such Member in good faith
pursuant to the terms hereof to the extent set forth in a budget approved by
all Members, or shall credit such amounts against such Member’s initial Capital
Contribution as provided in Section 7.1(a)(ii), so that each Member’s
share of such costs shall be in proportion to their respective Contribution
Percentages.  If BH elects not to cause
the Company to acquire the Project or the Company fails to acquire the Project
for any reason, then, each Member shall be responsible for and pay 50% of all
Pursuit Costs incurred by the Members.

 

(C)           Additional Legal Fees.  Fees of legal counsel for the Members
incurred in connection with or related to the negotiation of this Agreement
shall be borne by each Member and shall not be reimbursed by the Company.

 

(D)          Failure to Acquire the Project.  Whether the Company shall proceed with the
transactions contemplated by the Contract, including (without limitation)
whether it shall close the purchase of the Project, shall be determined by BH
in its sole discretion, and neither CTRI nor any Affiliate of CTRI shall have
any claim against the Company or BH by reason of such determination; provided
that if BH unilaterally determines not to authorize the Company to close the
acquisition of the Project, it shall endeavor to use reasonable efforts to keep
CTRI updated as to its decision making process.

 

(ii)           Closing Contributions.  In the event BH decides to cause the Company
to close the purchase of the Project pursuant to the Contract, then on or
before the Acquisition Date, BH and CTRI shall contribute in cash to the Company
(or be credited to the extent as provided in Section 7.1(a)(i) with
making cash contributions) the amount required to close the purchase of the
Project.  Any Capital Contributions made
pursuant to this Section 7.1(a)(ii) shall be made in
proportion to the Contribution Percentages of the Members.

 

(b)           Additional Capital Contributions — Working Capital.  If either Member, in accordance
with Section 5.2(cc), reasonably determines at any time or from
time to time that the

 

18

 

operating cash flow of the
Company is insufficient adequately to (A) protect, preserve and/or
maintain in its current condition any Project or the Company’s interest
therein, or (B) fund expenditures provided for in any current Annual
Company Budget approved by BH, then, subject to the limitations set forth
herein (including, without limitation, Section 5.2(cc) above), such
Member may require that all of the Members make the necessary additional
Capital Contributions to the Company by giving written notice (a “Working
Capital Call”) to the Members setting forth (1) the total amount of
additional Capital Contributions required, (2) the reason the additional
Capital Contribution is required pursuant to this Section 7.1(b), (3) each
Member’s pro rata share (based on the Members’ Contribution Percentage) of the
Working Capital Call, and (4) the date each Member’s additional Capital
Contribution is due and payable, which date, unless otherwise provided in this Section 7.1(b),
shall be no sooner than thirty (30) days  after
the Working Capital Call has been delivered to such Member.  In the event the cash insufficiency is due to
a Force Majeure Event or is needed for Emergency Repairs, then BH’s or CTRI’s
consent to such Working Capital Call will not be required (and if not so due,
such consent shall be required), and any amounts due with respect to such
Working Capital Call shall be due within five (5) Business Days after the
Working Capital Call has been delivered.  Any additional Capital Contributions
made in accordance with this Section 7.1(b) shall be payable
to the Company in immediately available funds.

 

(c)           Default Capital Contributions.  If any Member fails to timely fund its pro
rata share of an additional Capital Contribution to be made in accordance with Section 7.1(a)(ii) or
Section 7.1(b) (any such Member, a “Non-Funding Member,”
and the amount that such Non-Funding Member failed to contribute, the “Default
Amount”), or if additional capital is required to be contributed to the
Company due to a failure of the Manager to perform its obligations hereunder
(other than a failure by the Manager to make additional Capital Contributions),
then the other Member (the “Funding Member”), at its election, and as
its sole and exclusive remedy, may either (i) make a Priority Loan to the
Company in the principal amount of the Default Amount, (ii) contribute to
the Company the Default Amount as an additional Capital Contribution (a “Substitute
Contribution”), or (iii) withdraw the Capital Contribution that was
made at the time the Default Amount was to be contributed to the Company.  Any Priority Loans made in accordance with
this Section 7.1(c) shall not be considered a Capital
Contribution, shall be repaid prior to the distribution of any Available Cash
in accordance with Section 9.1, and shall be subordinate to any
Company indebtedness that is secured by the Project.  If the Funding Member elects to contribute
the Default Amount to the Company, the Funding Member’s Percentage Interest
shall be adjusted to equal the percentage equivalent of the quotient determined
by dividing:

 

(i)            the positive difference, if any, between: (A) the sum of (I) one
hundred percent (100%) of the aggregate Capital Contributions (excluding
Substitute Contributions then or theretofore made) then or theretofore made by
the Funding Member to the Company, plus (II) two hundred percent (200%) of
the Substitute Contributions then or theretofore made by the Funding Member to
the Company (the excess of 200% of the Funding Member’s Substitute
Contributions over the Funding Member’s Substituted Contributions is referred
to herein as the “Excess Amounts”); minus (B) the Substitute
Contributions then or theretofore made by the Non-Funding Member; by

 

(ii)           one hundred percent (100%) of the aggregate Capital Contributions
(including, without limitation, Substitute Contributions) then or theretofore
made by all of the Members to the Company.

 

(iii)          The Percentage Interest of the Non-Funding Member shall be reduced by the
percentage necessary to insure that the Percentage Interests add up to
100%.  At the same time, the Back-End
Percentage Interests of the Non-Funding Member shall be decreased in the same
proportion as the Non-Funding Member’s Percentage Interests was adjusted
pursuant to the foregoing provisions (e.g., if a Member’s
Percentage Interest is reduced by half or 50%, then the Back-End Percentage
Interests of such Member will also be reduced by half or 50%) and the decrease
in the Non-Funding Member’s

 

19

 

Back End Percentage
Interest shall be added to the Back-End Percentage Interest of the Funding
Member.  In addition, an amount of
Undistributed Capital equal to such Excess Amount shall be treated as having
been transferred from the Non-Funding Member to the Funding Member but such
transfer shall be solely for the purpose of computing Percentage Interests,
Undistributed Capital pursuant to Section 9.1, and Internal Rate of
Return pursuant to Section 9.1 with the result that each Member will
have Undistributed Capital in proportion to its adjusted Percentage Interest
after giving effect to such transfer. 
The Capital Accounts shall be adjusted (but not below zero) accordingly.

 

(iv)          For illustrational purposes only, assume that: (a) the Non-Funding
Member’s Percentage Interest is 80%; (b) the Funding Member’s Percentage
Interest is 20%; (c) the Non-Funding Member has previously contributed
$1,600,000 to the Company and the Funding Member has previously contributed
$400,000 to the Company; (d) an additional Capital Contribution was
requested pursuant to Section 7.1(b) in the amount of
$100,000; (e) the Funding Member contributes $20,000; (f) the
Non-Funding Member fails to contribute $80,000, and the Funding Member
contributes the $80,000 as an additional Capital Contribution. Under these
circumstances, the Funding Member’s Percentage Interest would be adjusted to
equal 27.62% (i.e., the quotient of: (a) the difference between: (i) 
the sum of: (A) $420,000; plus (B) $160,000 (i.e., 200% of $80,000);
and (ii) $0 (Substitute Contributions previously made by Non-Funding
Member); divided by (b) $2,100,000 (total Capital Contributions made to
the Company)), and the Non-Funding Member’s Percentage Interest would be
reduced to 72.38%.

 

Section 7.2            Withdrawal of Members’ Contributions to Capital.  Except as provided in this Agreement, no
Member may withdraw capital from the Company without the consent of the other
Members.  No Member shall be entitled to
interest on its contributions of capital to the Company.  The Members agree that no Member or Manager
shall be personally liable for the return of Capital Contributions of any other
Member, if and to the extent that any return is required; and any such return
shall be made solely from the assets of the Company, if any.

 

Section 7.3            Capital Accounts.

 

(a)           A separate “Capital Account” shall be established and maintained
for each Member in accordance with the rules set forth in Section 1.704-l(b) of
the Regulations.  Subject to the
foregoing, generally the Capital Account of each Member shall be credited with
the sum of (i) all cash and the fair market value of any property (net of
liabilities assumed by the Company and liabilities to which such property is
subject) contributed to the Company by such Member as provided in this
Agreement, and (ii) all Net Profits, gains and other items of income of
the Company allocated to such Member pursuant to Article 8 hereof,
and shall be debited with the sum of (x) all Net Losses, items of
deduction or loss of the Company allocated to such Member pursuant to Article 8
hereof, (y) such Member’s distributive share of expenditures of the
Company described in Section 705(a)(2)(B) of the Code, and (z) all
cash and the fair market value of any property (net of liabilities assumed by
such Member and the liabilities to which such property is subject) distributed
by the Company to such Member pursuant to Article 9 hereof.  Any references in any Section or
subsection of this Agreement to the Capital Account of a Member shall be deemed
to refer to such Capital Account as the same may be credited or debited from
time to time as set forth above and as otherwise required by Regulations under Section 704(b) of
the Code.

 

(b)           The following additional rules shall apply in maintaining Capital
Accounts:

 

(i)            Amounts described in Section 709 of the Code (other than amounts
with respect to which an election is in effect under Section 709(b) of
the Code) shall be treated as described in Section 705(a)(2)(B) of
the Code.

 

20

 

(ii)           In the case of a contribution to the Company of a promissory note (other
than a note that is readily tradable on an established securities market), the
Capital Account of the Member contributing such note shall not be increased
until (a) the Company makes a taxable disposition of such note, or (b) principal
payments are made on such note.

 

(iii)          If property is contributed to the Company, Capital Accounts shall be
adjusted in accordance with Sections 1.704-l(b)(2)(iv)(d) and 1.704-l(b)(2)(iv)(g) of
the Regulations

 

(iv)          If, in any Fiscal Year, the Company has in effect an election under Section 754
of the Code, Capital Accounts shall be adjusted in accordance with Section 1.704-l(b)(2)(iv)(m) of
the Regulations.

 

(c)           It is the intention of the Members to satisfy the capital account
maintenance requirements of Section 1.704-l(b)(2)(iv) of the
Regulations, and the foregoing provisions defining Capital Accounts are
intended to comply with such provisions. 
If either Member, in accordance with Section 5.2(mm),
determines that adjustments to Capital Accounts are necessary to comply with
such Regulations, then the adjustments shall be made provided it does not
materially impact upon the manner in which property is distributed to the Members
in liquidation of the Company.

 

(d)           Except as may otherwise be provided in this Agreement, whenever it is
necessary to determine the Capital Account of a Member, the Capital Account of
such Member shall be determined after giving effect to all allocations and
distributions for transactions effected prior to the time as of which such
determination is to be made.  Any Member,
including any substitute Member, who shall acquire an interest or whose
interest shall be increased by means of a transfer to him of all or part of the
interest of another Member, shall have a Capital Account which reflects such
transfer.

 

ARTICLE 8.

ALLOCATIONS
OF PROFITS AND LOSSES

 

Section 8.1            Allocations of Fiscal Year Items.

 

(a)           Allocation Net Losses.  After giving effect to the special
allocations set forth in Section 8.4, Net Losses for any taxable
year shall be allocated among the Members so as to reduce, proportionately, the
differences between their respective Target Accounts and Partially Adjusted
Capital Accounts for such taxable year.

 

(b)           Allocation Net Profits.  After giving effect to the special
allocations set forth in Section 8.4, Net Profits for any taxable
year shall be allocated among the Members so as to reduce, proportionately, the
differences between their respective Target Accounts and Partially Adjusted
Capital Accounts for such taxable year.

 

Section 8.2            Proration of Items.  Except to the extent otherwise required by
applicable law: (a) in applying Section 8.1 of this Agreement,
to the extent possible, each item of income, gain, loss, and deduction shall be
allocated among the Members in the same proportions as each other such item,
and, to the extent permitted by law, each item of credit shall be allocated in
such proportions; and (b) to the extent necessary to produce the result
prescribed by Section 8.1 of this Agreement, items of income and
gain shall be allocated separately from items of loss and deduction.

 

Section 8.3            Limitation on Loss Allocations.  Notwithstanding anything in this Agreement to
the contrary, no loss or item of deduction shall be allocated to a Member if
such allocation would cause the Capital Account of such Member to have a
deficit in excess of the sum of (a) the amount of additional

 

21

 

capital such Member would be required to contribute
to the Company if the Company were to dissolve on the last day of the
accounting period to which such allocation relates plus, (b) such Member’s
distributive share of Company Minimum Gain as of the last day of such
accounting period, determined pursuant to Regulation Section 1.704-2(g)(1),
plus (c) such Member’s share of Member Minimum Gain as of the last day of
such year, determined pursuant to Regulation Section 1.704-2(i)(5).  Any amounts not allocated to a Member
pursuant to the limitations set forth in this paragraph shall be allocated to
the other Members to the extent possible without violating the limitations set
forth in this paragraph.

 

Section 8.4            Special Allocations.  The following special allocations shall be
made in the following order:

 

(a)           Minimum Gain Chargeback.  Except as otherwise provided in Section 1.704-2(f) of
the Regulations, in the event there is a net decrease in Company Minimum Gain
during a Company taxable year, each Member shall be allocated (before any other
allocation is made pursuant to this Article 8) items of income and
gain for such year (and, if necessary, for subsequent years) equal to that
Member’s share of the net decrease in Company Minimum Gain. The determination
of a Member’s share of the net decrease in Company Minimum Gain shall be
determined in accordance with Regulation Section 1.704-2(g). The items to
be specially allocated to the Members in accordance with this Section 8.4(a) shall
be determined in accordance with Regulation Section 1.704-2(f)(6). This Section 8.4(a) is
intended to comply with the Minimum Gain chargeback requirement set forth in Section 1.704-2(f) of
the Regulations and shall be interpreted consistently therewith.

 

(b)           Member Minimum Gain Chargeback:  Except as otherwise provided in
Regulation Section 1.704-2(i)(4), in the event there is a net decrease in
Member Minimum Gain during a Company taxable year, each Member who has a share
of that Member Minimum Gain as of the beginning of the year, to the extent
required by Regulation Section 1.704-2(i)(4) shall be specially
allocated items of Company income and gain for such year (and, if necessary,
subsequent years) equal to that Member’s share of the net decrease in Member
Minimum Gain.  Allocations pursuant to
this subparagraph (b) shall be made in accordance with Regulation Section 1.704-2(i)(4).  This Section 8.4(b) is
intended to comply with the requirement set forth in Regulation Section 1.704-2(i)(4) and
shall be interpreted consistently therewith.

 

(c)           Qualified Income Offset Allocation.  In the event any Member
unexpectedly receives any adjustments, allocations or distributions described
in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6) of the Regulations which would cause the negative
balance in such Member’s Capital Account to exceed the sum of (i) its
obligation to restore a Capital Account deficit upon liquidation of the
Company, plus (ii) his share of Company Minimum Gain determined pursuant
to Regulation Section 1.704-2(g)(1), plus (iii) such Member’s share
of Member Minimum Gain determined pursuant to Regulation Section 1.704-2(i)(5),
items of Company income and gain shall be specially allocated to such Member in
an amount and manner sufficient to eliminate such excess negative balance in
such Member’s Capital Account as quickly as possible; provided that an
allocation pursuant to this Section 8.4(c) shall be made only
if and to the extent that such Member would have such excess negative balance
in such Member’s Capital Account after all other allocations provided in this Article 8
have been tentatively made as if this Section 8.4(c) were not
in the Agreement.  This Section 8.4(c) is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently therewith.

 

(d)           Gross Income Allocation.  In the event any Member has a deficit Capital
Account at the end of any Company taxable year which is in excess of the sum of
(i) any amounts such Member is obligated to restore pursuant to this
Agreement, plus (ii) such Member’s distributive share of Company Minimum
Gain as of such date, plus (iii) such Member’s share of Member Minimum
Gain determined

 

22

 

pursuant to Regulation Section 1.704-2(i)(5),
each such Member shall be specially allocated items of Company income and gain
in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 8.4(d) shall be made only
if and to the extent that such Member would have a deficit Capital Account in
excess of such sum after all other allocations provided for in this Article 8
have been made, except assuming that Section 8.4(c), and this Section 8.4(d) were
not contained in this Agreement.

 

(e)           Basis Adjustments.  To the extent an adjustment to the tax basis
of any Company asset pursuant to section 734(b) or 743(b) of the Code
is required, pursuant to section 1.704-1(b)(2)(iv)(m)(2) or section
1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in
determining Capital Accounts as the result of a transfer or a distribution to a
Member in complete liquidation of his interest in the Company, the amount of
such adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to
the Members in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such section of the
Regulations.

 

(f)            Allocation of Nonrecourse Deductions.  Nonrecourse Deductions shall be
allocated to the Members in accordance with their respective Percentage
Interests.

 

(g)           Allocation of Member Nonrecourse Deductions.  Member Nonrecourse Deductions
shall be allocated as prescribed by the Regulations.

 

Section 8.5            Built-In Gain or Loss/Section 704(c) Tax Allocations. In accordance
with Section 704(c) of the Code and the applicable Regulations thereunder,
income, gain, loss, deduction and tax depreciation with respect to any property
contributed to the capital of the Company, or with respect to any property
which has a Book Value different than its adjusted tax basis, shall, solely for
federal income tax purposes, be allocated among the Members so as to take into
account any variation between the adjusted tax basis of such property to the
Company and the Book Value of such property. 
Any elections, accounting conventions or other decisions relating to
such allocations shall be made by BH in a manner that (i) reasonably
reflects the purposes and intention of this Agreement, and (ii) complies
with Code Sections 704(b) and 704(c) and the Regulations
thereunder.  For such allocations, BH may
select any method permitted in the Regulations under Code Section 704(c) with
respect to such allocations, including the “traditional method”, the “traditional
method with curative allocations” and the “remedial allocation method.”

 

Section 8.6            Recapture.  Ordinary
taxable income arising from the recapture of depreciation and/or investment tax
credit shall be allocated to the Members in the same manner as such
depreciation and/or investment tax credit was allocated to them.

 

Section 8.7            Retention of Section 751 Assets.  Upon the occurrence of an event which would
otherwise cause a reduction in a Member’s respective interest in the Company’s Section 751
assets (“substantially appreciated inventory” and “unrealized receivables” as
defined in Section 751 of the Code), such as the admission of new Members
or otherwise, no such reduction shall occur with respect to Members who were
Members immediately preceding such event and who continue to be Members after
the occurrence of such event but, rather, each such Member shall retain its
respective interest in the Company’s Section 751 assets existing
immediately prior to such event.

 

Section 8.8            Prohibition Against Retroactive Allocations.  Notwithstanding anything in this Agreement to
the contrary, no Member shall be allocated any loss, credit or income
attributable to a period prior to its admission to the Company.  In the event that a Member transfers all or a
portion of its

 

23

 

Membership Interest, or if there is a reduction in a
Member’s Percentage Interest due to the admission of new Members or otherwise,
each Member’s distributive share of Company items of income, loss, credit, etc.,
shall be determined by taking into account each Member’s varying interests in
the Company during the Company’s taxable year. 
For this purpose, unless BH elects to provide for an interim closing of
the Company’s books, each Member’s distributive share shall be estimated by
taking the pro rata portion of the distributive share such Member would have included
in its taxable income had it maintained its Membership Interest throughout the
Company year.  Such proration shall be
based upon the portion of the year during which such Member held the Membership
Interest, except that extraordinary, non-recurring items shall be allocated to
the Persons holding Membership Interests at the time such extraordinary items
occur.

 

Section 8.9            Allocation of Nonrecourse Liabilities.  The “excess nonrecourse liabilities” of the
Company (within the meaning of Section 1.752-3(a)(3) of the
Regulations) shall be allocated to the Members in accordance with their
respective Percentage Interests.

 

ARTICLE 9.

DISTRIBUTIONS TO MEMBERS

 

Section 9.1            Available Cash Distributions.  The Manager shall cause Available Cash to be
distributed to the Members on a monthly basis in the following order of
priority:

 

(a)           First, to each Member to the extent such Member has Undistributed
Capital, in proportion to each such Member’s Undistributed Capital, in an
amount up to the Undistributed Capital of each such Member;

 

(b)           Second, 100% to the Members in proportion to their Percentage Interests
until BH has received an amount equal to its 12% IRR Preference Amount as of
the date of such distribution;

 

(c)           Third, 90% to the Members in proportion to their Percentage Interests and
10% to the Members in proportion to their Back-End Percentage Interests until
BH has received an amount equal to its 15% IRR Preference Amount as of the date
of such distribution;

 

(d)           Fourth, 70% to the Members in proportion to their Percentage Interests
and 30% to the Members in proportion to their Back-End Percentage Interests
until BH has received an amount equal to its 20% IRR Preference Amount as of
the date of such distribution; and

 

(e)           Fifth, 50% to the Members in proportion to their Percentage Interests and
50% to the Members in proportion to their Back-End Percentage Interests.

 

Section 9.2            Limitation Upon Distributions.  No distribution shall be made to Members if
prohibited by Section 18-607 of the Delaware Act.

 

ARTICLE 10.

CERTAIN
FEES

 

Section 10.1         Certain
Fees to Members and Affiliates.

 

(a)           On the Acquisition Date, the Company shall pay 50% of the Acquisition Fee
to the Affiliate of BH designated by BH and the remaining 50% of the
Acquisition Fee to the Affiliate of CTRI designated by CTRI.

 

24

 

(b)           On the first day of each calendar month following the Acquisition Date,
provided the Company acquires the Project, the Company shall pay 1/12th of the Asset Management Fee, which
Asset Management Fee shall be paid 50% to the Affiliate of BH designated by BH
and the remaining 50% of the Asset Management Fee to the Affiliate of CTRI
designated by CTRI.

 

(c)           The Manager shall cause the Company to enter into a property management
agreement with Newport Real Estate Services, Inc., a California
corporation, in the form approved by the Members.

 

Section 10.2         Termination
of Affiliate Contracts.

 

(a)           Notwithstanding anything
herein to the contrary, in the event that CTRI or any of its Affiliates are
providing services to the Company in exchange for a fee (whether such fee is
payable under this Agreement or a separate document), any termination or
modification of such arrangement shall require the approval of BH.

 

(b)           Notwithstanding anything to
the contrary, if the Company sells or otherwise disposes of the Project or if
CTRI or its Affiliates no longer owns an interest in the Company, then CTRI’s
and CTRI’s Affiliates’ rights to receive (i) those fees specified in any
property management agreement between CTRI and/or its Affiliates and the
Company, and (ii) the Asset Management Fee shall automatically be
terminated except with respect to such fees, costs and reimbursements that have
accrued to the time of the sale, disposition or termination of interest, but
have yet to be paid.

 

(c)           Notwithstanding anything to
the contrary, if the Company sells or otherwise disposes of the Project, if BH
or its Affiliates no longer owns an interest in the Company, then BH’s and BH’s
Affiliates’ rights to receive the Asset Management Fee shall automatically be
terminated except with respect to such fees, costs and reimbursements that have
accrued to the time of the sale, disposition or termination of interest, but
have yet to be paid.

 

Section 10.3         Accounting
Period.  The Company’s
accounting period shall be the calendar year.

 

Section 10.4         Records.  Proper and complete records and books of
account shall be kept or shall be caused to be kept by the Company in which
shall be entered fully and accurately all transactions and other matters
relating to the Company’s business in such detail and completeness as is
customary and usual for businesses of the type engaged in by the Company. The
books and records shall at all times be maintained at the principal executive
office of the Company and shall be open to the reasonable inspection and
examination of the Members or their duly authorized representatives during
reasonable business hours following one-days’ advance notice to each
Member.  The Company shall keep at its
principal place of business the following records:

 

(a)           A current list of the full name and last known address of each Member;

 

(b)           Copies of records to enable a Member to determine the relative voting
rights, if any;

 

(c)           A copy of the Certificate of Formation of the Company and all amendments
thereto;

 

(d)           Copies of the Company’s federal, state, and local income tax returns and
reports, if any, for the three most recent years;

 

25

 

(e)           Copies of this Agreement, together with any amendments thereto; and

 

(f)            Copies of any financial statements of the Company for the three most
recent years.

 

Section 10.5         Audits and
Reports.  The Manager
shall deliver to BH the following financial statements and reports at the times
indicated below:

 

(a)           Commencing on September 1, 2011, and each subsequent September 1st thereafter during the term of this
Agreement, the Manager shall prepare and submit to BH an Annual Business Plan
for the next ensuing calendar year.  The
Annual Business Plan shall include a summary in reasonable detail of all
activities or operations contemplated with respect to the Project and the
Company for the period in question, including details of anticipated
expenditures and revenues.

 

(b)           The Manager will prepare, or cause to be prepared, at the expense of the
Company, and furnish to each Member the following within the periods set forth
below (provided that for so long as it diligently performs its obligations
hereunder, the Manager shall not be responsible for the delays of any Person
that is not an Affiliate of Manager or reputable accountants or auditors
retained by the Manager on behalf of the Company), all of which shall be
certified by the Manager as being true and correct, to Manager’s knowledge:

 

(i)            within twelve (12) days after the end of each fiscal quarter of the
Company, unless such fiscal quarter is the last fiscal quarter of any fiscal
year of the Company, (A) an unaudited balance sheet of the Company dated
as of the end of such fiscal quarter, (B) an unaudited related income
statement of the Company for such fiscal quarter, (C) an unaudited
statement of each Member’s Capital Account for such fiscal quarter, (D) an
unaudited statement of cash flows of the Company for such fiscal quarter, and (E) a
reconciliation of actual operating expenses and operating revenues during such
period compared with the Annual Company Budget amounts for such items, and (F) a
quarterly explanation of the discrepancies; and

 

(ii)           within twelve (12) days after the end of each calendar month, a status
report of the Company’s activities during such calendar month, including
summary descriptions of additions to, dispositions of and leasing and occupancy
of Project and any material legal issues such as claims filed or threatened
against the Company, material claims of the Company against other parties and
developments in any then pending legal actions affecting the Company during
such month.

 

(c)           The Manager will prepare, or cause to be prepared, on an accrual basis in
accordance with GAAP and on a tax basis, at the expense of the Company, and
furnish to each Member no later than January 15 after the end of each
fiscal year of the Company the following, all of which shall be certified by
the Manager as being true and correct, to Manager’s knowledge:

 

(i)            an unaudited balance sheet of the Company dated as of the end of such
fiscal year;

 

(ii)           an unaudited related income statement of the Company for such fiscal
year;

 

(iii)          an unaudited statement of each Member’s Capital Account for such fiscal
year;

 

26

 

(iv)          an unaudited statement of cash flows of the Company as of the end of the
fiscal year; and

 

(v)           such other supporting schedules, reports and backup information as are reasonably
requested by BH.

 

(d)           In addition, if requested by BH, the Manager will prepare, at the expense
of the Company, and furnish to each Member on or before the later to occur of (i) forty-five
(45) calendar days after the end of each fiscal year of the Company, or (ii) 20
days following Manager’s receipt of such request, the final audited amount of
net income of the Company for such fiscal year and, within sixty (60) calendar
days after the end of such taxable year, each of the following, all of which shall
be certified by the Manager as being true and correct and all of which shall be
certified in the customary manner by the Company Accountant (which firm shall
provide such balance sheet, income statement and statement of Capital Account
in draft form to the Members for review prior to finalization and certification
thereof) (i) an audited balance sheet of the Company dated as of the end
of such taxable year; (ii) an audited related income statement of the
Company for such taxable year; (iii) an audited statement of cash flows
for such taxable year; and (iv) an audited statement of each Member’s
Capital Account for such taxable year.

 

(e)           Promptly after the end of each fiscal year, the Manager will cause the
Company Accountant to prepare and deliver to each Member a report setting forth
in sufficient detail all such additional information and data with respect to
business transactions effected by or involving the Company during the fiscal
year as will enable the Company and each Member to timely prepare its federal,
state and local income tax returns in accordance with applicable laws, rules and
regulations.  The Manager will use its
diligent commercially reasonable efforts to cause the Company Accountant to
prepare all federal, state and local tax returns required of the Company,
submit those returns to the other Members for their approval not later than March 1st
of the year following such fiscal year. 
Within ninety (90) days after the expiration of each taxable year, the
Manager shall deliver to BH final tax returns for the preceding taxable year
for the Company and year end financial statements for the Company prepared the
Company Accountant in accordance with GAAP consistently applied.  In no event shall the Manager file the tax
returns on behalf of the Company unless such returns have been approved by BH
in accordance with Section 5.2(r).

 

(f)            The Manager shall prepare, or cause to be prepared, at Company expense,
such additional financial reports and other information as BH may determine are
appropriate.  The Manager will furnish to
each Member upon request, at the expense of the Company, copies of all reports,
statements, notices and other material written information received by the
Company or the Manager from, or delivered by or on behalf of the Company to,
any third party lender.

 

(g)           The Company shall pay in accordance with the applicable Approved Annual
Company Budget for the Company the costs of any third parties providing the
Company with auditing and tax preparation services in connection with the
preparation of the reports and financial statements described in Section 10.5.

 

Section 10.6         Methods of
Accounting.  All annual
income tax and financial reports and returns of the Company shall be prepared
in accordance with GAAP consistently applied.  Interim reports shall be prepared on an
accrual basis. All elections with respect to tax matters to be made by or for
the Company shall be made by the Tax Matters Member.

 

Section 10.7         Tax Matters
Member.  For
purposes of Code §§6221 through 6233, the Tax Matters Member shall have the
following duties:

 

27

 

(a)           The Tax Matters Member shall keep the Members informed of all
administrative and judicial proceedings, as required by Code §6223(g), and
shall furnish to the Members a copy of each notice or other communication
received by the Tax Matters Member from the Internal Revenue Service (except
such notices or communications as are sent directly to the Members by the
Internal Revenue Service).  The Tax
Matters Member is hereby authorized and required by the Members to file all tax
returns of the Company and in all instances to elect to treat the Company as a
partnership for tax purposes.  The
expenses so incurred by the Tax Matters Member shall be Company expenses and
shall be paid by the Company in accordance with the applicable Annual Company
Budget for the Company.

 

(b)           The Tax Matters Member shall have the authority, on behalf of the
Company, to do all or any of the following:

 

(i)            enter into a settlement agreement or make any election with the IRS which
purports to bind any other Member;

 

(ii)           file a petition as contemplated in Code §§6226(a) or 6228;

 

(iii)          intervene in any action as contemplated in Code §6226(b);

 

(iv)          file any request contemplated in Code §6227(c);

 

(v)           enter into an agreement extending the period of limitations as
contemplated in Code §6229(b)(1)(B); and

 

(vi)          in the event of a transfer of all or any portion of the Membership
Interests of any Member, elect pursuant to Section 754 of the Code to
adjust the basis of assets of the Company.

 

Should
the Tax Matters Member wish to resign, BH shall promptly appoint a replacement,
and upon such replacement’s acceptance of the appointment, such resignation
shall be effective.

 

Section 10.8         Matters
Concerning Banking. 
Subject to Section 5.2(ee), all funds of the Company shall
be deposited in its name in an account or accounts maintained at a bank
designated by the Manager or with an agent designed by the Members.  Such funds shall not be commingled with the
funds of any other Person.  Checks shall
be drawn upon the Company account or accounts only for purposes of the Company
and shall be signed by signatories approved by the Members.

 

Section 10.9         REIT
Matters.  Within
twenty-five (25) days following the end of each calendar quarter, the Company
shall provide to BH all tax information necessary for BH (or its REIT
affiliates) to comply with the REIT requirements under Sections 856 and 857 of
the Code.  Notwithstanding anything to
the contrary in this Agreement, neither the Company nor any Member (acting on
the Company’s behalf) shall take any action which would cause BH (or its REIT
affiliates) to (a) fail to qualify as a “real estate investment trust” (as
defined under Sections 856 & 857 of the Code) or (b) incur any
additional taxes under Section 857 or Section 4981 of the Code (or
any successor provisions).  In
particular, the Company shall conduct its business affairs in a manner so as to
avoid incurring income that would not qualify under Sections 856(c)(2) and
856(c)(3) of the Code and will not acquire assets that are not described
in Section 856(c)(4) of the Code unless approved by BH.  The Members shall periodically consult with
each other (or their designee) to ensure that any prospective transaction
undertaken by the Company, or a Member acting on behalf of the Company, shall
not cause BH (or its REIT affiliates) to fail to qualify as a REIT.  If the Members disagree as to whether any
transaction will cause BH (or its REIT affiliates) to fail to qualify as a REIT
(as defined under Sections 856 and 857 of the Code) or incur

 

28

 

any additional taxes under Section 857 or Section 4981
of the Code (or any successor provisions), the reasonable determination of BH
shall be final.

 

Section 10.10       Legal
Counsel.

 

(a)           The legal counsel for the Company (“Company Counsel”) shall be
selected by BH.  Company Counsel shall be
responsible for assisting the Manager’s in-house counsel with the negotiation
and drafting of legal documents for the Company and other legal work of a
primary nature.

 

(b)           All costs and expenses of legal counsel shall be Company expenses and
shall be included in the Approved Annual Company Budget.

 

ARTICLE 11.

TRANSFERABILITY,
WITHDRAWAL AND MARKETING OF PROJECT

 

Section 11.1         Transfer
Limitations.

 

(a)           Except as expressly provided in Section 11.1(b) or Section 11.2,
no Member shall, either directly or indirectly, sell, assign, transfer,
mortgage, charge or otherwise encumber, or suffer any third party to sell,
assign, transfer, mortgage, charge or otherwise encumber, or contract to do or
permit any of the foregoing, whether voluntarily or by operation of law (herein
sometimes collectively called a “transfer”), any part or all of its interest in
the Company, or substitute a transferee in its place as a substitute Member of
the Company, without the unanimous consent of the Members and any attempt to do
so shall be void.  In no event shall the
Manager approve any transfer to any person or entity that is not an “accredited
investor” as defined in Regulation D promulgated pursuant to the Securities
Act.

 

(b)           Notwithstanding anything herein to the contrary, BH may transfer all or
any portion of its interest in the Company, either directly or indirectly, to
an Affiliate.  Any such transferee shall
be admitted as a substitute Member of the Company upon written notice to CTRI
of such transfer.  Nothing in this Article 11
is meant to or will be interpreted to restrict in any way the ability of any
equity holder in Behringer Harvard Opportunity REIT II, Inc. BHO II, Inc.,
BHO Business Trust II or Behringer Harvard Opportunity OP II, LP and/or their
constituent owners from transferring securities issued by such entities.

 

(c)           Notwithstanding anything herein to the contrary, CT may transfer all or
any portion of its interest in the Company, either directly or indirectly, to
an Affiliate; provided, that the day-to-day management of such Affiliate are
controlled, either directly or indirectly, by at least three of the CTRI Key
Persons.  Any such transferee shall be
admitted as a substitute Member of the Company upon written notice to BH of
such transfer.  Nothing in this Article 11
is meant to or will be interpreted to restrict in any way the ability of any
equity holder in CT California Fund VI, LLC or CT Realty Corporation and/or
their constituent owners from transferring securities issued by such entities.

 

(d)           In order to effectuate the purpose of this Section 11.1, but
except as provided in Section 11.1(b), each Member that is an
entity will seek to transfer its interest in the Company only through a direct transfer
of such interest therein in the manner contemplated in this Article 11,
and no transfer or other disposition of any stock or partnership or other
beneficial interest in any such Entity will be effected, directly or
indirectly, unless unanimously approved by the Members.

 

(e)           In the event of a transfer of any interest in contravention of the
provisions of this Section 11.1, the person or entity to whom such
transfer is made shall become neither a Member nor an assignee hereunder, and
shall not be entitled to participate in any decision or to receive any share of

 

29

 

profits or cash in respect
of the Company’s business or to share in distributions, if any, in which its
assignor would otherwise have been entitled to share, and shall have no right
to require any information or accounting of any transactions of the Company,
and such assignee shall not be entitled to vote with respect to any Company
matter.  No transferee shall be a Member
nor shall it have any of the rights thereof until admitted as a Member pursuant
to Section 11.1 and until such transferee shall have executed a
counterpart of this Agreement and agreed in writing to assume and be bound by
all of the relevant obligations of the transferor.

 

(f)            Each Member acknowledges and
agrees that such Member shall neither transfer, directly or indirectly, any
part or all of its interest in the Company, nor permit a transfer, directly or
indirectly, of any of the ownership interests in such Member, nor permit a
change of control of such Member or its Affiliates if such transfer or such
change in control would constitute a default under the Loan Documents.

 

Section 11.2         Buy/Sell
Agreement.

 

(a)           General.  At any time after the Lock-Out
Period either Member or upon the occurrence of a Default Event, the Member who
did not cause the Default Event, such Member (the “Purchasing Member”),
by giving the Shotgun Notice (defined below), may offer to buy all, but not
less than all, of the other Member’s (the “Selling Member”) Membership
Interests on the terms and conditions set forth herein, and in such event, the
Selling Member shall be obligated to sell its Membership Interests to the
Purchasing Member; provided, however, at the election of the
Selling Member, the Selling Member may buy the Purchasing Member’s Membership
Interest, and the Purchasing Member shall be obligated to sell its Membership
Interests on the terms and conditions set forth herein to the Selling Member.

 

(b)           Shotgun Notice.  As used herein, “Shotgun Notice” is a
notice that shall (i) be in writing signed by the Purchasing Member; (ii) include
the terms and conditions of the offer, including a statement specifying the
proposed value of the Project net of the Company’s liabilities (including any
then existing mortgage loans) (the “Proposed Net Value”) and a statement
as to the proposed purchase price for the Selling Member’s Membership Interest,
which shall be the cumulative amount that would be distributed to the Selling
Member if the Proposed Net Value was distributed to the Members in accordance
with Section 12.6 (the “Put/Call Price”); and (iii) include
the adjustments to be made to the Put/Call Price on the Closing Date, if any.

 

(c)           Terms and Conditions. The terms and conditions as set forth in the Shotgun Notice, if
otherwise in compliance with this Section, cannot be changed by the Selling
Member or the Purchasing Member, and any attempt by the Purchasing Member or
the Selling Member to change such terms and conditions shall be void, unless agreed
to by both the Selling Member and the Purchasing Member.

 

(d)           Response. The Selling Member shall have a period of ninety (90) days after receipt
of the Shotgun Notice (“Response Period”) within which to notify the
Purchasing Member in writing (the “Answer”) whether the Selling Member
elects to sell its Membership Interest at the Put/Call Price, or to buy the
Purchasing Member’s Membership Interest. If the Selling Member does not deliver
the Answer within the above period, then the Selling Member shall be deemed to
have conclusively elected to sell it’s Membership Interest to the Purchasing
Member for the Put/Call Price specified in the Shotgun Notice. In the event the
Selling Member elects to purchase the Purchasing Member’s Membership Interest
as set forth in the Answer, then the initial “Purchasing Member” shall
thereafter be deemed the “Selling Member” and the “Selling Member” shall
thereafter be deemed the “Purchasing Member” for purposes of this Section 11.2.

 

30

 

(e)           Deposit.  If the Selling Member elects to purchase the
Purchasing Member’s Membership Interest, then the Selling Member shall deliver
a deposit equal to five percent (5%) of the Put/Call Price (the “Deposit”)
to a nationally recognized title insurance company, as escrow agent (the “Escrow
Agent”), concurrently with its delivery of the Answer to the Purchasing
Member.  If the Selling Member elects to
sell its Membership Interest to the Purchasing Member, then the Purchasing
Member shall deliver its Deposit to the Escrow Agent promptly following its
receipt of the Answer.  The Deposit shall
be in the form of a certified check made payable to the Escrow Agent.  Concurrently with depositing a check, the
Members shall provide to the Escrow Agent a social security or employer
identification number for the Escrow Agent’s use in depositing the check in an
interest-bearing account. The costs for services of the Escrow Agent shall be
paid at Closing, one-half by the Selling Member and one-half by the Purchasing
Member.

 

(f)            Escrow Agreement.
By execution of this Agreement the Members agree that the Escrow Agent shall
hold the Deposit in escrow and shall dispose of the Deposit only in accordance
with the following provisions:

 

(i)            Escrow Agent shall deliver the Deposit, or such portion thereof as is
required to be delivered hereunder, to the Selling Member or to the Purchasing
Member, as the case may be, as follows:

 

(A)          to the Selling Member, or otherwise at the direction of the Selling
Member, upon completion of the Closing Date (hereinafter defined), in which
case the Deposit shall be applied towards Put/Call Price; or

 

(B)           to the Selling Member, after receipt of the Selling Member’s demand in
which the Selling Member certifies that the Purchasing Member has defaulted
under this Section, and the Selling Member is thereby entitled to receive the
Deposit; but the Escrow Agent shall not honor the Selling Member’s demand until
more than ten (10) days after the Escrow Agent has transmitted a copy of
the Selling Member’s demand to the Purchasing Member, nor thereafter if the
Escrow Agent receives a Notice of Objection (hereinafter defined) from the
Purchasing Member within such ten (10) day period; or

 

(C)           to the Purchasing Member, after receipt of the Purchasing Member’s demand
in which the Purchasing Member certifies that the Selling Member has defaulted
under this Section, and the Purchasing Member is thereby entitled to receive
the Deposit; but the Escrow Agent shall not honor the Purchasing Member’s
demand until more than ten (10) days after the Escrow Agent has
transmitted a copy of the Purchasing Member’s demand to the Selling Member, nor
thereafter if the Escrow Agent receives a Notice of Objection (hereinafter
defined) from the Selling Member within such ten (10) day period; or

 

(D)          to any party, at the written direction of both the Selling Member and the
Purchasing Member.

 

Upon
delivery of the Deposit in accordance with the terms and conditions herein, the
Escrow Agent shall be relieved of all liability hereunder and with respect to
the Deposit. The Escrow Agent shall deliver the Deposit, at the election of the
party or parties entitled to receive the same, by (i) a good, unendorsed
certified check or checks of the Escrow Agent payable to the order of such
party or parties, (ii) an unendorsed official bank or cashier’s check or
checks payable to the order of such party or parties, or (iii)

 

31

 

a
bank wire transfer or transfers of immediately available funds to an account
designated by such party or parties.

 

(ii)           Upon receipt of a written demand under Section 11.2(f)(i)(B) or
under Section 11.2(f)(i)(C) above, the Escrow Agent shall
promptly transmit a copy of such demand to the other Member. Within ten (10) days
after the date of transmitting the same, but not thereafter, the other Members
may object to the delivery of the Deposit to the Member(s) requesting the
Deposit by transmitting a notice of objection (a “Notice of Objection”)
to the Escrow Agent.  After receiving a
Notice of Objection, the Escrow Agent shall promptly transmit a copy of such
Notice of Objection to the Member requesting the Deposit; and thereafter, the
Escrow Agent shall continue to hold the Deposit until the Escrow Agent receives
a written agreement of the Selling Member and the Purchasing Member directing
the disbursement of the Deposit, in which event the Escrow Agent shall disburse
the applicable Deposit in accordance with such agreement.  In the event of any litigation between the
Selling Member and the Purchasing Member relating to the Deposit, the Escrow
Agent will deposit the Deposit with the clerk of the court in which such
litigation is pending. In the event the Deposit is deposited in court by the
Escrow Agent pursuant to the foregoing sentence, the Escrow Agent shall be
entitled to rely upon the judgment of such court.

 

(iii)          The Escrow Agent may rely on the foregoing provisions in lieu of an
escrow agreement with the Members. Notwithstanding the foregoing, in the event
that the Escrow Agent requests a commercially reasonable written agreement
embodying the foregoing provisions, each Member shall promptly execute such an
agreement. If any Member shall fail to execute such agreement within five (5) days
after transmittal thereof, or if the agreement materially differs from the
terms hereof, upon such determination of either Member, then either Member may
direct the Escrow Agent to transfer the check to another Escrow Agent who will
not require a separate written escrow agreement.

 

(iv)          When the Deposit check is deposited with the Escrow Agent, the Escrow
Agent shall be instructed in writing that the Escrow Agent’s acceptance of the
check as a Deposit will constitute acceptance by the Escrow Agent of the terms
and conditions set forth herein, and the Escrow Agent shall be provided with a
copy of this Article with such Deposit.

 

(g)           Closing.

 

(i)            The sale and acquisition of the Membership Interest (the “Closing”)
shall occur no later than thirty (30) days after the deliver of the Answer (the
“Closing Date”)  through the
offices of the Escrow Agent, in escrow. 
At such Closing, the Selling Member shall convey and assign to the
Purchasing Member by assignment with warranty of title, free and clear of all
liens, claims, and encumbrances arising through the assignor, the Membership
Interest of the Selling Member and shall execute and deliver to the Purchasing
Member all documents which are reasonably required to give effect to the sale
and acquisition of such Membership Interest. The Members shall take such other
actions and execute such other documents as may be necessary or appropriate to
give effect to any transaction contemplated by this Section.  At the Closing, the Purchasing Member shall
pay the Selling Member the Put/Call Price by electronic transfer of immediately
available funds, less a credit for the Deposit, subject to the adjustments set
forth in the Shotgun Notice.  In
addition, at the Closing, (A) the Company’s books shall be closed as of
the Closing Date and all items of Company income and expense shall be
apportioned in calculating Available Cash as of the day preceding the Closing
Date, (B) Available Cash (exclusive of any holdback for reserves, which
reserves shall be held for a period of no more than one year, after which period,
such reserves will be distributed to the Members in accordance with

 

32

 

Section 9.1 that has been received by the Company through the Closing Date shall be
distributed in accordance with the provisions of Section 9.1, and (C) the
purchase price to be paid by the Purchasing Member shall be increased by the
aggregate amount of all additional Capital Contributions made by the Selling
Member in the period between the date of the Shotgun Notice and the Closing
Date (to the extent not otherwise included in Available Cash) and decreased by
any amounts of net proceeds from a capital transaction received by the Company
during the period between the date of the Shotgun Notice and the Closing Date
and distributed to the Selling Member pursuant to the terms hereof.

 

(ii)           All loans made or deemed made by or to the Selling Member shall be repaid
in full (including all accrued but unpaid interest thereon) at the Closing. No
transaction pursuant to this Section shall relieve the Selling Member from
any duty or obligation owed to the Company or to the other Members to the
extent such obligation accrued and is properly attributable to the period prior
to the Closing Date, nor shall it constitute a waiver or release of claims with
respect thereto. Subject to provisions of Section 14.18, the
Purchasing Member shall defend, indemnify, and hold harmless the Selling Member
from all obligations and liabilities arising from the Membership Interest
accruing and properly attributable to the period beginning on the Closing Date,
and the Selling Member shall defend, indemnify and hold harmless the Purchasing
Member from all obligations and liabilities arising from the Membership
Interest accruing and properly attributable to the period prior to the Closing
Date.  The foregoing sentence shall
survive the Closing and shall not require further documentation to take effect,
but if requested by either Member, both Members will execute a reasonable
confirming document which is consistent with the foregoing provisions.

 

(iii)          If at the Closing Date, the Selling Member or such Member’s affiliates or
related entities, shall have any guarantees, collateral, or covenants lodged
with third parties to secure any indebtedness, liability, or obligation of the
Company, including any liability under nonrecourse carveouts, or shall have
outstanding any commitment to give such guarantees, collateral, or covenants (“Personal
Liability”), the Purchasing Member shall deliver or cause to be delivered
to the Selling Member, no later than the Closing Date, a cancellation of such
Personal Liability from the relevant beneficiaries.  As an alternative to the foregoing, the
Selling Member, at its election, may accept the Purchasing Member’s indemnity
for all manner of loss, claims. and damages that could arise as a result of any
Personal Liability, so long as (A) such indemnity is supported by an
irrevocable clean letter of credit in an amount equal to the maximum potential
Personal Liability (as reasonably determined by the Selling Member) and (B) such
letter of credit is payable at sight, renewable annually, issued by a
nationally recognized United States banking institution, and is otherwise
reasonably acceptable to the Selling Member. The foregoing letter of credit shall
remain in full force and effect until the Personal Liability is released.

 

(iv)          In the event that the Selling Member shall be prohibited under the terms
of any Company debt or other obligation from selling its Membership Interest to
the Purchasing Member without the consent of or payment to a third party, or
otherwise is prohibited from consummating this transaction without the consent
of or payment to a third party, then in such event, such obligation giving rise
to such prohibition, as the case may be, shall be fully discharged by the
Purchasing Member on the Closing Date and any prepayment fee, premium, or cost
shall be paid by the Purchasing Member, unless the appropriate mortgagee or
other creditor or obligee shall permit such transfer to be made, in which case
the Purchasing Member shall pay all cost and fees related to obtaining such
consent to the transfer.

 

(v)           In the event that Section 11.2(g)(ii) is operative,
thirty (30) days prior to Closing, CTRI shall execute and deliver and shall
cause CTRI’s principals to execute and deliver

 

33

 

any
agreement or document reasonably required by any Lender to obtain such Lender’s
consent to the transfer of a Membership Interest pursuant to this Section 11.2,
including, without limitation, any acknowledgement agreements pursuant to which
the principals of CTRI confirm their continuing obligations under the Loan
Documents; provided, however, that such other agreements or
documents do not in any way increase in any material respect or create any new
cost to, or liability or obligations of, CTRI.

 

(h)           Time. Time shall be of the
essence in any sale referred to in this Section. Notwithstanding anything to
the contrary in this Section, all notices or transmissions under this Section shall
comply with the notice provisions of this Agreement, and any time period
relating to such notices or transmissions shall be deemed to commence on the
day set forth in the notice provisions relating to the mode of transmission
used.

 

(i)            Default.  Should the Purchasing Member fail timely to
close, the Selling Member, as his exclusive remedies in the circumstances, (i) shall
be entitled to retain the Deposit, as liquidated damages for such failure and (ii) may,
at its election (exercisable by, and only by, written notice to the Purchasing
Member within ten (10) days following such failure), elect to purchase the
interest of the Purchasing Member for the price thereof determined pursuant to Section 11.2
by reference to the Proposed Net Value (and the Selling Member shall acquire
the Purchasing Member’s debt claims against the Company for the full amounts
owed).  If the Selling Member exercises
such election, Section 11.2 shall apply, except that the respective
roles of the parties shall be reversed and the ninety (90) day period referred
to therein shall run from the date of such exercise.  Should the Selling Member timely elect to
purchase the interest of the Purchasing Member, but fail to consummate such
purchase within ninety (90) days following such election, no Member shall have
any further rights or duties in connection with the then-current proceedings
under this Section 11.2, except that the Selling Member shall pay
(or reimburse the Purchasing Member for) all reasonable expenses incurred by
the Purchasing Member as a result of the Selling Member’s exercise of such
election.

 

(j)            Purchaser.  In connection with a transfer pursuant to
this Section 11.2, the Purchasing Member may designate another
Person that is an Affiliate of such Purchasing Member to acquire the Selling
Member’s interest in the Company, in which event such other person shall
acquire such interest, but no such designation or acquisition shall relieve the
Purchasing Member from any obligation under this Section 11.2.

 

Section 11.3         Termination
of Obligations.  As of the
effective date of any transfer not prohibited hereunder by a Member of its
entire interest in the Company, such Member’s rights and obligations hereunder
shall terminate except as to items accrued as of such date and except as to any
indemnity obligations of such Member attributable to acts or events occurring
prior to such date.  Thereupon, except as
limited by the preceding sentence, this Agreement shall terminate as to the
transferring Members but shall remain in effect as to the other Members.  In the event of a transfer of its entire
Membership Interest by a Member to another Member, the Member to whom such
interest is transferred shall indemnify, defend and hold harmless the Member so
transferring its Membership Interest from and against any and all claims,
demands, losses, liabilities, expenses, actions, lawsuits, and other
proceedings, judgments, awards, and costs and expenses (including but not
limited to reasonable attorneys’ fees) incurred in or rising directly or
indirectly, in whole or in part, out of operation of the business of the
Company, excluding only those liabilities, if any, accruing prior to the date
of such transfer.

 

Section 11.4         Restraining
Order.  In the
event that any Member shall at any time transfer or attempt to transfer its
Company interest in violation of the provisions of this Agreement and any
rights hereby granted, then the other Member shall, in addition to all rights
and remedies at law and in equity, be

 

34

 

entitled to a decree or order restraining and
enjoining such transfer and the offending Member shall not plead in defense
thereto that there would be an adequate remedy at law; it being hereby
expressly acknowledged and agreed that damages at law will be an inadequate
remedy for a breach or threatened breach of the violation of the provisions
concerning transfer set forth in this Agreement.

 

Section 11.5         No
Termination. 
Notwithstanding any provision to the contrary in this Article 11,
unless otherwise approved by BH, no Member shall transfer all or any part of
its Membership Interest to a Person or Entity other than another Member if such
transfer would result in a termination of the Company under the Code; provided
that BH may not authorize a transfer of all or any part of its Membership
Interest if such transfer is not otherwise approved by the Members, if such
approval is otherwise required in accordance with this Article 11.

 

Section 11.6         Withdrawal.  No Member shall have the right to withdraw
from the Company without the prior written consent of the remaining Members.

 

Section 11.7         Change of
Control.

 

(a)           In the event of a Change of Control (as hereinafter defined) and
notwithstanding the Lock-Out Period, BH may elect by written notice to CTRI to
cause any or all of the following remedies and/or consequences to take effect:

 

(i)            BH may: (A) replace CTRI as Manager; or (B) designate an
unaffiliated, third party Person to replace CTRI as Manager.

 

(ii)           BH may elect at any time after a Change of Control to cause the Manager
to actively market the Company’s interest in the Project for sale to third
parties.

 

(b)           For purposes of this Section 11.7, the term “Change of
Control” shall include the following:

 

(i)            Three or more CTRI Key Persons are no longer controlling the day to day
management of CTRI or an Affiliate thereof (a “Departure”), and within
60 days of such CTRI Key Person’s Departure, CTRI does not present a potential
replacement for such CTRI Key Person (or any previously approved replacement),
or CTRI presents and BH does not approve a potential replacement for such CTRI
Key Person (or any previously approved replacement), provided, however,
if CTRI presents a potential replacement for such CTRI Key Person (or any
successor thereto), and BH does not approve such potential replacement, CTRI
shall have an additional 30 days (i.e., 90 days from the applicable
party’s Departure) to present and obtain approval with respect to such
potential replacement.  Any potential
replacement for such CTRI Key Person (or any previously approved replacement)
must have skills, experience and education consistent with the requirements of
the role and person being replaced; and/or

 

(ii)           Either: (a) Robert Campbell fails to own, directly or indirectly, at
least 5% of the ownership interests in CT Realty Corporation; or (b) James
C. Watson fails to own (or hold stock options to), directly or indirectly, at
least 5% of the ownership interests in CT Realty Corporation.

 

35

 

ARTICLE 12.

DISSOLUTION
AND TERMINATION

 

Section 12.1         Waiver of
Rights.  Each Member
hereby expressly waives any and all rights to dissolve, terminate or liquidate,
or to petition a court for the partition, dissolution, termination or liquidation
of the Company except as provided in this Article 12.

 

Section 12.2         Voluntary
Termination.  The Company
may voluntarily terminate upon the occurrence of any of the following events:

 

(a)           the unanimous written consent of all of the Members; or

 

(b)           the sale of substantially all the assets of the Company and the
distribution to the Members of all proceeds from such sale.

 

Section 12.3         Events of
Involuntary Dissolution.  Unless continued by the Members pursuant to
the provisions of Section 12.4, the Company shall be involuntarily
dissolved upon the occurrence of any of the following events:

 

(a)           the filing of an involuntary petition in bankruptcy against any Member
which is not dismissed within 120 days of such filing;

 

(b)           any Member makes an assignment for the benefit of its creditors or the
filing by any Member of any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future Federal Bankruptcy Code or any present
or future federal, estate or other statute or law relating to bankruptcy,
insolvency or other relief for debtors; or

 

(c)           any Member seeking, or consenting to, or acquiescing in the appointment
of any trustee, receiver, conservator or liquidator of it or of all or any
substantial portion of its property or interest in the Company.

 

Section 12.4         Reformation
of Company.  Notwithstanding the provisions of Section 12.3,
the Company shall not be dissolved upon the occurrence of any of the events
enumerated in Section 12.3 in the event that, within sixty (60)
days after the date of any of such events, the remaining Members not
responsible for the occurrence of such event elect to continue the business of
the Company in a reconstituted form.

 

Section 12.5         Effect of
Dissolution.  Upon
dissolution, the Company shall cease to carry on its business, except as
permitted by Section 18-803 of the Delaware Act.

 

Section 12.6         Winding Up,
Liquidation and Distribution of Assets.

 

(a)           Upon dissolution, an accounting shall be made by the Company Accountant
of the accounts of the Company and of the Company’s assets, liabilities and
operations, from the date of the last previous accounting until the date of
dissolution.  The Manager shall
immediately proceed to wind up the affairs of the Company.

 

(b)           If the Company is dissolved and its affairs are to be wound up, the
Manager shall, with the consent of BH in accordance with Section 5.2(pp),
in the following order of priority:

 

36

 

(i)            sell or otherwise liquidate all of the Company’s assets promptly as
practicable;

 

(ii)           allocate any Net Profit or Net Loss or items of income, gain, loss or
deduction resulting from such sales to the Members in accordance with Article 8
hereof;

 

(iii)          discharge all liabilities of the Company, including liabilities to
Members who are creditors, to the extent otherwise permitted by law, other than
liabilities to Members for distributions, and establish, for a period not to
exceed one (1) year following the winding-up of the Company, such reserves
as BH may deem reasonably necessary to provide for contingent or unforeseen
liabilities or obligations of the Company; and

 

(iv)          distribute any remaining proceeds to the Members in the same manner and
order of priority as provided for distributions under Section 9.1.

 

(c)           Notwithstanding anything to the contrary in this Agreement, upon a
liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations, if any Member has a deficit Capital Account (after giving effect
to all contributions, distributions, allocations and other Capital Account
adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Member’s Capital Account shall
not be considered a debt owed by such Member to the Company or to any other
Person for any purpose whatsoever.

 

(d)           Upon completion of the winding up, liquidation and distribution of the
assets, the Company shall be deemed terminated.

 

(e)           All Members and the Manager shall comply with any applicable requirements
of applicable law pertaining to the winding up of the affairs of the Company
and the final distribution of its assets.

 

Section 12.7         Certificate
of Termination.  When all
debts, liabilities and obligations have been paid and discharged or adequate
provisions have been made therefor and all of the remaining property and assets
have been distributed to the Members, a Certificate of Termination may be
executed by the Manager and filed with the Secretary of State of Delaware in
accordance with the Delaware Act.

 

Section 12.8         Return of
Contribution Nonrecourse to Other Members.  Except as provided by law, upon dissolution,
each Member shall look solely to the assets of the Company for the return of
its Capital Contribution.  If the Company
property remaining after the payment or discharge of the debts and liabilities
of the Company is insufficient to return the cash contribution of one or more
Members, such Member or Members shall have no recourse against any other
Member.

 

ARTICLE 13.

ADDITIONAL
MEMBERS

 

Section 13.1         Admission
of a New Member.  From the
date of the formation of the Company, any Person or Entity acceptable to each
of the Members may become a Member of this Company either by the issuance by
the Company of Membership Interests for such consideration as the Manager with
the consent of BH shall determine, or as a transferee of a Member’s Membership
Interest or any portion thereof, subject to the terms and conditions of this
Agreement.

 

37

 

ARTICLE 14.

MISCELLANEOUS
PROVISIONS

 

Section 14.1         Governing Laws.  This
Agreement, and the application of interpretation hereof, shall be governed by
its terms and by the laws of the State of Delaware, and specifically the
Delaware Act.

 

Section 14.2         No Action for Partition.  No Member has any right to maintain any
action for partition with respect to the property of the Company.

 

Section 14.3         Execution of Additional Instruments.  Each Member hereby agrees to execute such
other and further statements of interest and holdings, designations, powers of
attorney and other instruments necessary to comply with any laws, rules or
regulations.

 

Section 14.4         Waivers.  The failure
of any party to seek redress for violation of or to insist upon the strict
performance of any covenant or condition of this Agreement shall not prevent a
subsequent act, which would have originally constituted a violation, from
having the effect of an original violation.

 

Section 14.5         Rights and Remedies Cumulative.  The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive the right to use any or all other remedies.  Such rights and remedies are given in
addition to any other rights the parties may have by law, statute, ordinance or
otherwise.

 

Section 14.6         Severability.  If
any provision of this Agreement or the application thereof to any person or
circumstance shall be invalid, illegal or unenforceable to any extent, the
remainder of this Agreement and the application thereof shall not be affected
and shall be enforceable to the fullest extent permitted by law.

 

Section 14.7         Heirs, Successors and Assigns.  Each and all of the covenants, terms,
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors and
assigns.

 

Section 14.8         Third Parties.  None
of the provisions of this Agreement shall be for the benefit of or enforceable
by any third party.

 

Section 14.9         Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same instrument.  The delivery of an executed counterpart of
this Agreement by facsimile or as a PDF or similar attachment to an email shall
constitute effective delivery of such counterpart for all purposes with the
same force and effect as the delivery of an original, executed counterpart.

 

Section 14.10       Certification of Non-Foreign Status.  In order to comply with § 1445 of the Code
and the applicable Regulations thereunder, in the event of the disposition by
the Company of a United States real property interest as defined in the Code
and Regulations, each Member shall provide to the Company, an affidavit
stating, under penalties of perjury, (i) the Member’s address, (ii) United
States Taxpayer identification number, and (iii) that the Member is not a
foreign person as that term is defined in the Code and Regulations.  Failure by any Member to provide such
affidavit by the date of such disposition shall authorize the Manager to
withhold 10% of each such Member’s distributive share of the amount realized by
the Company on the disposition.

 

38

 

Section 14.11       Notices.  Each Notice
shall be in writing, and shall be deemed to have been properly given or served
when transmitted by facsimile transmission or internet e-mail (with a
conforming copy to be delivered by other means) or when delivered to any
nationally recognized overnight courier or deposited with the United States
Postal Service or any official successor thereto, designated as registered or
certified mail, return receipt requested, bearing adequate postage and
addressed as hereinafter provided, or by personal delivery (which may include
delivery by commercial courier service) if receipt is procured.  The time period in which a response to any
Notice must be made, or any action taken or payment made with respect thereto,
shall start on the date which is three (3) days after the date of the
confirmation of receipt of such facsimile transmission, the date of the
delivery of such internet e-mail, the date of receipt indicated on the return
receipt of the Notice or on the date of personal delivery evidenced by a
receipt.  Rejection of or other refusal
to accept a Notice, or the inability to deliver because of changed address or
status of which no Notice was given, shall be deemed to be receipt of the Notice
sent.  By giving to the other Members at
least 10 days’ prior Notice thereof, any Member shall have the right from time
to time during the term of this Agreement to change its address for the
purposes of this Agreement and to specify as its new address any other address
within the United States of America.  All
dates and time referred to in this Agreement shall be determined based on local
time in Dallas, Texas.  Initially,
Notices shall be sent to the addresses specified in Exhibit C to
this Agreement.

 

Section 14.12       Amendments and Waivers.  Any amendment to or waiver of a provision of
this Agreement shall be made in writing and signed by each of the Members.

 

Section 14.13       Invalidity.  The
invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.  If any particular provision
herein is construed to be in conflict with the provisions of the Delaware Act,
the Delaware Act shall control and such invalid or unenforceable provisions
shall not affect or invalidate the other provisions hereof, and this Agreement
shall be construed in all respects as if such conflicting provision were omitted.

 

Section 14.14       Further Assurances.  The Members each agree to cooperate, and to
execute and deliver in a timely fashion any and all additional documents
necessary to effectuate the purposes of the Company and this Agreement.

 

Section 14.15       Time.  Time is of the essence of this Agreement.

 

Section 14.16       Non Business Days.  Whenever action must be taken (including the
giving of notice or the delivery of documents) under this Agreement during a
certain period of time or by a particular date that ends or occurs on a
non-Business Day, then such period or date shall be extended until the
immediately following Business Day.

 

Section 14.17       General Statutory Override.  To the extent permitted by law, the
provisions of this Agreement shall govern over all provisions of the Delaware
Act which would apply but for (and inconsistently with) this Agreement.  For each question (a) with respect to
which the Delaware Act provides a rule (a “default rule”) but permits a
limited liability company’s operating agreement to provide a different rule and
(b) which is addressed by this Agreement, the default rule shall not
apply to the Company.  Without limiting
the generality of the foregoing, the following provisions of the Delaware Act
shall not apply to the Company: Section 18-304, Section 18-801 and Section 18-804.

 

Section 14.18       Exculpation of BH and Related Parties.  Notwithstanding anything to the contrary
contained in this Agreement or in any exhibits attached hereto or in any
documents executed in connection herewith, it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of CTRI or
any of its successors or assigns against BH in connection with this Agreement
or any action taken by the Company pursuant to this Agreement, including,
without limitation, with respect to

 

39

 

any alleged act or omission of BH or any other
representative of BH, any misrepresentation (whether allegedly intentional or
unintentional) by or on behalf of BH, or any breach by or on the part of BH of
any representation, warranty, covenant, undertaking, indemnity or agreement
contained in this Agreement (collectively, the “BH’s Undertakings”),
will not exceed the aggregate investment of BH in the Company and the Project,
and (b) no personal liability or personal responsibility of any sort with
respect to any of the BH’s Undertakings or any alleged breach thereof is
assumed by, or will at any time be asserted or enforceable against, BH or any
of its Affiliates, or against any of their respective shareholders, directors,
officers, employees, agents, advisors, constituent partners, members,
beneficiaries, trustees or representatives.

 

Section 14.19       Exculpation of CTRI and Related Parties .  Notwithstanding anything to the contrary
contained in this Agreement or in any exhibits attached hereto or in any
documents executed in connection herewith, it is expressly understood and
agreed by and between the parties hereto that: (a) the recourse of BH or
any of its successors or assigns against CTRI in connection with this Agreement
or any action taken by the Company pursuant to this Agreement, including,
without limitation, with respect to any alleged act or omission of CTRI or any
other representative of CTRI, any misrepresentation (whether allegedly
intentional or unintentional) by or on behalf of CTRI, or any breach by or on
the part of CTRI of any representation, warranty, covenant, undertaking,
indemnity or agreement contained in this Agreement (collectively, the “CTRI’s
Undertakings”), will not exceed the aggregate investment of CTRI in the
Company and the Project, and (b) no personal liability or personal
responsibility of any sort with respect to any of the CTRI’s Undertakings or
any alleged breach thereof is assumed by, or will at any time be asserted or
enforceable against, CTRI or any of its Affiliates, or against any of their
respective shareholders, directors, officers, employees, agents, advisors,
constituent partners, members, beneficiaries, trustees or representatives.

 

Section 14.20       Press Releases.  No
public announcement, press release or other similar public disclosure of the
acquisition of the Project, the terms of this Agreement, the activities of the
Company, or the plans of the Company will be made unless same is approved in
advance in writing by BH.   For purposes
of this Section 14.20, a written communication by an employee of BH
authorizing an announcement, press release or other similar public disclosure
shall be deemed an approval by BH. 
However, notwithstanding the preceding sentence, any Member shall have
the right, without obtaining the consent of any other Member, to make such
disclosures as may, in the reasonable judgment of such Member’s counsel, be
required by applicable law as long as such Member shall solicit and
consider comments from BH to any such disclosure as is practicable given the
legal requirements and the time available to make such disclosures. 
Furthermore, it is agreed that the foregoing provisions of this Section 14.20
shall not prohibit a Member from disclosing such information to the
accountants, attorneys, consultants, lenders and vendors of the Company as is
necessary to allow such parties to provide services, funds or goods to the
Company.  The Members have agreed that if
a Member breaches the obligation set forth in the first sentence of this Section 14.20
(the “Non-Disclosure Obligation”), the actual damages that will be
incurred by the other Members as a result of such breach would be extremely
difficult or impracticable to determine.  Therefore, the Members agree
that if a Member or any Affiliate of a Member breaches the Non-Disclosure
Obligation, such Member shall pay to each of the other Members liquidated
damages (the “Liquidated Damages”) in the amount of Five Thousand Dollars
($5,000) for each such breach, such amount having been agreed upon, after
negotiation, as the Members’ reasonable estimate of the damages that will be
suffered by reason of a breach of the Non-Disclosure Obligation.  Any Liquidated Damages becoming payable
pursuant to this Section 14.20 shall be paid within ten (10) days
after the breach of the Non-Disclosure Obligation giving rise to the Liquidated
Damages.  If not paid within such ten (10) day
period, the Liquidated Damages shall thereafter bear interest at the lesser of
twelve percent (12%) per annum or the highest rate permitted by applicable
law.  All Company distributions and other
payments that otherwise would be made to the Member that is liable for Liquidated
Damages shall be paid to the other Members until the Liquidated Damages and all
interest

 

40

 

accrued thereon are paid in full (with all such
payments being applied first to accrued and unpaid interest and then to the
Liquidated Damages).

 

Section 14.21       SPE Provisions.  Notwithstanding anything in this Agreement to
the contrary, unless and until that certain loan (“Loan”) from PCCP
Capital I, LLC, a Delaware limited liability company (together with its
successors and assigns, “Lender”), to the Company evidenced and secured
by certain loan documents (collectively, “Loan Documents”) including,
without limitation, a loan agreement executed by Lender and Company in
connection with the acquisition of the Project (“Loan Agreement”) and a
deed of trust encumbering the Project, has been paid in full in accordance with
the terms and provisions of such Loan Documents, the following provisions shall
be and remain in effect and shall control in the event of any conflict with any
contrary provisions hereof or of any other Company governance documents:

 

(a)           The purpose for
which Company is organized shall be limited to (i) owning, holding,
selling, leasing, transferring, exchanging, operating and managing Company’s
interest in the Project, (ii) entering into the Loan, (iii) refinancing
the Project in connection with a permitted repayment of the Loan, and (iv) transacting
any and all lawful business that is incident, necessary and appropriate to
accomplish the foregoing.

 

(b)           Company will
not own any asset or property other than (i) the Project and
(ii) incidental personal property necessary for and used in connection
with the ownership or operation of the same.

 

(c)           Company shall
not engage in a business other than the ownership, operation and management of
the Project and any other property which is hereafter acquired by Company with
Lender’s prior written consent.

 

(d)           Except as
otherwise expressly permitted in Section 8.16(d) of the Loan
Agreement, Company will not enter into any contract or agreement with any Affiliate,
CT California Fund VI, LLC, a California limited liability company (“Guarantor”),
or any Affiliate of Guarantor, provided, however, that Company may enter into
contracts with Affiliates with Lender’s prior written consent so long as such
contracts relate to the Project and provide for payments at prevailing market
rates.

 

(e)           Except as
otherwise expressly permitted in Section 8.16(e) of the Loan
Agreement, Company will not incur any indebtedness, secured or unsecured, in
violation of Section 8.8 of the Loan Agreement.  In no event shall any indebtedness other than
the Loan be secured (either subordinate or pari passu) by the Project, and no
indebtedness may be secured, directly or indirectly, by any partnership,
membership or other equity interest in Company.

 

(f)            Company has not
made and will not make any loans or advances to any person or entity and shall
not acquire obligations or securities of an Affiliate.

 

(g)           Company will
remain solvent and Company will pay its debts and liabilities (including, as
applicable, shared personnel and overhead expenses) from its assets as the same
shall become due; provided that this covenant shall not imply any capital
contribution obligation other than the obligation to contribute the required “Borrower
Equity” (as defined in the Loan Agreement).

 

(h)           Company will do
all things necessary to observe organizational formalities and preserve its
existence, and Company will not amend, modify or otherwise change, in violation
of the covenants of this Section 14.21 or Section 8.16 of the Loan
Agreement, the partnership certificate, partnership agreement, articles of
incorporation and bylaws, operating agreement, trust or other organizational
documents of Company without the written consent of Lender.

 

41

 

(i)            Company shall
maintain all of its books, records, financial statements and bank accounts
separate from those of its Affiliates. 
Company’s assets will not be listed as assets on the financial statement
of any other Person.  Company shall have
its own separate financial statement, provided, however, that Company’s assets
may be included in a consolidated financial statement of its parent companies
if inclusion on such a consolidated statement is required to comply with the
requirements of GAAP.  Company will file
its own tax returns and will not file a consolidated federal income tax return
with any other corporation.  Company
shall maintain its books, records, resolutions and agreements as official
records.

 

(j)            Company will
be, and at all times will hold itself out to the public as, a legal entity
separate and distinct from any other person or entity, shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name and shall not identify itself or any of its Affiliates
as a division or part of the other.

 

(k)           Company will
maintain adequate capital for the normal obligations reasonably foreseeable in
a business of its size and character and in light of its contemplated business
operations; provided that this covenant shall not imply any capital
contribution obligation other than the obligation to contribute the required
Borrower Equity.

 

(l)            Neither Company
nor any constituent party will seek the dissolution, winding up, liquidation,
consolidation or merger, in whole or in part, or the sale of material assets of
Company.

 

(m)          Company will
not commingle the funds and other assets of Company with those of any other
Person.

 

(n)           Company will
not commingle its assets with those of any other Person and will hold all of
its assets in its own name.

 

(o)           Except for the
Seller Purchase Agreement Indemnification Obligation (as defined in the Loan
Agreement), Company will not guarantee or become obligated for the debts of any
other Person and will not hold itself out as being responsible for the debts or
obligations of any other Person.

 

(p)           Company shall
not pledge its assets for the benefit of any other Person, other than with
respect to the Loan.

 

(q)           Without the
unanimous written consent of each Member, Company shall never file a petition
for relief under the Bankruptcy Reform Act of 1978, 11 U.S.C. §101-1330, as the
same may be hereafter amended or modified, or under any other present or future
state of federal law regarding bankruptcy, reorganization or other debtor
relief law.

 

[REMAINING PORTION OF PAGE LEFT INTENTIONALLY BLACK]

 

42

 

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year first above written.

 

BH:

 

	
  BEHRINGER
  HARVARD INTERCHANGE, LLC,

  	
   

  
	
  a
  Delaware limited liability company

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Behringer
  Harvard Opportunity OP II LP,

  	
   

  
	
   

  	
  a
  Delaware limited partnership,

  	
   

  
	
   

  	
  its
  sole member

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  BHO
  II, Inc.,

  	
   

  
	
   

  	
  a
  Delaware corporation,

  	
   

  
	
   

  	
  its
  general partner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Gerald J. Reihsen, III

  	
   

  
	
   

  	
  Name:
  

  	
  Gerald
  J. Reihsen, III

  	
   

  
	
   

  	
  Title:

  	
  Executive
  Vice President

  	
   

  
	
   

  	
   

  
	
  CTRI:

  	
   

  
	
   

  	
   

  
	
  CT
  INTERCHANGE LLC,

  	
   

  
	
  a
  Delaware limited liability company

  	
   

  
	
   

  	
   

  
	
  By:

  	
  CT
  CALIFORNIA FUND VI, LLC,

  	
   

  
	
   

  	
  a
  California limited liability company,

  	
   

  
	
   

  	
  its
  sole member

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  CT
  Fund Manager VI, LLC,

  	
   

  
	
   

  	
   

  	
  a
  California limited liability company,

  	
   

  
	
   

  	
   

  	
  its
  Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Robert M. Campbell

  	
   

  
	
   

  	
  Name:

  	
  Robert
  M. Campbell

  	
   

  
	
   

  	
  Title:

  	
  Manager

  	
   

  
						

 

 

EXHIBIT A

 

PROJECT DESCRIPTION

 

PARCELS
1, 3, 4 AND 5 OF PARCEL MAP NO. 17375, IN THE CITY OF SAN BERNARDINO,
COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA AS PER MAP FILED IN BOOK 219,
PAGES 84 THROUGH 91 INCLUSIVE, OF PARCEL MAPS IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

 

Exhibit A-1

 

EXHIBIT B

 

PRE-APPROVED LIST OF PERSONS TO
SERVE AS OFFICERS

 

	
  James
  C. Watson

  	
  President

  
	
   

  	
   

  
	
  Larry
  Mathena

  	
  Vice
  President

  

 

 

EXHIBIT C

 

ADDRESSES
FOR NOTICE

 

	
  If to BH:

  	
  c/o Behringer Harvard
  Funds

  
	
   

  	
  15601 Dallas Parkway,
  Suite 600

  
	
   

  	
  Addison, Texas 75001-6026

  
	
   

  	
  Attention: James D. Fant

  
	
   

  	
  Fax No.: 214-655-1610

  
	
   

  	
  E-mail: jfant@behringerharvard.com

  
	
   

  	
   

  
	
  With a copy to:

  	
  c/o Behringer Harvard
  Funds

  
	
   

  	
  15601 Dallas Parkway,
  Suite 600

  
	
   

  	
  Addison, Texas 75001-6026

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Fax No.: 214-655-1610

  
	
   

  	
  E-mail: trenolds@behringerharvard.com

  
	
   

  	
   

  
	
  And to:

  	
  Haynes and Boone, LLP

  
	
   

  	
  2323 Victory Avenue, Suite 700

  
	
   

  	
  Dallas, Texas 75219

  
	
   

  	
  Attention: Richard K. Martin

  
	
   

  	
  Fax No.: (214) 200-0740

  
	
   

  	
  E-mail: rick.martin@haynesboone.com

  
	
   

  	
   

  
	
  If to CTRI:

  	
  c/o CT Realty Investors

  
	
   

  	
  65 Enterprise, Suite 150

  
	
   

  	
  Aliso Viejo, California 92656

  
	
   

  	
  Attention: James Watson

  
	
   

  	
  Fax No.: (949) 330-5771

  
	
   

  	
  E-mail: watty@ctrinvestors.com

  
	
   

  	
   

  
	
  With a copy to

  	
  c/o CT Realty Investors

  
	
   

  	
  65 Enterprise, Suite 150

  
	
   

  	
  Aliso Viejo, California 92656

  
	
   

  	
  Attention: Larry Mathena

  
	
   

  	
  Fax No.: (949) 330-5771

  
	
   

  	
  E-mail: lmathena@ctrinvestors.com

  

 

 

EXHIBIT D

 

PRE-APPROVED LIST OF SIGNATORIES ON BANK ACCOUNTS

 

Larry
Mathena

 

Patrick
Carrier

 

Marc
Belluomini

 

Each
of the following persons, and each person from time to time that holds the
following titles at Behringer Harvard Holdings, LLC or Behringer Harvard
Opportunity REIT II, Inc., shall be an authorized signatory:

 

	
  Chief
  Financial Officer

  	
  Gary
  Bresky

  
	
   

  	
   

  
	
  Vice
  President of Operations

  	
  Cindy
  Fallis Cooper

  
	
   

  	
   

  
	
  Treasurer

  	
  Gary
  Bresky

  
	
   

  	
   

  
	
  Assistant
  Treasurer

  	
  Stephanie
  Castle

  
	
   

  	
   

  
	
  Cash
  Manager

  	
  Elaine
  Rainey

  
	
   

  	
   

  
	
  Assistant
  Cash Manager

  	
  Terri
  Crocker

  
	
   

  	
   

  
	
  Chief
  Account Officer

  	
  Bryan
  SinclairExhibit
10.53

 

LOAN AGREEMENT

 

 

BY AND BETWEEN

 

 

PCCP CAPITAL I, LLC,

 

AS LENDER

 

 

AND

 

 

CT/BH INTERCHANGE LLC,

 

AS BORROWER

 

 

DATED AS OF:  November 23, 2010

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Defined Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  Exhibits

  	
  14

  
	
   

  	
   

  	
   

  
	
  1.3

  	
  Principals of Construction

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE II LOAN

  	
  15

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Loan

  	
  15

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Use of Funds

  	
  15

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Loan Fee; Exit Fee

  	
  15

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Funding of Loan

  	
  15

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Loan Documents

  	
  16

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Effective Date

  	
  16

  
	
   

  	
   

  	
   

  
	
  2.7

  	
  Interest on Loan

  	
  16

  
	
   

  	
   

  	
   

  
	
  2.8

  	
  Loan Payments

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.9

  	
  Maturity Date

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.10

  	
  Credit for Payments

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.11

  	
  Full Repayment and Reconveyance

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.12

  	
  Authorization

  	
  17

  
	
   

  	
   

  	
   

  
	
  2.13

  	
  Extension Option

  	
  18

  
	
   

  	
   

  	
   

  
	
  2.14

  	
  Intentionally omitted

  	
  18

  
	
   

  	
   

  	
   

  
	
  2.15

  	
  Partial Release of Property

  	
  19

  
	
   

  	
   

  	
   

  
	
  2.16

  	
  Recourse

  	
  20

  
	
   

  	
   

  	
   

  
	
  2.17

  	
  Prepayment

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE III CONDITIONS TO DISBURSEMENT

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  General Conditions; Conditions to Initial Disbursement

  	
  20

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Conditions to Additional Disbursements

  	
  24

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Account Pledge and Assignment

  	
  25

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Loan Disbursements

  	
  26

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Cash Management Account

  	
  26

  

 

1

 

	
  ARTICLE IV CONSTRUCTION

  	
  27

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Liens and Stop Notices

  	
  27

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Construction Responsibilities

  	
  27

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Inspections

  	
  27

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Intentionally omitted

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.5

  	
  Intentionally omitted

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.6

  	
  Contractor Construction Information

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.7

  	
  Prohibited Contracts

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.8

  	
  Assessments and Community Facilities Districts

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.9

  	
  Delay

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.10

  	
  Construction Contracts

  	
  28

  
	
   

  	
   

  	
   

  
	
  4.11

  	
  Additional Conditions to Disbursements

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE V INSURANCE; CASUALTY, CONDEMNATION AND
  RESTORATION

  	
  29

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Title Insurance

  	
  29

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Property Insurance

  	
  29

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Liability Insurance

  	
  30

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Umbrella or Excess Liability Insurance

  	
  30

  
	
   

  	
   

  	
   

  
	
  5.5

  	
  Intentionally omitted

  	
  30

  
	
   

  	
   

  	
   

  
	
  5.6

  	
  General Insurance Requirements

  	
  30

  
	
   

  	
   

  	
   

  
	
  5.7

  	
  Restoration Proceeds

  	
  31

  
	
   

  	
   

  	
   

  
	
  5.8

  	
  Restoration

  	
  32

  
	
   

  	
   

  	
   

  
	
  5.9

  	
  Disbursement

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI REPRESENTATIONS AND WARRANTIES

  	
  33

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Organization; Power; Single Purpose Entity

  	
  33

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Authority; Enforceability

  	
  34

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Ownership of Borrower

  	
  34

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  No Conflict

  	
  34

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Consents and Authorizations

  	
  34

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Financial Information

  	
  34

  
	
   

  	
   

  	
   

  
	
  6.7

  	
  Litigation; Adverse Effects; Condemnation

  	
  35

  
	
   

  	
   

  	
   

  
	
  6.8

  	
  Payment of Taxes

  	
  35

  
	
   

  	
   

  	
   

  
	
  6.9

  	
  Disclosure

  	
  36

  
	
   

  	
   

  	
   

  
	
  6.10

  	
  Requirements of Law and Other Covenants

  	
  36

  
	
   

  	
   

  	
   

  
	
  6.11

  	
  Deliveries

  	
  36

  

 

2

 

	
  6.12

  	
  Title to Assets; No Liens

  	
  36

  
	
   

  	
   

  	
   

  
	
  6.13

  	
  Utilities

  	
  36

  
	
   

  	
   

  	
   

  
	
  6.14

  	
  Leases

  	
  36

  
	
   

  	
   

  	
   

  
	
  6.15

  	
  Affiliate Fees

  	
  37

  
	
   

  	
   

  	
   

  
	
  6.16

  	
  Defects

  	
  37

  
	
   

  	
   

  	
   

  
	
  6.17

  	
  Patriot Act and Related Matters

  	
  37

  
	
   

  	
   

  	
   

  
	
  6.18

  	
  No Additional Liabilities of Guarantors Not Previously
  Disclosed in Writing to Lender

  	
  37

  
	
   

  	
   

  	
   

  
	
  6.19

  	
  ERISA

  	
  37

  
	
   

  	
   

  	
   

  
	
  6.20

  	
  Investment Company Act; Public Utility Holding Company Act

  	
  38

  
	
   

  	
   

  	
   

  
	
  6.21

  	
  Property Management Agreement

  	
  38

  
	
   

  	
   

  	
   

  
	
  6.22

  	
  REOC Status

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII REPORTING COVENANTS

  	
  38

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Financial Statements and Other Financial and Operating
  Information

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII OTHER COVENANTS

  	
  40

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Existence

  	
  40

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Compliance

  	
  40

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Payment of Taxes, Assessments and Charges

  	
  40

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Books and Records

  	
  41

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Entry and Inspection

  	
  41

  
	
   

  	
   

  	
   

  
	
  8.6

  	
  Management of Property

  	
  41

  
	
   

  	
   

  	
   

  
	
  8.7

  	
  Use of Proceeds

  	
  42

  
	
   

  	
   

  	
   

  
	
  8.8

  	
  Additional Liabilities

  	
  42

  
	
   

  	
   

  	
   

  
	
  8.9

  	
  Leases

  	
  42

  
	
   

  	
   

  	
   

  
	
  8.10

  	
  Limitations on Distributions

  	
  43

  
	
   

  	
   

  	
   

  
	
  8.11

  	
  Subdivision Maps; Zoning; Joint Assessment

  	
  43

  
	
   

  	
   

  	
   

  
	
  8.12

  	
  ERISA Compliance

  	
  44

  
	
   

  	
   

  	
   

  
	
  8.13

  	
  Application of Gross Income

  	
  44

  
	
   

  	
   

  	
   

  
	
  8.14

  	
  Transfers; Management of Borrower

  	
  44

  
	
   

  	
   

  	
   

  
	
  8.15

  	
  Approved Budget

  	
  46

  
	
   

  	
   

  	
   

  
	
  8.16

  	
  Special Purpose Entity

  	
  46

  
	
   

  	
   

  	
   

  
	
  8.17

  	
  Completion of Tenant Improvements and Capital Improvements

  	
  48

  
	
   

  	
   

  	
   

  
	
  8.18

  	
  Loan In-Balance; Required Deposit(s) into Interest Reserve
  Account

  	
  48

  
	
   

  	
   

  	
   

  
	
  8.19

  	
  Borrower Equity

  	
  48

  
	
   

  	
   

  	
   

  
	
  8.20

  	
  Maintenance; Waste; Alterations

  	
  48

  

 

3

 

	
  8.21

  	
  Counterparty

  	
  49

  
	
   

  	
   

  	
   

  
	
  8.22

  	
  Deferred Maintenance and Environmental Remediation

  	
  49

  
	
   

  	
   

  	
   

  
	
  8.23

  	
  Required Principal Paydown in the Event Property Fails to
  Achieve Required Debt Constant by April 1, 2012

  	
  49

  
	
   

  	
   

  	
   

  
	
  8.24

  	
  CC&Rs/Association Demands and Notices

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX HAZARDOUS MATERIALS

  	
  49

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Special Representations and Warranties

  	
  49

  
	
   

  	
   

  	
   

  
	
   

  	
  (d)   Border Zone Property

  	
  50

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Hazardous Materials Covenants

  	
  50

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Inspection by Lender

  	
  51

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Hazardous Materials Indemnity

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE X APPLICATION OF REVENUE

  	
  51

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Priority of Application of Gross Income

  	
  51

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Priority of Application of Gross Sales Proceeds

  	
  52

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Intentionally omitted

  	
  52

  
	
   

  	
   

  	
   

  
	
  10.4

  	
  Distributions to Borrower

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI EVENTS OF DEFAULT AND REMEDIES

  	
  52

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Events of Default

  	
  52

  
	
   

  	
   

  	
   

  
	
  11.2

  	
  Remedies upon Default

  	
  54

  
	
   

  	
   

  	
   

  
	
  11.3

  	
  Remedies Cumulative

  	
  54

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Lender Appointed Attorney-In-Fact

  	
  55

  
	
   

  	
   

  	
   

  
	
  11.5

  	
  Lender’s Right to Perform

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII RESERVE ACCOUNTS

  	
  55

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Reserve Accounts Generally

  	
  55

  
	
   

  	
   

  	
   

  
	
  12.2

  	
  Taxes and Insurance

  	
  55

  
	
   

  	
   

  	
   

  
	
  12.3

  	
  Deferred Maintenance Costs and Remediation Costs

  	
  56

  
	
   

  	
   

  	
   

  
	
  12.4

  	
  Capital Improvement Costs

  	
  56

  
	
   

  	
   

  	
   

  
	
  12.5

  	
  Interest Reserve Account

  	
  56

  
	
   

  	
   

  	
   

  
	
  12.6

  	
  Disbursements

  	
  57

  
	
   

  	
   

  	
   

  
	
  12.7

  	
  Interest on Reserve Accounts

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII SECONDARY MARKET TRANSACTIONS

  	
  57

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  General

  	
  57

  
	
   

  	
   

  	
   

  
	
  13.2

  	
  Borrower Cooperation

  	
  58

  

 

4

 

	
  13.3

  	
  Dissemination of Information

  	
  58

  
	
   

  	
   

  	
   

  
	
  13.4

  	
  Change of Payment Date

  	
  58

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV MISCELLANEOUS

  	
  58

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Intentionally omitted

  	
  58

  
	
   

  	
   

  	
   

  
	
  14.2

  	
  Actions

  	
  58

  
	
   

  	
   

  	
   

  
	
  14.3

  	
  Nonliability of Lender

  	
  59

  
	
   

  	
   

  	
   

  
	
  14.4

  	
  No Third Parties Benefited

  	
  60

  
	
   

  	
   

  	
   

  
	
  14.5

  	
  Indemnity

  	
  60

  
	
   

  	
   

  	
   

  
	
  14.6

  	
  Binding Effect; Assignment

  	
  60

  
	
   

  	
   

  	
   

  
	
  14.7

  	
  Execution in Counterparts

  	
  60

  
	
   

  	
   

  	
   

  
	
  14.8

  	
  Amendments; Waiver in Writing

  	
  60

  
	
   

  	
   

  	
   

  
	
  14.9

  	
  Costs, Expenses and Taxes

  	
  61

  
	
   

  	
   

  	
   

  
	
  14.10

  	
  Tax Service

  	
  61

  
	
   

  	
   

  	
   

  
	
  14.11

  	
  Survival

  	
  62

  
	
   

  	
   

  	
   

  
	
  14.12

  	
  Notices

  	
  62

  
	
   

  	
   

  	
   

  
	
  14.13

  	
  Further Assurances

  	
  63

  
	
   

  	
   

  	
   

  
	
  14.14

  	
  Governing Law

  	
  63

  
	
   

  	
   

  	
   

  
	
  14.15

  	
  Severability of Provisions

  	
  63

  
	
   

  	
   

  	
   

  
	
  14.16

  	
  Intentionally omitted

  	
  63

  
	
   

  	
   

  	
   

  
	
  14.17

  	
  Headings

  	
  63

  
	
   

  	
   

  	
   

  
	
  14.18

  	
  Time of the Essence; Delay Not a Waiver

  	
  63

  
	
   

  	
   

  	
   

  
	
  14.19

  	
  Construction of Agreement

  	
  64

  
	
   

  	
   

  	
   

  
	
  14.20

  	
  Brokers

  	
  64

  
	
   

  	
   

  	
   

  
	
  14.21

  	
  Lender’s Discretion

  	
  64

  
	
   

  	
   

  	
   

  
	
  14.22

  	
  Preferences

  	
  64

  
	
   

  	
   

  	
   

  
	
  14.23

  	
  Intentionally omitted

  	
  64

  
	
   

  	
   

  	
   

  
	
  14.24

  	
  Intentionally Omitted

  	
  64

  
	
   

  	
   

  	
   

  
	
  14.25

  	
  Waiver of Marshalling of Assets Defense

  	
  64

  
	
   

  	
   

  	
   

  
	
  14.26

  	
  Waiver of Right to Trial by Jury; Judicial Reference in the
  Event of Jury Trial Waiver Unenforceability

  	
  64

  
	
   

  	
   

  	
   

  
	
  14.27

  	
  Relationship of Parties

  	
  65

  
	
   

  	
   

  	
   

  
	
  14.28

  	
  Servicer

  	
  65

  
	
   

  	
   

  	
   

  
	
  14.29

  	
  Limitation on Liability

  	
  65

  

 

5

 

LOAN AGREEMENT

 

THIS
LOAN AGREEMENT is made and entered into as of November
      , 2010, by and between CT/BH INTERCHANGE
LLC, a Delaware limited liability company (“Borrower”),
and PCCP CAPITAL I, LLC, a Delaware limited liability company (together with
its successors and/or assigns, “Lender”).

 

R E C I T A L S:

 

A.                                   Borrower has
requested that Lender provide Borrower with real estate secured financing in
the amount of up to TWENTY-ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 Dollars
($21,500,000.00) (the “Loan”) in
connection with Borrower’s acquisition and leasing costs relating to the
Property (as defined below).

 

B.                                     Lender is
willing to provide such secured loan to Borrower, on the terms and conditions
contained in this Agreement and the other Loan Documents.

 

NOW,
THEREFORE, in consideration of the making of the Loan by Lender, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1                                 Defined Terms.  As used in this Agreement, the following
terms shall have the meanings set forth respectively after each:

 

“Account” means, collectively, the
Collection Account and the Cash Management Account, together with any other
accounts now or hereafter established by Borrower for the benefit of Lender
hereto in connection with the Loan.

 

“Actual Lender Expenses” has the meaning given to such term
in Exhibit D to this Agreement.

 

“ADA” means the Americans with Disabilities
Act, 42 U.S.C. §§ 12101, et seq., as the same may be
hereafter amended or modified.

 

“Affiliate” means (a) any Person which
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, Borrower or Guarantor,
(b) any Person, ten percent (10%) or more of the equity interest of which
is held beneficially or of record by Borrower or Guarantor (but the term “Affiliate”
shall not include any Persons that are solely direct or indirect limited
partners or non-managing members in Borrower or Guarantor), (c) any
general partner or managing member in Borrower or Guarantor and
(d) Guarantor.

 

“Affiliate Fees” has the meaning given to such term in Section
3.1(w) of this Agreement.

 

“Affiliate Management Fee” has the meaning given to such term
in Section 8.16(d) of this Agreement.

 

“Agreement” means this Loan Agreement.

 

1

 

“Applicable Interest Rate” has the meaning given to such term
in the Note.

 

“Appraisal” means a written appraisal
prepared by an MAI appraiser reasonably acceptable to Lender and prepared in
compliance with applicable regulatory requirements, including, without
limitation, the Financial Institutions Recovery, Reform and Enforcement Act of
1989, as amended from time to time, and subject to Lender’s customary
independent appraisal requirements.

 

“Appraised Value” means the “as-is” market value of the
Property as reasonably determined by Lender, on the basis of the most recent
Appraisal of the Property accepted by Lender.

 

“Approved Budget” means the improvement and
operating budget for the Property approved by Lender as required under Sections
3.1(s) and 8.15.  The initial
Approved Budget is attached hereto as Exhibit G.

 

“Assignment of Interest Rate Protection Agreement” means that
certain Collateral Assignment of Interest Rate Protection Agreement, in form
and substance satisfactory to Lender, executed by Borrower, in favor of Lender
dated as of even date herewith, and consented to by the “Cap Bank” thereunder.

 

“Assignment of Management Agreement” means
an Assignment and Subordination of Property Management Agreement, in form and
substance satisfactory to Lender, executed by Borrower and Property Manager in
favor of Lender.

 

“Association” means InterChange Business Center Association,
a California non-profit corporation.

 

“Association Estoppel” means that certain Estoppel
Certificate Regarding Declaration of Covenants, Restrictions and Easements for
InterChange Business Center, in form and substance acceptable to Lender.

 

“Assumed Liability” has the meaning given to such term in Section
8.14(iv)(x) of this Agreement.

 

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, 11
U.S.C. §101-1330, as the same may be hereafter amended or modified.

 

“BH” means Behringer Harvard Interchange, LLC, a Delaware
limited liability company and a direct Member in Borrower.

 

“Border Zone Property” means any property designated as “border
zone property” under the provisions of California Health and Safety Code
Sections 25220 et seq., or any regulation adopted in accordance therewith.

 

“Borrower” has the meaning given to such term in the opening
paragraph of this Agreement.

 

“Borrower Equity” means an amount not less
than Thirteen Million Eight Hundred Thirty-Two Thousand Five Hundred and No/100
Dollars ($13,832,500.00), which Borrower shall cause to be contributed to or
applied in payment of the costs and expenses incurred by Borrower in connection
with Borrower’s acquisition and leasing of the Property, including the payment
to Seller of a portion of the purchase price payable for the Property, prior to
the disbursement of any proceeds of the Loan by Lender (none of which shall be removed as Borrower’s equity from the Property or
utilized to pay any fees, costs, 

 

2

 

refunds
or other charges for the Property or the Loan transaction except as may
otherwise be approved by Lender in the exercise of its sole discretion).

 

“Borrower Improvements” means any capital, tenant or other
improvements that Borrower commences constructing at the Property.

 

“Breakage Prepayment Premium” has the meaning given to such
term in the Note.

 

“Business Day” means (a) with respect
to any borrowing, payment or rate determination with respect to LIBOR, a day,
other than a Saturday or a Sunday, on which dealings in U.S. Dollars are
carried on in the London interbank market, and (b) for all other purposes,
any day excluding Saturday, Sunday and any day which is a legal holiday under
the laws of the State of California  or which is a
day on which banking institutions located in the State of California are
required or authorized by law or other governmental action to close.”

 

Capital
Expenditure Reserve Account” has the meaning given to
such term in Section 12.1 of this Agreement.

 

“Carveout Guaranty” means that certain Indemnity and Guaranty
Agreement executed and delivered by Guarantor in favor of Lender pursuant to
this Agreement.

 

“Cash Application Statement” has the meaning given to such
term in Section 3.5(b) of this Agreement.

 

“Cash Management Account” has the meaning given to such term
in Section 3.5(c) of this Agreement.

 

“Cash Management Agreement” means that certain Cash
Management Agreement executed by and among Borrower, Lender and Property
Manager.

 

“Cash Management Bank” has the meaning given to such term in Section
3.5(c) of this Agreement.

 

“Casualty” has the meaning given to such term in Section
5.7 of this Agreement.

 

“Casualty Retainage” has the meaning given to such term in Section
5.9 of this Agreement.

 

“CC&Rs” means that certain Declaration of Covenants,
Restrictions and Easements for InterChange Business Center dated as of March
29, 2007, by SE I-215, L.P., a California limited partnership, and HSB I-215,
L.P., a California limited partnership, and recorded on March 30, 2007 as
Instrument No. 2007-0198478 in the Official Records, as amended by that certain
Amendment No. 1 to Declaration of Covenants, Restrictions and Easements for
InterChange Business Center dated as of March 24, 2008, by and among the
Hillwood Lit II, LP, a Delaware limited partnership, HW LIT InterChange, L.P.,
a California limited partnership, HSB I-215, L.P., a California limited
partnership, SE I-215, L.P., a California limited partnership, InterChange
Drainage Basin, LLC, a California limited liability company, and the
Association, and recorded on March 28, 2008 as Instrument No. 2008-0136064 in the
Official Records.

 

“City” means the City of San Bernardino, located in the
County of San Bernardino and State of California.

 

3

 

“Clearing Bank” shall have the meaning given to such term in Section
3.5(a) of this Agreement.

 

“Closing Date” means the date on which all
of the conditions precedent to Lender’s obligations set forth in Section 3.1
of this Agreement shall have been satisfied, as determined by Lender in its
sole discretion.

 

“Code” means the Internal Revenue Code (Title 26 of the
United States Code), as the same may be hereafter amended or modified.

 

“Collateral” means, collectively, the
Property, the Personal Property and any other real or personal property now or
hereafter acquired by Borrower in or upon which a Lien is granted by Borrower,
or as to which an assignment for security purposes is made by Borrower,
pursuant to this Agreement or the other Loan Documents.

 

“Collection Account” has the meaning given to such term in Section
3.5(a) of this Agreement.

 

“Completion Guaranty” means that certain Completion Guaranty
executed and delivered by Guarantor in favor of Lender pursuant to this
Agreement.

 

“Condemnation Proceeds” has the meaning given to such term in
Section 5.7 of this Agreement.

 

“Control” means the possession, directly or indirectly, of
the power to cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, family
relationship or otherwise; and the terms “controls”, “controlling” and “controlled”
have the meanings correlative to the foregoing.

 

“Counterparty” has the
meaning given to such term in Section 8.21 of this Agreement.

 

“Covenant” has the meaning given to such term in Section
11.1(g) of this Agreement.

 

“CT” has the meaning given to such term in Section
8.14(iv)(y) of this Agreement.

 

“CT Interchange” means CT Interchange LLC, a Delaware limited
liability company and the manager and a direct Member of Borrower.

 

“CT Principals” has the meaning given to such term in Section
8.14 of this Agreement.

 

“CTRI” has the meaning given to such term in Section 8.6
of the Agreement.

 

“Debt Constant” means a percentage calculated as of the date
in question by dividing (a) Net Operating Income by (b) the sum, as of the date
in question, of the (i) then outstanding Loan amount and (ii) the then
remaining unfunded Loan commitment (which commitment amount shall include any
then unfunded portion(s) of the Interest Holdback and the Leasing Holdback).

 

“Debt Service” as of any date, means the annual interest due
on the outstanding principal balance of the Loan, as of such date, at the
Applicable Interest Rate (as defined in the Note) in effect as of such date.

 

“Debt Service Coverage Ratio” means the ratio of the Net
Operating Income to Deemed Debt Service.

 

4

 

“Deed of Trust” means that certain Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
executed and delivered by Borrower in favor of Lender pursuant to this
Agreement which encumbers all of Borrower’s right, title and interest in and to
the Property.

 

“Deemed Debt Service” means the product of (a) (i) the
greater of (x) an assumed constant interest rate under the Note equal to seven
and one-half percent (7.5%) or (y) the Applicable Interest Rate per annum as of
the date of determination, multiplied by (b) the then current
outstanding principal balance of the Loan on such date.

 

“Default Interest Rate” shall have the meaning given to such
term in the Note.

 

“Deferred Maintenance and Environmental Reserve Account” has
the meaning given to such term in Section 12.1(a) of this Agreement.

 

“Deposit Account Control Agreement” means a Deposit Account
Control Agreement in form and substance satisfactory to Lender, executed by and
among Borrower, Bank of America, N.A., and Lender.

 

“Disbursement Budget” means the budget
setting forth the purposes for which Borrower shall be entitled to use the
proceeds of the Loan and the Borrower Equity, which is included in the
Disbursement Plan attached hereto as Exhibit C.

 

“Disbursement Plan” means the plan setting
forth certain conditions to disbursement of the proceeds of the Loan attached
hereto as Exhibit D.

 

“Effective Date” means the date described in
Section 2.6 of this Agreement.

 

“Environmental Indemnity Agreement” means
that certain Environmental Indemnity Agreement executed and delivered by
Borrower and Guarantor collectively and jointly and severally in favor of
Lender pursuant to this Agreement.

 

“Environmental Reports” means the reports and studies set
forth on Exhibit L attached hereto, copies of which were previously
delivered to Lender.

 

“Equity Interests” means (a) partnership interests (general
or limited) in a partnership; (b) membership interests in a limited liability
company; (c) shares or stock interests in a corporation; and (d) the beneficial
ownership interests in a trust.

 

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

 

“ERISA Affiliate” has the
meaning given to such term in Section 6.19 of this Agreement.

 

“Estimated Lender Expenses” has the meaning given to such
term in Exhibit D to this Agreement.

 

“Event of Default” means each of those
events so designated in Section 11.1 of this Agreement.

 

“Exit Fee” has the meaning given to such term in Section
2.3(b) of this Agreement.

 

“Extended Maturity
Date” means December 1, 2014.

 

5

 

“Extended Term” has the meaning given to such term in Section
2.13 of this Agreement.

 

“Extension Fee” has the meaning given to such term in Section
2.13(c) of this Agreement.

 

“Extension Notice” has the meaning given to such term in Section
2.13(a) of the Agreement.

 

“Extension Option” has the meaning given to such term in Section
2.13 of this Agreement.

 

“Financing Statements” means the UCC-1
financing statements granted by Borrower in favor of Lender pursuant to this
Agreement in order to perfect Lender’s Lien on any of the Personal Property,
one of which will be filed with the Secretary of State of the State of
Delaware, and the other of which will be recorded in the Official Records.

 

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

 

“Fitch” shall
mean Fitch, Inc.

 

“GAAP” means generally accepted accounting
principles in the United States set forth in the opinions and pronouncements of
the Accounting Principles Board of the American Institute of Certified Public
Accounts and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

 

“Government Lists” has the meaning given to such term in Section
6.17 of this Agreement.

 

“Governmental Authority” means any national,
federal, state, regional or local government, or any other political
subdivision of any of the foregoing, in each case with jurisdiction over
Borrower, the Property, or any Person with jurisdiction over Borrower or the
Property exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

 

“Gross Income” means all income from or in
respect of the Property, including, without limitation, rental revenues,
amounts, payments, fees, rentals, additional rentals, reimbursements (including
all reimbursements of expenses or other reimbursements by tenants, licensees or
other users of the Property, or by insurance or other reimbursement,
recoupment, discount or credit to Borrower), income, interest and other monies
directly or indirectly received by or on behalf of or credited to Borrower from
any Person with respect to Borrower’s ownership, use, development, operation,
leasing, franchising, marketing or licensing of the Property.  Income relating to multiple periods shall be
spread over all such periods equally.

 

“Gross Sales Proceeds” means all consideration directly or
indirectly received by or on behalf of, or paid, payable or credited to or for
the account of, Borrower in connection with Borrower’s sale and conveyance of
all or any portion of the Released Property as expressly permitted
hereunder.  All Gross Sales Proceeds
shall be in cash, or, in the event that Borrower shall accept a purchase money
promissory note as partial payment, Gross Sales Proceeds shall include cash in
an amount equal to the original principal amount of such purchase money
promissory note

 

“Guarantor” means CT California Fund VI,
LLC, a California limited liability company, and any other Person guaranteeing
any of Borrower’s obligations under this Agreement or the other Loan Documents.

 

6

 

“Hazardous Materials” has the meaning given
to such term in Section 9.1(a) of this Agreement.

 

“Hazardous Materials Claims” has the meaning
given to such term in Section 9.1(c) of this Agreement.

 

“Hazardous Materials Laws” has the meaning
given to such term in Section 9.1(b) of this Agreement.

 

“Holdbacks” means, collectively, the Interest Holdback and
the Leasing Holdback.

 

“Impositions” means all ground rents and all taxes (including,
without limitation, all real estate, ad valorem or value added, sales
(including those imposed on lease rentals), use, single business, gross
receipts, intangible transaction privilege, privilege, license or similar
taxes), assessments (including, without limitation, to the extent not
discharged prior to the Closing Date, all assessments for public improvements
or benefits, whether or not commenced or completed within the term of the
Loan), water, sewer or other rents and charges, Association fees or assessments,
excises, levies, fees (including, without limitation, license, permit,
inspection, authorization and similar fees), and all other governmental
charges, in each case whether general or special, ordinary or extraordinary,
foreseen or unforeseen, of every character in respect of the Property,
(including all interest and penalties thereon), which at any time prior to,
during or in respect of the term hereof: (1) may be assessed or imposed on or
in respect of (i) Borrower (including, without limitation, all income,
franchise, single business or other taxes imposed on Borrower for the privilege
of doing business in the jurisdiction in which the Property is located) or
Lender (including taxes resulting from future changes in law which impose upon
Lender or any trustee an obligation to pay any property taxes or other taxes or
which otherwise adversely affect Lender’s interests), (ii) the Property or
any part thereof, or (iii) any occupancy, operation, use or possession of,
or sales from, or activity conducted on, or in connection with the Property or
the leasing or use of the Property or any part thereof, or the acquisition or
financing of the acquisition of the Property by Borrower; and (2) for which a
statutory monetary lien arises upon non-payment.

 

“Improvements” means the four (4) industrial buildings
containing approximately 801,933 rentable square feet, in the aggregate, and
all other improvements and fixtures now or hereafter located on the Real
Property.

 

“In-Balance” has the meaning given to such term in Section
3.2(c)(v) of this Agreement.

 

“Indebtedness” means, at any given time, the outstanding
principal indebtedness under the Note, together with all accrued and unpaid
interest thereon and all other obligations and liabilities due or to become due
to Lender pursuant hereto or any of the other Loan Documents.

 

“Indemnified Party” means each of Lender, each of its
Affiliates and their respective successors and assigns, any Person who is or
will have been involved with the servicing of the Loan, Persons who may hold or
acquire or will have held a full or partial interest in the Loan (including
Investors, as well as custodians, trustees and other fiduciaries who hold or
have held a full or partial interest in the Loan for the benefit of third
parties) (including any other Person who holds or acquires or will have held a
participation or other full or partial interest in the Loan or the collateral
therefor), and the respective officers, directors, and employees, agents,
Affiliates, successors and assigns of any and all of the foregoing; provided,
however, that the term “Indemnified Parties” shall not include third party
purchasers of the Property at or after a foreclosure sale or deed in lieu of
foreclosure in the event such purchaser is a third party and is not affiliated
with Lender or with any purchaser, assignee or participant which obtained its
interest(s) in the Loan Documents prior to the applicable foreclosure.

 

7

 

“Initial Funding Amount” has the meaning given to such term
in Section 2.4(a) of this Agreement.

 

“Insurance Proceeds” has the meaning given to such term in Section
5.7 of this Agreement.

 

“Interest Holdback” shall have the meaning given to such term
in Exhibit D of this Agreement.

 

“Interest Rate Protection Agreement”
means an agreement, with a term to expire not less than the Original Maturity
Date (if purchased in connection with the origination of the Loan) or the
Extended Maturity Date (if purchased in connection with the extension of the Loan
in accordance with Section 2.13 below), which provides for a cap of the
one (1) month “LIBOR Rate” (as defined in the Note) at a strike price of
not more than three and one-half percent (3.5%) and which is in an amount not
less than the maximum Loan Amount, in form and substance acceptable to Lender
in its sole and absolute discretion, with a confirmation from the Counterparty
in form acceptable, between Borrower and, subject to Section 8.21,
a Counterparty reasonably acceptable to Lender with a Minimum Counterparty
Rating, and all amendments, restatements, replacements, supplements and
modifications thereto.

 

“Interest Reserve Account” has the meaning given to such term
in Section 12.1 of this Agreement.

 

“Investor” has the
meaning given to such term in Section 13.3 of this Agreement.

 

“Leases” means all leases and other agreements or
arrangements affecting the use or occupancy of all or any portion of the
Property now in effect or hereafter entered into (including all lettings,
licenses, concessions, tenancies and other occupancy agreements covering or
encumbering all or any portion of the Property), together with any guarantees,
supplements, amendments, modifications, extensions and renewals of the same.

 

“Leasing Guidelines” means the guidelines and parameters set
forth on Exhibit F attached hereto, as the same may be modified by
Lender from time to time in accordance with Section 8.9 below.

 

“Leasing Holdback” has the meaning given to such term in Exhibit
D of this Agreement.

 

“Legal Requirements” means (a) all statutes, laws, rules,
orders, regulations, ordinances, judgments, orders, decrees and injunctions of
Governmental Authorities affecting Borrower, the Loan Documents, the Property
or any part thereof, and all Permits and regulations relating thereto, (b) all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower, at any time in force
affecting the Property or any part thereof, (c) terms of any insurance policy
maintained by or on behalf of Borrower, and (d) the organizational documents of
Borrower.

 

“Lender” means PCCP Capital I, LLC, a
Delaware limited liability company, and its successors and/or assigns.

 

“Liabilities and Costs” means any losses,
actual damages, costs, fees, expenses, claims, suits, judgments, awards,
liabilities (including strict liabilities), obligations, debts, diminutions in
value, fines, penalties, charges, costs of Remediation (whether or not
performed voluntarily), amounts paid in settlement, foreseeable and
unforeseeable consequential damages, litigation costs, reasonable attorneys’
fees, engineers’ fees, environmental consultants’ fees, and investigation costs
(including costs for sampling, testing and analysis of soil, water, air,
building materials, and other materials and substances whether solid, liquid or
gas), of whatever kind or nature, and whether or not incurred in connection
with 

 

8

 

any judicial or
administrative proceedings, actions, claims, suits, judgments or awards.

 

“Lien” means any mortgage, deed of trust, deed to secure
debt, lien pledge, easement, restrictive covenant, hypothecation, assignment,
security interest, conditional sale or other title retention agreement,
financing lease having substantially the same economic effect as any of the
foregoing, or financing statement or similar instrument.

 

“Liquidity” means a determination of solely the cash,
marketable securities and committed but uncalled capital of the Members of the
proposed Replacement Guarantor.

 

“Loan” has the meaning given to such term in
Recital A above.

 

“Loan Documents” means, collectively, this Agreement and all
other documents, agreements, instruments and certificates now or hereafter
evidencing, securing or delivered to Lender in connection with the Loan,
including the documents listed on Exhibit B attached hereto, as each may
be (and each of the defined terms shall refer to such documents as they may be)
amended, restated, or otherwise modified from time to time.

 

“Loan Fee” has the meaning given to such
term in Section 2.3(a) of this Agreement.

 

“Loan-to-Value Ratio” means the ratio of (a) the sum of (i)
the outstanding principal amount of the Loan as of the date in question, and
(ii) the committed and undisbursed portion of the Loan as of the date in
question, to (b) the then applicable Appraised Value as of such date, as
determined by Lender in its reasonable discretion.

 

“Major Lease” means any lease covering 300,000 rentable
square feet or more.

 

“Master Property Management Agreement” means that certain
Amended and Restated Property Management and Leasing Agreement, entered into
among Behringer Harvard Opportunity REIT II, Inc., a Maryland corporation,
Behringer Harvard Opportunity OP II LP, a Texas limited partnership and
Behringer Harvard Opportunity II Management Services, LLC, a Texas limited
liability company, as amended by that certain Interchange Property Amendment by
and between Behringer Harvard Opportunity II Management Services, LLC, a Texas
limited liability company and Borrower (the “Amendment to
Master Property Management Agreement”).

 

“Material Adverse Effect” means, as applicable, a material
adverse effect upon (a) the business or financial position or results of
operation of Borrower or (b) the ability of Borrower to perform, or of Lender
to enforce, any of the Loan Documents.

 

“Maturity Date” means the Original Maturity
Date, unless extended in accordance with Section 2.13, in which case the
Maturity Date shall be the Extended Maturity Date.

 

“Members” means the direct or indirect
holders of Equity Interests in the Borrower.

 

“Minimum Counterparty Rating” means (a) a short term credit
rating from S&P and Fitch of at least “A-1” and (b) either (i) a long term
credit rating from Moody’s of at least “Aa3” or (ii) a long term credit rating
from Moody’s of at least “A1” and a short term credit rating from Moody’s of “P-1”.

 

“Mold” has the meaning given to such in Section 9.1(a)
of this Agreement.

 

“Moody’s” means Moody’s Investors
Service, Inc.

 

9

 

“Net Operating Income” for any period means
(a) the forward twelve (12) months of Gross Income derived from Leases at the
Property which have not less than twelve (12) months remaining term and
assuming no future Leases are signed, whether they are renewals or new Leases;
provided that, for purposes of calculating Net Operating Income, Gross Income
shall be increased over the applicable forward twelve (12) months for any newly
signed Leases which have not less than twelve (12) months of remaining term and
Gross Income shall not include any rental income from any Lease in which a
tenant is not paying rent; provided, however, that in calculating Net Operating
Income, Gross Income from rents shall be limited to the lesser of actual or
ninety-five (95%) of the rents that would be collectible if the Property
maintained one hundred percent (100%) occupancy, less, for the same
applicable period, (b) (i) any Concessions (as defined below) and (ii) actual
Operating Expenses (as defined below). 
For the purposes of this definition of Net Operating Income, “Operating Expenses” shall include operating expenses of any
kind and nature relating to the Property, as well as those operating expenses
incurred in connection with maintenance, repairs, taxes, insurance, utilities,
property management, and other costs and expenses of ownership and operation
and (iii) but shall exclude any operating expenses actually paid by tenants at
the Property.  For those Operating
Expenses that are not paid on a monthly or quarterly basis, such as real
property taxes and insurance premiums, Lender shall make an adjustment so that
such Operating Expenses shall be deemed to have been incurred by Borrower
during the period in question on a basis proportionate to the balance of the
year in question.  For the purposes of
this definition of Net Operating Income, “Concessions”
shall mean (a) those costs incurred or amounts paid by Borrower directly to or
on behalf of any tenant for the purpose of inducing such tenant to enter into a
lease and/or (b) the aggregate amount of any free rent credited or granted by
Borrower to tenants under Leases (as permitted pursuant to the Loan Documents)
as amortized evenly over the tenant’s respective Lease term(s).  Such concessions shall be amortized over the
full term of the applicable lease with only the amortization for the period in
question to be deducted from Gross Income for such period.  Net Operating Income shall be evidenced by
the operating statements, rent rolls and other operating information provided
by Borrower to Lender under this Agreement, and such other evidence of income
and expense as Lender shall reasonably require in order for Lender to evaluate
Net Operating Income.

 

“Net Restoration Proceeds” has the meaning given to such term
in Section 5.7 of this Agreement.

 

“Net Sale Proceeds” means, with respect to
Borrower’s sale and conveyance of all or any portion of the Property and/or
Improvements as may be expressly permitted hereunder, the Gross Sales Proceeds
from such sale and conveyance, less the Sales Costs for the sale and
conveyance of the Property or such portion thereof.

 

“Net Worth” has the meaning given to such term in Section
8.14(iv)(x) of this Agreement.

 

“New Payment Date”  has the
meaning given to such term in Section 13.4 of this Agreement.

 

“Note” means that certain Promissory Note
Secured by Deed of Trust evidencing the Loan in the maximum principal amount
thereof, made by Borrower in favor of Lender pursuant to this Agreement.

 

“OFAC” has the meaning given to such term in Section 6.17
of this Agreement.

 

“Official Records” means the Official
Records of San Bernardino County, California.

 

“Original Maturity Date” means December 1, 2013.

 

“Oversight Fee” has the meaning given to such term in Section
8.6 of this Agreement.

 

10

 

“Parcel” means each parcel within the Property that has been
created by legal subdivision through recordation of the Subdivision Map, or has
otherwise been created in accordance with all applicable Legal Requirements.

 

“Patriot Act” means the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended
from time to time, and corresponding provisions of future Legal Requirements.

 

“Patriot Act Offense” has the meaning given to such term in Section
6.17 of this Agreement.

 

“Permitted Encumbrances” means, with respect to the Property,
collectively, (a) the Lien created by the Loan Documents, (b) all
Liens and other matters disclosed in the title insurance policy insuring the
Deed of Trust, or any part thereof which have been approved by Lender, (c)
Liens, if any, for Impositions imposed by any Governmental Authority not yet
due or delinquent, and (d) such governmental, public utility and private
restrictions, covenants, reservations, easements, licenses or other agreements
of an immaterial nature which may be granted by Borrower after the Closing Date
and which do not have a Material Adverse Effect.

 

“Permitted Transfers” has the meaning given to such term in Section
8.14 of this Agreement.

 

“Person” means any individual, corporation,
partnership, limited liability company, trust, unincorporated organization or
other entity, and any Governmental Authority.

 

“Personal Property” means any tangible and
intangible personal property of Borrower in which Lender shall be granted a
Lien pursuant to the Deed of Trust or any other Loan Document.

 

“Potential Default” means a condition or
event which has occurred and which, after notice or lapse of time, or both,
would constitute an Event of Default if that condition or event were not cured
within any applicable cure period.

 

“Property” means,
collectively, the Real Property, the Personal Property and the Improvements.

 

“Property Management Agreement” means that
certain Property Management Agreement dated as of November
      , 2010, between Borrower and Newport Real
Estate Services, Inc, a California corporation, and any other property
management agreement entered into by Borrower with a Property Manager, in any
case as expressly permitted hereunder.

 

“Property Manager” means Newport Real Estate
Services, Inc., a California corporation, and any successor property manager
for the Property as expressly permitted pursuant to this Agreement.

 

“Purchase
Agreement” means that certain Purchase and Sale Agreement,
dated as of November 16, 2010, between Seller and Buyer.

 

“Purchase Agreement Indemnification Obligation” has the
meaning given to such term in Section 14.5 of this Agreement.

 

“Rating Agencies” means Fitch, Inc., Moody’s Investors
Service, Inc. or S&P or any successor thereto, and any other nationally
recognized statistical rating organization to the extent that any of the
foregoing have been or will be engaged by Lender or its designees in connection
with or in anticipation of a Secondary Market Transaction (each, individually,
a “Rating Agency”).

 

11

 

“Rating Agency Confirmation” means a confirmation by each of
the applicable Rating Agencies which confirms that the taking of the action
referenced therein will not result in any qualification, withdrawal or
downgrading of any existing ratings of securities created in the applicable
Secondary Market Transaction.

 

“Real Property” means that certain parcel of
real property located in the City of San Bernardino, County of San Bernardino,
State of California and more particularly described in Exhibit A
attached hereto and all appurtenances thereto.

 

“Release” means with respect to Hazardous Materials, but is
not limited to, any presence, release, deposit, discharge, emission, leaking,
leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.

 

“Released Property” has the meaning given to such term in Section
2.15 of this Agreement.

 

“Remediation” means, but is not limited to, any activity to
(a) clean up, detoxify, decontaminate, disinfect, contain, treat, remove,
respond to, correct, dispose of, transport, or otherwise remediate, prevent,
cure or mitigate any Release of any Hazardous Materials; any action to comply
with any Hazardous Materials Laws or with any permits issued pursuant thereto;
or (b) inspect, investigate, study, monitor, assess, audit, sample, test,
or evaluate any actual, potential or threatened Release of Hazardous Materials.

 

“Removal Conditions” has the meaning given to such term in Section
8.14(iv) of this Agreement.

 

“Removal Transfer Event” has the meaning given to such term
in Section 8.14(iv) of this Agreement.

 

“Rent Roll” has the meaning given to such term in Section
3.1(d)(v) of this Agreement.

 

“Rents” means, with respect to the Property, all rents
(whether denoted as advance rent, minimum rent, percentage rent, additional
rent or otherwise), receipts, issues, income, royalties, profits, revenues,
proceeds, bonuses, deposits (whether denoted as security deposits or
otherwise), lease termination fees or payments, rejection damages, buy-out fees
and any other fees made or to be made in lieu of rent, any award made hereafter
to Borrower in any court proceeding involving any tenant, lessee, licensee or
concessionaire under any of the Leases in any bankruptcy, insolvency or
reorganization proceedings in any state or federal court, and all other
payments, rights and benefits of whatever nature from time to time due under
the Leases.

 

“REOC” has the meaning given to such term in Section 6.22
of this Agreement.

 

“Replacement Guarantor” has the meaning given to such term in
Section 8.14(iv)(x) of this Agreement.

 

“Replacement Property Manager” has the meaning given to such
term in Section 8.14(iv)(y) of this Agreement.

 

“Request” has the meaning given to such term in Exhibit E
to this Agreement.

 

12

 

“Required Debt Constant” means ten percent (10%).

 

“Required Principal Paydown” has the meaning given to such
term in Section 8.23 of this Agreement.

 

“Reserve Accounts” means, collectively, the Tax and Insurance
Reserve Account, the Interest Reserve Account, the Deferred Maintenance and
Environmental Reserve Account and the Capital Expenditure Reserve Account.

 

“Restoration” has the meaning given to such term in Section
5.8 of this Agreement.

 

“Restoration Proceeds” has the meaning given to such term in Section
5.7 of this Agreement.

 

“Restoration Proceeds Threshold” has the meaning given to
such term in Section 5.7 of this Agreement.

 

“Retention” has the meaning given to such term in Section
4.11 of this Agreement.

 

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

 

“Sales Costs” means the sum of (i) customary and reasonable
brokerage commissions (collectively, “Commissions”)
actually paid by Borrower to non-affiliated independent third party real estate
brokers in connection with Borrower’s sale and conveyance of all or any portion
of the Property (which shall in no event exceed seven percent (7.00%) of the
Gross Sales Proceeds, (ii) customary and reasonable escrow fees, premiums for
title insurance, recording fees and other costs actually paid by Borrower to
independent third parties in connection with the consummation of such sale and
conveyance, and (iii) costs payable to Lender in connection with the applicable
partial release pursuant to clauses (e) (other than the Reconveyance Fee, which
shall not be deemed a Sales Cost) and (h) of Section 2.15 below;
provided, however, that the portion of the Exit Fee payable pursuant to clause
(d) of Section 21.5 below shall not be deemed a Sales Cost; and provided
further, however, that in no event shall the Sales Costs (excluding
Commissions) in a particular partial release exceed ten percent (10.00%) of
Gross Sales Proceeds of such partial release.

 

“Secondary
Market Transaction” has the meaning given to such term in Section
13.1 of this Agreement.

 

“Security Deposit Account” has the meaning given to such term
in Section 10.3 of this Agreement.

 

“Seller” means IBC Industrial Properties LLC, a Delaware
limited liability company.

 

“Servicer” has the meaning given to such term in Section
14.27 of this Agreement.

 

“Servicing Agreement” has the meaning given to such term in Section
14.27 of this Agreement.

 

“SPE” has the meaning given to such term in Section 8.16
of this Agreement.

 

“Subdivision Map” has the meaning given to such term in Section
8.11 of this Agreement.

 

“Subordination Agreement” means each
Subordination, Nondisturbance and Attornment Agreement, to be executed by all
tenants of the Property as provided in this Agreement, in form and

 

13

 

substance acceptable to
Lender.

 

“Taking” has the meaning given to such term in Section 5.7
of this Agreement.

 

“Tax and Insurance Monthly Installment” has the meaning given
to such term in Section 12.2 of this Agreement.

 

“Tax and Insurance Reserve Account” has the meaning given to
such term in Section 12.1(a) of this Agreement.

 

“Tenant Estoppel Certificate” means each
Tenant Estoppel Certificate to be executed by all tenants of the Property as
provided in this Agreement, in form and substance acceptable to Lender.

 

“Tenant Redirect Letters” means,
collectively, letters, in the form attached hereto as Exhibit F attached
hereto, and otherwise in a form and substance satisfactory to Lender, addressed
to each tenant of the Property (and any new tenants with whom Borrower enters
into leases after the date hereof for space at the Property in accordance with
the Loan Documents) executed by Borrower, which letters shall require each
tenant to deliver its respective rent (and all other sums owed by such tenant
to Borrower under the applicable lease) in accordance with the instructions
contained in such letters to the Collection Account established and controlled
by Lender to be held by Lender in accordance with Section 3.3 of
this Agreement.

 

“Title Company” means First American Title Insurance Company.

 

“Title Policy” means the
most current version of ALTA extended coverage lender’s title policy issued by
Title Company insuring the first priority Lien of the Deed of Trust in the full
maximum possible amount of the Loan subject only to such exceptions approved by
Lender and including such endorsements as are required by Lender.

 

“Transfer” means the sale, transfer, hypothecation,
encumbrance, mortgage, conveyance, lease , alienation, assignment, disposition,
divestment, or leasing with option to purchase, or assignment of the Property,
or any portion thereof or interest therein (whether direct or indirect, legal
or equitable, including the issuance, sale, assignment, alienation, conveyance,
divestment, transfer, disposition, hypothecation, mortgage or encumbrance of
any ownership interest in Borrower or in any entity having an ownership
interest in Borrower, whether direct or indirect) (or entering into any agreement
or contract to do any of the foregoing that is not conditioned on compliance
with the terms of the Loan Documents), or undertaking, suffering or causing any
of the foregoing to occur voluntarily, involuntarily or by operation of law.

 

“Transition Date” has the meaning given to such term in Section
9.4 of this Agreement.

 

1.2                                 Exhibits.  Exhibits A, B, C, D, E, F, G, H, I, J, K and L,
all as attached to this Agreement, are hereby incorporated into this Agreement.

 

1.3                                 Principals of
Construction.  All references
to sections and schedules are to sections and schedules in or to this Agreement
unless otherwise specified.  All uses of
the word “including” shall mean “including, without limitation” unless the
context shall indicate otherwise.  Unless
otherwise specified, the words “hereof,” “herein” and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.  Unless otherwise specified, all meanings
attributed to defined terms herein shall be equally applicable to both the
singular and plural forms of the terms so defined.

 

14

 

ARTICLE II

LOAN

 

2.1                                 Loan.  Subject to the terms and conditions contained
in this Agreement, and in reliance upon the representations and warranties of
Borrower set forth hereunder and in the other Loan Documents, Lender hereby
agrees to lend to Borrower, and Borrower hereby agrees to borrow from Lender,
the maximum principal sum of up to Twenty-One Million Five Hundred Thousand and
No/100 Dollars ($21,500,000.00).  The
Loan shall be evidenced by the Note.  The
Note shall be secured, in part, by the Deed of Trust encumbering the
Property.  No portion of the Loan, once
repaid, may be reborrowed by Borrower. 
Borrower agrees to repay the Indebtedness in accordance with the terms
thereof and the terms hereof.  Borrower
shall receive only one borrowing hereunder up to the maximum Loan amount and
any amount borrowed and repaid hereunder may not be reborrowed.

 

2.2                                 Use of Funds.  Borrower shall use the proceeds of the Loan
and the Borrower Equity for the sole purposes of acquiring the Property, and
any further amounts disbursed under the Loan shall be used solely for the
purposes and uses as are permitted or required under this Agreement (including Exhibits
C and D hereof) and the other Loan Documents.

 

2.3                                 Loan Fee; Exit
Fee.

 

(a) Loan
Fee.  Borrower shall pay to Lender,
at Loan closing, a loan fee in the amount of Three Hundred Twenty-Two Thousand
Five Hundred and No/100 Dollars ($322,500.00) (the “Loan Fee”).  Borrower
shall pay the Loan Fee to Lender from Borrower Equity, which Borrower Equity
shall not come from Loan proceeds or otherwise be borrowed by Borrower (or any
Member) at any tier or level.  The Loan
Fee shall be deemed earned when due and shall not be subject to reduction or be
refundable under any circumstances.

 

(b) Exit
Fee.  On the Maturity Date or earlier
acceleration of the Loan, Borrower shall be obligated to pay Lender an
additional fee (the “Exit Fee”)
equal to the greater of (i) one and one-half percent (1.50%) multiplied by
the amount of Loan principal to be repaid on the applicable date or (ii) the
difference between (A) Two Million Four Hundred Thousand and No/100
Dollars ($2,400,000.00) and (B) the sum of (1) the Loan Fee, plus (2) the
aggregate amount of non-default interest paid theretofore paid by Borrower to
Lender as of the applicable date plus (3) any portions of the Exit
Fee theretofore by Borrower to Lender as of the applicable date.  The Exit Fee shall be deemed earned when due
pursuant to this Section 2.3(b), and shall not be subject to
reduction or be refundable under any circumstances.

 

2.4                                 Funding of Loan.

 

(a)                                  Initial Funding
Amount.  Subject to the terms,
provisions and conditions of this Agreement and the other Loan Documents, on
the Effective Date, Borrower agrees to borrow from Lender, and Lender shall
disburse to Borrower from the proceeds of the Loan the sum of Eighteen Million
Seventy-Five Thousand and No/100 Dollars ($18,075,000.00) (the “Initial Funding Amount”); provided,
however, that interest shall commence accruing under the Note the date that the
Loan funds are wired into escrow by Lender and by its execution hereof,
Borrower agrees that it shall be obligated to pay such interest irrespective of
whether or not the Effective Date occurs.

 

(b)                                 Disbursement
Requests Subsequent to Effective Date from Holdbacks and Reserve Accounts.  With respect to any disbursement of any Loan
proceeds to be made by the Lender from Holdbacks and/or Reserve Accounts
subsequent to the funding of the Initial Funding Amount on the Effective Date
as expressly permitted hereunder, but in no event more frequently than on one (1) occasion

 

15

 

in any one (1) calendar
month.  Such funds shall be disbursed by
Lender by not later than the sixth (6th) day of a calendar month, provided that
(i) all conditions precedent to funding set forth hereunder have been
satisfied and (ii) Borrower shall have given to Lender, at 222 North
Sepulveda Boulevard, Suite 2222, El Segundo, California 90245,
Attention:  Servicing, or at such other
address as Lender shall designate in writing, an original or facsimile written
request for disbursement in the form required pursuant hereto, not less than
four (4) Business Days prior to end of the immediately preceding calendar
month Each such request for disbursement shall be in the form attached hereto
as Exhibit E and shall, among other things, (i) specify
Borrower’s desired funding date (which shall be a Business Day) in respect of
the disbursement of Loan proceeds, (ii) specify the amount of the proposed
disbursement, (iii) specify the proposed use of such disbursement of Loan
proceeds (which may, as permitted hereunder, include payment of an allowance to
the tenant under Leases for tenant improvements), (iv) contain a written
certification by Borrower that each of the conditions to Lender’s obligation to
fund the applicable Loan Holdback as set forth herein have been satisfied and (v) contain
a written certification by Borrower that the representations and warranties
required to be remade in connection with Loan disbursements made subsequent to
the Effective Date pursuant to Section 3.2(c)(i) below, are
deemed remade (and accordingly, remain true, correct and complete) as of the
date the applicable request for disbursement is so delivered to Lender.  Each such request for disbursement shall also
be accompanied by such additional documents and information relating to the
proposed disbursement as Lender shall reasonably require.   Each such request for disbursement from the
Leasing Holdback shall be accompanied by an administrative fee payable to
Lender in the amount of Seven Hundred Fifty and No/100 Dollars ($750.00) per
draw, which administrative fee shall be deducted by Lender from the Leasing
Holdback concurrently with the funding of the applicable Leasing Holdback
disbursement.

 

(c)                                  Funding of Loan
Proceeds Subsequent to Effective Date.  Subject to Lender’s approval of the request
for disbursement and in accordance with the terms and conditions contained in
this Agreement, including, without limitation, the conditions to disbursement
set forth in Sections  2.4, 3.1 and 3.2, Article IV
and in Exhibit D attached hereto, Lender shall use commercially
reasonable efforts to make available to Borrower the proceeds of each
disbursement requested by Borrower on the funding date specified in the
Borrower’s request for disbursement (or such other date as Lender shall deem
appropriate) and shall disburse such funds into such account of Borrower as
Borrower shall specify and Lender shall approve.

 

2.5                                 Loan Documents.  Borrower shall deliver, or cause to be
delivered to Lender concurrently with this Agreement, each of the documents,
properly executed and in recordable form, as applicable, described in Exhibit B
hereto as in Loan Documents, together with the other documents described in Exhibit B
hereto which are listed as not Loan Documents.

 

2.6                                 Effective Date.  The dates of this Loan Agreement and the
other Loan Documents are for reference purposes only.  The effective date of delivery and transfer
to Lender of the security under the Loan Documents and of Borrower and Lender’s
obligations under the Loan Documents (the “Effective
Date”) shall be the date on which the Deed of Trust is recorded in
the Official Records or the date upon which the Loan is deemed “closed” by
Lender and Borrower; provided, however, that interest shall commence accruing
under the Note the date that the Loan funds are wired into escrow by Lender at
Borrower’s request.

 

2.7                                 Interest on
Loan.  Interest shall accrue on the
Loan at the rate or rates provided for in the Note, and shall be paid by
Borrower in the amounts and at the times provided for in the Note, all of the
terms and provisions of which are fully incorporated into this Agreement.  Lender shall provide Borrower with a monthly
interest statement indicating the amount of interest payable for such month
along with the Interest Holdback and Interest Reserve balances available
therefor.  Provided that sufficient funds
therefor remain in the Interest Holdback and there are not funds then held in
the Interest 

 

16

 

Reserve Account, Lender
shall, and is authorized by Borrower, to disburse to itself each month from the
Interest Holdback the amount necessary to pay such accrued and unpaid interest
on the Loan in accordance with the provisions of the Disbursement Plan attached
hereto as Exhibit D.  All
amounts disbursed by Lender from the Interest Holdback shall be deemed to be
amounts outstanding under the Loan. 
Neither the depletion of the Interest Holdback nor the non-satisfaction
of any condition to disbursement contained in Article III of this
Agreement shall release Borrower from any of Borrower’s obligations under this
Agreement or the other Loan Documents, including the obligation to pay interest
and other charges and payment under or with respect to the Loan when due from
other funding sources of Borrower.

 

2.8                                 Loan Payments.  Payments on the outstanding amount of the
Loan shall be paid by Borrower in accordance with the terms of the Note and
this Loan Agreement.

 

2.9                                 Maturity Date.  Unless extended pursuant to Borrower’s valid
and timely exercise of Extension Option, the Maturity Date of the Loan shall be
the date set forth in the definition of “Maturity Date”
in Section 1.1 above, at which time all sums due and owing under
this Agreement and the other Loan Documents shall be repaid in full.  All payments due to Lender under this
Agreement, whether upon the Maturity Date or otherwise, shall be paid in
immediately available funds.

 

2.10                           Credit for
Payments.  Any payment
made upon the outstanding principal balance of the Loan, or the accrued
interest thereon, shall be credited as of the Business Day received, provided
that such payment is made by Borrower no later than 1:00 p.m. (Pacific
Standard Time or Pacific Daylight Time, as applicable) and constitutes
immediately available funds.  Any payment
made after such time or which does not constitute immediately available funds
shall be credited upon such funds having become unconditionally and immediately
available to Lender.

 

2.11                           Full Repayment
and Reconveyance.  Upon
receipt of all amounts owing and outstanding under the Loan Documents, Lender
shall issue a full reconveyance of the Property from the Lien of the Deed of
Trust; provided, however, that all of the following conditions shall be
satisfied at the time of, and with respect to, such reconveyance:  (a) Lender shall have received all
escrow, closing and recording costs, the reasonable costs of preparing and
delivering such reconveyance and any sums then due and payable under the Loan
Documents; (b) Lender shall have received the entire Exit Fee in
accordance with Section 2.3 hereof and any LIBOR breakage fees
payable under the Note; and (c) Lender shall have received a written
release satisfactory to Lender of any set aside letter, letter of credit or
other form of undertaking which Lender has issued to any surety, Governmental
Authority or other Person in connection with the Loan and/or the Property.  Lender’s obligation to make further
disbursements under the Loan shall terminate as to any portion of the Loan
undisbursed as of the date of issuance of such full reconveyance, and any
commitment of Lender to lend any undisbursed portion of the Loan shall be
cancelled.

 

2.12                           Authorization.  Borrower shall act under this Agreement and
the other Loan Documents only through such authorized representatives as
Borrower shall designate to Lender in writing from time to time.  Borrower hereby designates Marc Belluomini as
Borrower’s authorized representative for purposes of this Agreement and the
other Loan Documents, and such Person shall continue as Borrower’s authorized
representative until such time as Borrower shall duly authorize other or
additional Persons so to act on behalf of Borrower.  Lender shall be entitled to act on the
instructions of any Person identifying himself or herself as one of the Persons
authorized by Borrower, and Borrower shall be bound thereby in the same manner
as if any such Person were actually so authorized.  Borrower shall indemnify, defend and hold Lender
harmless from and against any and all Liabilities and Costs arising out of or
in any way connected with Lender’s acceptance of or acting upon any
instructions or directions from the Person or Persons so authorized.

 

17

 

2.13                           Extension
Option.  Borrower shall have the option
to extend the term of the Loan (“Extension
Option”) from the Original Maturity Date to the Extended Maturity
Date (the “Extended Term”), strictly upon
satisfaction of each and all of the following conditions precedent:

 

(a)                                  Notice.  Borrower shall provide Lender with written
notice of Borrower’s request to exercise the Extension Option (“Extension Notice”) not more than one
hundred fifty (150) days, but not less than thirty (30) days, prior to the
Original Maturity Date.

 

(b)                                 No Event of
Default; No Monetary Potential Default.  Both on the date of Lender’s receipt of the
Extension Notice and on the Original Maturity Date, no Event of Default shall
exist and no monetary Potential Default shall exist, and Borrower shall so
certify to Lender in writing.

 

(c)                                  Extension Fee.  Concurrently with Lender’s approval of the
Extension Option (if the same is so granted by Lender), Borrower shall pay to
Lender an extension fee (the “Extension Fee”)
in immediately available funds in an amount equal to one-half percent (.50%) of
the sum of the then (i) then outstanding Loan amount and (ii) the
unfunded Loan commitment (which commitment amount shall include any then
unfunded portion(s) of the Interest Holdback and the Leasing
Holdback).  The Extension Fee shall be
deemed earned upon payment and shall not be subject to reduction or be
refundable under any circumstances.  In
addition to the Extension Fee, if Borrower delivers the Extension Notice,
Borrower shall reimburse Lender for all reasonable costs and expenses incurred
by Lender, whether paid to third-parties or otherwise (including outside legal
counsel), in connection with its approval or disapproval and documentation of
the extension of the Original Maturity Date, within ten (10) days after
Borrower’s receipt of a notice from Lender setting forth the amount of such
costs and expenses and a demand for reimbursement.  Such costs and expenses may include, but
shall not be limited to, reasonable legal fees, title insurance endorsement
charges, environmental review costs, appraisal fees, audit fees and inspection
fees.

 

(d)                                 Documents.  Borrower shall execute, or cause the
execution of, all documents reasonably required by Lender to exercise the
Extension Option, including, without limitation, consents of Guarantor, and
shall deliver to Lender, at Borrower’s sole cost and expense, such title
insurance endorsements to the Title Policy as Lender shall reasonably
require.  Without limitation thereon,
Borrower shall certify to Lender, in a form of writing acceptable to Lender,
that each and every representation and warranty made by Borrower hereunder or
under the other Loan Documents, remains true, correct and complete in all
material respects.

 

(e)                                  Required Debt
Constant.  The
Property shall have achieved and shall maintain the Required Debt Constant,
both as of the date of Lender’s receipt of the Extension Notice and on the
Original Maturity Date.

 

(f)                                    Loan-to-Value
Threshold.  The
Loan-to-Value Ratio of the Property shall be equal to or less than sixty
percent (60%), as determined by an “as-is” Appraisal engaged by Lender (at
Borrower’s sole cost and expense) at the time of Lender’s receipt of the
Extension Notice, and otherwise complying with the requirements set forth
herein.

 

(g)                                 Interest Rate
Protection Agreement.  Borrower
shall purchase a new Interest Rate Protection Agreement for the length of the
Extended Term at a rate acceptable to Lender in its sole discretion, but not
lower than three and one-half percent (3.50%).

 

2.14                           Intentionally
omitted.

 

18

 

2.15                           Partial Release
of Property.  Borrower
shall have the right to obtain from Lender a partial release of individual
buildings and the respective Parcels on which such buildings are located
(collectively, the “Released Property”) from the lien of the Deed of Trust
securing Borrower’s obligations under the Loan Documents in connection with the
sale of any of the same to a third party that is not an Affiliate of Borrower
or Guarantor with the Borrower in an arms-length transaction, all upon
satisfaction in full of each and all of the following conditions precedent:

 

(a)                                  Borrower shall
deliver to Lender a written request for such partial release not later than
thirty (30) days prior to the day on which Borrower desires such partial
release to become effective;

 

(b)                                 All lot split,
zoning, use, access, reciprocal access and title insurance matters shall be
addressed to the satisfaction of Lender, including without limitation,
(i) at Lender’s request in the event of a recordation of Subdivision Map
in connection with the applicable partial release, the issuance of a new or
updated ALTA survey depicting the remaining portion of the Property, and
(ii) if applicable, the approval and execution by all necessary parties of
a Lender approved (in the exercise of Lender’s reasonable discretion)
reciprocal access agreement between the Property and the Released
Property.  In addition, with respect to
the parking count, access and configuration of the remaining Property, and
without limitation on the foregoing, at no time prior to or following any such
partial release shall there be less than the number of legal parking spaces
required by all applicable Legal Requirements;

 

(c)                                  No Event of
Default shall have occurred and be continuing, either as of the date on which
Borrower shall request such partial release and/or as of the effective date of
such partial release;

 

(d)                             A portion of
the Exit Fee in an amount equal to one and half percent (1.50%) of the amount
of the Loan principal being so repaid shall be paid in full to Lender;

 

(e)                                  Lender shall
have been paid, in immediately available funds, all escrow, closing and
recording costs; the reasonable costs of preparing and delivering such partial
release and any other related documents, including without limitation
reasonable attorneys’ fees; the reasonable out-of-pocket costs incurred by
Lender in verifying that all conditions precedent to the release of the
applicable parcels have been satisfied; the cost of any title insurance
endorsements required by Lender and a partial release fee equal to Fifteen
Thousand and No/100 Dollars ($15,000.00) for each such partial release (the “Reconveyance Fee”);

 

(f)                                    Borrower shall
have paid to Lender, in immediately available funds, on or before the effective
date of any such permitted partial release, a release price (the “Release Price”) equal to the greater of (i) the amount
as set forth on Exhibit K attached hereto with respect to the Released
Property or (ii) one hundred percent (100%) of the Net Sales Proceeds in
connection with such partial release.

 

(g)                                 If any new map
or lot line adjustment has occurred, then Borrower shall have provided Lender
with evidence acceptable to Lender that the Property and the remaining portion
of the Property each has been formally designated as a distinct, separate, tax
lot and Lender shall have received evidence satisfactory to Lender that any
tax, bond or assessment affecting the Property, including any assessment or
special tax imposed in connection with any improvement district, assessment
district or special taxing district, shall have been properly allocated between
the subject Released Property and the remaining Property; and

 

(h)                                 Borrower, at
its sole cost and expense, shall have delivered to Lender one or more
endorsements to the Title Policy insuring that, after giving effect to such
release, (i) the lien created hereby and insured under such title policy
is a first priority lien on the remaining Property subject only to original
Permitted Encumbrances applicable to the remaining Property, (ii) the
Title Policy is in 

 

19

 

full force and effect and
unaffected by such release and (iii) that the Title Policy has been “dated
down” to be effective as of the date of the applicable partial release.

 

Neither
the acceptance of any payment or the issuance of any partial release by Lender
shall affect the Borrower’s obligation to pay all amounts owing under this
Agreement or the other Loan Documents or the lien of the Deed of Trust on the
remaining Property.

 

2.16                           Recourse.  The Loan shall be full recourse to
Borrower.  Further, Lender shall have the
right to (i) proceed against Borrower or Guarantor under the Environmental
Indemnity Agreement, or to proceed against Guarantor under the Carveout
Guaranty or Completion Guaranty; (ii) name Borrower or Guarantor in any
foreclosure or similar legal action to the extent necessary to enforce Lender’s
rights under the Loan Documents (it being acknowledged, however, that any such
legal action shall be subject to the limitations on collection set forth in
this Section); and/or (iii) obtain injunctive relief against Borrower,
Guarantor, any Affiliate or other Person, or maintain any suit or action in
connection with the preservation, enforcement or foreclosure of any Lien now or
hereafter securing any Indebtedness or obligations of Borrower under this
Agreement or the other Loan Documents.

 

2.17                           Prepayment.  The Loan shall be open to prepayment in whole
or in part without premium or penalty so long as (a) in connection with a
partial prepayment of the Loan from the application of Release Prices made in
connection with a partial release, such partial release (and associated
prepayment) is made pursuant to and in strict accordance with Section 2.15
of this Agreement, (b) in connection with a prepayment of the Loan in
full, Borrower provides to Lender prior written notice thereof at least fifteen
(15) days but not more than sixty (60) days prior to the proposed date of the
Loan prepayment in full and Borrower pays to Lender the Exit Fee and all other
amounts due hereunder or under the other Loan Documents (including, without
limitation, any Breakage Prepayment Premium) or (c) in connection with a
prepayment of the Loan in part not made in connection with a partial release of
the Property (such as pursuant to the application of Gross Income in accordance
with clause (d) of Section 10.1 below), Borrower provides to
Lender prior written notice thereof at least thirty (30) days but not more than
sixty (60) days prior to the proposed date of the Loan prepayment and Borrower
pays to Lender a portion of the Exit Fee in an amount equal to one and half
percent (1.50%) of the amount so prepaid.

 

ARTICLE III

CONDITIONS TO DISBURSEMENT

 

3.1                                 General
Conditions; Conditions to Initial Disbursement.  Lender’s obligation to make the disbursements
of the Initial Funding Amount on the Closing Date is subject to the
satisfaction of each of the following conditions precedent on or before the
Closing Date:

 

(a)                                  Borrower Loan
Documents.  Borrower
(and any other party thereto) shall have executed, acknowledged (if
appropriate) and delivered to Lender each of the following, in form and
substance acceptable to Lender:

 

(i)                                     this Agreement;

 

(ii)                                  the Note;

 

(iii)                               the Deed of
Trust;

 

(iv)                              the
Environmental Indemnity Agreement;

 

20

 

(v)                                 the Cash
Management Agreement;

 

(vi)                              the Assignment
of Management Agreement;

 

(vii)                           the Assignment
of Interest Rate Protection Agreement;

 

(viii)                        the Financing
Statements with respect to the Liens on the Personal Property granted under the
Deed of Trust and the other Loan Documents;

 

(ix)                                the Deposit
Account Control Agreement; and

 

(x)                                   each of the other
Loan Documents and all other documents to be executed and/or delivered by or on
behalf of Borrower pursuant to this Agreement or as Lender shall otherwise
reasonably require.

 

(b)                                 Guaranty Loan
Documents.  Borrower
and Guarantor, as applicable, shall have executed and delivered to Lender each
of the following, in form and substance acceptable to Lender:

 

(i)                                     the Completion
Guaranty;

 

(ii)                                  the Carveout
Guaranty;

 

(iii)                               the
Environmental Indemnity Agreement; and

 

(iv)                              all other
documents to be executed and/or delivered by or on behalf of Guarantor pursuant
to this Agreement or as Lender shall otherwise reasonably require.

 

(c)                                  Other Documents.  Borrower (and/or any other party thereto)
shall have executed, acknowledged (if appropriate) and delivered to Lender all
other documents to be executed and/or delivered in connection with the Loan or
as Lender shall otherwise reasonably require.

 

(d)                                 Property
Documents.  Lender
shall have received the following documents with respect to the Property, in
form and substance acceptable to Lender:

 

(i)                                     an Appraisal or
Appraisals of the Property, showing an “as-is” aggregate value for the Property
of not less than Twenty-Seven Million and No/100 Dollars ($27,000,000.00), and
an “as-stabilized” aggregate value for the Property of not less than Thirty-Five
Million and No/100 Dollars (35,000,000.00), and otherwise acceptable to Lender
in its sole discretion;

 

(ii)                                  the Title
Policy in the amount of the Loan, insuring Lender that the Deed of Trust
constitutes a valid first priority Lien upon Borrower’s interest in the
Property, subject only to the Permitted Encumbrances, with such endorsements
and otherwise in such form and substance as shall be acceptable to Lender and
Lender’s counsel, and that such Title Policy shall at all times expressly
insure against all mechanics’ liens;

 

(iii)                               such
environmental assessments, studies, reports and investigations on the Property,
and/or the soils or groundwaters thereof, prepared by environmental consultants
satisfactory to Lender and in form and substance acceptable to Lender and
Lender’s counsel in the sole discretion of such Persons;

 

(iv)                              a current ALTA
survey of the Property certified in favor of 

 

21

 

Lender and otherwise in a
form acceptable to Lender and Lender’s counsel;

 

(v)                                 a certified,
current rent roll (“Rent Roll”) for
the Property, which Rent Roll is attached hereto as Exhibit H; and

 

(vi)                              such other
documents with respect to the Property as are required pursuant to this
Agreement or as Lender shall otherwise require.

 

(e)                                  Organizational
Documents.  Lender
shall have received such corporate, partnership and limited liability company
documents with respect to Borrower and its constituent entities and Guarantor
as Lender shall require, including evidence of authorization and incumbency of
all Persons executing the Loan Documents on behalf of Borrower;

 

(f)                                    Performance.  Borrower shall have performed, in all
material respects, all agreements and covenants to be performed by Borrower under
this Agreement or the other Loan Documents on or before the Closing Date;

 

(g)                                 Intentionally
omitted;

 

(h)                                 Litigation,
Other Proceedings.  Except for
the litigation that is the subject of the Purchase Agreement Indemnification
Obligation, there shall not have been instituted or threatened any litigation
or proceeding in any court or by or before any Governmental Authority affecting
or threatening to affect Borrower, Guarantor, the Property, or any other
Collateral, as determined by Lender in its sole discretion, which has a
Material Adverse Effect on the value of the Property or any other Collateral or
Lender’s right or ability to receive payment in full of all amounts payable by
Borrower to Lender under this Agreement or the other Loan Documents;

 

(i)                                     Perfection of
Liens.  The Deed of Trust, the
Financing Statements and any other recordable Loan Documents shall have been
recorded or filed, as applicable, and Lender shall have a valid, perfected
first priority Lien on Borrower’s interest in the Property and on all of the
Collateral subject to the Loan Documents;

 

(j)                                     No Event of
Default.  On the Closing Date, no Event
of Default or Potential Default shall exist (including, without limitation, no
Lien shall exist against the Property (or any portion thereof) in violation of Section 4.1
below);

 

(k)                                  Loan Fees.  On the Closing Date, Lender shall have
received the Loan Fee and any other fees or other amounts then due to Lender
under this Agreement and the other Loan Documents, and all reasonable expenses
of Lender incurred prior to the Closing Date (including without limitation all
attorneys’ and appraisers’ fees, environmental review costs, cost engineering
expenses, title insurance premiums and endorsement charges), shall have been
paid by Borrower;

 

(l)                                     Consents and
Approvals.  Any
licenses, permits, consents and approvals of Governmental Authorities, and all
corporate, partnership and limited liability company action necessary to enable
Borrower to enter into the financing transactions contemplated by this Agreement
shall have been obtained and/or taken by Borrower (including, without
limitation, any required consents of any Members);

 

(m)                               Insurance.  Lender shall have received evidence that
Borrower has, with respect to the Property all insurance policies and associated
coverage amounts required under Article V of this Agreement, in
each case satisfactory to Lender and issued by insurance companies acceptable
to 

 

22

 

Lender, and loss payable
endorsements in form and substance satisfactory to Lender naming Lender as loss
payee (as its interests may appear) shall have been delivered to Lender,
together with such certificates of insurance and binders as Lender shall
require;

 

(n)                                 Representations
and Warranties.  All representations
and warranties of Borrower contained in this Agreement or the other Loan
Documents shall be true and correct in all material respects;

 

(o)                                 Opinions of
Counsel.  Lender shall have received
opinions of counsel for Borrower dated as of the Closing Date as to such
matters as Lender shall require, in form and substance satisfactory to Lender
and Lender’s counsel;

 

(p)                                 Standard Form of
Lease; Leases; Subordination Agreements and Tenant Estoppel Certificates.  Lender shall have received and approved
Borrower’s standard form of Lease for the Property.  Lender shall have received and approved all
of the existing Leases of the Property, including without limitation, all
amendments and guaranties relating to such Leases, and Lender shall have
received Subordination Agreements and Tenant Estoppel Certificates from each of
the tenants at the Property, in form and substance satisfactory to Lender and
Lender’s counsel;

 

(q)                                 Due Diligence.  Lender shall have completed its review of the
Property and the other Collateral, including, without limitation, any contracts
and agreements relating to the Property, and Lender shall have completed such
other real estate and legal due diligence investigations as Lender deems
necessary, and such review and investigations shall provide Lender with
resulting information which, in Lender’s sole discretion, is satisfactory to
permit Lender to enter into this Agreement and to make the Loan;

 

(r)                                    Disbursement
Plan.  Borrower shall have satisfied
any other specific conditions in the Disbursement Plan for the use of the Loan
proceeds to be disbursed to Borrower on the Closing Date;

 

(s)                                  Budgets.  Lender shall have reviewed and approved any
and all improvement and operating budgets for the Property, and Borrower’s
proposed sources and uses of funds for the Loan proceeds and Borrower Equity;

 

(t)                                    Financial
Statements.  Lender
shall have received such financial statements and other financial information
on Borrower, Guarantor and Members as Lender shall require, and such financial
statements and other financial information shall be in form and substance
acceptable to Lender;

 

(u)                                 Borrower Equity.  Borrower shall have caused the entire
Borrower Equity to be applied to the payment of Borrower’s costs and expenses
of acquiring the Property on or prior to the Effective Date;

 

(v)                                 Interest Rate
Protection Agreement.  Borrower
shall have purchased an Interest Rate Protection Agreement or other hedging
instrument acceptable to Lender in its sole and absolute discretion consistent
with this Agreement, which Interest Rate Protection Agreement shall have been
assigned to Lender in writing pursuant to an Assignment of Interest Rate
Protection Agreement, which shall name Lender as payee thereunder otherwise be
in a form acceptable to Lender;

 

(w)                               Affiliate Fees.  Borrower shall have disclosed to Lender, and
Lender shall have approved, all fees, commissions and other amounts which have
been or will be reimbursed or 

 

23

 

paid to or paid on behalf of
Borrower, Guarantor or any Affiliate thereof in connection with the acquisition
or financing of the Property to the extent the same are either (i) to be
paid from Loan proceeds, Gross Sales Proceeds or Gross Income
(unless, in the case of Gross Income, Borrower was entitled to a
distribution of the same pursuant to Section 10.1(e) below),
or (ii) constitute amounts paid by Seller or any affiliate of Seller (“Affiliate Fees”).  All
Affiliate Fees shall be deducted from the calculation of the capitalization
costs of the financing transaction contemplated by this Agreement for
determining the maximum principal amount of the Loan and Borrower’s required
equity contribution.  Without limitation
on the foregoing, all Affiliate Fees shall be subordinate to the Loan and shall
be terminable by Lender in the event of the occurrence of an Event of Default;

 

(x)                                   Association
Estoppel.  Lender
shall have received the Association Estoppel; and

 

(y)                                 Other Documents.  Lender shall have received and approved such
other documents, materials or information as Lender or its counsel shall
require.

 

3.2                                 Conditions to
Additional Disbursements.  The
obligation of Lender to make any disbursement under the Loan subsequent to the
disbursement of the Initial Funding Amount is subject to the satisfaction of
the following additional conditions precedent as of the date of any such
disbursement:

 

(a)                                  Disbursement
Request.  Lender shall have received a
written request for disbursement (except of an Interest Reserve) submitted in
accordance with Section 2.4 of this Agreement;

 

(b)                                 Disbursement
Plan.  Borrower shall have satisfied
any other specific conditions in the Disbursement Plan for use of the Loan
proceeds to be disbursed to Borrower; and

 

(c)                                  Additional
Matters.  As of the date of any such
disbursement:

 

(i)                                     Representations
and Warranties.  All of the
representations and warranties of Borrower contained in this Agreement (other
than those contained in: the second (2nd) or third (3rd) sentences of Section 6.6; clauses (c) and
(d) of Section 6.7; and in Sections 6.9, 6.11, 6.14
or 6.18, each of this Agreement), shall be true and correct in
all material respects as though made on and as of such date (or if the same is
or are no longer true, correct or complete, the foregoing does not cause a
Material Adverse Effect);

 

(ii)                                  No Default.  No Event of Default or Potential Default
shall have occurred and be continuing or would result from the making of such
disbursement; and

 

(iii)                               Application of
Gross Income.  Borrower
shall have applied all Gross Income in accordance with the Loan Documents and
shall provide evidence reasonably satisfactory to Lender evidencing such
application;

 

(iv)                              Intentionally
omitted;

 

(v)                                 In-Balance.  Notwithstanding anything to the contrary
contained herein or in the other Loan Documents, any undisbursed Loan funds in
the Interest Holdback, together in the aggregate with any funds theretofore
deposited by Borrower into the Interest Reserve Account, shall be at all times
equal to or greater than the amount which Lender from time to time reasonably
determines necessary to pay expected interest for the Loan during the remainder
of the Loan term based on Net Operating Income derived from then Leases at the
time such determination is made and calculated using the debt service on the Loan
which is anticipated to accrue for the period at the Applicable Interest Rate

 

24

 

which would be in effect
under the Note under the so-called “Forward LIBOR Curve” during the remaining
Loan term period (taking into account the Interest Rate Protection
Agreement).  The satisfaction of the
foregoing condition shall mean the Loan is “In-Balance”.;

 

(vi)                              Compliance with
Construction Provisions in Article IV.  To the extent the disbursement is from the
Capital Expenditure Reserve Account, Borrower shall have complied with the each
and all of the additional construction-related requirements set forth in Article IV
of this Agreement;

 

(vii)                           Title Policy. The lien of
the Deed of Trust shall continue to be insured by the Title Policy as a senior
priority lien against the Property, subject only the Permitted Encumbrances;

 

(viii)                        Expenditures.  Each advance subsequent to the Initial
Funding Amount for payment of expenses and costs incurred in connection with
the construction of the Borrower Improvements shall have been approved by
Lender in its sole but good faith discretion. 
Lender shall make disbursements upon completion of the Borrower
Improvements, or the portion thereof for which Borrower shall have requested
payment, subject to Borrower’s satisfaction of such conditions as Lender shall
require, including, without limitation, (A) each disbursement being for
costs and expenses consistent with the Disbursement Budget; and (B) Borrower’s
providing to Lender such evidence of such costs and such evidence of Borrower’s
completion of the Borrower Improvements or the portion thereof for which
Borrower shall have requested payment, as Lender shall require and subject,
however, to the provisions set forth in Sections 5.9, 12.5 and Item
3 of Exhibit D regarding progress payments.  Any Affiliate Fees payable as part of
expenses or costs incurred in connection with the construction of the Borrower
Improvements shall be subject to the prior written approval of Lender, which
approval may be granted or withheld in Lender’s sole and absolute discretion,
provided that if CT becomes the Replacement Property Manager, then Lender will
not disapprove any such Affiliate Fees that, together with all other fees
payable under the applicable Property Management Agreement are, in the
aggregate, within market rates payable to non-affiliated property managers as
reasonably determined by Lender;

 

(ix)                                Invoices.  Lender shall have received copies of bills,
invoices, documents of title, vouchers, statements, payroll records, receipts
and any other documents evidencing the total amount expended, incurred or due
for any requested disbursement items;

 

(x)                                   Lien Waivers.  In connection with any Borrower Improvements,
Lender shall have received evidence of Borrower’s use of a lien release and
payment system reasonably acceptable to Lender for payments or disbursements to
any contractor, subcontractor, materialman, supplier or lien claimant; and
waivers and releases of any mechanics’ lien, stop notice claim, equitable lien
claim or other lien claim rights, to the extent related to individual work or
materials, the cost of which exceeds Fifty Thousand and No/100 Dollars
($50,000.00), in the aggregate; and

 

(xi)                                Other
Information.  Lender
shall have received any other document, material or information as Lender shall
reasonably request.

 

3.3                                 Account Pledge
and Assignment.  The
proceeds of the Loan and amounts deposited on account of any budget shortfall,
when qualified for disbursement, shall be deposited into the Collection Account
or otherwise disbursed to or for the benefit or account of Borrower under the
terms of this Agreement.  As additional
security for Borrower’s performance under the Loan Documents, Borrower hereby
irrevocably pledges and assigns to Lender, and grants to Lender a security
interest in, the Collection Account and all monies at any time on deposit in
the Collection Account or the Account.

 

25

 

3.4                                 Loan
Disbursements.  Subject to
the Lender’s approval of the request for disbursement and satisfaction of the
terms and conditions of this Agreement, including, without limitation, the
conditions precedent contained in this Article III and in Article IV,
the proceeds of the Loan shall be disbursed in accordance with the terms and
conditions of the Disbursement Budget and the Disbursement Plan.  All disbursements shall be held by Borrower
in trust until disbursed and applied by Borrower solely for the purpose for
which the funds have been disbursed. 
Lender has no obligation to monitor or determine Borrower’s use or
application of the disbursements. 
Notwithstanding anything to the contrary contained herein, Lender shall
have no obligation to make any disbursements of Loan proceeds unless and until
Borrower shall have caused the Borrower Equity to be applied in payment of the
costs and expenses set forth in Exhibit D attached hereto to the
extent then due.

 

3.5                                 Cash Management
Account.

 

(a)                                  A Collection
Account (as defined below) shall be established on the Effective Date, and
during the term of the Loan, all Gross Income shall be deposited in the
Collection Account pursuant to the terms hereof and the Cash Management
Agreement.  Borrower hereby agrees that
Borrower (i) shall execute the Tenant Redirect Letters addressed to each
existing tenant on the Effective Date and to each future tenant executing an
approved Lease subsequent to the Effective Date and (ii) shall, upon
execution thereof, deliver such Tenant Redirect Letters to Lender.   Lender is hereby authorized to deliver such
Tenant Redirect Letters to the tenants at the Property upon the occurrence of
an Event of Default.  Lender agrees to
execute and deliver letters to the tenants terminating such Tenant Redirect
Letters on written request by Borrower after repayment of the Loan and all
obligations secured by the Deed of Trust. 
In connection therewith, the “Collection Account” shall be a
non-interest bearing demand deposit account in the name of Borrower with a bank
approved by Lender in writing, it being understood that Lender hereby approves
Bank of America (the “Clearing Bank”). 
Borrower shall cause all Gross Income to be deposited into the
Collection Account within two (2) Business Day following Borrower’s
receipt thereof.

 

(b)                                 Within ten (10) days
following the end of each calendar month, Borrower shall cause to be prepared
and delivered to Lender a written statement in a form acceptable to Lender (“Cash
Application Statement”) detailing the items of Gross Income received for such
calendar month; the Operating Expenses to which Gross Income shall have been
applied by Borrower for such calendar month (including a comparison to the
Operating Budget), or the portion thereof, paid out of Gross Income or amounts
on deposit in any accounts (including the Collection Account or the Cash
Management Account (hereinafter defined) following an Event of Default and the
implementation of the Cash Management Account) for such calendar month; amounts
funded into the Tax and Insurance Reserve Account, the Capital Expenditure
Reserve Account, the Deferred Maintenance and Environmental Reserve Account and
the Interest Reserve Account, if any; amounts paid to Property Manager, if any;
and the amount of any distributions made to Borrower during such month pursuant
to Section 2.10 above.

 

(c)                                  After the
Collection Account has been established, funds deposited in the Collection
Account shall be swept by the Clearing Bank on a daily basis into the Borrower’s
operating account at Clearing Bank, unless an Event of Default shall be
continuing, in which event such funds shall be swept on a daily basis into a
non-interest bearing account (the “Cash Management Account”) controlled by
Lender in Borrower’s name at a bank selected by Lender (the “Cash Management
Bank”).    Upon the occurrence and during
the continuance of an Event of Default (or Events of Default), no funds in the
Cash Management Account shall be distributed to Borrower and all funds in the
Cash Management Account shall be applied and utilized in Lender’s sole and
absolute discretion.

 

26

 

If and to the extent that
Lender shall determine that (xx) Borrower shall have failed to cause any
Gross Income or funds in the Collection Account to be applied in the manner
required hereunder, or (yy) Borrower did not use such funds as required
hereunder, then within two (2) Business Days following written notice
thereof from Lender to Borrower, Borrower shall cause such misapplied Gross
Income or funds in the Collection Account to be restored into the Collection
Account and/or applied in the manner required under this Agreement, as directed
by Lender.  Notwithstanding anything to
the contrary contained in this section, Borrower shall have no right to receive
any funds from the Collection Account at any time after the occurrence and
during the continuance of an Event of Default, or at any time following
maturity or acceleration of the Loan.  As
additional security for Borrower’s performance under this Agreement and the
other Loan Documents, Borrower hereby irrevocably pledges to Lender, and grants
Lender a lien on, the Collection Account and the Cash Management Account, all
funds on deposit in such accounts at any time and all proceeds and products
thereof to secure all of Borrower’s obligations hereunder and under the Loan
Documents.

 

ARTICLE IV

CONSTRUCTION

 

4.1                                 Liens and Stop
Notices.  If a claim of lien is recorded
which affects the Property or a bonded stop notice is served upon Lender,
Borrower shall, within twenty (20) calendar days of such recording or service
or within five (5) calendar days of Lender’s demand, whichever occurs
first:  (a) pay and discharge the
claim of lien or bonded stop notice; (b) effect the release thereof by
recording or delivering to Lender a surety bond in sufficient form and amount;
or (c) provide Lender with other assurances which Lender deems, in its
sole discretion, to be satisfactory for the payment of such claim of lien or
bonded stop notice and for the full and continuous protection of Lender from
the effect of such lien or bonded stop notice.

 

4.2                                 Construction
Responsibilities.  In the
event that Borrower elects to commence at any time all or any portion of the
same, Borrower shall construct any of the Borrower Improvements in a
workmanlike manner according to the plans and specifications and the
recommendations of any soils or engineering report approved by Lender.  Borrower shall comply with all applicable
laws, ordinances, rules, regulations, building restrictions, recorded covenants
and restrictions, and requirements of all regulatory authorities having
jurisdiction over the Property or Improvements. 
Borrower shall be solely responsible for all aspects of Borrower’s
business and conduct in connection with the Property and Improvements,
including, without limitation, for the quality and suitability of the plans and
specifications and their compliance with all governmental requirements, the
supervision of the work of construction, the qualifications, financial
condition and performance of all architects, engineers, contractors, material
suppliers, consultants and property managers, and the accuracy of all
applications for payment and the proper application of all disbursements.  Lender is not obligated to supervise, inspect
or inform Borrower or any third party of any aspect of the construction of the
Improvements or any other matter referred to above.  Borrower shall not be permitted to construct
any capital or other improvements at the Property other than those Borrower
Improvements expressly permitted hereunder.

 

4.3                                 Inspections.  Lender shall have the right to enter upon the
Property at all reasonable times to inspect the Improvements (including the
Borrower Improvements) and the construction work to verify information
disclosed or required pursuant to this Agreement.  Any inspection or review of the Improvements
(including the Borrower Improvements) by Lender is solely to determine whether
Borrower is properly discharging its obligations to Lender and may not be
relied upon by Borrower or by any third party as a representation or warranty
of compliance with this Agreement or any other agreement.  Lender owes no duty of care to Borrower or
any third party to protect against, or to inform Borrower or any third party
of, any negligent, faulty, inadequate or defective design or construction of
the Improvements (including the Borrower Improvements) as determined by Lender.  

 

27

 

Further, and throughout the
course of construction of the improvements, Lender shall have the right, in its
good-faith discretion, to employ, at Borrower’s sole cost and expense, an
inspector or inspectors and a consultant or consultants who shall review as
agent for Lender all construction activities undertaken in regard to any
Property.  If required by Lender, a
certificate, inspection report or indication from such inspector(s) and/or
consultant(s) that construction complies with any applicable plans and
budget (including percent completion requirements) shall be a further condition
precedent to Lender’s approval of each draw request.

 

4.4                                 Intentionally
omitted.

 

4.5                                 Intentionally
omitted.

 

4.6                                 Contractor
Construction Information.   Within ten (10) days of Lender’s written
request, Borrower shall deliver to Lender from time to time in a form
acceptable to Lender with respect to any construction of any Borrower
Improvements reasonably expected to exceed One Hundred Thousand and No/100
Dollars ($100,000.00) for an individual job (or in the aggregate if related to
the same job):  (a) a list detailing
the name, address and phone number of each contractor, subcontractor and
material supplier previously employed or to be employed or used for
construction of the Borrower Improvements together with the dollar amount,
including changes, if any, of each contract and subcontract, and the portion
thereof, if any, paid through the date of such list; (b) copies of each
contract and subcontract identified in such list, including any changes
thereto; (c) a cost breakdown of the projected total cost of constructing
the Borrower Improvements, and that portion, if any, of each cost item which
has been incurred; and (d) a construction progress schedule detailing the
progress of construction and the projected sequencing and completion time for
uncompleted work, all as of the date of such schedule.  Borrower agrees that Lender may disapprove
any contractor, subcontractor or material supplier which, in Lender’s
reasonable determination, is deemed financially or otherwise unqualified;
provided, however, that the absence of any such disapproval shall not
constitute a warranty or representation of qualification by Lender.  Lender may contact any such contractor,
subcontractor or material supplier to discuss the course of construction.

 

4.7                                 Prohibited
Contracts.  Without
Lender’s prior written consent, Borrower shall not contract for any materials,
furnishings, equipment, fixtures or other parts or components of the Borrower
Improvements or any other Improvements, if any third party shall retain any
ownership interest in such items after their delivery to the Property.  Borrower shall have five (5) days to
effect the removal of any such retained interest.

 

4.8                                 Assessments and
Community Facilities Districts.  Without Lender’s prior written consent,
Borrower shall not cause or suffer to become effective or otherwise consent to
the formation of any assessment district or community facilities district which
includes all or any part of the Property and Improvements pursuant to:  (a) the Mello-Roos Community Facilities
Act of 1982; (b) the Municipal Improvement Act of 1913; or (c) any
other comparable or similar statute or regulation.  Nor shall Borrower cause or otherwise consent
to the levying of special taxes or assessments against the Property by any such
assessment district or community facilities district.

 

4.9                                 Delay.  Borrower shall promptly notify Lender in
writing of any event causing delay or interruption of construction, or the
timely completion of construction of Borrower Improvements commenced by
Borrower.  The notice shall specify the
particular work delayed, and the cause and period of each delay.

 

4.10                           Construction
Contracts.  Without
limitation on other requirements, Lender may require that for each contract or
subcontract for an amount in excess of Two Hundred Fifty Thousand and 

 

28

 

No/100 Dollars
($250,000.00), Borrower shall furnish to Lender, separately with respect to
each such request, AIA forms G702 and G703 (or acceptable equivalents) and such
other forms and schedules of values as may from time to time be approved or
required by Lender, duly signed and sworn to by Borrower and each applicable
contractor, with all blanks appropriately completed, setting forth such details
concerning construction of the improvements as Lender shall require.  If required by Lender, Borrower shall have
furnished to Lender evidence that all required inspections by Governmental
Authorities have been satisfactorily completed.

 

4.11                           Additional
Conditions to Disbursements.  In addition to and without limitation on any
requirements to funding set forth in this Agreement, each disbursement by
Lender from the Leasing Holdback (for Borrower Improvements) or from the
Capital Expenditure Reserve Account will be subject to a market rate retention
not to exceed ten percent (10%) (“Retention”), which shall be disbursed for the
benefit or account of the Borrower only upon the later of (i) completion
of the relevant Borrower Improvements in accordance with applicable Legal
Requirements and delivery of a statutory “Notice of Completion”, and (ii) either
(a) the expiration of the applicable statutory lien period, (b) 
receipt of lien waivers from all potential lien claimants in form and substance
reasonably acceptable to Lender, or (c) Lender’s receipt of a mechanic’s
lien endorsement (or other endorsement to the Title Policy acceptable to Lender
confirming the priority of Lender’s security interest in the Property over any
such liens).

 

ARTICLE V

INSURANCE; CASUALTY,
CONDEMNATION AND RESTORATION

 

Borrower
agrees that, on or after the date hereof, until payment in full of the Loan and
the other amounts payable under the Loan Documents, Borrower shall obtain and
maintain in effect, at Borrower’s sole expense, the following policies of
insurance in form and substance satisfactory to Lender, each of which, except
for the insurance required in Section 5.1 below, shall have claims
paying ability ratings of at least “A-VIII” by A.M. Best Company, or the
equivalent of any other rating agency in the event A.M. Best Company is
declared unsatisfactory to Lender, and shall otherwise be approved by Lender.

 

5.1                                 Title Insurance.  The Title Policy, together with any
endorsements, reinsurance and co-insurance agreements which Lender may require,
insuring Lender, in the principal amount of the Loan, that the Deed of Trust
constitutes a valid first priority Lien on the Real Property, subject only to
matters approved by Lender in writing. 
During the term of the Loan, Borrower shall deliver to Lender, within
five (5) days of Lender’s written request, such other endorsements to the
Title Policy as Lender may reasonably require.

 

5.2                                 Property
Insurance.   An All Risk property insurance policy,
including, but not limited to, coverage for wind, hail, flood, collapse,
sinkhole and terrorism (full coverage) for an amount not less than one hundred
percent (100%) of the replacement cost of the Property (exclusive of costs for
foundations, underground utilities and footings) without deduction for physical
depreciation.  Such All Risk property
insurance policy shall contain a standard lender loss payable endorsement, equivalent
to a 438 BFU endorsement, and not less than the following:  (a) an agreed amount endorsement waiving
any coinsurance provisions; (b) a deductible not to exceed Fifty Thousand
and No/100 Dollars ($50,000.00); (c) ordinance or law coverage including (i) loss
in value to the undamaged portion of the building(s) to full replacement
value, (ii) demolition costs with a limit per loss of ten percent (10%) of
the value of the building(s) affected by loss, and (iii) increased
costs of construction with a limit per loss of twenty percent (20%) of the
value of the building(s) affected by loss; (d) machinery and
equipment breakdown with coverage including, but not limited to, loss or damage
from electrical injury, machinery and equipment breakdown, and explosion of
steam boilers, air conditioning equipment, high pressure piping, pressure
vessels or similar apparatus; and (e) business income and loss rents
coverage in amount equal to 

 

29

 

the
higher of the estimated gross income for the property for a period of twelve
(12) months or Two Million Four Hundred Thousand and No/100 Dollars
($2,400,000.00), which may be increased from time to time by Lender, with 365
Day Extended Period of Indemnity.  Any
flood insurance placed through the National Flood Insurance Program at Lender’s
request shall be valued on an actual cash basis with a deductible not to exceed
Fifty Thousand an No/100 Dollars ($50,000.00).

 

5.3                                 Liability
Insurance. A Commercial General Liability policy insuring
against claims for personal injury, bodily injury, death or property damage
occurring upon, in or about the property, to be on “occurrence” form with
limits not less than One Million and No/100 Dollars ($1,000,000.00) per
occurrence and Two Million and No/100 Dollars ($2,000,000.00) general
aggregate.  An Automobile Liability
policy with limits not less than One Million and No/100 Dollars ($1,000,000.00)
per occurrence and One Million and No/100 Dollars ($1,000,000.00) general
aggregate.  A Workers Compensation and
Employer’s Liability policy with limits not less than Statutory Limits for
Workers Compensation and Employers’ Liability limits as follows: One Million
and No/100 Dollars ($1,000,000.00) Bodily Injury by Accident - Each Accident,
$1,000,000; One Million and No/100 Dollars ($1,000,000.00) Bodily Injury by
Disease — Each Employee; and One Million and No/100 Dollars ($1,000,000.00)
Bodily Injury by Disease — Policy Limit. 
A Pollution Liability insurance policy with limits not less than Two
Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00) per occurrence
and Five Million and No/100 Dollars ($5,000,000.00) general aggregate.  The General Liability policy shall contain a
per location general aggregate if covering multiple locations.

 

5.4                                 Umbrella or
Excess Liability Insurance. A commercial umbrella or
excess liability policy with limits not less than Twenty Million and No/100
Dollars ($20,000,000.00).   This policy
shall schedule the following policies as “underlying”:  Commercial General Liability, Automobile
Liability and Employer’s Liability.

 

5.5                                 Intentionally
omitted.

 

5.6                                 General
Insurance Requirements.  The
following additional requirements are also applicable:

 

(a)                                  Insurance
premiums on all policies must be paid annually in advance.  All outstanding premiums for the current
policy term are to be paid prior to the Effective Date;

 

(b)                                 No insurance
policy required hereunder shall be permitted to provide for premium assessments
to be made against Lender;

 

(c)                                  Borrower shall
provide the following prior to the Effective Date:   (i) an Acord 25, Acord 25S or
equivalent certificate of liability insurance and (ii) an Acord 27, Acord
28 or equivalent certificate of property insurance;

 

On
the certificates of insurance listed above, the following wording must be
stricken:  “endeavor to” and “but failure
to mail notice shall impose no obligation of liability of any kind upon the
company, its agents or representatives.”

 

(d)                                 Each policy
shall contain not less than a thirty (30) day notice to Lender of written
cancellation or material change and not less than ten (10) days prior
notice to Lender of cancellation for non-payment of premium;

 

(e)                                  Lender to be
named (i) the mortgagee and loss payee with respect to the property
insurance coverage, and (ii) an additional insured with respect to general
liability as follows:

 

30

 

PCCP
Capital I, LLC

c/o
PCCP, LLC

Attention:  Servicing

222
N. Sepulveda Blvd., Suite 2222

El Segundo, California 90245

 

(f)                                    A waiver of
subrogation shall be provided on all policies of insurance, except pollution
liability and automobile liability policies, waiving rights of recovery against
Lender; and

 

(g)                                 The limits of
insurance contained herein are minimum limits established by Lender and shall
not be construed to mean that Lender represents or warrants that the required
limits contained herein are adequate for protection to Borrower.

 

5.7                                 Restoration
Proceeds.

 

Any and all awards,
compensation, reimbursement, damages, proceeds, settlements, and other payments
or relief paid or to be paid, together with all rights and causes of action
relating to or arising from, (i) any insurance policy maintained by or on
behalf of Borrower following any damage, destruction, casualty or loss to all
or any portion of the Property (a “Casualty”, and
such proceeds, “Insurance Proceeds”) or (ii) any
temporary or permanent taking or voluntary conveyance of all or part of the
Property, or any interest therein or right accruing thereto or use thereof, as
the result of, or in settlement of, any condemnation or other eminent domain
proceeding by any Governmental Authority whether or not the same shall have
actually been commenced (a “Taking”, and
such proceeds, “Condemnation Proceeds”, and
together with Insurance Proceeds, collectively, “Restoration
Proceeds”) are hereby assigned to Lender as additional collateral
security hereunder subject to the Lien of the Deed of Trust, to be applied in
accordance with this Article V. 
Lender shall be entitled to receive and collect all Restoration Proceeds,
and Borrower shall instruct and cause the issuer of each policy of insurance
described herein and any applicable Governmental Authority to deliver to Lender
all Restoration Proceeds.  Borrower shall
execute such further assignments of the Restoration Proceeds as Lender may from
time to time reasonably require. 
Notwithstanding the foregoing, if the Restoration Proceeds, less the
amount of Lender’s costs and expenses (including attorneys’ fees and costs)
incurred in collecting the same (the “Net Restoration Proceeds”),
are Five Hundred Thousand and No/100 Dollars ($500,000.00) or less (the “Restoration Proceeds Threshold”), provided no Event of
Default then exists, Lender shall make such Net Restoration Proceeds available
to Borrower.  All Insurance Proceeds
received by Borrower or Lender in respect of business interruption coverage,
and all Condemnation Proceeds received with respect to a temporary Taking
available to Borrower, shall be deposited in a segregated escrow account with
Lender or its servicer, as applicable, and Lender shall estimate the number of
months required for Borrower to restore the damage caused such Casualty or
replace cash flow interrupted by such temporary Taking, as applicable, and
shall divide the aggregate proceeds by such number of months, and, provided no
Event of Default then exists, shall disburse a monthly installment thereof to
Borrower each such month.  Subject to
Lender’s rights under Section 5.7, provided no Event of Default has
occurred and is continuing and the Restoration has been completed in accordance
with this Agreement, any Net Restoration Proceeds available to Borrower for
Restoration, to the extent not used by Borrower in connection with, or to the
extent they exceed the cost of such Restoration and any costs incurred by
Lender, shall be paid to Borrower.

 

Lender shall be entitled at
its option to participate in any compromise, adjustment or settlement in
connection with (i) any insurance policy claims relating to any Casualty,
and (ii) any Taking in an amount in controversy, in either case, in excess
of the Restoration Proceeds Threshold, and Borrower shall within ten (10) Business
Days after request therefor reimburse Lender for all reasonable 

 

31

 

out-of-pocket expenses (including reasonable
attorneys’ fees and disbursements) incurred by Lender in connection with such
participation.  Borrower shall not make
any compromise, adjustment or settlement in connection with any such claim in
excess of the Restoration Proceeds Threshold or if an Event of Default then
exists without the prior written approval of Lender.  Borrower shall not make any compromise,
adjustment or settlement in connection with any claim unless same is commercially
reasonable.

 

If and to the extent Restoration
Proceeds are not required to be made available to Borrower to be used for the
Restoration of the Improvements affected by the Casualty or Taking, as
applicable, pursuant to this Agreement, Lender shall be entitled, without
Borrower’s consent, to apply such Restoration Proceeds or the balance thereof,
at Lender’s option either (i) to the full or partial payment or prepayment
of the Indebtedness or (ii) to the Restoration of all or any part of such
Improvements affected by the Casualty or Taking, as applicable.

 

5.8                                 Restoration.  Notwithstanding
anything to the contrary set forth in Section 5.7, Lender agrees
that Lender shall make the Net Restoration Proceeds (other than business
interruption insurance proceeds, which shall be held and disbursed as provided
in Section 5.7) available to Borrower for Borrower’s restoration
and repair of the Improvements affected by the Casualty or Taking (a “Restoration”), as applicable, on the following terms and
subject to Borrower’s satisfaction of the following conditions; provided, that
Lender shall have the right to waive any of the following conditions in its
discretion:

 

(a)                                  At the time of
such Casualty or Taking, as applicable, and at all times thereafter there shall
exist no Event of Default;

 

(b)                                 The Improvements
affected by the Casualty or Taking, as applicable, shall be capable of being
restored (including replacements) to substantially the same condition, utility,
quality and character, as existed immediately prior to such Casualty or Taking,
as applicable, in all material respects with a fair market value and
projected cash flow of the Property equal to or greater than prior to such
Casualty or Taking, as applicable;

 

(c)                                  Borrower shall
demonstrate to Lender’s reasonable satisfaction Borrower’s ability to pay the
Indebtedness coming due during such repair or restoration period (after taking
into account proceeds from business interruption insurance carried by
Borrower), the following:

 

(d)                                 (i) in the
event of a Casualty, the Casualty resulted in an actual or constructive loss of
less than thirty percent (30%) of the fair market value of the Property and
less than thirty percent (30%) of the rentable area of the Property, (ii) in
the event of a Taking, the Taking resulted in an actual or constructive loss of
less than fifteen percent (15%) of the fair market value of the Property and
less than fifteen percent (15%) of the rentable area of the Property, less than
fifteen percent (15%) of the land constituting the Property is taken, such land
is located along the perimeter or periphery of the Property, and no portion of
the Improvements is the subject of such Taking, and (iii) in any event, (A) Leases
covering at least sixty-five percent (65%) of the rentable square footage of
the Property and (B) all Major Leases will remain in full force and effect
during and after the Restoration.

 

(e)                                  Borrower shall
have provided to Lender all of the following, and collaterally assigned the
same to Lender pursuant to assignment documents acceptable to Lender:  (i) an architect’s contract with an
architect reasonably acceptable to Lender and complete plans and specifications
for the Restoration of the Improvements lost or damaged to the condition,
utility and value prior to the applicable Casualty; (ii) fixed-price or
guaranteed maximum cost construction contracts with contractors reasonably
acceptable to Lender for completion of the Restoration work in accordance with
the aforementioned plans 

 

32

 

and specifications; (iii) such additional funds
(if any) as are necessary from time to time, in Lender’s reasonable opinion, to
complete the Restoration (which funds shall be held by Lender as additional
collateral securing the Indebtedness and shall be disbursed, if at all,
pursuant to this Article V); and (iv) copies of all permits and
licenses necessary to complete the Restoration in accordance with the plans and
specifications and all Legal Requirements.

 

(f)                                    Borrower shall
commence such work within one hundred eighty (180) days after such Casualty or
Taking, as applicable, and shall diligently pursue such work to completion;

 

(g)                                 Lender shall be
satisfied that the Restoration will be completed on or before the earliest to
occur of (i) the date six (6) months prior to the Maturity Date (as
the same may be extended in accordance with this Agreement), (ii) such
time as may be required under applicable Legal Requirements in order to repair
and restore the Property to the condition it was in immediately prior to such
Casualty or such Taking, as applicable, (iii) the expiration of the
business interruption insurance coverage referred to above, and (iv) earliest
date required pursuant to the terms of any Major Lease; and

 

(h)                                 the Property
and the use thereof after the Restoration will be in compliance with all
applicable Legal Requirements.

 

5.9                                 Disbursement.

 

Each disbursement by Lender
of such Restoration Proceeds shall be funded subject to conditions and in
accordance with disbursement procedures which a commercial construction lender
would typically establish in the exercise of sound banking practices, including
requiring lien waivers and any other documents, instruments or items which may
be reasonably required by Lender.

 

In
no event shall Lender be obligated to make disbursements of Restoration
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as determined by Lender,
less, as to each contractor, subcontractor or materialman engaged in a
Restoration, a Retention of the costs actually incurred for work in place as
part of such Restoration, as reasonably determined by Lender, and (ii) the
amount actually withheld by Borrower (the “Casualty Retainage”);
provided, however, that Lender shall disburse progress payments, not more
frequently than monthly, in proportion to the completion of the applicable work
comprising the Restoration and subject to Lender’s receipt of conditional lien
waivers and the applicable Casualty Retainage. 
The Casualty Retainage shall not be released until Lender reasonably
determines that, in the case of a subcontractor, that the applicable portion of
the Restoration performed by such subcontractor has been completed in
accordance with the provisions of this Agreement, or in the case of a contractor,
that the Restoration has been completed in accordance with the provisions of
this Agreement and that all approvals necessary for the re-occupancy and use of
the Property have been obtained from all appropriate Governmental Authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the Casualty
Retainage.

 

ARTICLE VI

REPRESENTATIONS AND
WARRANTIES

 

In
order to induce Lender to execute this Agreement and make the Loan, Borrower
hereby represents and warrants to Lender as follows:

 

6.1                                 Organization;
Power; Single Purpose Entity.  Borrower (a) is duly organized and
validly existing in good standing under the laws of the State of Delaware, (b) is
duly qualified to do business in each jurisdiction in which the nature of its
business or any of the Property makes such 

 

33

 

qualification necessary,
(c) has the requisite power and authority to carry on its business as now
being conducted, and (d) has the requisite power to execute and deliver,
and perform its obligations under, the Loan Documents.  Borrower is a “registered organization”
within the meaning of the Uniform Commercial Code in effect in the State where
Borrower is organized, and Borrower’s organizational identification number
issued by such State is set forth under its signature hereto.  Borrower is now, and shall at all time
remain, an SPE (as defined in Section 8.16 below) and in full
compliance with all the terms and conditions contained in Section 8.16
below.

 

6.2                                 Authority;
Enforceability.  Borrower
has the requisite legal power and authority to execute, deliver and perform
each of the Loan Documents.  The
execution, delivery and performance thereof, and the consummation of the
transactions contemplated thereby, have been duly authorized by all requisite
action of Borrower, and no other proceedings or authorizations on the part of
Borrower are necessary to consummate such transactions.  The Loan Documents executed by Borrower in
connection with the Loan are the legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their terms, subject
only to bankruptcy, insolvency and other limitations on creditors’ rights generally
and to equitable principles.  Such Loan
Documents are, as of the Closing Date, not subject to any right of rescission,
set-off, counterclaim or defense by Borrower, including the defense of usury.

 

6.3                                 Ownership of
Borrower.  Borrower
has heretofore provided to Lender a written statement setting forth the Members
and their respective ownership percentages, and the shareholders, partners or
members in the Members and their respective ownership percentages.  Except as may be expressly permitted pursuant
to Section 8.14 below, without the prior written consent of Lender,
Borrower shall not cause or permit any change in the Members or in the
shareholders, partners or members in the Members, or in the relative ownership
interests of such Members or such shareholders, partners or members in the
Members.

 

6.4                                 No Conflict.  The execution, delivery and performance by
Borrower of the Loan Documents, and each of the transactions contemplated
thereby, do not and will not (a) conflict with or violate Borrower’s partnership
agreement, articles of organization, operating agreement or other
organizational documents, as the case may be, or (b) conflict with, result
in a breach of or constitute (with or without notice or lapse of time or both)
a default under any (i) contractual obligation to which Borrower, the
Property or the other Collateral is subject, (ii) statute, ordinance, rule or
regulation of any Governmental Authority applicable to Borrower, the Property
or the other Collateral or (iii) court or Governmental Authority order, or
(c) result in or require the creation or imposition of any Lien upon any
of the properties or assets of Borrower (other than Liens in favor of Lender
arising pursuant to the Loan Documents).

 

6.5                                 Consents and
Authorizations.  Borrower
has obtained all consents and authorizations required under its organizational
documents or pursuant to its contractual obligations with any other Person, and
has obtained all consents and authorizations of, and effected all notices to
and filings with, any Governmental Authority as may be necessary to allow
Borrower to lawfully execute, deliver and perform its obligations under the
Loan Documents.

 

6.6                                 Financial
Information.  All
financial statements and other financial information heretofore delivered by
Borrower to Lender, including, without limitation, information relating to the
financial condition of Borrower, Guarantor, or, to Borrower’s knowledge, the
Property (including, without limitation, constructions schedules and budgets
for construction work done a the Property prior to the Effective Date), or the
Members in Borrower, are true and correct in all material respects, fairly and
accurately reflect the financial condition of the subject thereof and have been
prepared in accordance with GAAP, or another accounting method approved by
Lender.  There has been no change that
would have a

 

34

 

Material Adverse Effect on
Borrower or Guarantor, or the ability of Borrower or Guarantor to perform its
respective obligations under the Loan Documents, since the date of such
financial statements or other financial information.  There are no known material unrealized or
anticipated losses of Borrower or Guarantor.  
None of Borrower, any Member or Guarantor has filed or been the subject
of any bankruptcy, insolvency, reorganization, dissolution or similar proceeding
or any proceeding for the appointment of a receiver or trustee for all or any
substantial part of their respective property. 
Neither Borrower nor Guarantor has admitted in writing its inability to
pay its debts when due, made an assignment for the benefit of creditors or
taken other similar action. 
Notwithstanding the above, to the extent the above representations and
warranties relate to the Property with respect to periods prior to Borrower’s
ownership thereof, such representations and warranties are made only to
Borrower’s best knowledge.

 

6.7           Litigation; Adverse Effects;
Condemnation.

 

(a)           There is no action, suit,
proceeding, governmental investigation or arbitration, at law or in equity, or
before or by any Governmental Authority, pending against and served upon or, to
Borrower’s knowledge, threatened against and not served upon Borrower,
Guarantor, the Property or any other Collateral which is reasonably likely to
(i) result in a Material Adverse Effect on such Person, the Property or
the other Collateral, or (ii) materially and adversely affect the ability
of either Guarantor to perform its obligations under the Completion Guaranty,
the Carveout Guaranty or the Environmental Indemnity Agreement (each, as
applicable).  Notwithstanding the above,
to the extent the above representations and warranties relate to the Property
with respect to periods prior to Borrower’s ownership thereof, such
representations and warranties are made only to Borrower’s knowledge.

 

(b)           Borrower is not (i) in
violation of any applicable Legal Requirements, which violation is reasonably
likely to have a Material Adverse Effect on Borrower, Guarantor, the Property
or any other Collateral, or (ii) subject to or in default with respect to
any court or Governmental Authority order which is reasonably likely to have a
Material Adverse Effect on Borrower, Guarantor, the Property or any other
Collateral.  There are no governmental or
administrative proceedings pending or, to the Borrower’s knowledge, threatened
against Borrower, the Property or any other Collateral, which, if adversely
decided, would have a Material Adverse Effect on Borrower, Guarantor, the
Property or any other Collateral. 
Notwithstanding the above, to the extent the above representations and
warranties relate to the Property with respect to periods prior to Borrower’s
ownership thereof, such representations and warranties are made only to
Borrower’s knowledge.

 

(c)           There are no known, pending
or, to Borrower’s knowledge, threatened eminent domain or condemnation
proceedings affecting the Property (or any portion thereof).

 

(d)           Except for the litigation
that is the subject of the Purchase Agreement Indemnification Obligation, there
are no known, pending or to Borrower’s knowledge, threatened claims outstanding
against Borrower or the Property (or any portion thereof) in respect of any
work done on or prior to the date hereof at, on or around the Property by any
contractor or third party claimant.

 

6.8           Payment of Taxes.  All tax returns and reports to be filed by
Borrower have been timely filed, and all taxes, assessments, fees and other
governmental charges shown on such returns or otherwise payable by Borrower
have been paid when due and payable, except such taxes, if any, as are being
contested in good faith by appropriate proceedings, and subject to such extensions
of the filing and/or due date thereof as Borrower shall have obtained.  Borrower has no knowledge of any proposed tax
assessment against Borrower that will have a Material Adverse Effect on
Borrower, which is not being actively contested in good faith by Borrower or
Seller.

 

35

 

6.9           Disclosure.  The representations and warranties of
Borrower contained in this Agreement and the other Loan Documents and all
certificates, financial statements and, to Borrower’s knowledge, other
documents delivered to Lender in connection therewith, do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.  All organizational documents, financial
statements, Leases, agreements and, to Borrower’s knowledge, other documents
and instruments delivered by Borrower to Lender pursuant to this Agreement and
the other Loan Documents are true, correct and complete copies of the
originals.  The foregoing representations
and warranties with respect to any documents, Leases or instruments relating to
the Property and not prepared by or on behalf of Borrower are made to Borrower’s
knowledge.  Borrower has not withheld any
material non-public fact from Lender in regard to any matter addressed in or
material to the Loan Documents.  To
Borrower’s knowledge, none of the materials or information provided to Lender
in connection with the Loan or pursuant to the Loan Documents is false or
misleading in any material respect.

 

6.10         Requirements of Law and
Other Covenants.  Borrower
and, to Borrower’s knowledge, the Property and the use thereof comply with (a) all
statutes, ordinances, rules and regulations of Governmental Authorities
applicable to Borrower or the Property (including, without limitation, the ADA
and all Hazardous Materials Laws), and (b) any restrictive covenants or
other title matters affecting the Property or any portion thereof.  Borrower shall be responsible for all ADA and
Hazardous Materials Laws compliance costs. The Property consists of legal and
separate lot(s) for tax assessment purposes.  To Borrower’s knowledge, all requisite
permits, easements and rights of way necessary for the occupancy, operation,
ownership and use of the Property have been or will be obtained by Borrower and
those that have been obtained are in full force and effect.

 

6.11         Deliveries.  Borrower has heretofore delivered to Lender
true, complete and correct copies of the Purchase Agreement, all Leases at the
Property, the Property Management Agreement and the other documents, materials
and information delivered to Borrower or otherwise obtained by or prepared for
Borrower with respect to the acquisition, ownership or operation of the
Property by Borrower.

 

6.12         Title to Assets; No Liens.  On the Effective Date, upon consummation of
the transactions contemplated by the Purchase Agreement, Borrower has good and
marketable title to the Property, free and clear of all Liens, except for any
Liens arising in favor of Lender under the Loan Documents and the Permitted
Encumbrances.

 

6.13         Utilities.  To Borrower’s knowledge, all utility
services, including, without limitation, gas, water, sewage, electrical and to
Borrower’s knowledge, telephone, necessary for the use and occupancy of the
Property are available at or within the boundaries of the Property and have
been connected.

 

6.14         Leases.  The rent roll attached hereto as Exhibit H
hereto is true, complete and correct, the Property are not subject to any
Leases or occupancy agreements other than as described in Exhibit H.  To Borrower’s knowledge, the Leases
identified on Exhibit H are in full force and effect and there are
no defaults thereunder by Borrower. 
Except as set forth on Exhibit H, to Borrower’s knowledge,
no rent (including security deposits) has been paid more than one (1) month
in advance of its due date.  Except as
set forth on Exhibit H attached hereto, to Borrower’s knowledge,
any payments, free rent, partial rent, rebate of rent or other payments,
credits, allowances or abatements required to be given by Borrower to any
tenant has already been received by such tenant.  The tenants under the Leases have accepted
possession of and are in occupancy of all of their respective demised premises
and have commenced the payment of rent under the Leases.

 

36

 

6.15         Affiliate Fees.  Except as specifically approved by Lender or
expressly permitted by this Agreement, Borrower is not obligated to pay any
Affiliate Fees to any Affiliate in connection with the acquisition, financing,
operation or management of the Property. 
Notwithstanding anything to the contrary contained herein, all Affiliate
Fees shall at all times be subordinate to the Loan (and Borrower’s operating
agreement shall contain an express statement to such effect).

 

6.16         Defects.  To Borrower’s knowledge, there are no
defects, facts or conditions affecting the Property or any portion thereof
which would make the Property unsuitable for the occupancy, use or sale
thereof.  To Borrower’s knowledge, and as
otherwise may be disclosed in the Environmental Reports, there are no surface
or subsurface soils conditions adversely affecting the Property, including,
without limitation, unstable soil or landfills.

 

6.17         Patriot Act and Related
Matters.  Borrower complies and will
comply at all times with the Patriot Act and all applicable requirements of
Governmental Authorities having jurisdiction of Borrower and the Property,
including those relating to money laundering and terrorism. Lender shall have
the right to audit Borrower’s compliance with the Patriot Act and all
applicable requirements of Governmental Authorities having jurisdiction of
Borrower and the Property, including those relating to money laundering and
terrorism.  In the event that Borrower
fails to comply with the Patriot Act or any such requirements of Governmental
Authorities, then Lender may, at its option, cause Borrower to comply therewith
and any and all costs and expenses incurred by Lender in connection therewith
shall be secured by the Deed of Trust and the other Loan Documents and shall be
immediately due and payable.

 

Neither
Borrower, Guarantor, nor, Borrower’s knowledge, any Member (a) is listed
on any Government Lists (as defined below), (b) is a person who has been
determined by competent authority to be subject to the prohibitions contained
in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other
similar prohibitions contained in the rules and regulations of OFAC (as
defined below) or in any enabling legislation or other Presidential Executive
Orders in respect thereof, (c) has been previously indicted for or
convicted of any felony involving a crime or crimes of moral turpitude or for
any Patriot Act Offense (as defined below), or (d) is not currently under
investigation by any Governmental Authority for alleged criminal activity.  For purposes hereof, the term “Patriot Act Offense” means any violation of the criminal
laws of the United States of America or of any of the several states, or that
would be a criminal violation if committed within the jurisdiction of the
United States of America or any of the several states, relating to terrorism or
the laundering of monetary instruments, including any offense under (a) the
criminal laws against terrorism; (b) the criminal laws against money
laundering, (c) the Bank Secrecy Act, as amended, (d) the Money
Laundering Control Act of 1986, as amended, or the (e) Patriot Act.  “Patriot Act Offense” also includes the
crimes of conspiracy to commit, or aiding and abetting another to commit, a
Patriot Act Offense.  For purposes
hereof, the term “Government Lists”
means (i) the Specially Designated Nationals and Blocked Persons Lists
maintained by Office of Foreign Assets Control (“OFAC”), (ii) any other list of terrorists, terrorist
organizations or narcotics traffickers maintained pursuant to any of the Rules and
Regulations of OFAC that Lender notified Borrower in writing is now included in
Government Lists, or (iii) any similar lists maintained by the United
States Department of State, the United States Department of Commerce or any
other government authority or pursuant to any Executive Order of the President
of the United States of America that Lender notified Borrower in writing is now
included in Government Lists.

 

6.18         No Additional Liabilities of
Guarantors Not Previously Disclosed in Writing to Lender.  Notwithstanding anything to the contrary
contained hereunder or under any of the other Loan Documents, neither Guarantor
has any obligation which was not previously disclosed to Lender in writing,
which obligation would have a Material Adverse Effect.

 

6.19         ERISA.  Neither Borrower nor any ERISA Affiliate (as
defined below) 

 

37

 

maintains, contributes to,
has any obligation to contribute to, or has any direct or indirect liability
with respect to any “employee benefit plan,” as defined in Section 3(3) of
ERISA (including any “multiemployer plan,” as defined in Section 3(37) of
ERISA) that is subject to Title IV or Section 302 of ERISA or Section 412
of the Code.  Borrower and any ERISA Affiliates are in compliance in all
material respects with the applicable provisions of ERISA and the Code with
respect to all employee benefit plans maintained by them.  Borrower is not an “employee benefit plan,”
as defined in Section 3(3) of ERISA, subject to Title I of ERISA, a “plan,”
as defined in Section 4975(e)(1) of the Code, subject to Code
Section 4975, or a “governmental plan” within the meaning of
Section 3(32) of ERISA.  None of the
assets of Borrower constitutes “plan assets” of one or more of any such plans
under 29 C.F.R. Section 2510.3-101 or otherwise.  Transactions by or with Borrower do not
violate state statutes regulating investment of, and fiduciary obligations with
respect to, governmental plans and such state statutes do not in any manner
affect the ability of the Borrower to perform its obligations under the Loan
Documents or the ability of Lender to enforce any and all of its rights under
the Loan Agreement.  If an investor or
direct or indirect equity owner in Borrower is a plan that is not subject to
Title I of ERISA or Section 4975 of the Code, but is subject to the
provisions of any federal, state, local, non-U.S. or other laws or regulations
that are similar to those portions of ERISA or the Code, the assets of the
Borrower do not constitute the assets of such plan under such other laws.  “ERISA Affiliate”
means any corporation or trade or business that is a member of any group of
organizations (a) described in Section 414(b) or (c) of the
Code, of which Borrower is a member, and (b) solely for purposes of
potential liability or any lien arising under Section 302 of ERISA and Section 412
of the Code, described in Section 414(m) or (o) of the Code, of
which Borrower is a member.  Borrower
shall take or refrain from taking, as the case may be, such actions as may be
necessary to cause the representations and warranties in this Section 6.19
to remain true and accurate throughout the term of the Loan.

 

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

 

6.21         Property Management
Agreement.  The
Property Management Agreement is in full force and effect, and constitutes the
entire agreement with respect to the management of the Property between
Property Manager and Borrower and has not been assigned or encumbered (other
than pursuant to the Deed of Trust), or modified, amended, or supplemented in
any material respect.  Neither Property
Manager nor Borrower is in default in the performance of the terms and
provisions of the Property Management Agreement.

 

6.22         REOC Status.  Borrower has, at all times since the date of
its first investment, satisfied all of the requirements set forth in 29 C.F.R.
§ 2510.3-101(e) to qualify as a “real estate operating company,” as
defined in such regulation (a “REOC”).

 

ARTICLE VII

REPORTING COVENANTS

 

Borrower
covenants and agrees that, on and after the date hereof, until payment in full
of the Loan and other amounts payable under the Loan Documents:

 

7.1           Financial Statements and
Other Financial and Operating Information.  Borrower shall keep and maintain or shall
cause to be kept and maintained, on a calendar year basis, in accordance 

 

38

 

with GAAP or another
accounting method approved by Lender (either cash or accrual basis is
acceptable), books, records and accounts reflecting in reasonable detail all of
the financial affairs of Borrower and all items of income and expense in
connection with the operation of the Property. 
Borrower shall deliver or cause to be delivered to Lender:

 

(a)           Monthly Operating
Statements; Lease Status Reports.  As soon as practicable, and in any event
within thirty (30) days following the end of each month during the Loan term,
operating statements for the Property for such month in such form as Lender
shall require, together with rent rolls. 
In addition and not in limitation of the foregoing, commencing on the
Effective Date and continuing throughout the balance of the Loan term (as the
same may be extended in accordance herewith), lease status reports for the
Property in such form as Lender shall reasonably require, with year-to-date,
prior year comparison, and variance to budget reporting, dated as of the last
day of such month, in form and substance satisfactory to Lender, certified by
Borrower.

 

(b)           Annual Financial Statements.  Within ninety (90) days after the end of each
calendar year, annual unaudited financial statements of Borrower and each
Guarantor, consisting of a balance sheet, income statement and statement of
sources and uses of funds, together with related schedules and supporting
reports, when applicable.  Such financial
statements shall be prepared on the basis of GAAP, or another accounting method
approved by Lender (either cash or accrual basis is acceptable), and shall be
accompanied by a certificate executed by Borrower or such Guarantor, certifying
the completeness, fairness and consistency thereof.  If audited financial information is prepared,
Borrower shall deliver copies of that information within fifteen (15) days
following its final preparation.

 

(c)           Quarterly Financial
Statements.  Within
forty-five (45) days after the close of each calendar quarter, all the
financial information and certifications required under subparagraph (b) above
as to such calendar quarter.

 

(d)           Budgets.  Not later than thirty (30) days prior to the
end of each calendar year, projections of Borrower detailing expected sources
and uses of funds for the Property for the next year, as well as cumulative,
actual budgets for the immediately preceding twelve (12) month period.  With respect to the foregoing budgets,
Borrower shall provide such additional supporting details as Lender shall
reasonably request.

 

(e)           Knowledge of Event of
Default.  Promptly upon Borrower
obtaining knowledge of (i) any condition or event which constitutes an
Event of Default or Potential Default, or (ii) any condition or event
which has or will have a Material Adverse Effect on Borrower or the Property,
written notice specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by Borrower
and the nature of such claimed Event of Default, Potential Default or other
event or condition, and what action Borrower has taken, is taking and proposes
to take with respect thereto.

 

(f)            Litigation, Arbitration or
Government Investigation. 
Promptly upon Borrower obtaining knowledge of (i) the institution
of, or threat of, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Borrower, the Property or any other Collateral
not previously disclosed in writing by Borrower to Lender pursuant to this
section, including any eminent domain or other condemnation proceedings
affecting the Property, or (ii) any material development in any action,
suit, proceeding, governmental investigation or arbitration already disclosed,
which, in either case, has a Material Adverse Effect on Borrower, Guarantor,
the Property or any other Collateral, written notice thereof to Lender and such
other information as may be available to it to enable Lender and its counsel to
evaluate such matters.

 

39

 

(g)           Organizational Documents.  Pursuant to Section 6.1 above, a
true, correct and complete copy of Borrower’s limited partnership or limited
liability company operating agreement; and promptly following the date thereof,
any amendments or modifications thereof entered into in accordance with and as
may be expressly permitted under, this Agreement and the other Loan Documents.

 

(h)           Other Information.  Such other information, reports, contracts,
schedules, lists, documents, agreements and instruments in the possession or
control of Borrower with respect to (i) the Collateral, or (ii) the
business, assets, condition (financial or otherwise), income or prospects of
Borrower as Lender may from time to time reasonably request, including, without
limitation, annual information with respect to cash flow projections, budgets,
operating statements (current year and immediately preceding year), rent rolls,
lease expiration reports, leasing status reports, equity funding requirements,
contingent liability summaries, projections of leasing fees and overhead
budgets.

 

ARTICLE VIII

OTHER COVENANTS

 

Borrower
covenants and agrees that, on and after the date hereof, until payment in full
of the Loan and other amounts payable under the Loan Documents:

 

8.1           Existence.  Borrower shall at all times maintain its
limited liability company existence and shall do or cause to be done all things
necessary to preserve and keep in full force and effect its rights to do
business in, and shall remain in good standing in, each jurisdiction in which
the character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary.

 

8.2           Compliance.  Borrower shall comply with all covenants,
conditions, restrictions, Leases, easements, reservations, rights and
rights-of-way and all applicable Legal Requirements relating to the Property
(including, without limitation, all Hazardous Materials Laws and the ADA), and
Borrower shall obtain and maintain in full force and effect all necessary
approvals, consents, licenses and permits of any Governmental Authority.   Borrower shall notify Lender promptly of any
written notice or order that Borrower receives from any Governmental Authority
relating to Borrower’s failure to comply with such applicable Legal
Requirements.

 

8.3           Payment of Taxes,
Assessments and Charges. 
Except to the extent that Lender is obligated to pay Impositions and
insurance premiums from the Tax and Insurance Reserve Account pursuant to the
terms of Section 12.2, Borrower shall pay all Impositions and
insurance premiums with respect to itself and the Property in accordance with
the terms hereof.  Borrower may, at its
expense, after prior notice to Lender, contest by appropriate proceedings
conducted in good faith and with due diligence, the validity or application of
any Legal Requirements, Imposition, or any claims of mechanics,
materialmen, suppliers or vendors, and may withhold payment of the same pending
such proceedings if permitted by law, as long as (i) in the case of any
Impositions or claims of mechanics, materialmen, suppliers or vendors, such
proceedings shall suspend the collection thereof from the Property, (ii) neither
the Property nor any part thereof or interest therein will be sold, forfeited
or lost if Borrower pays the amount or satisfies the condition being contested,
and Borrower would have the opportunity to do so, in the event of Borrower’s
failure to prevail in such contest, (iii) Lender would not, by virtue of
such permitted contest, be exposed to any risk of civil or criminal liability,
and neither the Property nor any part thereof or any interest therein would be
subject to the imposition of any Lien for which Borrower has not furnished
additional security as provided in clause (iv) below, as a result of the
failure to comply with any Legal Requirement of such proceeding which would not
be released if Borrower pays the amount or satisfies the condition being
contested, and Borrower would have the opportunity to do so, in the event of 

 

40

 

Borrower’s failure to
prevail in the contest, and (iv) Borrower shall have furnished to Lender
additional security in respect of the claim being contested or the loss or damage
that may result from Borrower’s failure to prevail in such contest in such
amount as may be requested by Lender, but in no event less than 125% of the
amount of such claim.

 

8.4           Books and Records.  Borrower shall: (a) maintain full and
complete books of account and other records reflecting the results of its
operations in accordance with GAAP or another accounting method approved by
Lender; and (b) permit Lender and its agents, at any time and from time to
time, upon notice reasonable under the circumstances, which may be written or
oral, to inspect and copy all of such books and records.

 

8.5           Entry and Inspection.  Lender and its authorized representatives
shall, at all times, upon notice reasonable under the circumstances, which may
be written or oral (except in the case of exigent circumstances, in which case
no prior notice need be given), have the right of entry and free access to the
Property to inspect the Property for any purpose including, without limitation,
the evaluation of the existence, location, nature and magnitude of any
Hazardous Materials, and Borrower’s compliance with Hazardous Materials
Laws.  Such entry shall be undertaken so
as to minimize any interference with Borrower’s construction of any Borrower
Improvements and tenants’ use of the Property to the extent reasonably possible
and shall be subject to the rights of the tenants under the Leases.  Lender shall not perform any invasive testing
relating to Lender’s evaluation of Hazardous Materials unless an Event of
Default shall have occurred and be continuing, or unless Lender shall have
reason to suspect the presence of Hazardous Materials on, under or the vicinity
of the Property.

 

8.6           Management of Property.  The Property will be managed at all times by
Property Manager pursuant to the Property Management Agreement unless
terminated as expressly permitted pursuant to the Loan Documents. Borrower
shall be permitted to enter into the Master Property Management Agreement so
long as (i) the Property Management Agreement, as such Agreement may be
amended or replaced pursuant to the terms of this Agreement, is in effect and (ii) provided
that all fees payable by Borrower under the Master Property Management
Agreement (collectively, “Oversight Fee”),
together with the property management fee payable by Borrower to Property
Manager, in the aggregate, shall in no event exceed the total fees payable
pursuant to the Property Management Agreement in effect as of the Effective
Date, as such agreement may be amended or replaced in accordance with the terms
of this Agreement. Lender hereby approves the Master Property Management
Agreement and, subject at all times to the proviso in clause (ii) in the
immediately preceding sentence, the fees payable thereunder.  Borrower
hereby covenants and agrees that it will not amend or modify the Amendment to
Master Property Management Agreement.  Borrower shall diligently perform
all terms and covenants of the Property Management Agreement.  Borrower
shall not (a) surrender, terminate, cancel, or materially modify the
Property Management Agreement (and for purposes hereof, increasing the fee(s) payable
thereunder shall be deemed a material modification), (b) enter into any
other agreement relating to the management or operation of the Property with
Property Manager or any other Person (except for the Master Property Management
Agreement pursuant to the Amendment to Master Property Management Agreement as
permitted above), (c) consent to the assignment by Property Manager of its
interest under the Property Management Agreement or (d) waive or release
any of its rights and remedies under the Property Management Agreement, in each
case, without the consent of Lender.  CTRI Management Services Inc., a
California corporation and an Affiliate of CT Interchange (“CTRI”), is hereby approved by Lender as a
replacement Property Manager subject to Lender’s reasonable approval of a new
Property Management Agreement between Borrower and CTRI containing
substantially the same terms as the Property Management Agreement being replaced. 
In the event that CTRI is appointed as the new property manager of the Property
or if at any time, Lender consents to the appointment of a new property manager
other CTRI or such other new property manager and Borrower shall, as a
condition to Lender’s consent, execute a subordination of the new
Lender-approved Property Management Agreement in form 

 

41

 

and substance satisfactory
to Lender.  With respect to any such new manager, Lender’s consent of a
new property manager other than CTRI may be conditioned upon Borrower
delivering (or causing to be delivered) to Lender a Rating Agency Confirmation
with respect to such new manager and new Property Management Agreement.

 

8.7           Use of Proceeds.  Borrower shall use the proceeds of the Loan
solely for the purposes permitted under this Agreement, including Exhibits C and
D attached hereto, and the other Loan Documents.

 

8.8           Additional Liabilities.  Without the prior written consent of Lender,
(a) Borrower shall not incur any indebtedness or obligations other than
the indebtedness, loans from Members or Affiliates expressly permitted under
this Agreement, obligations of Borrower under this Agreement and the other Loan
Documents, construction obligations in respect Borrower Improvements and
leasing commissions payable with respect to Leases permitted hereunder or
unsecured trade payables relating to the Property and incurred by Borrower in
the ordinary course of its business not to exceed Fifty Thousand and No/100 Dollars
($50,000.00); provided, however, that such limitation shall not apply with
respect to common area maintenance obligations at the Property with respect to
which non-defaulting tenants at the Property are obligated, pursuant to their
respective Leases, to reimburse Borrower therefor; (b) Borrower shall not
cause or permit any additional Liens to encumber or otherwise affect title to
the Property or the other Collateral; and (c) Borrower shall not cause or
permit any partner, member or other equity interest holder in Borrower to
mortgage, pledge, hypothecate or encumber such Person’s partnership, membership
or other equity interest in Borrower.

 

8.9           Leases.

 

(a)           Borrower shall (i) observe
and perform all of the material obligations imposed upon the lessor under the
Leases; (ii) promptly send copies to Lender of all notices of default that
Borrower shall send or receive under any Major Lease; (iii) promptly
notify Lender of any tenant under a Major Lease at the Property which has
vacated, or has given Borrower written notice of its intention to vacate, the
premises (or any portion thereof) leased to such tenant pursuant to the
applicable Lease; and (iv) enforce the terms, covenants and conditions in
the Leases to be observed by tenants in accordance with commercially reasonable
practices for properties similar to the Property.  Borrower shall obtain the prior written
approval of Lender, which approval shall may be granted or withheld by Lender
in Lender’s sole and absolute discretion, for the entry into any Lease,
amendment thereto, assignment thereof, or subletting thereunder (to the extent
Borrower as landlord has approval rights over such subletting), and without
limitation thereon, all Leases shall (A) meet or exceed the Leasing
Guidelines, (B) be with creditworthy tenants as determined by Lender in
its reasonable discretion and (C) be documented using, without material
deviation from, the standard lease form approved by Lender in its reasonable
discretion.  Lender’s failure to respond
to a request from Borrower for approval within ten (10) Business Days of
the latter of (i) such receipt of such request and (ii) receipt of
all information reasonably requested by Lender shall be deemed Lender’s
approval, provided that Borrower delivers to Lender a writing marked in bold
lettering with the following:  “LENDER’S
RESPONSE IS REQUIRED WITHIN 10 BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT
TO THE TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER” and the
envelope containing the writing must be marked “PRIORITY” in bold letters.  Any approval or deemed Lender approval of a
Lease will be deemed to mean and include approval of the tenant improvements
and leasing commissions thereunder (and release of the Leasing Holdback therefor,
subject to other Holdback release conditions), and to any purchase option
therein, the terms of which would be permitted under Section 2.15.

 

(b)           Notwithstanding the
provisions of clause (a) above of this Section 8.9, Borrower
may enter into any Lease (or any amendment, assignment or sublease thereof),
other than a 

 

42

 

Major Lease, after the date hereof, without the
prior written consent of Lender provided that such Lease (i) is documented
using, and does not materially deviate from, the standard lease form approved
by Lender in its reasonable discretion; (ii) complies with the Leasing
Guidelines; (iii) is an arms-length transaction with a tenant that is not
an Affiliate of Borrower, and (iv) is subordinate to the Deed of Trust and
the tenant thereunder agrees to attorn to Lender.  All proposed Leases that do not satisfy the
requirements set forth in this Section 5.7 require Lender’s prior
written approval at Borrower’s expense (including reasonable legal fees and
expenses).  Borrower shall promptly
deliver to Lender a copy of each Lease entered into after the Closing Date,
together with written certification from Borrower confirming that (y) the
copy delivered is a true, complete and correct copy of such Lease and (z) Borrower
has satisfied all conditions of this Section 8.9.

 

(c)           Borrower shall not (i) make
any assignment or pledge of any Lease or Rents to anyone other than Lender
until the Indebtedness is paid in full, (ii) collect any Rents under the
Leases more than one (1) month in advance unless such prepaid rents are
deposited into the Collection Account (or Cash Management Account, if
applicable) (except that Borrower may collect in advance such security deposits
as are permitted pursuant to applicable Legal Requirements and are commercially
reasonable in the prevailing market); (iii) terminate any Lease (provided,
however, that Borrower may terminate any such Lease if the lessee thereunder is
in material monetary default of such Lease); or (iv) execute or grant any
modification of any Lease which, in the aggregate, could reasonably be expected
to have a Material Adverse Effect.

 

(d)           Any letter of credit or
other instrument that Borrower receives in lieu of a cash security deposit
under any Lease shall, if permitted pursuant to applicable Legal Requirements,
name Lender as payee or mortgagee thereunder (or, at Lender’s option, be fully
assigned to and held by Lender).

 

(e)           Notwithstanding anything
herein to the contrary, Lender agrees to review any new lease form submitted by
Borrower, and at Borrower’s written request, shall modify the Leasing
Guidelines from time or time and/or on a case-by-case basis so long as, in each
case in Lender’s sole discretion, (i) the aggregate, forward-projecting
lease terms are materially unchanged from the Leasing Guidelines or (ii) market
conditions dictate such modification.

 

8.10         Limitations on Distributions.  Upon the occurrence and during the
continuance of a monetary Event of Default or Potential Default and thereafter,
and/or upon receipt of written notice following the occurrence and during the
continuance of a non-monetary Event of Default or Potential Default, Borrower
shall not: (a) distribute any money or other property to any Member or
other Equity Interest holder in Borrower, whether in the form of earnings,
income or other proceeds from the Property; or (b) repay any principal or
interest on any loan or other advance made to Borrower by any Member in
Borrower; or (c) loan or advance any funds to any such Member in Borrower.

 

8.11         Subdivision Maps; Zoning;
Joint Assessment.  Borrower
shall not record any final map, parcel map, lot line adjustment or other
subdivision map of any kind covering any portion of the Property (or portion
thereof) (collectively, “Subdivision Map”),
or otherwise without subdivide in any way, in each and every case, only with
Lender’s prior written consent with respect thereto (which consent may be
granted or withheld in Lender’s sole and absolute discretion).  Borrower shall not change the Property’s use
or initiate, join in or consent to any (a) change in any private
restrictive covenant, zoning ordinance or other public or private restrictions
limiting or defining the Property’s uses or any part thereof (including filing
a declaration of condominium, map or any other document having the effect of
subjecting the Property to the condominium or cooperative form of ownership),
including, without limitation, the CC&Rs, or (b) joint assessment of
the Property with any other real or personal property.

 

43

 

8.12         ERISA Compliance.  Borrower shall at all times comply with the
provisions of ERISA with respect to any retirement or other employee benefit
plan to which it is a party as an employer, and as soon as possible after
Borrower knows, or has reason to know, that any Reportable Event (as defined in
ERISA) with respect to any such plan of Borrower has occurred, Borrower shall
furnish to Lender a written statement setting forth details as to such
Reportable Event and any action, if any, which Borrower proposes to take with
respect thereto, together with a copy of a notice of such Reportable Event
furnished to the Pension Benefit Guaranty Corporation.

 

8.13         Application of Gross Income.  To the extent required under the Cash
Management Agreement after the occurrence and during the continuance of an
Event of Default, all Gross Income deposited by Borrower into the Collection
Account shall be applied by Lender pursuant to Section 3.5 hereof
and the Cash Management Agreement.  In no
event shall Gross Income be distributed to any Member except as expressly
permitted under Section 10.1.

 

8.14         Transfers; Management of
Borrower.  Borrower
shall not Transfer the Property, any portion thereof or any interest therein,
or except as may be expressly permitted pursuant to this Section 8.14,
allow a Transfer of any direct or indirect Equity Interests in Borrower or
Guarantor, in each case, without the prior written consent of Lender.  Except as may be expressly permitted pursuant
to this Section 8.14, Borrower shall not cause or permit any direct
or indirect Member or other Equity Interest holder in Borrower or Guarantor to,
directly or indirectly, Transfer, convey, assign, mortgage, pledge,
hypothecate, encumber, alienate or grant a security interest in the partnership
interest, membership interest or other equity interest of such partner, Member,
other Equity Interest holder in Borrower without Lender’s prior written
consent.  Lender, in its discretion,
shall have the right to declare the entire outstanding principal amount of the
Loan, and all accrued and unpaid interest, fees and charges thereon, to be
immediately due and payable in the event that any Transfers take place in
contravention of the provisions set forth in this Section.

 

Notwithstanding
the foregoing or anything herein to the contrary, the following shall be deemed
permitted Transfers (“Permitted Transfers”)
in Borrower which shall not require the consent of Lender or payment to Lender
of any transfer or assumption fee(s) in connection therewith, so long as
in each case (a) Lender receives at least thirty (30) days’ prior written
notice thereof (except in the case of (ii) and (iii) below), (b) a
Lender-approved Property Manager continues to manage the Property pursuant to a
Property Management Agreement (each in accordance with the provisions of this
Agreement), (c) Borrower reimburses Lender for any reasonable costs or
expenses incurred by Lender in connection with its review of the proposed
Permitted Transfer (including, without limitation, reasonable attorneys’ fees
and/or costs) (except in the case of (ii) and (iii) below); (d) no
Event of Default exists at either the time of Borrower’s delivery of written
notice as aforesaid or on the proposed date of the applicable requested
Permitted Transfer except with respect to the Transfers described in clause
(ii), (iii) or (iv) below of this Section 8.14; (e) no such
Transfer shall release (or be deemed to release) Guarantor from any of its
obligations under any of the Carveout Guaranty or the Environmental Indemnity
Agreement (except as set forth in clause (iv)(x) below of this Section 8.14;
(f) at all times while all or any portion of the Loan remains outstanding
and CT Interchange continues to retain its Equity Interest in Borrower, Robert
M. Campbell and/or James Watson (collectively, “CT
Principals”) shall not be permitted in any way to Transfer, and such
CT Principals shall be obligated to retain their respective ownership interests
and, subject to BH’s removal and acquisition rights set forth in clause (iv) below
and in the proviso and the end of this clause (f), their managerial roles in
Borrower (or its manager); provided, however, that a Transfer upon the death of
either or both of the CT Principals (or substitute CT Principals) shall not
constitute an Event of Default so long as a substitute CT Principal (or
substitute CT Principals) replaces (or replace) the deceased CT Principal(s) within
thirty (30) days after the death thereof, which substitute CT Principals are
acceptable to Lender in its sole but good faith discretion and provided further
that there are, at all times, not less than two (2) CT Principals (and for
the purposes hereof, Larry Mathena and/or

 

44

 

Marc Belluomini are approved
as substitute CT Principals); and (g) no change in Control of Borrower or
Guarantor shall occur as a result of such Transfer (except in the case of
clause (iv) below):

 

(i)            the Members shall be
permitted to transfer (but not encumber) their respective Equity Interests for
tax or estate planning purposes, so long as the transfer in question (A) is for
the benefit of the immediate family of the transferor, (B) notwithstanding such
transfer, the transferor remains the sole decision-maker during his lifetime
with respect to all such transferred interests, (C) does not affect the
management or control of the Borrower and (D) otherwise complies in all
respects with the terms and conditions of the Loan Documents;

 

(ii)           Transfers of non-managing
member or limited partnership (as applicable) interests in BH (or its upstream
Affiliates or Members), so long as no change in Control of BH occurs;

 

(iii)          Transfers of non-managing
member or limited partnership (as applicable) interests in CT Interchange (or
its upstream Affiliates or Members), so long as no change in Control of CT
occurs; and

 

(iv)          a removal by BH of CT
Interchange from Control or as “manager” of Borrower pursuant to the
organizational documents of Borrower or the acquisition by BH from CT of all or
a portion of the Equity Interests of CT in Borrower (each, a “Removal Event Transfer”), provided that such removal or
acquisition shall be expressly conditioned upon the conditions (the “Removal Conditions”) being satisfied:

 

(x)            BH shall provide to Lender a
credit-worthy Person acceptable in all respects to Lender in its sole and
absolute discretion to serve as guarantor (the “Replacement
Guarantor”) under the Carveout Guaranty, the Completion Guaranty and
the Environmental Indemnity Agreement; provided that the obligations and
liabilities of such Replacement Guarantor under the Carveout Guaranty only
shall only extend to matters (“Assumed Liability”)
first arising or accruing on or after the date of the Removal Event Transfer
(such liability bifurcation not being applicable to liability in respect of the
Completion Guaranty or the Environmental Indemnity Agreement); and provided,
further, that the original Guarantor shall be released expressly from all
Assumed Liability but shall not be released for obligations and liabilities
under any of the Carveout Guaranty, the Completion Guaranty or the
Environmental Indemnity Agreement arising prior to the date of the Removal
Event Transfer.  Lender hereby approves
any such Replacement Guarantor that is a BH-controlled Affiliate possessing a
Net Worth (as defined in Section 5(p) of the Carveout Guaranty) equal to or
greater than Fifty Million and No/100 Dollars ($50,000,000.00) and Liquidity
(as defined below) equal to or greater than Two Million Five Hundred Thousand
and No/100 Dollars ($2,500,000.00); and

 

(y)
if the original Property Manager has been removed in connection with the
applicable Removal Event Transfer, cause Borrower to appoint or hire a new
Lender-approved Property Manager (“Replacement Property
Manager”) to manage and operate the Property on a day-to-day basis
pursuant to a new written Property Management Agreement approved by Lender
(which approval shall not be unreasonably withheld so long as the Property
Management Agreement is substantially in the same form as the Lender-approved
Property Management Agreement then in effect and the original Property Manager
in connection with the closing of the Loan). 
Any such Replacement Property Manager must be an institutional quality
property manager reasonably approved by Lender, with at least five (5) years’
prior experience managing industrial/office properties and which, at the time
of its appointment, manages at least 3,000,000 square feet of property than the
Property.  CTRI or any Affiliate thereof
(“CT”) is hereby pre-approved as a
Replacement Property Manager subject to such party’s execution of a Property
Management Agreement as required hereunder.

 

45

 

Without
limitation on the foregoing, prior to and as a condition precedent to any such
Removal Event Transfer, the applicable Lender-approved Replacement Guarantor
must execute and deliver to Lender a non-recourse carveout guaranty
substantially similar to the Carveout Guaranty (subject to the liability
bifurcation described in clause (x) above), a completion guaranty substantially
similar to the Completion Guaranty and an environmental indemnity agreement
substantially similar to the Environmental Indemnity Agreement, the applicable Lender-approved
Replacement Property Manager must be appointed or hired, and Borrower, the
applicable Replacement Guarantor and, if applicable, the Replacement Property
Manager shall each execute such documents or agreements, and take such further
steps, as Lender deems reasonably necessary to effectuate the Removal
Conditions.  This paragraph shall not
apply to CT in the event it becomes a Replacement Property Manager.

 

8.15         Approved Budget.  On or before December 1 of each year
throughout the term of the Loan, as the same may be extended, Borrower shall
submit to Lender for Lender’s review and approval (a) a capital
improvement budget for the Property, which shall not include any Affiliate Fees
unless expressly approved by Lender in writing, and (b) an operating
budget for the Property (which budget may provide for the establishment and
funding of reserves).  Borrower shall use
its commercially reasonable efforts to cause the Property to be owned and
operated in accordance with the Approved Budget, and shall make no changes to
any such Approved Budget without the prior written consent of Lender.  The initial Approved Budget is attached
hereto as Exhibit G.

 

8.16         Special Purpose Entity.  Borrower, has been, shall be and shall remain
at all times a special purpose bankruptcy remote entity (an “SPE”) and shall at all times comply with
the following covenants:

 

(a)           The purpose for which
Borrower is organized has always been and shall be limited to (i) owning,
holding, selling, leasing, transferring, exchanging, operating and managing
Borrower’s interest in the Property, (ii) entering into the Loan,
(iii) refinancing the Property in connection with a permitted repayment of
the Loan, and (iv) transacting any and all lawful business that is
incident, necessary and appropriate to accomplish the foregoing.

 

(b)           Borrower has never owned,
does not own and will not own any asset or property other than (i) the
Property and (ii) incidental personal property necessary for and used in
connection with the ownership or operation of the same.

 

(c)           Borrower has never and shall
not engage in a business other than the ownership, operation and management of
the Property and any other property which is hereafter acquired by Borrower
with Lender’s prior written consent.

 

(d)           Borrower has not entered and
will not enter into any contract or agreement with any Affiliate, Guarantor, or
any Affiliate of Guarantor, provided, however, that Borrower may enter into
contracts with Affiliates with Lender’s prior written consent so long as such
contracts relate to the Property and provide for payments at prevailing market
rates.  Notwithstanding the foregoing,
Borrower shall be permitted, among other uses and at Borrower’s election, to
pay an Affiliate of Borrower or Guarantor a property management and an asset
management fee (the “Affiliate Management Fee”),
which Affiliate Management Fee may only be paid by Borrower (or any Affiliate
thereof) to such Affiliate solely either (a) from additional equity (which
equity shall be in excess of the Borrower Equity required to be contributed by
Borrower on the Effective Date pursuant hereto) of Borrower, Guarantor or any
Affiliate thereof (or their respective principals) or (b) to the extent
Borrower is expressly entitled hereunder to receive distributions of Gross
Income pursuant to Section 10.1(e) below, from Gross Income in the event
Borrower receives a distribution of the same pursuant to such Section
10.1(e).

 

46

 

(e)           Borrower has not incurred
and will not incur any indebtedness, secured or unsecured, in violation of
Section 8.8.  Notwithstanding anything
herein to the contrary, Members may make unsecured loans to Borrower or to
other Members provided that each and all of the following conditions are
satisfied at all times:  (x) such loan(s)
is or are and shall remain at all times subordinate in all respects to the Loan
(and, if made to Borrower, the applicable Member making such loan(s) and
Borrower shall execute any documentation required by Lender to memorialize such
continued subordination) and (y) such loan(s) does not result in a reduction or
dilution of the amount of the Borrower Equity. 
Notwithstanding the foregoing, in no event shall any indebtedness other
than the Loan be secured (either subordinate or pari  passu) by
the Property, and no indebtedness may be secured, directly or indirectly, by
any partnership, membership or other equity interest in Borrower.

 

(f)            Borrower has not made and
will not make any loans or advances to any person or entity and shall not
acquire obligations or securities of an Affiliate.

 

(g)           Borrower has always been, is
and will remain solvent and Borrower will pay its debts and liabilities
(including, as applicable, shared personnel and overhead expenses) from its
assets as the same shall become due; provided that this covenant shall not
imply any capital contribution obligation other than the obligation to
contribute the required Borrower Equity.

 

(h)           Borrower has done or caused
to be done and will do all things necessary to observe organizational
formalities and preserve its existence, and Borrower will not amend, modify or
otherwise change, in violation of the covenants of this Section 8.16,
the partnership certificate, partnership agreement, articles of incorporation
and bylaws, operating agreement, trust or other organizational documents of
Borrower without the written consent of Lender.

 

(i)            Borrower has always
maintained and shall maintain all of its books, records, financial statements
and bank accounts separate from those of its Affiliates.  Borrower’s assets have not been and will not
be listed as assets on the financial statement of any other Person.  Borrower has always had and shall have its
own separate financial statement, provided, however, that Borrower’s assets may
be included in a consolidated financial statement of its parent companies if
inclusion on such a consolidated statement is required to comply with the
requirements of GAAP.  Borrower has
always filed and will file its own tax returns and will not file a consolidated
federal income tax return with any other corporation.  Borrower has always maintained and shall
maintain its books, records, resolutions and agreements as official records.

 

(j)            Borrower has always been,
will be, and at all times will hold itself out to the public as, a legal entity
separate and distinct from any other person or entity, shall correct any known
misunderstanding regarding its status as a separate entity, shall conduct
business in its own name and shall not identify itself or any of its Affiliates
as a division or part of the other.

 

(k)           Borrower has always
maintained and will maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations; provided that this covenant shall not
imply any capital contribution obligation other than the obligation to
contribute the required Borrower Equity.

 

(l)            Neither Borrower nor any
constituent party has ever sought or will seek the dissolution, winding up,
liquidation, consolidation or merger, in whole or in part, or the sale of
material assets of Borrower.

 

(m)          Borrower has never and will
not commingle the funds and other assets of Borrower with those of any other
Person.

 

47

 

(n)           Borrower has never and will
not commingle its assets with those of any other Person and will hold all of
its assets in its own name.

 

(o)           Except for the Purchase
Agreement Indemnification Obligation, Borrower has never and will not guarantee
or become obligated for the debts of any other Person and does not and will not
hold itself out as being responsible for the debts or obligations of any other
Person.  Notwithstanding anything herein
or in the other Loan Documents to the contrary, Borrower shall not be obligated
to cause the release of any Lien(s) respecting the litigation that is or are
the subject of Purchase Agreement Indemnification Obligation, so long as such
Liens were recorded against the Property prior to the Effective Date and are
not listed as exceptions to the Title Policy; provided, however, that the
foregoing shall not relieve (or be deemed to relieve) Borrower of its
obligation(s) to keep the Property free and clear of Liens that are not
Permitted Encumbrances arising from and after the Effective Date (subject to
the cure rights in respect thereof as expressly set forth hereunder).

 

(p)           Borrower has never and shall
not pledge its assets for the benefit of any other Person, other than with
respect to the Loan.

 

(q)           Borrower has never and
without the unanimous written consent of each Member, Borrower shall never file
a petition for relief under the Bankruptcy Code, or under any other present or
future state of federal law regarding bankruptcy, reorganization or other
debtor relief law.

 

8.17         Completion of Tenant
Improvements and Capital Improvements.  Without in any way limiting the other
requirements expressly set forth herein respecting construction, Borrower shall
complete any Borrower Improvements, free and clear of any Liens, in accordance
with and within the time frame set forth in any plans and budget submitted to
Lender in connection with such tenant improvements or capital improvements and
approved by Lender in its reasonable discretion.

 

8.18         Loan In-Balance; Required
Deposit(s) into Interest Reserve Account.  Borrower shall at all times cause the Loan to
be In-Balance. In connection therewith, Borrower hereby agrees that if Lender
reasonably determines at any time that the Loan is not In-Balance, then Borrower
shall be obligated to deposit the amount of such deficiency (from additional
Borrower equity (in excess of the Borrower Equity contributed by Borrower on
the Effective Date in accordance herewith)) into the Interest Reserve Account
within five (5) Business Days following written demand therefor.  Any funds deposited in the Interest Reserve
Account in accordance with this paragraph shall be utilized for payment of
interest costs prior to any additional Loan proceeds being made available from
the Interest Holdback for payment of such costs by Lender.  Funds held in the Interest Reserve Account,
if any, shall be held and disbursed in accordance with the provisions of Section
12.5 below.

 

8.19         Borrower Equity.  Borrower shall cause the Borrower Equity to be
contributed to or applied in payment of the costs and expenses incurred by
Borrower in connection with Borrower’s acquisition of the Property (none of
which shall be removed as Borrower’s equity from the Property or utilized to
pay any fees, costs, refunds or other charges for the Property or the Loan
transaction), including the payment to Seller of a portion of the purchase
price payable for the Property, prior to the disbursement by Lender of any
initial proceeds of the Loan or disbursements of the Loan subsequent to the
Effective Date.

 

8.20         Maintenance; Waste;
Alterations.  Borrower shall at all times keep the Property
in good repair, working order and condition, except for reasonable wear and
use.  Borrower shall not permit the
Improvements to be removed or demolished or otherwise altered (provided,
however, that Borrower may remove, demolish or alter worn out or
obsolete Improvements that are promptly replaced with Improvements, as
applicable, of equivalent value and functionality, unless Borrower reasonably 

 

48

 

determines that such
replacement is not necessary for the operation of the Property and would not
have a Material Adverse Effect). 
Borrower may not, without Lender’s approval, perform alterations to the
Property, the cost of which exceed One Hundred Thousand and No/100 Dollars
($100,000.00), in the aggregate.

 

8.21         Counterparty.  At all times during the term of the Loan,
Borrower shall maintain in effect an Interest Rate Protection Agreement and
with a counterparty (“Counterparty”)
reasonably acceptable to Lender having a Minimum Counterparty Rating at
inception.  In the event of any downgrade
or withdrawal of the rating of such Counterparty by any Rating Agency below the
Minimum Counterparty Rating or the placement by Moody’s of such Counterparty “On
Watch for Downgrade” from the Minimum Counterparty Rating, Borrower shall
replace the Interest Rate Protection Agreement not later than thirty (30) days
following receipt of notice from Lender of such downgrade or withdrawal with an
Interest Rate Protection Agreement in form and substance reasonably
satisfactory to Lender (and meeting the requirements set forth in this Section 8.21)
from a Counterparty reasonably acceptable to Lender having a Minimum
Counterparty Rating.

 

8.22         Deferred Maintenance and
Environmental Remediation.  Borrower shall perform the deferred
maintenance work and environmental remediation to the Property itemized on Exhibit
J hereto within the time periods set forth on said Exhibit J

 

8.23         Required Principal Paydown
in the Event Property Fails to Achieve Required Debt Constant by April 1, 2012.  In the event that the Property does not
achieve the Required Debt Constant at any time on or before April 1, 2012, then
Borrower shall immediately pay to Lender a required principal paydown of the
Loan equal to Two Million Seven Hundred Thousand and No/100 Dollars
($2,700,000.00), less any Loan principal repayments paid to Lender
pursuant to the application of partial releases in accordance herewith or
otherwise (such amount, the “Required Principal Paydown”).  In addition, concurrently with Borrower’s
payment to Lender of the Required Principal Paydown, if so payable, Borrower
shall also be obligated to pay the applicable portion of the Exit Fee due in
connection with such payment.  Further,
if so payable, the Required Principal Paydown shall come from additional
Borrower equity and shall be in addition to the Borrower Equity contributed to
the Property on the Effective Date in accordance herewith.

 

8.24         CC&Rs/Association
Demands and Notices.  Borrower
shall provide Lender with true, correct and complete copies of all notices or
demands sent or received by Borrower or Property Manager in respect of the
Association and/or the CC&Rs within two (2) days after receipt or
distribution thereof.

 

ARTICLE IX

HAZARDOUS MATERIALS

 

9.1           Special Representations and
Warranties.  Without in
any way limiting the other representations and warranties set forth in this
Agreement, and after reasonably investigation and inquiry, Borrower hereby
expressly represents and warrants to Lender to Borrower’s knowledge as of the
date of this Agreement as follows:

 

(a)           Hazardous Materials.  Except as set forth in the Environmental
Reports, The Property is not and has not been a site for the use, generation,
manufacture, storage, treatment, release, threatened release, discharge,
disposal, transportation or presence of any oil; flammable explosives;
asbestos; urea formaldehyde insulation; radioactive materials; fungi or bacterial
matter which reproduces through the release of spores or the splitting of
cells, including, without limitation, mold, mildew, and viruses, whether or not
living (collectively, “Mold”);
hazardous wastes; toxic or 

 

49

 

contaminated substances or
similar materials, including, without limitation, any substances which are “hazardous
substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,”
“regulated substances,” “industrial solid wastes,” or “pollutants” under the
Hazardous Materials Laws, as described below, and/or other applicable
environmental laws, ordinances and regulations (collectively, “Hazardous Materials”).  “Hazardous
Materials” shall not include commercially reasonable amounts of such
materials used in the ordinary course of operation of the Property or of any
tenant’s business which are used and stored at all times in accordance with all
then applicable Hazardous Materials Laws, or Mold in amounts or concentrations
not detectable by means such as those used in preparing a standard phase I mold
survey.

 

(b)           Hazardous Materials Laws.  Except as set forth in the Environmental
Reports, the Property is in compliance with all laws, ordinances and
regulations relating to Hazardous Materials (“Hazardous
Materials Laws”), including, without limitation: the Clean Air Act,
as amended, 42 U.S.C. Section 7401  et  seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251
et  seq.; the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. Section 6901  et  seq.; the
Comprehensive Environment Response, Compensation and Liability Act of 1980, as
amended (including the Superfund Amendments and Reauthorization Act of 1986, “CERCLA”), 42 U.S.C. Section 9601  et  seq.;
the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601
et  seq.; the Occupational Safety and Health Act, as amended, 29
U.S.C. Section 651, the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C Section 11001  et  seq.;
the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801
et  seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f
et  seq.; and all comparable state and local laws, laws of other
jurisdictions or orders and regulations.

 

(c)           Hazardous Materials Claims.  There are no claims or actions (“Hazardous Materials Claims”) pending or
threatened against Borrower or the Property by any Governmental Authority or by
any other Person relating to Hazardous Materials or pursuant to Hazardous
Materials Laws.

 

(d)           Border Zone
Property.  The
Property has not been designated as “Border Zone Property” under the provisions
of California Health and Safety Code, Sections 25220 et  seq. and
to the Borrower’s knowledge, there has been no occurrence or condition on any
real property adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to be designated as Border Zone Property.

 

9.2           Hazardous Materials
Covenants.  Borrower
agrees as follows:

 

(a)           No Hazardous Activities.  Borrower shall not cause or permit the
Property to be used as a site for the use, generation, manufacture, storage,
treatment, release, discharge, disposal, transportation or presence of any
Hazardous Materials.

 

(b)           Compliance.  Borrower shall comply and cause the Property
to comply with all Hazardous Materials Laws.

 

(c)           Notices.  Borrower shall immediately notify Lender in
writing of:  (1) the discovery by
Borrower of any Hazardous Materials on, under or about the Property;
(2) any knowledge by Borrower that the Property does not comply with any
Hazardous Materials Laws; (3) Borrower’s knowledge of any Hazardous
Materials Claims; and (d) the
discovery by Borrower of any occurrence or condition on any real property
adjoining or in the vicinity of the Property that could cause the Property or
any part thereof to be designated as Border Zone Property.

 

50

 

9.3           Inspection by Lender.  Lender, its employees and agents, may from
time to time (whether before or after the commencement of a nonjudicial or
judicial foreclosure proceeding) enter and inspect the Property for the purpose
of determining the existence, location, nature and magnitude of any past or
present Release or threatened Release of any Hazardous Materials into, onto,
beneath or from the Property.  In
connection therewith, Lender shall not conduct any invasive testing of the
Property unless an Event of Default shall have occurred and be continuing, or
unless Lender has reason to suspect the presence of Hazardous Materials on,
under or in the vicinity of the Property.

 

9.4           Hazardous Materials
Indemnity.  Borrower
hereby agrees to defend, indemnify and hold harmless the Indemnified Parties
from and against any and all Liabilities and Costs (but expressly excluding
punitive damages and diminution in value of the Property relating to
Liabilities and Costs over and above the maximum Loan amount) which Lender may
incur as a direct or indirect consequence of the use, generation, manufacture,
storage, disposal, threatened disposal, transportation or presence of Hazardous
Materials in, on, under or about the Property. 
Borrower shall immediately pay to Lender upon demand any amounts owing
under this indemnity, together with interest from the date the indebtedness
arises until paid at the rate of interest applicable to the principal balance
of the Note.  Borrower’s duty and
obligations to defend, indemnify and hold harmless Lender shall survive the
cancellation of the Note and the release, reconveyance or partial reconveyance
of the Deed of Trust.  Notwithstanding
anything to the contrary contained herein, the foregoing indemnification
obligation shall not apply to claims, demands, suits, actions, liabilities,
costs, damages or expenses (a) of an Indemnified Party to the extent that the
subject of such indemnification obligation is or was caused by or arises of the
sole gross negligence or willful misconduct or fraud of that particular
Indemnified Party or (b) that were first introduced to the Property by a party
other than Borrower, Guarantor, any Affiliate of either of the foregoing or any
officer or principal of any of the same, on or after the Transition Date.  As used herein, the term “Transition Date” shall mean the earlier to occur of (i) the
date, if any, on which the Indebtedness has been paid, performed and finally
discharged in full (without possibility for disgorgement), and the Deed of
Trust has been released or reconveyed, and (ii) the date on which the Lien of
the Deed of Trust is fully and finally foreclosed or a conveyance by deed in
lieu of such foreclosure is fully and finally effective and possession of the
Property has been given to and accepted by Lender or any other purchaser or
grantee free of occupancy and claims to occupancy by Borrower and its heirs,
devisees, representatives, successors and assigns; provided that, if such
payment, performance, release, foreclosure or conveyance is challenged, in
bankruptcy proceedings or otherwise, the Transition Date shall be deemed to not
to have occurred until such challenge is validly released, dismissed with
prejudice or otherwise barred by law from further assertion; provided, however,
that in connection with the foregoing, Borrower (and not Lender) shall have the
burden of proving that any such deposit, release or discharge first occurred on
or after the Transition Date.

 

ARTICLE X

APPLICATION OF REVENUE

 

10.1         Priority of Application of
Gross Income.  Borrower
shall cause all Gross Income to be applied on a monthly basis for the following
purposes and in the following order of priority:

 

(a)                   First, to the
payment of the Lender-approved Operating Expenses pursuant to the Approved
Budget;

 

(b)                  Next, the
balance, if any to fund any Reserve Accounts required hereunder or under the
Cash Management Agreement;

 

(c)                   Next, the
balance, if any, to Lender to make the monthly interest payments due and
payable on the Loan;

 

51

 

(d)                  Next, the
balance, if any, to Lender, to be applied in reduction of the outstanding principal
amount of the Loan and the applicable portion of the Exit Fee payable in
connection with such principal repayments, until such time, if ever, that the
Debt Service Coverage Ratio for the Property exceeds 1.40:1 for each of the
preceding three (3) calendar months; and

 

(e)                   Next, the
balance, if any, to Borrower, to be applied as provided in (and subject to the
limitations set forth in) Section 10.4 below.

 

IN THE EVENT THAT GROSS INCOME SHALL NOT BE SUFFICIENT TO ENABLE
BORROWER TO MAKE ANY OF THE PAYMENTS DESCRIBED IN SUBPARAGRAPHS (a), (b) AND/OR
(c) ABOVE (OR THAT FUNDS ARE NOT SUFFICIENT IN THE INTEREST HOLDBACK TO MAKE
THE PAYMENTS DESCRIBED IN (c) ABOVE), BORROWER SHALL BE AND REMAIN OBLIGATED TO
MAKE SUCH PAYMENTS FROM OTHER SOURCES.

 

10.2         Priority of Application of
Gross Sales Proceeds.  Borrower
shall cause all Gross Sales Proceeds to be disbursed from an independent third
party escrow holder for the following purposes and in the following order of
priority:

 

(a)          First, to the
payment of the Lender-approved Sales Costs;

 

(b)          Next, the
balance, if any, to Lender to make the monthly interest payments or to pay
other costs and/or expenses due and payable with respect to the Loan;

 

(c)          Next, the
balance, if any, to Lender, to pay the applicable portion of the Exit Fee; and

 

(d)          Next, the
balance, if any, to Lender, to be applied in reduction of the outstanding
principal balance of the Loan.

 

10.3         Intentionally omitted.

 

10.4         Distributions
to Borrower.  Borrower shall be entitled to apply or cause
to be applied all funds described in Section 10.1(e) above for such
purposes as Borrower shall desire. 
Notwithstanding the foregoing or anything to the contrary contained
hereunder or under any of the other Loan Documents, upon the occurrence and
during the continuance of an Event of Default, Borrower shall have no right to
apply such funds for any purpose (including, without limitation, distributions
to Members), without Lender’s prior written approval, which approval may be
granted or withheld in Lender’s sole and absolute discretion.

 

ARTICLE XI

EVENTS OF DEFAULT AND REMEDIES

 

11.1         Events of Default.  The occurrence of any one or more of the
following, whatever the reason therefor, shall constitute an Event of Default
hereunder:

 

(a)           Payment.  Borrower shall fail to pay any accrued
interest on the Loan, any portion of the principal amount of the Loan, or any
other amount payable by Borrower under the this Agreement or the other Loan
Documents within five (5) days following the date when and as the same shall
become due and payable, provided that the foregoing grace period shall not
apply to amounts payable by Borrower on the Maturity Date;

 

52

 

(b)           Other Covenants.  Borrower shall fail to perform any other covenant
or agreement to be performed by Borrower under this Agreement or the other Loan
Documents, and such failure shall continue for more than thirty (30) days after
written notice thereof is given to Borrower by Lender; provided, however, that
such 30-day cure period shall not apply to any of the occurrences set forth in
clauses (a), (c) or (d) (except as set forth therein) through (n), inclusive,
of this Section 11.1;

 

(c)           Liens, Attachments,
Condemnation. 
(i) The recording of any mechanic’s lien or claim of lien against
in the Property and the continuance of such lien or claim of lien for twenty
(20) days without discharge, satisfaction or provision for payment being made
by Borrower in a manner satisfactory to Lender, or without provision of a bond
to release such lien of record satisfactory to Lender; or (ii) the
sequestration or attachment of, or any levy or execution upon, any of the
Property, any other Collateral, or any substantial portion of the other assets
of Borrower, which sequestration, attachment, levy or execution is not
released, expunged or dismissed prior to the earlier of sixty (60) days or the
sale of the assets affected thereby;

 

(d)           Representations and
Warranties.  Any
representation or warranty made by Borrower in this Agreement or any of the
other Loan Documents or in any certificate, agreement, instrument or other
document made or delivered pursuant to or in connection with any of the Loan
Documents shall have been false or misleading in any material respect when
made; provided, however, if such representation or warranty was not actually
known by Borrower to be false or misleading when made, Borrower shall have the
notice and cure period set forth in subsection (b) above;

 

(e)           Dissolution.  Borrower or Guarantor is terminated, dissolved
or liquidated; or all or substantially all of the assets of Borrower or
Guarantor are sold or otherwise transferred or disposed of without Lender’s
written consent;

 

(f)            Insolvency.  (i) Borrower or Guarantor is the subject of
an order for relief by any bankruptcy court, or is unable or admits in writing
its inability to pay its debts as they mature, or makes an assignment for the
benefit of creditors; or (ii) Borrower or Guarantor applies for or consents to
the appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any part of its property;
or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed without the application or consent of Borrower or
Guarantor, as applicable, and the appointment continues undischarged or
unstayed for one hundred twenty (120) days; or (iii) Borrower or Guarantor
institutes or consents to any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, custodianship, conservatorship,
liquidation, rehabilitation or similar proceedings relating to it or to all or
any part of its property under the Laws of any jurisdiction; or any similar
proceeding is instituted without the consent of Borrower or Guarantor, as
applicable, and continues undismissed or unstayed for one hundred twenty (120)
days; or (iv) any judgment, writ, attachment, execution or similar process is
issued or levied against all or any part of the property of Borrower or
Guarantor and is not released, vacated or fully bonded within one hundred
twenty (120) days after its issue or levy;

 

(g)           Breach of Guaranty Covenant.  Guarantor shall breach the Covenant as
defined in and set forth in Section 5(p) of the Carveout Guaranty;
provided, however, that such breach shall not constitute an Event of Default
hereunder so long as a Replacement Guarantor satisfying the requirements of Section
8.14 above executes the applicable documents required thereunder within
fifteen (15) days after Lender’s delivery to Borrower of notice of original
Guarantor’s breach of the Covenant (and upon such required document execution
by the applicable Replacement Guarantor in accordance with such Section 8.14,
thereafter this clause (g) shall no longer be applicable);

 

(h)           Other Default.  The occurrence of any other event,
circumstance or 

 

53

 

condition that constitutes a
“Default” or “Event of Default” under any of the other Loan Documents, or any
of the other documents referenced as “Other Documents” on Exhibit B
attached hereto;

 

(i)            Withdrawal.  In Lender’s discretion, the withdrawal of
Guarantor from active participation in Borrower’s business activities, and
Borrower’s failure to provide a substitute or Replacement Guarantor the
requirements set forth in Section 8.14(iv)(x) above within thirty (30)
days after the occurrence of such withdrawal;

 

(j)            Loss of Priority.  The failure at any time of the Deed of Trust
to be a valid first priority Lien upon the Property or any portion thereof,
other than as a result of any release or reconveyance of the Deed of Trust with
respect to any portion of Borrower’s interest in the Property pursuant to this
Agreement;

 

(k)           Hazardous Materials.  The discovery of any Hazardous Materials in,
on, under or about the Property subsequent to the Effective Date that either
are required to be remediated by applicable Law or result in a material
diminution in the value of the Property, if Borrower shall fail to commence
such remediation within thirty (30) days after written notice thereof, and
thereafter diligently prosecute such remediation to completion;

 

(l)            Transfers.  Borrower shall fail to strictly comply with
the provisions of Section 8.14 (Transfers; Management of Borrower);

 

(m)          Single Purpose Entity.  Borrower shall fail to strictly comply with
the provisions of Section 8.16 (Single Purpose Entity); or

 

(n)           ERISA Compliance.  Borrower shall fail to strictly comply with
the provisions of Section 8.12 (ERISA Compliance).

 

11.2         Remedies upon Default.  Upon the occurrence and during the
continuance of an Event of Default, all or any one or more of the rights,
powers and other remedies available to Lender against Borrower under any Loan
Document, or at law or in equity may be exercised by Lender at any time and
from time to time (including the right to accelerate and declare the
outstanding Indebtedness to be immediately due and payable), without notice or
demand, whether or not all or any portion of the Indebtedness shall be declared
due and payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents with respect to all or any portion of the Property.  Notwithstanding anything contained to the
contrary herein, the outstanding Indebtedness shall be accelerated and
immediately due and payable, without any election by Lender upon the occurrence
of an insolvency action described in Section 11.1(f).

 

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

 

54

 

obligated in accordance with the terms hereof,
notwithstanding (i) the release or substitution of Property at any time,
or of any rights or interest therein or (ii) any delay, extension of time,
renewal, compromise or other indulgence granted by Lender in the event of any
Event of Default with respect to the Property or otherwise hereunder.  Notwithstanding any other provision of this
Agreement, Lender reserves the right to seek a deficiency judgment or preserve
a deficiency claim, in connection with the foreclosure of the Deed of Trust on
the Property, to the extent necessary to foreclose on other parts of the
Property.

 

11.4         Lender Appointed
Attorney-In-Fact.  Borrower hereby irrevocably and
unconditionally constitutes and appoints Lender as Borrower’s true and lawful
attorney-in-fact, with full power of substitution, at any time after the
occurrence and during the continuance of an Event of Default to execute,
acknowledge and deliver any documents, agreements or instruments and to
exercise and enforce every right, power, remedy, option and privilege of
Borrower under all Loan Documents, and do in the name, place and stead of
Borrower, all such acts, things and deeds for and on behalf of and in the name
of Borrower under any Loan Document, which Borrower could or might do or which
Lender may deem necessary or desirable to more fully vest in Lender the rights
and remedies provided for under the Loan Documents and to accomplish the
purposes thereof.  The foregoing powers
of attorney are irrevocable and coupled with an interest.

 

11.5         Lender’s Right to Perform.  If Borrower fails to perform any covenant or
obligation contained herein for a period of five (5) Business Days after
Borrower’s receipt of notice thereof from Lender following the occurrence and
during the continuance of an Event of Default, Lender may, but shall have no
obligation to, perform, or cause performance of, such covenant or obligation,
and the expenses of Lender incurred in connection therewith shall be payable by
Borrower to Lender upon demand, together with interest thereon at the Default
Interest Rate.  Notwithstanding the
foregoing, Lender shall have no obligation to send notice to Borrower of any
such failure.

 

ARTICLE XII

RESERVE ACCOUNTS

 

12.1         Reserve Accounts Generally.

 

(a)           Establishment.  On the Closing Date, Lender shall establish
the following accounts for purpose of holding the funds to be deposited by
Borrower pursuant to this Article XII:  a “Tax and Insurance Reserve
Account”,  a “Capital Expenditure Reserve Account”, a “Deferred Maintenance and Environmental Reserve Account” and
an “Interest Reserve Account”
(individually, a “Reserve Account”
and collectively, the “Reserve Accounts”),
or in accordance with the Cash Management Agreement.  Each Reserve Account shall be a custodial
account established by Lender and shall not constitute a trust fund.  Borrower acknowledges and agrees that the
Reserve Accounts are subject to the sole dominion, control and discretion of
Lender, its authorized agents or designees, subject to the terms hereof.  Borrower shall not have the right to make any
withdrawal from any Reserve Account.

 

(b)           Application upon Event of
Default.  Notwithstanding anything to
the contrary contained herein, if an Event of Default has occurred and is
continuing, (i) any amounts deposited into or remaining in any Reserve
Account shall be for the account of Lender and may be withdrawn by Lender to be
applied in any manner as Lender may elect in Lender’s discretion, and (ii) Borrower
shall have no further right in respect of the Reserve Accounts.

 

12.2         Taxes and Insurance.  On the date hereof, Borrower shall deposit
with Lender the following sums:  (i) Ninety-Three
Thousand Three Hundred Thirty-Two and No/100 Dollars ($93,332.00) with respect
to Impositions, and (ii) Forty-Nine Thousand Five Hundred and No/100
Dollars 

 

55

 

($49,500.00)
with respect to insurance premiums.  Such
sums shall be held by Lender in the Tax and Insurance Reserve Account.  Beginning on the first Payment Date and on
each Payment Date thereafter, Borrower shall deliver to Lender the amount
reasonably estimated by Lender to be one-twelfth (1/12th) of the annual amount
of (A) Impositions, which amount shall initially be Fifty-One Thousand Six
Hundred Sixty-Seven and No/100 Dollars ($51,667.00), and (B) insurance
premiums for policies required pursuant to this Agreement, which amount shall
initially be Six Thousand Three Hundred Seventy-Five and No/100 Dollars
($6,375.00) (provided, that Lender may re-calculate the foregoing monthly
amounts from time to time to assure that funds are reserved in sufficient
amounts to enable the payment of Impositions and insurance premiums thirty (30)
days prior to their respective due dates) (collectively, the “Tax and Insurance Monthly Installment”).  If such amounts for the then current Fiscal
Year or payment period are not ascertainable by Lender at the time a monthly
deposit is required to be made, the Tax and Insurance Monthly Installment shall
be Lender’s reasonable estimate based on one-twelfth (1/12th) of the aggregate
Impositions and insurance premiums for the prior Fiscal Year or payment period,
with adjustments reasonably determined by Lender.  As soon as Impositions and insurance premiums
are fixed for the then current Fiscal Year or period, the next ensuing Tax and
Insurance Monthly Installment shall be adjusted to reflect any deficiency or
surplus in prior Tax and Insurance Monthly Installments.  Lender shall make payments of Impositions and
insurance premiums out of the Tax and Insurance Reserve Account before the same
shall be delinquent to the extent that there are funds available in the Tax and
Insurance Reserve Account and Lender has received appropriate documentation to
establish the amount(s) due and the due date(s) as and when provided
above.

 

12.3         Deferred Maintenance Costs and Remediation Costs.  On the date hereof, Borrower shall deposit
Seventy-Five Thousand and No/100 Dollars ($75,000.00) into the Deferred
Maintenance and Environmental Reserve Account, which amounts shall be used for
payment of costs incurred by Borrower in connection with any deferred
maintenance or Remediation required pursuant to Section 8.22.

 

12.4         Capital Improvement Costs.  On the Effective Date, Borrower shall deliver
to Lender the sum of Two Hundred Thousand and No/100 Dollars ($200,000.00),
which sum shall be held in the Capital Expenditure Reserve Account.  Beginning on the first Payment Date and on
each Payment Date thereafter, Borrower shall deliver to Lender the sum of Five
Thousand Three Hundred Forty-Seven and No/100 Dollars ($5,347.00), which sums
shall be held in the Capital Expenditure Reserve Account.  Amounts held in the Capital Expenditure
Reserve Account shall be used for payment of costs incurred by Borrower in
connection with capital improvements to the Property reasonably approved by
Lender and otherwise in accordance with the terms of the Loan Documents,
including, but not limited to, all requirements, terms, covenants and
conditions applicable to certain Lender-approved capital or other improvements
to the Property as required and/or permitted under this Agreement and the other
Loan Documents.  Such sums shall be
subject to the disbursement procedures and requirements set forth in Article IV
and in addition, Lender shall disburse funds for capital improvements upon
evidence of lien free completion of such capital improvements and, in addition,
Lender may require ten percent (10%) retainage; provided, however, that Lender
shall disburse progress payments, not more frequently than monthly, in
proportion to the completion of such capital improvements and subject to Lender’s
receipt of conditional lien waivers and ten percent (10%) retainage.

 

12.5         Interest Reserve Account.  In the event that Borrower is obligated from
to time to cause the Loan to be In-Balance in accordance with this Agreement,
Borrower shall deliver the required deposit amount(s) into the Interest
Reserve Account within the time period specified in Section 8.18
above.  Funds in the Interest Reserve
Account shall be disbursed monthly directly to Lender for the payment of
interest which accrues and becomes due under the Note in strict accordance with
the quarterly schedule (including the quarterly disbursement limitation) set
forth on Exhibit I attached hereto. 
Lender shall provide Borrower with a monthly interest statement.  Depletion of the Interest Reserve Account (or

 

56

 

the
Interest Holdback) shall not release Borrower from any of Borrower’s
obligations under the Loan Documents including, without limitation, payment of
all accrued and due interest from other sources.  Notwithstanding the foregoing, any
disbursements from the Interest Reserve Account (and the Interest Holdback) shall
be subject to the provisions of Article X of this Agreement which require
that available Gross Income be first applied for the purposes specified
therein, including to the payment of accrued interest under the Note, before
Borrower shall be entitled to any disbursements from the Interest Reserve
Account (or the Interest Holdback).  To
the extent there exist funds in the Interest Reserve Account, such funds shall
be disbursed prior to any disbursements from the Interest Holdback.

 

12.6         Disbursements.  Not more frequently than once in any 30-day
period, and provided that no Event of Default has occurred and is continuing,
Borrower may request in writing that Lender release to Borrower funds from one
or more Reserve Accounts to the extent funds are available therein, for payment
of costs incurred by Borrower in connection with the expenses for which such
Reserve Account is maintained.  Together
with each such request, Borrower shall furnish Lender with copies of bills and
other documentation reasonably required by Lender to establish that such costs
are reasonable and are substantially in accordance with market rates, that the
work relating thereto has been completed and that such amounts are then due or
have been paid.  Lender shall approve or disapprove
such request within ten (10) Business Days after Lender’s receipt of such
request and, if approved, Lender shall release the funds to Borrower or
Borrower’s designee within ten (10) Business Days after Lender’s approval.

 

12.7         Interest on Reserve Accounts.  Borrower shall not be entitled to any
earnings or interest on funds deposited into the Tax and Insurance Reserve
Account.  Notwithstanding the foregoing,
amounts on deposit in the Deferred Maintenance and Environmental Reserve
Account and the Capital Expenditure Reserve Account shall bear interest at the
rates customarily offered by the bank or other financial institution used by
Lender or its servicer for the purposes of holding such accounts (provided,
however, that interest paid or payable with respect to any such account may not
be based on the highest rate of interest payable by Lender or such bank or
institution on deposits and shall not be calculated based on any particular
external interest rate or interest rate index, nor shall any such interest
reflect the interest rate utilized by Lender or such bank or institution to
calculate interest payable on deposits held with respect to any particular loan
or borrower or class of loans or borrowers, and Lender shall have no liability
with respect to the amount of interest paid and/or loss of principal).

 

ARTICLE XIII

SECONDARY MARKET TRANSACTIONS

 

13.1         General.  Borrower hereby acknowledges that
Lender may in one or more transactions (a) sell or securitize the Loan or
portions thereof in one or more transactions through the issuance of
securities, which securities may be rated by the Rating Agencies, (b) sell
or otherwise transfer the Loan or any portion thereof one or more times
(including selling or assigning its duties, rights or obligations hereunder or
under any Loan Document in whole, or in part, to a servicer and/or a trustee), (c) sell
participation interests in the Loan one or more times, (d) re-securitize
the securities issued in connection with any securitization, and/or (e) further
divide the Loan into two or more separate notes or components and/or reallocate
a portion of the Loan to a mezzanine loan to be secured by direct and/or
indirect Equity Interests in Borrower (the transactions referred to in clauses (a) through
(e) above, each a “Secondary Market Transaction” and collectively “Secondary
Market Transactions”); provided that no Secondary Market transactions will be
permitted if it increases Borrower’s or Guarantor’s costs (unless Lender agrees
to bear the responsibility to pay such increased costs) or liability from that
otherwise existing under the Loan Documents or alters the economic terms of the
Loan.  With respect to any Secondary
Market Transaction described in clause (e) above, (i) such notes,
note components, and mezzanine loans may be assigned different principal
amounts and interest rates, so long as immediately

 

57

 

after
the effective date of such modification, the aggregate amount of, and the
weighted average of the interest rates payable under, the Loan and such
component note(s) or mezzanine loan, equal the outstanding Principal
Indebtedness and Applicable Interest Rate, respectively, immediately prior to
such modification, and (ii) Borrower agrees to (A) at Lender’s
expense, modify its organizational structure to create one or more new
Single-Purpose Entities to be the mezzanine borrower(s) (and to be
otherwise satisfactory to Lender) and cause the same and any other owners of
direct or indirect Equity Interest in Borrower to enter into such agreements
deemed reasonably necessary by Lender to evidence and secure such mezzanine
loan, and (B) at Lender’s expense, execute and deliver to Lender such
amendments to the Loan Documents (including, without limitation, the Note),
title insurance endorsements, legal opinions (but not a substantive
non-consolidation legal opinion) and other customary loan documentation as
Lender may reasonably require in connection therewith).

 

13.2         Borrower Cooperation.  Borrower shall execute and deliver
to Lender such documents, instruments, certificates, financial statements,
assignments and other writings, do such other acts and provide such
information, and participate in such meetings and discussions, in each case
that are necessary to facilitate the consummation of each Secondary Market
Transaction; provided, however, that Borrower shall not be obligated to pay the
costs of any third parties or incur any liability in addition to that already
existing under the Loan Documents or alter the economic terms of the Loan in a
connection with any of the foregoing.

 

13.3         Dissemination of Information.  If Lender determines
at any time to participate in a Secondary Market Transaction, Lender may
forward to each purchaser, transferee, assignee, servicer, participant or
investor in such securities (individually, an “Investor” and collectively, the “Investors”),
any Rating Agency rating such securities, any organization maintaining
databases on the underwriting and performance of commercial loans, trustee,
counsel, accountant, and each prospective Investor, all documents and
information which Lender now has or may hereafter acquire relating to the Loan,
Borrower, any direct or indirect equity owner of Borrower, Guarantor and the
Property, which shall have been furnished by Borrower any Affiliate of Borrower,
Guarantor or any party to any Loan Document, or otherwise furnished in
connection with the Loan, as Lender in its discretion determines necessary or
desirable.

 

13.4         Change of Payment Date.  At any time prior to securitization of the
Loan by Lender, Lender shall have the right to change the Payment Date to a
date other than as set forth in the Note (such new date, the “New Payment Date”)
on thirty (30) days notice to Borrower; provided, however, that any such change
in the Payment Date:  (i) shall not
modify the amount of regularly scheduled monthly interest payments, except that
the first payment of interest payable on the New Payment Date shall be
accompanied by interest at the Applicable Interest Rate for the period from the
Payment Date in the month in which the New Payment Date first occurs to the New
Payment Date and (ii) shall extend the Maturity Date to the New Payment
Date occurring in the calendar month set forth in the definition of Maturity
Date; (iii) resulting in any LIBOR Breakage Fee or other cost shall be
paid by Lender.

 

ARTICLE XIV

MISCELLANEOUS

 

14.1         Intentionally omitted.

 

14.2         Actions.  Lender shall have the right, but not the
obligation, to commence, appear in, and defend any action or proceeding
purporting to affect the rights or duties of the parties hereunder or the
payment of any funds, and in connection therewith Lender may pay necessary
expenses, employ counsel, and pay reasonable attorneys’ fees and fees of expert
witnesses.  Borrower agrees to pay to

 

58

 

Lender, on demand, all costs
and expenses reasonably incurred by Lender in connection therewith, including,
without limitation, reasonable attorneys’ fees and fees of expert witnesses,
together with interest from the date of expenditure at the Default Interest
Rate.

 

14.3         Nonliability of Lender.  Borrower acknowledges and agrees that:

 

(a)           by accepting or approving
anything required to be provided to Lender pursuant to the Loan Documents,
including, without limitation, any certificate, financial statement, survey,
appraisal or insurance policy, Lender shall not be deemed to have warranted or
represented the sufficiency, effectiveness or legal effect of any term or
provision thereof, and such acceptance or approval thereof shall not constitute
a warranty or representation to anyone with respect thereto by Lender;

 

(b)           Lender neither undertakes
nor assumes any responsibility or duty to Borrower to select, review, inspect,
supervise, pass judgment upon or inform Borrower of any matter in connection
with the Property;

 

(c)           the relationship of Borrower
and Lender under the Loan Documents is, and shall at all times remain, solely
that of borrower and lender, and Lender neither undertakes nor assumes any
responsibility or duty to Borrower or to any other Person with respect to the
Property or the Loan, except as expressly provided in the Loan Documents; and
notwithstanding any other provision of the Loan Documents: (i) Lender is
not, and shall not be construed as, a partner, joint venturer, alter ego,
manager, controlling person or other business associate or participant of any
kind of Borrower or any Affiliate, and Lender does not intend to ever assume
such status; (ii) Lender’s activities in connection with the Loan
Documents shall not be “outside the scope of the activities of a lender of
money” within the meaning of California Civil Code Section 3434, as
amended or recodified from time to time, and Lender does not intend to ever
assume any responsibility to any Person for the quality, suitability, safety or
condition of the Property; and (iii) Lender shall not be deemed
responsible for or a participant in any acts, omissions or decisions of
Borrower or any Affiliate;

 

(d)           Lender shall not be directly
or indirectly liable or responsible for any loss, claim, cause of action,
liability, indebtedness, damage or injury of any kind or character to any
Person or property arising from any construction on, or occupancy or use of,
any of the Property, whether caused by, or arising from: (i) any defect in
any building, structure, grading, fill, landscaping or other improvements
thereon or in any on-site or off-site improvement or other facility therein or
thereon; (ii) any act or omission of Borrower, any Affiliates, or any
agents, employees, independent contractors, licensees or invitees of Borrower;
(iii) any accident in or on any of the Property or any fire, flood or
other casualty or hazard thereon; (iv) the failure of Borrower, any of
Borrower’s licensees, employees, invitees, agents, independent contractors or
other representatives to maintain any of the Property in a safe condition; and
(v) any nuisance made or suffered on any part of the Property, except to
the extent caused by Lender’s gross negligence or willful misconduct;

 

(e)           Borrower shall be solely
responsible for all aspects of Borrower’s business and conduct in connection
with the Property; and

 

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

 

59

 

14.4         No Third Parties Benefited.  This Agreement is made for the purpose of
setting forth certain rights and obligations of Borrower and Lender in
connection with the Loan. It is made for the sole protection of Borrower and
Lender, and Lender’s successors and assigns. 
No other person shall have any rights of any nature hereunder or by
reason hereof.

 

14.5         Indemnity.  Borrower hereby agrees to indemnify, defend
and hold Lender and its directors, officers, agents and employees harmless
from, any and all Liabilities and Costs which Lender or any such Person may
suffer or incur as a direct or indirect consequence of: (a) Lender’s
making of the Loan, except for violations of banking laws or regulations by
Lender; (b) Borrower’s failure to perform any of Borrower’s obligations as
and when required by this Agreement or any of the other Loan Documents,
including, without limitation, any failure, at any time, of any representation
or warranty of Borrower to be true and correct and any failure by Borrower to
satisfy any condition; (c) any claim or cause of action of any kind by any
Person to the effect that Lender is in any way responsible or liable for any
act or omission by Borrower, whether on account of any theory of derivative
liability, breach of fiduciary duty by Borrower or an Affiliate, breach of
contract by Borrower or an Affiliate or otherwise, including, without
limitation, any claim or cause of action for fraud, misrepresentation, tort or
willful misconduct by Borrower or any Affiliate or any cause of action brought
by Borrower’s direct or indirect investors; (d) any claim or cause of
action of any kind by any Person which would have the effect of denying Lender
the full benefit or protection of any provision of this Agreement or the Loan
Documents or (e) any claim or action asserted by Seller (or its
successor-in-interest or assignee) under any assumption or indemnification
obligation of Borrower (or any Affiliate thereof) under the Purchase Agreement
(each, a “Purchase Agreement Indemnification Obligation”).  Notwithstanding the foregoing or anything in
this Agreement or the other Loan Documents to the contrary, Borrower shall not
be obligated to indemnify Lender or any of its successors or assigns for or
with respect to any Liabilities or Costs arising from a Secondary Market
Transaction or any intentional tort or act of gross negligence which such party
is personally determined by the judgment of a court of competent jurisdiction
(sustained on appeal, if any) to have committed.  Borrower shall pay any indebtedness arising
under this indemnity to Lender immediately upon demand by Lender together with
interest thereon from the date such indebtedness arises at the Default Interest
Rate (as defined in the Note).  Borrower’s
duty to defend and indemnify Lender shall survive the release and cancellation
of the Note and release and reconveyance of the Deed of Trust.

 

14.6         Binding Effect; Assignment.  This Agreement shall be binding upon, and
shall inure to the benefit of, Borrower and Lender and their respective
successors and assigns, except that Borrower may not assign its rights or
delegate any of its duties under this Agreement or any of the other Loan
Documents without the prior written consent of Lender.  Borrower recognizes that this Agreement does
not provide for an ordinary loan and that Lender would not make the Loan except
in reliance upon Borrower’s expertise and reputation, Lender’s knowledge of
Borrower, and Lender’s understanding that this Agreement is more in the nature
of an agreement involving personal services than a standard loan where Lender
would rely on security which already exists.

 

14.7         Execution in Counterparts.  This Agreement and any other Loan Document,
but specifically excluding the Note, may be executed in any number of
counterparts, each of which when executed and delivered will be deemed to be an
original and all of which, taken together, will be deemed to be but one and the
same instrument.

 

14.8         Amendments; Waiver in
Writing.  No modification, amendment,
extension, discharge, supplement, termination or waiver of any provision of
this Agreement, the Note or any other Loan Document, or consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which

 

60

 

given.  Except as otherwise expressly provided
herein, no notice to or demand on Borrower shall entitle Borrower to any other
or future notice or demand in the same, similar or other circumstances.

 

14.9         Costs, Expenses and Taxes.  Borrower shall pay to Lender, on demand the
following (provided that if any Secondary market transaction occurs, in no
event shall any such items be in excess of what would have been incurred had
Lender not entered into such Secondary Market Transaction):

 

(a)           the attorneys’ fees and
expenses incurred by Lender or its respective successors and assigns in
connection with the negotiation, preparation, execution, delivery,
modification, and administration of this Agreement and any other Loan Document
and any matter related thereto; Lender shall inform Borrower of the attorneys’
fees and expenses incurred by Lender in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other Loan
Documents on or before the Effective Date;

 

(b)           the attorneys’ fees and expenses
incurred by Lender or its successors and assigns in connection with the
modification and administration of this Agreement and any other Loan Document
and any matter related thereto;

 

(c)           the costs and expenses of
Lender, any loan participant or their respective successors and assigns in
connection with the enforcement of this Agreement and any other Loan Document
and any matter related thereto, including, without limitation, the fees and
expenses of any legal counsel, independent public accountants and other outside
experts retained by Lender; and

 

(d)           all costs, expenses, fees,
premiums and other charges relating or arising with respect to the Loan
Documents or any transactions contemplated thereby or in the compliance with
any of the terms and conditions thereof, including but not limited to recording
fees, filing fees, release or reconveyance fees, title insurance premiums,
external or in-house appraisal or cost engineering fees (including
inspections), auditor fees and environmental consultant fees.  Borrower recognizes and agrees that formal
written Appraisals of the Property by a licensed independent appraiser may be
required by Lender’s internal procedures and/or federal regulatory reporting
requirements on an annual and/or specialized basis and that Lender may, at its
option, require inspection of the Property (or any portion thereof) by an
independent supervising architect and/or cost engineering specialist at least
every eighteen (18) months, and Borrower shall promptly pay the costs and expenses
of all such Appraisals and inspections required by law or otherwise required
hereunder, provided that Borrower shall not be obligated to reimburse Lender
more than Fifteen Thousand and No/100 Dollars ($15,000.00) in connection
therewith per year unless an Event of Default has occurred and is continuing
(in which case such limitation shall not apply).  Subject to the foregoing limitation, if
applicable, if any of the services described in this Section are provided
by an employee of Lender, Borrower shall reimburse Lender its standard charge
for such services.

 

All sums paid or expended by
Lender, any loan participant or their respective successors and assigns in
accordance with this Agreement and the other Loan Documents shall be considered
to be a part of the Loan.  All such sums,
together with all amounts to be paid by Borrower to Lender pursuant to this
Agreement and the other Loan Documents, shall bear interest from the date of
expenditure at the Default Interest Rate, and shall be immediately due and payable
by Borrower upon demand.

 

14.10       Tax Service.  During periods when tax impounds are not
required, Lender is authorized to secure, at Borrower’s expense, a tax service
contract which shall provide tax information on the Property to Lender for the
term of the Loan.

 

61

 

14.11       Survival.  This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the execution and delivery of this Agreement and
the execution and delivery by Borrower to Lender of the Note, and shall
continue in full force and effect so long as any portion of the Indebtedness is
outstanding and unpaid; provided, however, that the
representations, warranties and covenants set forth in Sections 6.19 and
9.1 shall survive in perpetuity. 
Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party.  All covenants, promises and
agreements in this Agreement contained, by or on behalf of Borrower, shall
inure to the benefit of the respective successors and assigns of Lender.  Nothing in this Agreement or in any other
Loan Document, express or implied, shall give to any Person other than the
parties and the holder(s) of the Note, the Deed of Trust and the other
Loan Documents, and their legal representatives, successors and assigns, any
benefit or any legal or equitable right, remedy or claim hereunder.

 

14.12       Notices.  All notices and other communications required
or permitted under this Agreement or any other Loan Document must be in writing
and must be personally delivered; mailed by U.S. registered or certified mail,
return receipt requested, postage prepaid; sent by nationally recognized
private courier service; or transmitted by facsimile (provided that a copy of
such notice or other communication is also delivered by another permitted means
of delivery, although any such facsimile shall be deemed delivered on the date
of transmission if sent on a business day before 3:00 p.m. Pacific time
(as evidenced by a confirmation slip form the transmitting machine), delivered
or addressed to the appropriate party at its respective address set forth
below:

 

	
  If
  to Borrower:

  	
  CT/BH
  Interchange LLC

  
	
   

  	
  c/o
  CT Realty Corporation

  
	
   

  	
  65
  Enterprise, Suite 150

  
	
   

  	
  Aliso
  Viejo, California 92656

  
	
   

  	
  Attn:
  Bob Campbell and Larry Mathena

  
	
   

  	
  Facsimile
  No.: (949) 330-5771

  
	
   

  	
   

  
	
  with a copy to:

  	
  Coontz & Matthews LLP

  
	
   

  	
  30048 Rancho Viejo Road, Suite 120

  
	
   

  	
  San Juan Capistrano, California 92675

  
	
   

  	
  Attn: Mibs Matthews, Esq.

  
	
   

  	
  Facsimile No.: (949) 240-3040

  
	
   

  	
   

  
	
  with
  a copy to:

  	
  Behringer
  Harvard Funds

  
	
   

  	
  15601
  Dallas Parkway, Suite 600

  
	
   

  	
  Addison,
  Texas 75001-6026

  
	
   

  	
  Attention:
  General Counsel

  
	
   

  	
  Facsimile:
  214-655-1610

  
	
   

  	
   

  
	
  and
  to:

  	
  Behringer
  Harvard Interchange, LLC

  
	
   

  	
  15601
  Dallas Parkway, Suite 600

  
	
   

  	
  Addison,
  Texas 75001-6026

  
	
   

  	
  Attention:
  Asset Manager

  
	
   

  	
  Telecopier:
  214-655-1610

  

 

62

 

	
  If
  to Lender:

  	
  PCCP
  Capital I, LLC

  
	
   

  	
  c/o
  PCCP, LLC

  
	
   

  	
  222
  North Sepulveda Boulevard, Suite 2222

  
	
   

  	
  El
  Segundo, California 90245

  
	
   

  	
  Attn:
  Legal Notices

  
	
   

  	
  Facsimile
  No.: (310) 414-7872

  

 

with
a copy to (but only with respect to pre-closing notice and post-closing notices
of default, but not with respect to requests for approval of leasing matters or
other contracts):

 

	
   

  	
  Steckbauer
  Weinhart Jaffe, LLP

  
	
   

  	
  333
  South Hope Street, 36th Floor

  
	
   

  	
  Los
  Angeles, California 90071

  
	
   

  	
  Attn:  Robert D. Jaffe, Esq.

  
	
   

  	
  Facsimile
  No.:  (213) 229-2870

  

 

Any party may change its
address by giving written notice to the other party in accordance with this Section 14.12.  If any notice or other communication is given
by registered or certified mail it will be deemed effective seventy-two (72)
hours after it is deposited in the U.S. mail, postage prepaid; or if given by
any other permitted means, when received at the address listed above.

 

14.13       Further Assurances.  Borrower shall, at its sole cost and expense,
do such further acts and execute and deliver such further documents as Lender
from time to time may reasonably require for the purpose of assuring and
confirming to Lender the rights hereby created, for carrying out the intention
or facilitating the performance of the terms of any Loan Document, or for
assuring the validity of any Lien under any Loan Document.

 

14.14       Governing Law.  This Agreement and the other Loan Documents
shall be governed by, and construed and enforced in accordance with, the laws
of the State of California.

 

14.15       Severability of Provisions.  Any provision in any Loan Document that is
held by a court of competent jurisdiction to be inoperative, unenforceable or
invalid shall be inoperative, unenforceable or invalid without affecting the
remaining provisions, and to this end the provisions of all Loan Documents are
declared to be severable.

 

14.16       Intentionally omitted.

 

14.17       Headings.  Article, section and subparagraph headings in
this Agreement are included for convenience of reference only and are not part
of this Agreement for any other purpose.

 

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

 

63

 

14.19       Construction of Agreement.  Both Borrower and Lender have cooperated in
the drafting and negotiation of this Agreement, and any ambiguities which may
be contained herein shall not be construed against either party.

 

14.20       Brokers.  Borrower hereby represents that, except for
Holliday Fenoglio Fowler, it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. Borrower shall indemnify, defend
and hold Lender harmless from and against any and all claims, liabilities,
costs and expenses of any kind (including Lender’s attorneys’ fees and
expenses) in any way relating to or arising from a claim by any Person that
such Person acted on behalf of Borrower in connection with the transactions
contemplated herein.  The provisions of
this Section 14.20 shall survive the expiration and termination of
this Agreement and the payment of the Loan.

 

14.21       Lender’s Discretion.  Whenever pursuant to
this Agreement or any other Loan Document, Lender exercises any right, option
or election given to Lender to approve or disapprove, or consent or withhold
consent, or any arrangement or term is to be satisfactory to Lender or is to be
in Lender’s discretion, the decision of Lender to approve or disapprove,
consent or withhold consent, or to decide whether arrangements or terms are
satisfactory or not satisfactory or acceptable or not acceptable to Lender in
Lender’s discretion, shall (except as is otherwise specifically herein
provided) be in the sole and absolute discretion of Lender.

 

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

 

14.23       Intentionally omitted.

 

14.24       Intentionally Omitted.

 

14.25       Waiver of Marshalling of
Assets Defense.  To the
fullest extent that Borrower may legally do so, Borrower waives all rights to a
marshalling of the assets of Borrower, and of the Property, or to a sale in
inverse order of alienation in the event of foreclosure of the interests hereby
created, and agrees not to assert any right under any laws pertaining to the marshalling
of assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to
defeat, reduce or affect the right of Lender under the Loan Documents to a sale
of the Property for the collection of the Indebtedness without any prior or
different resort for collection, or the right of Lender or any trustee under
the Deed of Trust to the payment of the Indebtedness in preference to every
other claimant whatsoever.

 

14.26       Waiver of Right to Trial by
Jury; Judicial Reference in the Event of Jury Trial Waiver Unenforceability. EACH PARTY TO
THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
THEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER

 

64

 

INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY.  NOTWITHSTANDING
THE FOREGOING TO THE CONTRARY, IN THE EVENT THAT THE JURY TRIAL WAIVER
CONTAINED HEREIN SHALL BE HELD OR DEEMED TO BE UNENFORCEABLE, EACH PARTY HERETO
HEREBY EXPRESSLY AGREES TO SUBMIT TO JUDICIAL REFERENCE PURSUANT TO CALIFORNIA
CODE OF CIVIL PROCEDURE SECTIONS 638 THROUGH 645.1 ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING HEREUNDER FOR WHICH A JURY TRIAL WOULD OTHERWISE BE
APPLICABLE OR AVAILABLE.  PURSUANT TO
SUCH JUDICIAL REFERENCE, THE PARTIES AGREE TO THE APPOINTMENT OF A SINGLE
REFEREE AND SHALL USE THEIR BEST EFFORTS TO AGREE ON THE SELECTION OF A
REFEREE.  IF THE PARTIES ARE UNABLE TO
AGREE ON A SINGLE A REFEREE, A REFEREE SHALL BE APPOINTED BY THE COURT UNDER
CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 AND 640 TO HEAR ANY DISPUTES
HEREUNDER IN LIEU OF ANY SUCH JURY TRIAL. 
EACH PARTY ACKNOWLEDGES AND AGREES THAT THE APPOINTED REFEREE SHALL HAVE
THE POWER TO DECIDE ALL ISSUES IN THE APPLICABLE ACTION OR PROCEEDING, WHETHER
OF FACT OR LAW, AND SHALL REPORT A STATEMENT OF DECISION THEREON; PROVIDED,
HOWEVER, THAT ANY MATTERS WHICH WOULD NOT OTHERWISE BE THE SUBJECT OF A JURY
TRIAL WILL BE UNAFFECTED BY THIS WAIVER AND THE AGREEMENTS CONTAINED
HEREIN.  THE PARTIES HERETO HEREBY AGREE
THAT THE PROVISIONS CONTAINED HEREIN HAVE BEEN FAIRLY NEGOTIATED ON AN
ARMS-LENGTH BASIS, WITH BOTH SIDES AGREEING TO THE SAME KNOWINGLY AND BEING
AFFORDED THE OPPORTUNITY TO HAVE THEIR RESPECTIVE LEGAL COUNSEL CONSENT TO THE
MATTERS CONTAINED HEREIN.  ANY PARTY TO THIS AGREEMENT
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY AND THE AGREEMENTS CONTAINED HEREIN
REGARDING THE APPLICATION OF JUDICIAL REFERENCE IN THE EVENT OF THE INVALIDITY
OF SUCH JURY TRIAL WAIVER.

 

14.27       Relationship of Parties.  The relationship of Borrower and Lender under
the Loan Documents is, and shall at all times remain, solely that of borrower
and lender, and Lender neither undertakes nor assumes any responsibility or
duty to Borrower or any third party with respect to the Property, except as
expressly provided in this Agreement and the other Loan Documents.

 

14.28       Servicer.  At the option of Lender, the
Loan may be serviced by a servicer/trustee (“Servicer”)
selected by Lender and Lender may delegate all or any portion of its
responsibilities under this Agreement, the Deed of Trust and the other Loan
Documents to Servicer pursuant to a servicing agreement (the “Servicing Agreement”) between Lender and
Servicer.  From and after Borrower’s receipt of written notice that Lender
has engaged Servicer to service the Loan pursuant to the Servicing Agreement,
Borrower shall be obligated to act at the direction of Servicer on behalf of
Lender in accordance with the terms and conditions of this Agreement, the Deed
of Trust and the other Loan Documents.   Borrower shall not be responsible
for any set-up fees or any other costs relating to or arising under the
Servicing Agreement.

 

14.29       Limitation on Liability.  Notwithstanding anything set forth in this
Agreement or any other Loan Document or otherwise, except as set forth in the
Carveout Guaranty, the Completion Guaranty and/or the Environmental Indemnity
Agreement, no direct or indirect (through tiered ownership 

 

65

 

or otherwise) advisor,
trustee, director, officer, employee, beneficiary, shareholder, participant,
partner, member, owner, representative or agent of Borrower shall have any
personal liability, directly or indirectly, under or in connection with this
Agreement or any other Loan Document or any amendment or amendments to any of
the foregoing made at any time or times, heretofore or hereafter, and the other
parties hereto and their successors and assigns and, without limitation, all
other persons and entities, shall look solely to Borrower’s assets for the
payment of any claim or for any performance, and each other party, on behalf of
itself and its successors and assigns, hereby waives any and all such personal
liability.  Nothing contained in this Section 14.29
shall be construed as prohibiting Lender from enforcing the obligations of
Guarantor under the Carveout Guaranty, the Completion Guaranty or the
Environmental Indemnity Agreement.

 

[SIGNATURES APPEAR ON FOLLOWING PAGE]

 

66

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  CT/BH
  INTERCHANGE LLC,

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  CT
  INTERCHANGE LLC,

  
	
   

  	
   

  	
  a
  Delaware limited liability company,

  
	
   

  	
   

  	
  its
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CT
  CALIFORNIA FUND VI, LLC,

  
	
   

  	
   

  	
  a
  California limited liability company,

  
	
   

  	
   

  	
  its
  Sole Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CT
  FUND MANAGER VI, LLC,

  
	
   

  	
   

  	
   

  	
  a
  California limited liability company,

  
	
   

  	
   

  	
   

  	
  its
  Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Robert M. Campbell

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Robert
  M. Campbell

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PCCP
  CAPITAL I, LLC,

  
	
   

  	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Brian Heafey

  
	
   

  	
   

  	
  Name:

  	
  Brian
  Heafey

  
	
   

  	
   

  	
  Title:

  	
  Authorized
  Signatory

  
							

 

67

 

EXHIBIT A

LEGAL DESCRIPTION OF REAL PROPERTY

 

Real property in the City of
San Bernardino, County of San Bernardino, State of California, described as
follows: 

 

PARCEL A:

 

PARCELS 1, 3, 4 AND 5 OF
PARCEL MAP NO. 17375, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN
BERNARDINO, STATE OF CALIFORNIA AS PER MAP FILED IN BOOK 219, PAGES 84 THROUGH
91 INCLUSIVE, OF PARCEL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.

 

EXCEPTING THEREFROM ALL OIL,
GAS AND OTHER MINERALS OF EVERY BEND AND CHARACTER IN, ON OR UNDER THE ABOVE
DESCRIBED LANDS WITHOUT THE RIGHT OF SURFACE ENTRY OR USE, AS CONVEYED TO
NORTEX MINERAL NO. 2, L.P., A TEXAS LIMITED PARTNERSHIP, IN MINERAL DEED
RECORDED OCTOBER 19, 2004, AS INSTRUMENT NO. 2004-0759938 OF OFFICIAL RECORDS,
SAN BERNARDINO COUNTY, CALIFORNIA.

 

PARCEL B:

 

EASEMENTS FOR (I) PRIVATE
SEWER AND ACCESS, (II) PRIVATE SEWER, AND (III) PRIVATE STREET AND
PUBLIC AND PRIVATE UTILITY PURPOSES OVER LOT B OF PARCEL MAP NO. 17375, AS
SHOWN ON PARCEL MAP ON FILE IN BOOK 219, PAGES 84 THROUGH 91 INCLUSIVE, OF PARCEL
MAPS, RECORDS OF SAN BERNARDINO COUNTY, CALIFORNIA.

 

PARCEL C:

 

NON-EXCLUSIVE EASEMENTS FOR
THE PURPOSE OF COMMON ROADS, COMMON UTILITIES AND COMMON DRIVES ALL AS
DESCRIBED IN THE DECLARATION OF COVENANTS, RESTRICTIONS AND EASEMENTS FOR
INTERCHANGE BUSINESS CENTER AS RECORDED MARCH 30, 2007, AS INSTRUMENT NO.
2007-0198478 OF OFFICIAL RECORDS, AS AMENDED BY AMENDMENT NO. 1 TO DECLARATION
OF COVENANTS, RESTRICTIONS AND EASEMENTS FOR INTERCHANGE BUSINESS CENTER
RECORDED MARCH 28, 2008 AS INSTRUMENT NO. 2008-0136064, OFFICIAL RECORDS.

 

APN: 0148-011-49,
0148-011-50, 0148-011-53, 0148-011-68 and 0148-011-69

 

 

EXHIBIT B

LOAN DOCUMENTS

 

1.                                       Loan Documents.  The documents listed in this Section 1,
and amendments, modifications and supplements thereto which have received the
prior written consent of Lender, together with any documents executed in the
future that are approved by Lender and that recite that they are “Loan
Documents” for purposes of this Agreement are collectively referred to herein
as the Loan Documents.

 

1.1                                 This Agreement.

 

1.2                                 Promissory Note
Secured by Deed of Trust of even date herewith, in the original principal
amount of the Loan made by Borrower payable to the order of Lender.

 

1.3                                 Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing of even
date herewith, executed by Borrower, as Trustor, in favor of Lender, as
Beneficiary.

 

1.4                                 Uniform
Commercial Code — National Financing Statement — Form UCC-1 of even date
herewith, by Borrower, as debtor, in favor of Lender, as secured party, to be
filed with the Secretary of State of the State of Delaware.

 

1.5                                 Uniform
Commercial Code — National Financing Statement — Form UCC-1 of even date
herewith, by Borrower, as debtor, in favor of Lender, as secured party, to be
recorded in the Official Records.

 

1.6                                 Cash Management
Agreement of even date herewith, executed by Borrower in favor of Lender.

 

1.7                                 Assignment and
Subordination of Property Management Agreement of even date herewith, executed
by Borrower and Property Manager in favor of Lender.

 

1.8                                 Collateral
Assignment of Interest Rate Protection Agreement of even date herewith,
executed by Borrower, Lender and Counterparty.

 

1.9                                 Deposit Account
Control Agreement of even date herewith, executed by and among Lender, Borrower
and Bank of America, N.A.

 

1.10                           Undelivered
Items Letter Agreement of even date herewith, executed by Borrower in favor of
Lender.

 

2.                                       Other Documents
(Which Are Not Loan Documents):

 

2.1                                 Completion
Guaranty of even date herewith, executed by Guarantor in favor of Lender.

 

2.2                                 Indemnity and
Guaranty Agreement of even date herewith, executed by Guarantor in favor of
Lender.

 

2.3                                 Environmental
Indemnity Agreement of even date herewith, executed by Borrower and 

 

 

Guarantor
in favor of Lender.

 

2.4                                 Opinion of
Borrower’s legal counsel, Coontz & Matthews LLP.

 

 

EXHIBIT C

DISBURSEMENT BUDGET

 

	
   

  	
   

  	
  A

  TOTAL

  COSTS

  	
   

  	
  B

  PAID BY

  BORROWER

  	
   

  	
  C

  TO BE PAID

  BY

  BORROWER

  	
   

  	
  D

  LOAN

  DISBURSEMENT

  BUDGET

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (at close)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Acquisition Price

  	
   

  	
  30,000,000.00

  	
   

  	
  11,925,000.00

  	
   

  	
   

  	
   

  	
  18,075,000.00

  	
   

  
	
  Tenant Improvements Holdback

  	
   

  	
  1,670,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,670,000.00

  	
   

  
	
  Leasing Commissions Holdback

  	
   

  	
  555,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  555,000.00

  	
   

  
	
  Past Due Costs & Contingency

  	
   

  	
  150,000.00

  	
   

  	
  150,000.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  
	
  Capital Improvements (into Reserve Acct)

  	
   

  	
  200,000.00

  	
   

  	
  200,000.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  
	
  Legal, Closing Costs & Due Diligence

  	
   

  	
  130,000.00

  	
   

  	
  130,000.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  
	
  Acquisition Fee

  	
   

  	
  450,000.00

  	
   

  	
  450,000.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  
	
  Equity Placement Fee

  	
   

  	
  215,000.00

  	
   

  	
  215,000.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  
	
  Interest Reserve Holdback

  	
   

  	
  1,200,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  1,200,000.00

  	
   

  
	
  Loan Fees & Expenses

  	
   

  	
  477,500.00

  	
   

  	
  322,500.00

  	
   

  	
  155,000.00

  	
   

  	
  0.00

  	
   

  
	
  Deferred Maintenance & Environmental
  (into Reserve Account)

  	
   

  	
  75,000.00

  	
   

  	
  75,000.00

  	
   

  	
   

  	
   

  	
  0.00

  	
   

  
	
  Working Capital & Operating Deficit

  	
   

  	
  210,000.00

  	
   

  	
   

  	
   

  	
  210,000.00

  	
   

  	
  0.00

  	
   

  
	
  TOTAL

  	
   

  	
  35,332,500.00

  	
   

  	
  13,467,500.00

  	
   

  	
  365,000.00

  	
   

  	
  21,500,000.00

  	
   

  

 

 

The foregoing Financial
Requirement Analysis represents the total cost necessary in Borrower’s
estimation to perform Borrower’s obligations under the Loan Documents.  Column A, “Total Costs,” sets forth Borrower’s
representation of the maximum cost for each item specified.  Column B, “Costs paid by Borrower,” sets
forth Borrower’s representation of costs that Borrower has paid or has caused
to be paid from Borrower Equity for each item specified.  Column C, “Costs to be paid by Borrower,”
sets forth Borrower’s representation of costs that Borrower will pay or will
cause to be paid from Borrower for each item specified.  Column D, “Disbursement Budget,” sets forth
the portion of the Loan which has been allocated for each item specified and
will be disbursed pursuant to the terms, covenants, conditions and provisions,
if any, of Exhibit D of this Agreement and the Loan Documents.

 

 

EXHIBIT D

DISBURSEMENT PLAN

 

1.             Acquisition Cost. 
Lender shall disburse the portion of the Loan shown in the Disbursement
Budget to or for the account of Borrower on the Effective Date for the sole
purposes of paying a portion of the purchase price payable by Borrower to
Seller for the Property pursuant to the Purchase Agreement.  Without limiting any other disbursement
condition contained in this Agreement, Lender shall not be obligated to
disburse any portion of such amount unless and until Borrower shall first cause
the Borrower Equity to be applied in the manner required under this
Agreement.  Lender shall make such
disbursement on the Effective Date directly to Seller through an escrow with a
title company acceptable to Lender or another escrow or similar arrangement
acceptable to Lender.  Without limiting
any other provision of this Agreement, including this Disbursement Plan,
interest shall commence to accrue on such disbursement (and on any other Loan
proceeds deposited by Lender into such escrow) as of the date of Lender’s
deposit of such proceeds in escrow, but such proceeds shall remain subject to
Lender’s sole control and disposition and no Person (including Borrower or
Seller) shall have any right in or to such funds unless and until all conditions
precedent to Lender’s obligation to disburse such Loan proceeds shall have been
satisfied, including, without limitation, Borrower’s concurrent acquisition of
the Property pursuant to the Purchase Agreement.

 

2.             Interest Holdback.  Lender shall hold back the sum equal to One
Million Two Hundred Thousand and No/100 Dollars ($1,200,000.00) from the Loan
to be made available and allocated as an interest shortfall reserve (“Interest Holdback”).  The Interest Holdback shall be disbursed monthly directly to Lender for the
payment of interest which accrues and becomes due under the Note in strict
accordance with the quarterly schedule (including the quarterly disbursement
limitation) set forth on Exhibit I attached hereto; provided,
however, that to the extent an amount less than the applicable quarterly
disbursement limit is funded by Lender from the Interest Holdback during a
particular quarter, the underfunded amount shall roll over to the next quarter
and the quarterly disbursement limitation for that next quarter shall be
automatically increased by the applicable underfunded amount being so rolled
over.  Such sums shall bear interest from
the date applied by Lender in accordance with the Note.  Lender is hereby authorized to charge the
Loan directly for such interest payments when due.  Lender shall provide Borrower with a monthly
interest statement.  Depletion of the
Interest Holdback (or the Interest Reserve Account, if applicable) shall not
release Borrower from any of Borrower’s obligations under the Loan Documents
including, without limitation, payment of all accrued and due interest from
other sources.  Notwithstanding the
foregoing, any disbursements from the Interest Holdback shall be subject to the
provisions of Article X of this Agreement which require that
available Gross Income be first applied for the purposes specified therein,
including to the payment of accrued interest under the Note, before Borrower
shall be entitled to any disbursements from the Interest Holdback (or the
Interest Reserve Account).

 

3.             Leasing Holdback. 
Lender shall hold back the sum equal of Two Million Two Hundred
Twenty-Five Thousand and No/100 Dollars ($2,225,000.00) from the Loan Amount to
establish the holdback for leasing costs and expenses (“Leasing
Holdback”).  Lender shall
release funds from the Leasing Holdback for leasing as Borrower spends funds
for tenant improvements and leasing commissions for Lender-approved Leases (or
Leases for which Lender’s approval is not required under this Agreement).  Lender shall disburse funds for leasing
commissions fifty percent (50%) upon receipt of a fully executed lease and
fifty percent (50%) upon that tenant’s occupancy of the space.  Lender shall disburse funds for tenant
improvements upon evidence of lien free completion of such tenant improvements
and, in addition, Lender may require ten percent (10%) retainage; provided,
however, that Lender shall disburse progress payments, not more frequently than
monthly, in proportion to the completion of such tenant improvements and subject
to Lender’s receipt of conditional lien waivers and ten percent (10%)
retainage.  Proceeds disbursed from the
Leasing Holdback shall accrue interest at the 

 

 

then current Applicable
Interest Rate in effect from time to time from and after the time such proceeds
are disbursed to or on behalf of Borrower until such time, if ever, as such
amounts are repaid to Lender.  Further,
in Lender’s sole discretion, Borrower may be permitted to complete the
construction of a “spec” suite(s) or tenant improvement build-out(s) at
the Property not in connection with a particular lease at the from proceeds in
the Leasing Holdback, subject to the disbursement requirements and procedures
set forth in this Agreement.  Each
disbursement request from the Leasing Holdback shall be accompanied by an
administrative fee in the amount of Seven Hundred Fifty and No/100 Dollars
($750.00) per draw.

 

4.             Conditions. 
Lender’s obligation to make available to or for the benefit or account
of Borrower portions of the Loan in the amounts and for the purposes set forth
in the Disbursement Budget shall be subject to the satisfaction of all
conditions precedent to such disbursement set forth in this Agreement,
including, without limitation, in Article III hereof, this
Disbursement Plan and the requirement that the Interest Holdback (together, in
the aggregate with funds in the Interest Reserve Account, if any) to be in
In-Balance.  In addition, Lender shall
have the right to reasonably require any other document, evidence or
information that Lender may request under any provision of this Agreement or
the other Loan Documents, or that Lender may otherwise reasonably require.  Borrower acknowledges that Lender’s approval
process with respect to disbursements of proceeds of the Loan may result in
disbursement delays, and Borrower hereby consents to such delays.

 

 

EXHIBIT E

FORM OF DISBURSEMENT REQUEST

 

PCCP Capital I, LLC

c/o PCCP, LLC

222 North Sepulveda Boulevard, Suite 2222

El Segundo, CA  90245

Attention:  Servicing

 

Re:                               CT/BH
Interchange LLC (“Borrower”)

Loan #                              
(“Loan”)

 

Ladies and Gentlemen:

 

Pursuant to the terms of
that certain Loan Agreement dated as of November       ,
2010 (the “Loan Agreement”), and the
representations and warranties set forth therein and herein, Borrower hereby
submits a disbursement request for the amount of $                    .  Capitalized terms have the same meanings as
in the Loan Agreement

 

This disbursement request (“Request”) shall be deemed to be a representation by Borrower
and of the person/entity signing this Request (in the case of the person/entity
signing this Request, to person’s/entity’s knowledge) that (A) no Event of
Default or Potential Default has occurred or will exist upon the making of this
requested disbursement; (B) the representations and warranties contained
in the Loan Agreement and in the other Loan Documents are, as of the date
hereof, true, correct and complete in all material respects; (C) all
information set forth in this Request; and on any exhibit attached hereto is
true, correct and complete in all material respects; and (D) all
conditions precedent to the disbursement to be made in connection with this
Request as required under the Loan Agreement and the other Loan Documents, have
been satisfied.

 

The following is an itemized
statement of the costs incurred or due for which disbursement is requested with
respect to Item 5 shown in Column D of the Disbursement Budget attached as
Exhibit C to the Loan Agreement, and the total amount incurred,
expended and/or due for Item 5 less prior disbursements.

 

	
  ITEM

  	
   

  	
  TOTAL AMOUNT INCURRED LESS PRIOR

  DISBURSEMENTS

  
	
  1)

  	
   

  	
   

  
	
  2)

  	
   

  	
   

  
	
  TOTAL DISBURSEMENT REQUEST

  	
   

  	
   

  

 

 

This Request is submitted as
of                               ,
20    .

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  CT/BH
  INTERCHANGE LLC,

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  CT
  INTERCHANGE LLC,

  
	
   

  	
   

  	
  a
  Delaware limited liability company,

  
	
   

  	
   

  	
  its
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CT
  CALIFORNIA FUND VI, LLC,

  
	
   

  	
   

  	
   

  	
  a
  California limited liability company,

  
	
   

  	
   

  	
   

  	
  its
  Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  CT
  FUND MANAGER VI, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  a
  California limited liability company,

  
	
   

  	
   

  	
   

  	
   

  	
  its
  Manager

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT F

 

LEASING GUIDELINES

 

	
   

  	
   

  	
  Lease Rate ($/psf/mo start rate)

  	
   

  	
  Tenant

  Improvememnt

  	
   

  	
  Leasing

  Commission

  	
   

  
	
  Building

  	
   

  	
  2010-2011

  	
   

  	
  2012

  	
   

  	
  2013

  	
   

  	
  2014

  	
   

  	
  2015

  	
   

  	
  Allowance

  	
   

  	
  Allowance

  	
   

  
	
  Building A

  	
   

  	
  $

  	
   0.22

  	
   

  	
  $

  	
   0.23

  	
   

  	
  $

  	
  0.24

  	
   

  	
  $

  	
   0.25

  	
   

  	
  $

  	
  0.26

  	
   

  	
  $

  	
   3.50

  	
   

  	
  6.00

  	
  %

  
	
  Building D1

  	
   

  	
  $

  	
  0.23

  	
   

  	
  $

  	
  0.24

  	
   

  	
  $

  	
  0.25

  	
   

  	
  $

  	
  0.26

  	
   

  	
  $

  	
  0.27

  	
   

  	
  $

  	
  2.75

  	
   

  	
  6.00

  	
  %

  
	
  Building D2

  	
   

  	
  $

  	
  0.23

  	
   

  	
  $

  	
  0.24

  	
   

  	
  $

  	
  0.25

  	
   

  	
  $

  	
  0.26

  	
   

  	
  $

  	
  0.27

  	
   

  	
  $

  	
  0.75

  	
   

  	
  6.00

  	
  %

  
	
  Building E

  	
   

  	
  $

  	
  0.23

  	
   

  	
  $

  	
  0.24

  	
   

  	
  $

  	
  0.25

  	
   

  	
  $

  	
  0.26

  	
   

  	
  $

  	
  0.27

  	
   

  	
  $

  	
  —

  	
   

  	
  6.00

  	
  %

  

 

· Inflated 4% annually
from Closing Date

· Lease Rate is starting
lease rate after free rent period 

· Five (5) Year
Term assumed

· 1.25 Months Free Rent
for each year of lease assumed

· NNN lease structure

 

Estimated
TI Expense:

 

	
  Building A

  	
   

  	
  354,000

  	
   

  	
  $

  	
  1,239,000

  	
   

  
	
  Building D1

  	
   

  	
  135,000

  	
   

  	
  $

  	
  371,250

  	
   

  
	
  Building D2

  	
   

  	
  218,000

  	
   

  	
  $

  	
  163,500

  	
   

  
	
  Building E

  	
   

  	
  95,000

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  1,773,750

  	
   

  

 

 

EXHIBIT G

Interchange
- Approved Budget

 

	
   

  	
   

  	
  Year 1

  	
   

  	
  Year 2

  	
   

  	
  Year 3

  	
   

  
	
  For the Years Ending

  	
   

  	
  Nov-2011

  	
   

  	
  Nov-2012

  	
   

  	
  Nov-2013

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Potential Gross Revenue

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base Rental Revenue

  	
   

  	
  $

  	
  1,341,310

  	
   

  	
  $

  	
  2,747,031

  	
   

  	
  $

  	
  2,820,431

  	
   

  
	
  Absorption & Turnover Vacancy

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  (145,616

  	
  )

  
	
  Base Rent Abatements

  	
   

  	
  (498,182

  	
  )

  	
  (391,753

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Scheduled Base Rental Revenue

  	
   

  	
  843,128

  	
   

  	
  2,355,278

  	
   

  	
  2,674,815

  	
   

  
	
  Expense Reimbursement Revenue

  	
   

  	
  438,335

  	
   

  	
  961,296

  	
   

  	
  944,329

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Potential Gross Revenue

  	
   

  	
  1,281,463

  	
   

  	
  3,316,574

  	
   

  	
  3,619,144

  	
   

  
	
  General Vacancy

  	
   

  	
  (38,444

  	
  )

  	
  (99,497

  	
  )

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Effective Gross Revenue

  	
   

  	
  1,243,019

  	
   

  	
  3,217,077

  	
   

  	
  3,619,144

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Security

  	
   

  	
  53,430

  	
   

  	
  55,033

  	
   

  	
  56,684

  	
   

  
	
  Cleaning

  	
   

  	
  6,165

  	
   

  	
  6,349

  	
   

  	
  6,540

  	
   

  
	
  Mgmt Fee

  	
   

  	
  18,646

  	
   

  	
  48,256

  	
   

  	
  54,287

  	
   

  
	
  HVAC

  	
   

  	
  4,110

  	
   

  	
  4,234

  	
   

  	
  4,360

  	
   

  
	
  Elevator

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  R&M

  	
   

  	
  26,715

  	
   

  	
  27,516

  	
   

  	
  28,342

  	
   

  
	
  Utilities

  	
   

  	
  113,025

  	
   

  	
  116,416

  	
   

  	
  119,908

  	
   

  
	
  parking Lot

  	
   

  	
  24,969

  	
   

  	
  25,716

  	
   

  	
  26,490

  	
   

  
	
  Landscaping

  	
   

  	
  82,200

  	
   

  	
  84,666

  	
   

  	
  87,206

  	
   

  
	
  Common Area Fees

  	
   

  	
  15,413

  	
   

  	
  15,874

  	
   

  	
  16,352

  	
   

  
	
  Insurance

  	
   

  	
  148,989

  	
   

  	
  153,456

  	
   

  	
  158,062

  	
   

  
	
  Taxes

  	
   

  	
  415,827

  	
   

  	
  424,143

  	
   

  	
  432,625

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Operating Expenses

  	
   

  	
  909,489

  	
   

  	
  961,659

  	
   

  	
  990,856

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net Operating Income

  	
   

  	
  333,530

  	
   

  	
  2,255,418

  	
   

  	
  2,628,288

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Leasing Costs

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tenant Improvements

  	
   

  	
  1,522,653

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Leasing Commissions

  	
   

  	
  558,906

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Leasing Costs

  	
   

  	
  2,081,559

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash Flow Before Debt Service &
  Taxes & Fees & Capital Expenditures

  	
   

  	
  $

  	
  (1,748,029 

  	
  )

  	
  $

  	
  2,255,418 

  	
   

  	
  $

  	
  2,628,288 

  	
   

  

 

 

EXHIBIT H

 

RENT ROLL

 

	
   

  	
   

  	
   

  	
   

  	
  Lease

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Start Date

  	
   

  	
  Unit

  	
   

  	
  Monthly

  	
   

  	
   

  	
   

  	
  Security

  	
   

  	
  Option

  	
   

  	
  Term

  	
   

  	
  Notice

  	
   

  	
  Effect

  	
   

  
	
  Unit #

  	
   

  	
  Tenant Name

  	
   

  	
  End Date

  	
   

  	
  SqFt

  	
   

  	
  Base Rent

  	
   

  	
  CAM

  	
   

  	
  Deposit

  	
   

  	
  Type

  	
   

  	
  (Yrs)

  	
   

  	
  Period

  	
   

  	
  Date

  	
   

  
	
  A

  	
   

  	
  Vacant

  	
   

  	
   

  	
   

  	
  354,108

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D1

  	
   

  	
  Vacant

  	
   

  	
   

  	
   

  	
  134,909

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D2A

  	
   

  	
  Genco

  	
   

  	
  8/31/09

  	
   

  	
  98,691

  	
   

  	
  $

  	
  27,633.48

  	
   

  	
  $

  	
  8,043.32

  	
   

  	
  $

  	
  —

  	
   

  	
  ROFR

  	
   

  	
   

  	
   

  	
  9-12 mo’s.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  9/30/13

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  3 1yr Extensions

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D2

  	
   

  	
  Genco Expansion

  	
   

  	
  TBD

  	
   

  	
  41,084

  	
   

  	
  $

  	
  10,887.26

  	
   

  	
  $

  	
  3,348.35

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TBD

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D2B

  	
   

  	
  Vacant

  	
   

  	
   

  	
   

  	
  79,033

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E

  	
   

  	
  FTDI

  	
   

  	
  1/7/09

  	
   

  	
  94,108

  	
   

  	
  $

  	
  32,937.80

  	
   

  	
  $

  	
  1,941.00

  	
   

  	
  $

  	
  35,478.72

  	
   

  	
  Renewal

  	
   

  	
  1-5yr.

  	
   

  	
  9-12 mo’s.

  	
   

  	
  6/6/2013

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  6/6/14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Leased SqFt

  	
   

  	
  29.2

  	
  %

  	
  233,833

  	
   

  	
  71,458.54

  	
   

  	
  13,332.67

  	
   

  	
  35,478.72

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vacant SqFt

  	
   

  	
  70.8

  	
  %

  	
  568,050

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total SqFt

  	
   

  	
  100.0

  	
  %

  	
  801,933

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT I

INTEREST HOLDBACK DISBURSEMENT SCHEDULE

 

	
  Quarter

  Ending

  	
   

  	
  1/30/2011

  	
   

  	
  4/30/2011

  	
   

  	
  7/31/2011

  	
   

  	
  10/31/2011

  	
   

  	
  1/31/2012

  	
   

  
	
  Disbursement from Interest Holdback

  	
   

  	
  $

  	
  348,796.00

  	
   

  	
  $

  	
  343,777.00

  	
   

  	
  $

  	
  349,578.00

  	
   

  	
  $

  	
  94,972.00

  	
   

  	
  $

  	
  62,877.00

  	
   

  
																	

 

 

EXHIBIT J

 

REQUIRED DEFERRED MAINTENANCE AND

ENVIRONMENTAL REMEDIATION

 

	
  Work

  	
   

  	
  Amount

  	
   

  	
  Date of Completion

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Asphalt
  Repairs:

  	
   

  	
  $

  	
  75,000.00

  	
   

  	
  1
  year after Effective Date

  	
   

  
							

 

 

EXHIBIT K

RELEASE PRICES

 

	
  D1

  	
   

  	
  134,909

  	
   

  	
  $

  	
  6,000,000.00

  	
   

  
	
  D2

  	
   

  	
  218,808

  	
   

  	
  $

  	
  9,150,000.00

  	
   

  
	
  E

  	
   

  	
  94,108

  	
   

  	
  $

  	
  3,750,000.00

  	
   

  
	
  A

  	
   

  	
  354,108

  	
   

  	
  $

  	
  13,350,000.00

  	
   

  
	
  Total

  	
   

  	
  801,933

  	
   

  	
  $

  	
  32,250,000.00

  	
   

  

 

 

EXHIBIT L

ENVIRONMENTAL REPORTS

 

Phase
I Environmental Site Assessment, EBI Consulting, November 18, 2010

Phase
I Environmental Site Assessment, EBI Consulting, April 21, 2010

Phase
I Environmental Site Assessment Report, Land America Assessment Corp., March 27,
2008

Phase
I Environmental Site Assessment, MWH Americas, August 2004

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00182-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00182-of-00352.parquet"}]]