PROMISSORY NOTE
$130,000,000.00 San Francisco, California
Loan No. 6 102 899 September 22,1998
FOR VALUE RECEIVED, the undersigned, 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
(collectively, "Maker"), each having an address at 10050 Bandley Drive,
Cupertino, California 95014, and the general partner of each being Mission West
Properties, a California corporation, JOINTLY AND SEVERALLY PROMISE TO PAY TO
THE ORDER OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation ("Prudential"), authorized to do business in the State of California
(Prudential and its successors and assigns who become holders of this Note
hereinafter collectively referred to as "Holder"), by "Electronic Funds
Transfer" to Prudential at Bank of New York, located in New York, New York, ABA
Routing Number 021-000-018, Account No. 890-0304-766, referencing Loan No. 6 102
899, or at such other place as Holder may from time to time designate, the
principal sum of One Hundred Thirty Million United States Dollars
($130,000,000.00), together with interest thereon from the Initial Disbursement
Date hereunder through the date the Loan is paid in full, at a rate per annum
equal to the Interest Rate.
1. DEFINITIONS. The following terms shall have the meanings set forth below.
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to such terms in the other Loan Documents.
DEED OF TRUST: That certain Deed of Trust, Security Agreement, Fixture
Filing with Assignment of Rents and Proceeds of even date herewith executed
by Maker as "Trustor" to the benefit of Prudential as "Beneficiary" as
security for repayment of this Note.
DISCOUNT RATE: The interest rate which, when compounded monthly, is
equivalent to the Treasury Rate when compounded semi-annually.
INITIAL DISBURSEMENT DATE: The date of this Note.
INTEREST RATE: A rate of interest per annum of six and fifty-six hundredths
percent (6.56%).
LOAN DOCUMENTS: As defined in the Deed of Trust.
MATURITY DATE: October 15, 2008.
NOTE: This Promissory Note.
PREPAYMENT AMOUNT: The amount of the Principal Balance prepaid on a
Prepayment Date.
PREPAYMENT DATE: Any date, prior to the Maturity Date, upon which all or
any portion of the Principal Balance is prepaid.
PREPAYMENT PREMIUM: As defined in Paragraph 6(a).
PRESENT VALUE OF THE PREPAYMENT AMOUNT: The amount determined by
discounting all scheduled payments of principal and interest remaining to
the Maturity Date, attributable to the Prepayment Amount, at the Discount
Rate. If the Prepayment Date occurs on a date other than a regularly
scheduled payment date under this Note, the actual number of days remaining
from the Prepayment Date to the next regularly scheduled payment date shall
be used to discount within this period.
PRIME RATE: The base rate on corporate loans posted by at least
seventy-five percent (75%) of the twenty (20) largest United States banks,
designated and published as the "Prime Rate" in the Wall Street Journal on
the date an Event of Default occurs.
PRINCIPAL BALANCE: The principal balance of this Note from time to time
outstanding.
SECONDARY INTEREST RATE: A rate of interest per annum equal to the lesser
of (i) the maximum rate allowed to be charged by Holder under applicable
law, or (ii) the greater of (A) the sum of the Interest Rate plus five
percent (5%), or (B) the sum of the Prime Rate plus five percent (5%).
TERM: The term of the Loan, commencing on the Initial Disbursement Date and
ending on the Maturity Date.
TREASURY RATE: The interest rate, conclusively determined by Holder, in its
sole discretion, on the Prepayment Date, equal to the semi-annual yield on
the Treasury Constant Maturity Series with maturity equal to the remaining
weighted average life of the Loan for the week prior to the Prepayment
Date, as reported in Federal Reserve Statistical Release H.15 - Selected
Interest Rates, such yield being determined by linear interpolation between
the yields reported in Release H.15, if necessary. If Release H.15 is no
longer published, Holder shall select a comparable publication to determine
the Treasury Rate.
2. PAYMENTS. On the fifteenth day of November, 1998, an amount equal to the sum
of (a) all accrued interest, at the Interest Rate, on the Principal Balance for
the period from the Initial Disbursement Date through and including October 14,
1998, and (b) a monthly installment of principal and interest in the amount of
Eight Hundred Twenty-Six Thousand Eight Hundred Twenty-Four and 80/100 Dollars
($826,824.80), shall be due and payable. Commencing on the fifteenth day of the
December, 1998, and continuing on the fifteenth day of each calendar month
thereafter through and including the Maturity Date, monthly installments of
principal and interest in the amount of Eight Hundred Twenty-Six Thousand Eight
Hundred Twenty-Four and 80/100 Dollars ($826,824.80) shall be due and payable.
The entire unpaid Principal Balance, plus accrued interest and other amounts
payable under the Loan Documents, shall be due and payable on the Maturity Date.
3. TREATMENT OF PAYMENTS.
(a) Until directed otherwise in writing by Holder, all payments made under
this Note shall be made by Electronic Funds Transfer from Maker's account
at an Automated Clearing House member bank satisfactory to Holder in its
sole discretion. Maker shall direct such bank in writing so to transfer
payments on their due dates to Holder's designated account. Each payment
shall be initiated by Holder by Electronic Funds Transfer through the
Automated Clearing House network for settlement on each respective due
date. Prior to each payment due date, Maker shall deposit and/or maintain
sufficient funds in Maker's account to cover each debit entry to Maker's
account.
(b) Holder's approval and designation of a bank (or banks) under PARAGRAPH
3(A) above shall be confirmed in writing. Notwithstanding Holder's
approval of a bank under PARAGRAPH 3(A) above, Holder shall have the
right, upon thirty (30) days prior written notice to Maker, (i) to require
Maker to use a different bank that is mutually acceptable to Maker and
Holder, or (ii) to designate a different account for Holder. All costs of
establishing and maintaining these accounts and all costs of these
Electronic Funds Transfers shall be paid by Maker.
(c) For purposes of calculating interest under this Note, a year of 360
days consisting of twelve (12) thirty (30) days months shall be employed
regardless of the actual time elapsed.
(d) All payments due under this Note or the Loan Documents shall be paid
by Maker in lawful money of the United States of America on the date such
payment is due. All such payments shall be made without deduction for any
present or future taxes, levies, deductions, charges or withholdings
(including Federal, state or local income taxes), which amounts shall be
paid by Maker.
(e) Payments from Maker to Holder under this Note shall be applied first
to any expense reimbursements under the Loan Documents, then to any Daily
Charges or Late Charges, as the case may be, then to accrued and unpaid
interest, and the balance to the Principal Balance and any Prepayment
Premium due thereon.
4. DAILY CHARGES; LATE CHARGES; SECONDARY INTEREST RATE.
(a) If Maker fails timely to pay any sum due and payable under this Note on
or before the date due, a late charge equal to Eight Hundred Fifty Dollars
($850.00) per day (the "Daily Charge") shall be due for each day that such
sum is not paid (including, the day upon which the payment is made), but if
such sum, together with the Daily Charges applicable thereto, is not paid
by the fourteenth (14th) day after the date such sum is due, a late charge
equal to four cents ($0.04) for each dollar ($1.00) of each such sum (the
"Late Charge") shall be immediately due and payable in lieu of all Daily
Charges. Maker acknowledges and agrees that its failure to make timely
payments will result in Holder incurring additional expense in servicing
the Loan, and that it is extremely difficult and impractical to ascertain
the extent of such damages and that the Daily Charge or the Late Charge
represent a fair and reasonable estimate, considering all of the
circumstances existing on the date of the execution of this Note, of the
costs that Holder will incur by reason of such late payment. Acceptance of
any Daily Charge or Late Charge shall not constitute a waiver of the
default with respect to the late payment, and shall not prevent Holder from
exercising any of the other rights or remedies available hereunder or at
law or in equity.
(b) Maker further acknowledges and agrees that during the time that any
payment of principal, interest or other amount due under this Note shall be
delinquent, Holder will incur additional costs and expenses attributable to
its loss of use of the money due and to the adverse impact on Holder's
ability to meet its other obligations and avail itself of other
opportunities. Maker agrees that it is extremely difficult and impractical
to ascertain the extent of such expenses, and Maker therefore agrees that
upon the occurrence of an Event of Default, interest at the Secondary
Interest Rate shall accrue on the Indebtedness, regardless of whether there
has been an acceleration of the maturity of the Indebtedness.
5. EVENT OF DEFAULT. The occurrence of an Event of Default under any Loan
Document shall constitute an Event of Default under this Note. Upon the
occurrence of an Event of Default, including the failure of the Maker to observe
the provisions of Paragraph 4.2 of the Deed of Trust, Holder, at its option, may
cause the Principal Balance, together with all unpaid accrued interest, any
Prepayment Premium and any other sums evidenced or secured by this Note or any
Loan Document, to be immediately due and payable, without further presentment,
demand, protest or notice of any kind, by so notifying Maker in writing.
6. PREPAYMENT.
(a) If for any reason the Principal Balance or any portion thereof is paid
prior to the Maturity Date, whether voluntarily, involuntarily, by
operation of law, acceleration, including acceleration on account of an
Event of Default and/or a violation of Paragraph 4.2 of the Deed of Trust,
or otherwise, but excluding any prepayment made as result of the
application by Holder of insurance proceeds or condemnation awards as
provided by the terms of the Loan Documents, Maker shall pay to Holder,
together with the subject Prepayment Amount and any unpaid accrued
interest, a prepayment charge (the "Prepayment Premium") equal to the
greater of:
(i) the product of (A) one percent (1%) of the Prepayment Amount
multiplied by (B) a fraction, the numerator of which is the number of
full months remaining until the Maturity Date as of the Prepayment
Date and the denominator of which is the number of full months
comprising the Term of the Loan; or
(ii) the Present Value of the Prepayment Amount less the sum of (A)
the Prepayment Amount, and (B) unpaid accrued interest, if any,
calculated as of the Prepayment Date.
(b) Maker shall have the right voluntarily to prepay all or any portion of
the Principal Balance, together with accrued interest thereon, but only if
Maker gives Holder not less than thirty (30) days' prior written notice of
its intention to prepay, and delivers to Holder, on or before the
Prepayment Date, the Prepayment Premium as calculated above, together with
the Prepayment Amount and all accrued interest and other sums due under
the Loan Documents. Notwithstanding the foregoing, Maker shall have the
right to prepay the Principal Balance, together with accrued interest
thereon, without payment of the Prepayment Premium, during the period of
time commencing fourteen (14) days immediately prior to the Maturity Date.
(c) Maker acknowledges that (i) the Prepayment Premium represents the
reasonable estimate of Holder and Maker of a fair average compensation for
the loss that may be sustained by Holder due to the payment of any of the
Principal Balance prior to the Maturity Date; (ii) the Prepayment Premium
shall be paid without prejudice to the right of Holder to collect any
other amounts provided to be paid hereunder or under the other Loan
Documents; and (iii) Holder shall not be obligated to actually reinvest
the Prepayment Amount in any Treasury Constant Maturity Series or other
specific investments as a condition to receiving the Prepayment Premium.
(d) Maker acknowledges that it is comprised of four (4) different Persons,
each of which owns separately its Property, and that the Loan is secured
by the interest of all Persons comprising Maker in all of the Property.
Maker further acknowledges that in connection therewith, for purposes of
allocating the Loan proceeds appropriately among the Persons comprising
Maker and their respective Property, Maker and Holder agree to allocate
the Loan proceeds in accordance with the Original Allocated Loan Amount as
set forth in Exhibit B to the Deed of Trust in order to ensure the
continuing adequacy of the security interest of Holder in each Property of
Maker under the Loan Documents. Maker agrees that any prepayment of the
Loan, unless otherwise provided in the Loan Documents, shall be applied
pro rata against the Original Allocated Loan Amount (as set forth in
Exhibit B to the Deed of Trust) of each Property.
(e) Maker hereby expressly waives any right it may have under California
Civil Code Section 2954.10 to prepay this Note, in whole or in part,
without payment of the Prepayment Premium, upon acceleration of the
Maturity Date of this Note, and agrees that if for any reason, a
prepayment of any or all of this Note is made, whether voluntarily,
involuntarily or upon or following any acceleration of the Maturity Date
of this Note by Holder, then Maker shall pay the Prepayment Premium
calculated pursuant to PARAGRAPH 6(a). By initialing this provision in the
space provided below, Maker hereby declares that the Holder's agreement to
make the Loan at the Interest Rate and for the Term set forth in this Note
constitutes adequate consideration, given individual weight by Maker, for
this waiver and agreement.
INITIALS OF MAKER: ____________________
7. SECURITY. This Note is secured by the Deed of Trust and the other Loan
Documents, which contain provisions for the acceleration of the maturity of this
Note upon the occurrence of certain described events.
8. HOLDER'S RIGHTS; NO WAIVER BY HOLDER. The rights, powers and remedies of
Holder under this Note shall be in addition to all rights, powers and remedies
given to Holder under the Loan Documents and any other agreement or document
securing or evidencing the Indebtedness or by virtue of any statute or rule of
law, including the California Uniform Commercial Code. All such rights, powers
and remedies shall be cumulative and may be exercised successively or
concurrently in Holder's sole discretion without impairing Holder's security
interest, rights or available remedies. Any forbearance, failure or delay by
Holder in exercising any right, power or remedy shall not preclude further
exercise thereof, and every right, power or remedy of Holder shall continue in
full force and effect until such right, power or remedy is specifically waived
in a writing executed by Holder. Maker waives any right to require the Holder to
proceed against any Person or to exhaust all or any part of the Property or to
pursue any remedy in Holder's power.
9. MAKER'S WAIVERS.
(a) Maker and any endorsers of this Note, and each of them, hereby waive
diligence, demand, presentment for payment, notice of non-payment, protest
and notice of protest, and specifically consent to and waive notice of any
renewals or extensions of this Note, whether made to or in favor of Maker
or any other person or persons. Maker and any endorsers of this Note
expressly waive all right to the benefit of any statute of limitations and
any moratorium, reinstatement, marshaling, forbearance, extension, or
appraisement now or hereafter provided by the Constitution and the laws of
the United States and of any state thereof, as a defense to any demand
against Maker or any such endorsers, to the fullest extent permitted by
law.
(b) Maker hereby waives any right to trial by jury with respect to any
action or proceeding brought by Holder or any other Person relating to (i)
the Obligations, or (ii) the Loan Documents. Maker hereby agrees that this
Note constitutes a written consent to waiver of trial by jury pursuant to
the provisions of California Code of Civil Procedure Section 631 and Maker
does hereby constitute and appoint Holder its true and lawful
attorney-in-fact, which appointment is coupled with an interest, and which
shall survive the dissolution or bankruptcy of any Maker, or any Transfer,
and Maker does hereby authorize and empower Holder, in the name, place and
stead of Maker, to file this Note with the clerk or judge of any court of
competent jurisdiction as statutory written consent to waiver of trial by
jury.
10. TRANSFERS BY HOLDER. This Note, or any interest in this Note and/or the Loan
Documents, may be hypothecated, transferred or assigned by Holder without the
prior consent of Maker.
11. AMENDMENT. This Note may be amended or modified only by an instrument in
writing which by its express terms refers to this Note and which is duly
executed by the party sought to be bound thereby.
12. SUCCESSORS AND ASSIGNS. This Note shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
13. GOVERNING LAW. This Note shall be governed by and construed in accordance
with the laws of the State of California.
14. TIME. Time is of the essence with respect to each and every term and
provision of this Note.
15. USURY. Notwithstanding any provision herein, the total liability for
payments in the nature of interest, additional interest, or other charges, under
this Note or any other Loan Document, shall not exceed the applicable limits
imposed by any applicable state or Federal interest rate laws. If any such
payments in the nature of interest, additional interest, and other charges made
hereunder or under any other Loan Documents are held to be in excess of the
applicable limits imposed by any applicable state or Federal laws, it is agreed
that any such amount held to be in excess shall be considered payment of
principal and the Principal Balance shall be reduced by such amount in the
inverse order of maturity so that the total liability for payments in the nature
of interest, additional interest and other charges, shall never exceed the
applicable limits imposed by any applicable state or Federal interest rate laws
in compliance with the desires of Holder and Maker as set forth herein.
16. NOTICES. All notices, consents and other communications required or
permitted by this Note shall be in writing and shall be given in the manner set
forth in the Deed of Trust.
17. ATTORNEYS' FEES. If any arbitration, litigation or similar proceedings are
brought by either party to enforce any obligation or to pursue any remedy under
this Note, the party prevailing in any such arbitration, litigation or similar
proceedings will be entitled to costs of collection, if any, and reasonable
attorneys fees incurred in connection with such proceedings and in collecting or
enforcing any award granted therein.
18. LIMITATION ON PERSONAL LIABILITIES.
(a) Except as expressly set forth in PARAGRAPHS 18(B) AND 18(C) below,
neither Maker nor any general partner of Maker (singularly or
collectively, the "Exculpated Parties") shall have any personal liability
for the Loan or any Obligations set forth in the Loan Documents, except
that Holder shall be entitled to bring a foreclosure action or proceeding
or other appropriate action or proceeding to enforce the Loan Documents or
foreclose or realize upon and/or protect the Property (including naming
the Exculpated Parties in such actions or proceedings) and/or to draw on,
and retain the proceeds of, any letter of credit issued in favor of Holder
with respect to the Loan.
(b) Notwithstanding anything to the contrary contained in this Note or in
any Loan Document, Holder shall be entitled to proceed personally against
the Exculpated Parties, or any of them, for, and the Exculpated Parties
shall have personal liability jointly and severally for:
(i) any indemnity, guaranty, or similar instrument furnished in
connection with the Loan (including the ERISA provisions of Paragraph
9.18 of the Deed of Trust and the Hazardous Substances Agreement);
(ii) any assessments and/or taxes (accrued and/or payable) with
respect to the Property to the extent income from the Property has
been used other than in accordance with the Loan Documents;
(iii) any security deposits of tenants (1) not turned over to Holder
upon foreclosure, sale (pursuant to power of sale), or conveyance in
lieu thereof, or (2) not turned over to a receiver or trustee for the
Property after his/her appointment;
(iv) any insurance proceeds or condemnation awards neither turned
over to Holder nor used in compliance with the terms of the Loan
Documents;
(v) if any of the Exculpated Parties executes an amendment or
termination of any Lease (other than a Lease with a Major Tenant
which is governed by Paragraph 18(c)(iv) below) without the prior
written consent of Holder, if such consent is required under the
terms of the Loan Documents, the Exculpated Parties shall have
personal liability for the greater of:
(1) the present value (calculated at the Discount Rate) of the
aggregate total dollar amount (if any) by which (A) the rental
income and/or other tenant obligations prior to the amendment
or termination of such Lease, exceeds (B) the rental income
and/or other tenant obligations after the amendment or
termination of such Lease, or
(2) any termination fee or other consideration paid in
connection with such amendment or termination;
(vi) waste of the Property;
(vii) any rents or other income from the Property received by any of
the Exculpated Parties following a default under the Loan Documents
and not otherwise applied to the Indebtedness or to the current (and
not deferred) operating expenses of the Property incurred in the
ordinary course, excluding amounts paid as operating expenses to a
Person related to or affiliated with any of the Exculpated Parties
unless payment of such amounts are expressly permitted under the
terms of the Loan Documents;
(viii) Maker's failure to maintain any letter of credit
required under the terms of the Loan Documents or otherwise in
connection with the Loan;
(ix) Maker's obligation to indemnify Holder for commissions
and fees under Paragraph 2.10 of the Deed of Trust; and/or
(x) all legal fees (including allocated costs of Holder's staff
attorneys) and other expenses incurred by Holder in enforcing the
Loan Documents if any Exculpated Party contests, delays, or otherwise
hinders or opposes (including the filing of a bankruptcy or
insolvency proceeding) any of Holder's enforcement actions.
(c) Except as provided in Paragraph 18(c)(v) below, the agreement
contained in this Paragraph 18 to limit the personal liability of the
Exculpated Parties shall become null and void and of no further force or
effect, and the Exculpated Parties shall have personal liability for all
Indebtedness and all Obligations evidenced by the Note and the Loan
Documents, in the event:
(i) there is any breach or violation of Paragraph
4.2 of the Deed of Trust;
(ii) there is any fraud or material misrepresentation by any of the
Exculpated Parties in connection with the Property, the Loan
Documents, the Application, or any other aspect of the Loan;
(iii) the Property or any part thereof becomes an asset in (1) a
voluntary bankruptcy or insolvency proceeding, or (2) any involuntary
bankruptcy or insolvency proceeding which is not dismissed within
ninety (90) days of filing, except that this clause (2) shall not
apply if such involuntary bankruptcy is filed by Holder;
(iv) any Exculpated Party executes an amendment or termination of any
Lease with a Major Tenant without the prior written consent of
Holder, if such consent is required under the terms of the Loan
Documents; or
(v) the Property or any individual property constituting the Property
is rendered "environmentally impaired", as such term is defined in
Section 726.5 of the California Code of Civil Procedure; provided,
however, that in such event, the Exculpated Parties shall have
personal liability only for the Original Allocated Loan Amount
allocated to the Property that is or are determined to be
"environmentally impaired", unless, in so limiting Holder's recourse
to less than all Indebtedness and all Obligations, Holder would be
substantially deprived of the benefits available to Holder under
Section 726.5.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered
effective as of the date first written above.
MAKER:
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
[Signatures continued on succeeding page]
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