CERTIFICATE REGARDING DISTRIBUTION OF LOAN PROCEEDS
AND INDEMNITY AGREEMENT
THIS CERTIFICATE is made as of September 22, 1998 by MISSION WEST
PROPERTIES, L.P., a Delaware limited partnership, MISSION WEST PROPERTIES, L.P.
I, a Delaware limited partnership, MISSION WEST PROPERTIES, L.P. II, a Delaware
limited partnership, and MISSION WEST PROPERTIES, L.P. III, a Delaware limited
partnership, each having offices at 10050 Bandley Drive, Cupertino, California
95014 (each a "Borrower" and collectively, "Borrowers"), to and for the benefit
of THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation
("Prudential"), in conjunction with a loan (the "Loan") made or to be made by
Prudential to Borrowers in the amount of One Hundred Thirty Million Dollars
($130,000,000.00) as more particularly described in that certain First Mortgage
Loan Application dated June 24, 1998 and executed by Borrowers (the
"Application").
This Certificate is made with respect to the following facts and
circumstances:
A. The Loan is to be evidenced by that certain Promissory Note of even
date herewith (the "Note") in the principal amount of One Hundred Thirty Million
Dollars ($130,000,000.00) executed by Borrowers as an aggregate loan to all
Borrowers as hereinafter described.
B. The Note shall be secured by, among other things, that certain Deed of
Trust, Security Agreement, and Fixture Filing with Assignment of Rents and
Proceeds of even date herewith executed by Borrowers, as Trustor, in favor of
Prudential, as Beneficiary (the "Deed of Trust"). Capitalized terms used herein
and not otherwise defined shall have the meanings given them in the Deed of
Trust.
C. Borrowers have advised Prudential, and Prudential has agreed, subject
to the certifications, warranties and representations of Borrowers contained in
this Certificate, that Borrowers desire that the proceeds of the Loan allocated
to each Borrower be allocated amongst the Borrowers, but in an amount that (i)
neither constitutes less than a substantial portion of the fair market value of
the Property of such Borrower that is being used as collateral for the Loan,
(ii) nor is more than 75% of the value of such Property as shown on Exhibit A
attached hereto. Borrowers understand and acknowledge that such allocation
reflects the commercial benefits being received by each Borrower from the Loan
transaction as well as the equitable allocation of Operating Partnership Units
held by each Borrower at the time of Loan closing.
D. Borrowers have requested that the Loan amount be encompassed in one
loan with a single set of Loan Documents binding all Borrowers notwithstanding
that the Loan proceeds are to be divided amongst Borrowers. Prudential has
agreed to allow Borrowers to borrow the funds using this structure solely
because of Borrowers' request.
E. On the basis of the foregoing facts and circumstances, Prudential is
willing to make the Loan as requested by Borrowers, but only in reliance on the
acknowledgments, representations and warranties of Borrowers contained herein.
NOW, THEREFORE, in order to induce Prudential to make the Loan, and in
consideration thereof and with the understanding that Prudential is relying
thereon, Borrowers hereby jointly and severally agree and certify as follows:
1. LOAN STRUCTURE. Borrowers acknowledge that, at Borrowers' request, the
Loan is made in the aggregate to Borrowers, and is evidenced by and made
pursuant to the Note, and that the Note is or is to be secured by a deed of
trust to be recorded in Alameda County, California and Santa Clara County,
California. The Note provides for joint and several liability among Borrowers at
Borrowers' request. Borrowers further acknowledge that any nonpayment of
principal or interest, including one resulting from one Borrower's failure to
pay any portion of the Note or any installment of principal or interest due
thereunder, may result in the Loan being declared in default, and all unpaid
principal under the Note accelerated. Without limiting the generality of the
foregoing, in such event all proceeds of the foreclosure sale of any Borrower's
property may be applied to satisfy the Note. Further, each Borrower acknowledges
and understands that such foreclosure sale proceeds may be applied to satisfy
the Note even if the value of such Borrower's property is greater than the
portion of the Note that such Borrower may be responsible for as agreed among
Borrowers. Borrowers have determined the allocation of Loan proceeds pursuant to
standards set forth of the Recitals set forth in PARAGRAPH C above and
Prudential shall not be responsible for the allocation of such proceeds of the
Loan among Borrowers.
2. CERTAIN CONSEQUENCES OF LOAN STRUCTURE. Each Borrower has been informed
and understands that the consequences of becoming obligated under the Loan
Documents that secure the Loan is that each Borrower's respective land,
improvements and other property is being encumbered as collateral for the entire
Loan. Each Borrower further understands and has been informed that in the event
of a default under the Loan, all Borrowers must act together for purposes of
curing any defaults, and that the failure to do so could result in the
foreclosure and sale, and ultimate loss, of each Borrower's respective Property.
3. ALLOCATION AND DISTRIBUTION OF THE PROCEEDS OF THE LOAN.
(a) Borrowers hereby acknowledge, represent and warrant that the
proceeds of the Loan allocated to, and to be received by, each Borrower
shall be in an amount that (i) neither constitutes less than a substantial
portion of the fair market value of the Property of such Borrower that is
being used as collateral for the Loan, (ii) nor is more than 75% of the
value of such Property as shown on EXHIBIT A attached hereto. The rights
and remedies of Prudential under the Loan Documents shall not be
diminished, reduced or modified due to allocation of the proceeds of the
Loan among Borrowers.
(b) Each Borrower agrees that up to a maximum amount not to exceed
its share of the Loan (per subsection (a)(ii)) and corresponding interest
and other expenses, it shall reimburse and indemnify and hold harmless the
other Borrowers (each an "Indemnitee") for any claim, loss, liability,
damage or expense suffered or paid by the Indemnitee (including payments
of the Loan and the loss of the Indemnitee's respective property as a
result of the exercise of Prudential's remedies under the Loan Documents)
because (i) such Borrower fails to make its allocated share of payments
under the Loan (based on the percentages noted in subsection (a) above
with respect to the Loan), or (ii) at the time of foreclosure or transfer
by deed in lieu of foreclosure, the value of such Borrower's property so
foreclosed or transferred has declined proportionately more (based on the
percentages noted in subsection (a) above with respect to the Loan) than
another Indemnitee's property since the date of this Certificate.
Borrowers shall be entitled to set off claims related to this Loan
transaction against one another so that the aggregate obligation of a
Borrower shall not exceed the maximum amount provided in the preceding
sentence. Nothing contained in this Agreement shall diminish the
obligations of each Borrower to indemnify the General Partner in
accordance with the terms of such Borrower's limited partnership
agreement.
4. REPRESENTATIONS REGARDING LOAN STRUCTURE AND TERMS. Borrowers jointly
and severally represent and warrant to Prudential that Borrowers have requested
that the Loan be made upon the following terms and acknowledge that Prudential
has agreed to such terms only on account of Borrowers' request to do so:
(a) The interest rate and repayment terms of the Loan are more
favorable than those that each individual Borrower could have obtained on
its own without the "pooling" of all of the collateral as security for the
Loan, and without the joint and several liability features of the Note.
(b) All of the individual parcels of land encumbered by the Deed of
Trust are interrelated in a manner such that financing of each of the
separate parcels apart from the others would be upon terms that are less
favorable to Borrowers, and Prudential would not finance each parcel
separately under such more favorable terms.
(c) The structure of the Loan has been devised in order to
accommodate Borrowers' existing operational structure in order to best
serve Borrowers' collective interests.
5. REPRESENTATIONS REGARDING BORROWERS' SOLVENCY. Borrowers further
jointly and severally covenant, represent and warrant to Prudential as follows:
(a) The proceeds of the Loan to be received by each of Borrowers,
coupled with the additional consideration described in subparagraph 4(b)
and other consideration described in the Loan Documents constitute
reasonably equivalent value in exchange for all of the transfers made and
obligations incurred by Borrowers under the Loan Documents.
(b) The Deed of Trust is not being executed by Borrowers for or on
account of any antecedent debt owed by any Borrower to Prudential.
(c) None of Borrowers is insolvent as of the date hereof, nor shall
any Borrower be insolvent on the date of the Loan closing or the date of
any Transfer.
(d) The execution, delivery, and recordation of the Deed of Trust is
intended by Borrowers and Prudential to be a contemporaneous exchange for
new value given to Borrowers, and shall in fact be a substantially
contemporaneous exchange.
(e) The transfers made and obligations incurred by Borrowers under
the Loan Documents are not made with actual intent to hinder, delay, or
defraud any entity to which any Borrower was, is, or subsequently becomes
indebted.
(f) No Borrower is or shall be insolvent on the date that any
transfer is to be made or obligation to be incurred under the terms of the
Loan Documents or on the date of the Loan closing, nor shall any Borrower
become insolvent as a result of such transfer or obligation.
(g) No Borrower is engaged in business or a transaction, or is about
to engage in business or a transaction, on the date of this Certificate,
the Loan closing or any such transfer, for which any property remaining
with such Borrower is an unreasonably small amount of capital.
(h) No Borrower intends to incur, or believes that it would incur,
debts that would be beyond such Borrower's ability to pay as such debts
matured.
6. INDEMNITY. Borrowers jointly and severally agree to indemnify, defend,
protect and hold harmless Prudential against any losses, claims, damages,
liabilities, or expenses (including attorneys' fees), suffered or incurred by
Prudential in the event of any misrepresentation by any Borrower in this
Certificate.
7. ATTORNEYS' FEES. Borrowers further agree that if any suit, action or
proceeding of any kind (an "action") is brought by any party hereto to enforce,
defend or interpret any provision of this Certificate (including an action for
declaratory relief), the prevailing party in such action shall recover from the
other parties to such action all reasonable costs and expenses which the
prevailing party may incur in bringing or defending such action and/or enforcing
any judgment granted therein, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action is
prosecuted to judgment. Any judgment or order entered in such action shall
specifically provide for the recovery of all reasonable costs and expenses
incurred by the prevailing party in connection therewith including, without
limitation, costs and expenses incurred in enforcing such judgment. Prudential
shall have the right (but not the obligation) to commence, appear in, or defend
any action purporting to affect any of the interests, rights, obligations or
liabilities of Prudential or Borrowers in connection with this Certificate or
any document referred to in this Certificate or executed in connection with this
Certificate, and Borrowers agree to pay to Prudential on demand all costs and
expenses reasonably incurred by Prudential in connection therewith.
8. SURVIVAL. This Certificate and the representations and warranties made
herein shall survive the closing of the Loan, and the execution and delivery of
the Loan Documents.
9. COUNTERPARTS. This Certificate may be executed in one or more
counterparts and such counterparts taken together shall constitute one and the
same document.
IN WITNESS WHEREOF, Borrowers have executed this Certificate as of the
day and year first written above.
BORROWERS:
MISSION WEST PROPERTIES, L.P.,
a Delaware limited partnership
By:Mission West Properties,
a California corporation, its general partner
By: ________________________________
Carl E. Berg, Chairman, President, CEO
MISSION WEST PROPERTIES, L.P. I,
a Delaware limited partnership
By:Mission West Properties,
a California corporation, its general partner
By: ________________________________
Carl E. Berg, Chairman, President, CEO
MISSION WEST PROPERTIES, L.P. II,
a Delaware limited partnership
By:Mission West Properties,
a California corporation, its general partner
By: ________________________________
Carl E. Berg, Chairman, President, CEO
MISSION WEST PROPERTIES, L.P. III,
a Delaware limited partnership
By:Mission West Properties,
a California corporation, its general partner
By: ________________________________
Carl E. Berg, Chairman, President, CEO
EXHIBIT A to
CERTIFICATE REGARDING DISTRIBUTION OF LOAN PROCEEDS AND INDEMNITY AGREEMENT
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PROPERTY ADDRESS(ES) PROPERTY OWNERSHIP
VALUE
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4949 Hellyer Avenue $20,909,728 MWP, LP
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4050 Starboard Drive $7,507,118 MWP, LP
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45700 Northport Loop East $7,118,116 MWP, LP
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45738 Northport Loop West $6,059,223 MWP, LP
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$41,594,185
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10300 Bubb Road $4,269,094 MWP, LP
I
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10500 North De Anza $57,907,240 MWP, LP
Boulevard I
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1230 \ 1250 East Arques $13,129,708 MWP, LP
Avenue I
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1135 Kern Avenue $2,402,338 MWP, LP
I
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450/460 National Avenue $4,526,751 MWP, LP
I
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$82,235,131
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3236 Scott Boulevard $7,305,892 MWP, LP
II
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1212 Bordeaux $10,102,559 MWP, LP
II
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1170 Morse $4,097,835 MWP, LP
II
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6311 San Ignacio $2,995,501 MWP, LP
II
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6321 / 6325 San Ignacio $12,365,352 MWP, LP
II
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6331 San Ignacio $14,917,702 MWP, LP
II
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6341 / 6351 San Ignacio $8,905,930 MWP, LP
II
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$60,690,771
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3550 \ 3560 \ 3570 \ 3580 $21,496,897 MWP, LP
Bassett Street III
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3540 \3542 \ 3544 Bassett $11,801,222 MWP, LP
Street III
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$33,298,119
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PORTFOLIO TOTAL $217,818,206
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